The incredible bull market in stocks has produced billions in profits for investors over the past 4 1/2 years — and millions in losses for those caught in the market’s occasional steep downswings. That seesawing continued last week as the Dow Jones index of 30 industrial stocks ended the week at 2235.37, after skyrocketing by 66.47 points one day and dropping by 51.13 the next. Amid the ups and downs, no investor has done better than George Soros, 56. During the past two years alone, the soft-spoken, Hungarian-born manager of a fund known as Quantum has amassed a staggering $1.5 billion in profits for himself and a small group of foreign investors. Says Barton Biggs, global strategist for Morgan Stanley: “Soros really is a genius, our all-time champion.” Quantum’s great leap in profits began with the move upward by the Dow from a level in the mid-1300s in August 1985. Soros caught the market wave by investing heavily not only in U.S. stocks but also in very volatile stock- index and currency futures. These can multiply returns many times over, or, conversely, produce huge losses. Now the largest so-called hedge fund, Quantum uses its stock and bond portfolio as collateral to buy more stocks and securities. Soros has an uncanny knack for switching successfully between stock, bond and money markets. In September 1985 he made what he calls the “killing of a lifetime” — about $150 million — by switching from dollar investments into Japanese yen. He took the plunge after learning that top officials of the five largest industrial countries had met at Manhattan’s Plaza Hotel. Soros’ guess: the five would lower the value of the dollar against other major currencies. Born in Budapest, Soros moved to Britain in 1947. He subsequently attended the London School of Economics. In 1956 he moved to the U.S. and worked for ten years as a broker and stock analyst. In 1969 Soros started the fund that became Quantum with only $250,000. Members of the Rothschild family and other rich Europeans soon kicked in an additional $6 million. Since then the fund has grown mostly through reinvested profits. Because Quantum is registered outside the U.S., Soros and a few members of his Manhattan-based management team are its only American investors. Soros is as inventive at spending money as he is at making it. A large part of the more than $500 million Soros has earned from Quantum is given to three foundations that sponsor greater openness in his native Hungary and other Communist societies. Dozens of Hungarian writers and scientists, actors and artists, who lack government endorsement and support for their activities, live on Soros Foundation grants. In addition, Soros is now bankrolling a dozen Hungarian high school graduates each year to study at Oxford. Earlier this month Soros flew to Moscow to see whether a “Glasnost” foundation could be established to test how serious Mikhail Gorbachev is about his new “openness” policy. In a forthcoming book, The Alchemy of Finance: Reading the Mind of the Market, Soros argues that a financial disaster of some kind is quite likely in the future, but that governments will coordinate their economic policies to avert calamity. Whichever way the economic winds blow, Soros intends to profit from them. All the evidence so far strongly suggests that he will, and handsomely at that.
