Is Soros taking his biggest gamble ever?

I know this is from a long time ago (from July):

As all this unfolded, Soros’s bleak assessment came like a thunderclap from the darkening clouds. Soros is the man credited, if that’s the right word, with breaking the Bank of England. His judgments over more than 30 years of investment performance provide a template for making indecent amounts of money and he is admired and feared, probably in equal measure. When he says we are in trouble, people listen. When he acts on his own advice, they pay very, very careful attention. This is one of those times.

Talk in the City suggests Soros has taken a significant position on the FTSE index. His nephew Peter Soros is believed to be overseeing the London operation, although when the Evening Standard contacted him yesterday by telephone he declined to speak. When asked if he was, in fact, heavily shorting the UK stock market, he replied “no comment” on three occasions - and then hung up.

It has been known for some time that Soros has gone short on European stocks but now the word is that, through his investment fund, he is staking a big down bet on London quoted shares.

This is how speculators - and Soros is the daddy of them all - make money in falling markets. By buying financial instruments called futures it is possible to take a punt on the movement of the Footsie. Soros’s bet, it is believed, is that it will go down.

Apparently Soros’ bet against the FTSE 100 paid off. I wonder how large was his position?

Well here is another one of his successful bets:

Undoubtedly, this spike in bank shares was due in large part to hedge funds, which began covering some of the massive short positions they’ve built up over the past 18 months. For example, billionaire George Soros–Croesus was told–has covered much of his shorts in financial stocks. Why chance another public policy move by regulators to shut off this automatic feeding trough?

Soros finally shorted oil at $137 a barrel and put on a long position in gold; he expects to see gold hold its ground even if oil continues to decline. In fact, the gold bug clique believes in a consistent 10-to-1 ratio for gold and oil. It holds that either gold will rise to 10 times a barrel of oil ($1,350 an ounce) or oil will fall to $96 a barrel–one-tenth the present market price of gold. Croesus was told Tuesday that statistics spanning many decades support, on average, this 10-to-1 ratio.

Here is his equity portfolio ($3.67 billion on 6/30/08):

(I hope he dumped Petrobras (he had 23% of his portfolio in it) before it plummeted, he also had a $187 million in Lehman brothers (5.1%), and 11% in Potash Corp. )

Here is a loser in this mess: Ken Griffin (he made $1.5 billion last year)

Citadel Investment Group, one of the world’s most successful and influential hedge funds, has been having a miserable year with returns that have dropped 26% to 30%.

But rumors that its performance was far worse were so rife that they helped drag down the stock market on Wednesday, and prompted Citadel to take steps to set the record straight.

The rumors swirled for days and gained momentum on Tuesday morning when they were published on a financial Web site. After a complaint from Citadel, the site pulled down the item within an hour. Still, by Wednesday afternoon, the rumors were buzzing all over Wall Street – and around the globe.

On Wednesday, Kenneth Griffin, head of Citadel, sent a letter to investors. September, he wrote, was the “single worst month, by far, in the history of Citadel. Our performance reflected extraordinary market conditions that I did not fully anticipate, combined with regulatory changes driven more by populism than policy.”

Falcone who made $1.7 billion from his bets against subprime did not gain much this year too:

Sept. 23 (Bloomberg) – Harbinger Capital Partners Fund, run by Philip Falcone, has given up most of the 42 percent gain it posted in the first half of the year amid losses on energy and commodity stocks, according to two investors.

The hedge fund declined 12 percent this month, leaving it up about 2 percent for the year through Sept. 19, said the investors, who asked not to be identified because the information is private. Harbinger Capital Partners, a unit of Harbert Management Corp. of Birmingham, Alabama, oversees $26 billion across its funds.

We have reduced our exposure to some of the higher volatility issuers on both the long and short sides of the portfolio,'' Falcone, 46, wrote in a report to investors at the beginning of September.We believe we are well positioned to withstand additional volatility in the weeks and months ahead.’’

Falcone, who works from New York, was not using borrowed money at the end of August, according to the letter. The use of leverage can enhance returns and deepen losses. The fund had 52 percent of assets in long securities, or those it expected to rise in price, while 48 percent was in short investments, or those Falcone was betting would fall.

Many people lost a significant amount of money from the financial crisis (unless you put your money in bonds). I am glad that one of the world’s most charitable people actually got wealthier from this.

It seems that Soros is one of the few hedge fund managers that made money this year. I know John Paulson did.

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