Why George Soros Called Me A Loser

“Get out! Like the market, they’re too big for you; you’re in over your head!”

The Hungarian voice was directed at my daughter Katie and me as we tested the waters of the Atlantic Ocean in Southampton, Long Island. Hurricane Andrew’s waves had been merciless that entire August 1992 weekend.

We turned around, and there stood our host, the legendary 60-something sultan of speculation, the man who broke the Bank of England, the invincible George Soros, the palindrome, in his bikini trunks. Like many Europeans of wealth and maturity, George likes to affect a certain riskiness in his recreational apparel.

My former boss, the bilious billionaire, bellowing at me, even as I was vacationing at his summer home—this was too much.

“Oh no,” I quickly rejoined, “the recommended procedure, as the great Francis Galton wrote, is to sit down facing the water, with your hands dug into the sand, and just let the waves roll over you after they break.”

Although I had not enjoyed the luxury of a childhood in Southampton, the air had been as rich, the sun as shiny, and the waves as big for the poor working stiffs like me who grew up next to the ocean in Brighton Beach, Brooklyn. “I’m very familiar with how to handle big waves. That’s my niche—going against.”

Always aware of the virtue of having an escape route in mind, I hastened to add, “Anyway, good people on shore can rescue a weak swimmer in trouble by firmly holding hands together in a line, with the foremost—that’s you, George—ready to clutch me while the wave recedes.”

Despite my bravado, a shudder ran through me. I am a speculator, and my daily bread depends on reversing big moves. In economic terms, my function is to balance supply and demand. I sell when prices are high and buy when prices are low. When prices are too high and consumers want to exchange cash for goods, I take their cash and let them have their goods. I prevent shortages by pushing prices down so consumers don’t have to pay up. Conversely, when prices are down and producers want cash badly for their goods, I give them the cash and take their goods. In these bad times, I keep producers from going broke, and prevent waste and spoilage by bringing prices up. I’m like a dynamic refrigerator, or a captain rationing food on an unexpectedly long voyage.

But these waves we were battling, caused by the biggest hurricane in 20 years, had been pounding the shore relentlessly. Although I wouldn’t admit it to George, it was very clear to me that something unusual was going on.

Even in today’s information economy, extremes in weather tend to coincide with violent moves in markets. Volcanoes, blizzards, and earthquakes all have an impact on stock markets and financial systems around the world.

Sure enough, on the two days following Hurricane Andrew, the markets moved in a horrible trend that almost buried me, exactly as George had predicted. The bond and stock markets plummeted, supposedly because insurance companies would be forced to sell bonds to pay all the storm damage claims. Everything is connected. When bonds fell 2 percent, the dollar fell a like amount. American assets often look less attractive to foreigners during violent stock and bond market declines.

When I tried to reverse the chain of tidal movements set off by the hurricane, I almost went under. Like the poor farmer, I had brought the reversing pot of water to the well once too often. At about this time, George Soros started calling me “the loser.” “Nothing personal, Victor, but have you seriously thought of closing up shop and calling it a day?” he’d say.

Good Trading,

Victor Niederhoffer

From Education of a Speculator, Copyright © 1997 By Victor Niederhoffer. Reprinted by arrangement with John Wiley & Sons, Inc.

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Editor’s Note: Victor Niederhoffer’s storied career as a speculator spans more than twenty-five years. Niederhoffer is the author of two critically acclaimed books on markets and speculation - Education of a Speculator and Practical Speculation with Laura Kenner - as well as numerous groundbreaking academic articles about markets. A magna cum laude graduate of Harvard, he holds a doctorate in economics from the University of Chicago Graduate School of Business. He is a five-time national champion in squash and claimed the world title in 1976.