Widely known as “The Man Who Broke the Bank of England,” George Soros rose to fame with his massive pound short position ahead of the 1992 UK Black Wednesday crisis.
Born in 1930 in Hungary, Soros has actually played a substantial role in the peaceful transition from communism to capitalism in Eastern Europe and has actually also supported American progressive and liberal political causes. He is also known for contributing billions of dollars to various philanthropic causes and is one of the 30 richest people in the world.
Soros studied philosophy in the London School of Economics, after he fled from Nazi-occupied Hungary and migrated to England. Upon graduation, he worked as a traveling salesman but was frustrated with his job that he wrote to a number of merchant banks requesting interviews.
His first financial job was an entry-level position at Singer and Friedlander in London. He later moved on to the arbitrage department where a fellow employee suggested he apply at the brokerage estate of F.M. Mayer in Brand-new York.
With this brokerage firm, Soros specialized in trading European stocks for three years. He then transferred to Wertheim & Co. as an analyst of European securities until 1963. In 1967, he was instrumental in the creation of an offshore investment fund called First Eagle Funds. Soon after, he set up the Double Eagle hedge fund himself with $4 million of investors’ capital and $250,000 of his own money.
In 1970, Soros founded Soros Fund Management and renamed Quantum Fund, which gained an estimated $1 billion from his short pound position.
Soros was a student of philosophy under Karl Popper at the London School of Economics. After his stint at Wertheim & Co, Soros returned to England to develop the theory of reflexivity based on Popper’s ideas. He applied this to economic theory and financial trading by espousing that the biases of traders entering financial transactions can change the fundamentals of an economy.
His Double Eagle fund grew from roughly $4 million to $12 million in four years, leading Soros to reinvest their holdings in the fund along with management fees to increase his stake.
The name Quantum Fund was based on Werner Heisenberg’s principle of quantum mechanics, which is the branch of physics focused on atoms and photons.
Soros is best known for his pound short position in the months leading up to September 1992, during which he recognized the United Kingdom’s unfavorable position under the European Exchange Rate Mechanism.
Five years later, Soros also took a massive short position on the Thai baht ahead of the Asian financial crisis, which some blame him for causing.
In 2008, his book titled The Brand-new Paradigm for Financial Markets described a super bubble that was built up over the past 25 years and was ready to collapse. Earlier this year, he predicted a financial crisis similar to 2008 based on the state of stock markets and currencies, most notably the weakening Chinese yuan.