Explaining How George Soros Broke the GBP
George Soros is widely known today for his expertise in investing and incredible success as a businessman. This success has left him with one of the most massive personal fortunes in the world. In fact, George Soros is now one of the thirty richest individuals in the world. While there is plenty of talk about George Soros in the mainstream media, very few people have actually taken the time to learn the story behind one of Soros’ most famous trades in his early career. ValueWalk just released a story on Soros’ famous trade.
The day that George Soros became an international investment phenomenon was September 17, 1992, which is referred to as “Black Wednesday.” The trade involved the position of Great Britain’s currency and George Soros’ ability to bet against its value. George Soros’ ability to foresee what would happen to the currency once it was floated on the exchange earned him billions of dollars along with a new title, “The Man Who Broke the Bank of England.” This all came about because once Britain floated the pound, it instantly fell about 25 percent against the U.S. Dollar. At that time, Soros’ Quantum Fund had an estimated $15 billion ready to bet that Great Britain’s currency would fall once it was floated on the exchange. Soros had literally bet it all on this currency trade and could have lost billions. The fund was entirely leveraged and engaged in widespread borrowing to make its position possible at exactly the right time. On the government’s end on www.georgesoros.com/, a failure to raise interest rates and plan for a potential currency rate drop cost the government of Great Britain an estimated £3.4 billion.
Based on the successful position of the Quantum Fund as the British Treasury almost tanked, the hedge fund grew instantly. Although the hedge fund was valued at around $15 billion before the famous trade, it was immediately worth an estimated $19 billion after. Several months after the trade, the fund grew to an impressive $22 billion. This was truly the starting point of how Soros grew his massive personal fortune. Given that the managers of the hedge fund were entitled to about 20 percent of the incredible growth, George Soros was able to earn his first billion literally overnight from this trade. Because Soros was able to replicate his wise investment strategies, his fortune has continued to grow. He is also widely consulted for his opinion on the state of international markets.
Soros is now known for his philanthropy just as much as his investment success. Through the Open Society Foundations on http://topics.wsj.com/person/S/george-soros/209, Soros works to promote free societies and accountable governments all around the world. Soros is also very involved in progressive causes and supporting liberal political campaigns through generous donations.