George Soros

[mocca_com]

Worst of economic crisis behind us: George Soros

BERLIN--The global economy has already passed the worst of the economic crisis and should soon pull out of its slump, led by Asia and China in particular, Hungarian-born US billionaire George Soros said on Monday.

And as China gradually edges out the US as the world's economic superpower, it will begin to replace America on the political stage as well, said the man who has made billions speculating on currencies.

"The economic free fall has been stopped, the collapse of the financial system has been averted," Soros was quoted as saying in an interview with German daily Frankfurter Allgemeine Zeitung.

He said the recovery would make up for "around half of the downturn we have had" and then the global economy would stagnate for a while.

"Asia will be the first to come out of this crisis but America is close behind. Nevertheless, China will replace the US as the motor of the world economy," he said.

"The American economy is still bigger than the Chinese. However, China will begin to contribute more and more to global economic growth. Therefore, political power will shift from America to China," Soros predicted.

http://newsinfo.inquirer.net/breakingne ... d-us-Soros

[winston]

He sounds more upbeat now compared to a few month ago when he was calling for the end of the world ..

China influence to grow faster than most expect-Soros

* China a positive force in market, influence to grow
* China banks' global isolation, state role will aid fast recovery
* Global stock rally may have more to run but is no bull market

By Edmund Klamann

SHANGHAI, June 7 (Reuters) - Financier George Soros said on Sunday that China's global influence is set to grow faster than most people expect, with its isolation from the global financial system and a heavy state role in banking aiding a relatively swift economic recovery.

He reiterated his cautious views regarding the surge in global stock markets, although he said it may have further to go given liquidity in the markets and that many investors are still sitting on the sidelines.

"In many ways, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system," he told an audience at Shanghai's Fudan University.

China's extensive capital controls have helped to shield its financial institutions from the worst of the global financial crisis.

"The influence of the state is also greater. So when the government says 'lend', banks lend," Soros added. "This puts China in a better position to recover from the recession and that is in fact what has happened."

( But lend to who ? To the SMEs or the SOEs ? )

New loans by Chinese banks surged to record levels in the first quarter, spurring optimism over recovery prospects for the world's third-largest economy.

POSITIVE FORCE

"China is going to be a positive force in the world and the market, and as a consequence, its power and influence are likely to grow. Personally, I believe it's going to grow faster than most people currently expect," Soros said.
He acknowledged that some doubts remain over China's economic recovery, however, noting data such as a continued fall in electricity consumption.

He also noted that China's aggressive 4 trillion yuan ($586 billion) economic stimulus programme, announced last year, had bolstered the economy.

"If that programme proves inadequate, it is in a position to apply additional stimulus. China is also in a position to foster a revival of its exports by extending credit and investing abroad," he said.

He reiterated his view that because China's economy is only one-quarter the size of the U.S. economy, it cannot replace the American consumer as the motor of the global economy, so global growth will be slower than in the past.

He sounded a more upbeat note for China's asset markets than for global markets overall, where he remained wary.

"I'm pretty cautious. Even though I've said prices are cheap, I'm not so optimistic as to put all my money into stocks or assets because I think that the outlook is fairly uncertain.

"I do, however, think that the Chinese economy is a promising economy. I think here it is more a matter of finding the right assets rather than saying that I'm not interested in investing."

Asked if the recent climb in global stock markets was a bear market rally, he said: "It may have further to go because there is a lot of liquidity, a lot of investors are on the sidelines. If the market keeps on going up, more of them may decide to join in. You never know how far the rally goes."

"But I certainly don't think we are at the beginning of a big bull market worldwide."

[millionairemind]

Soros Says CDS are Destructive, Should be Outlawed

Credit default swaps are "instruments of destruction" that should be outlawed, billionaire investor George Soros said on Friday.

Soros said the asymmetry of risk and reward embedded in CDS exerted so much downward pressure on the bonds underlying the contracts that companies and financial institutions could be brought to their knees.

"Some derivatives ought not to be allowed to be traded at all. I have in mind credit default swaps. The more I've heard about them, the more I've realized they're truly toxic," he told a banking conference.

"CDS are instruments of destruction which ought to be outlawed," Soros told a meeting of the Institute of International Finance, many of whose member banks and financial institutions are active participants in the huge CDS market.

Going short on bonds by purchasing a CDS contract carried limited risk but almost unlimited profit potential. By contrast, selling CDSs offered limited profit and practically unlimited risk, Soros said.

This asymmetry, which encouraged investors in effect to sell corporate bonds short, was reinforced by the fact that CDS were traded and so tended to be priced as warrants, which could be sold at any time, and not as options, he added.

Credit default swaps are used to protect against nonpayment of debt or to speculate on a company's credit quality.

But Soros said: "People buy a CDS not because they expect an eventual default but because they expect them to appreciate in response to adverse developments."

Skewed Incentives

He said one financial institution that discovered to its cost the risk/reward distortions of CDS was insurer American International Group, which was a big seller of CDS, offering banks protection against a deterioration in their bond portfolios, especially mortgage-linked securities.

The U.S. government stepped in to save AIG from collapse under bad mortgage bets last September, and has put up to $180 billion at the company's disposal since.

"AIG thought it was selling insurance on bonds and as such CDS were outrageously overpriced. In fact AIG was selling bear market warrants and it severely underestimated their value," Soros said.

At this point, the phenomenon that Soros describes as reflexivity kicked in. That is to say, the mispricing of financial instruments — in this case, CDS — affected the fundamentals that the prices were supposed to reflect.

Nowhere were the consequences of the ensuing chain reaction more severe than in the case of financial institutions, whose ability to do business depended on trust, Soros argued.

He cited the failures of Bear Stearns and Lehman Brothers.

But the potential damage that CDS could do was not limited to financial firms, Soros added.

He pointed to the bankruptcy of North America's largest newsprint maker, AbitibiBowater, and the pending bankruptcy of General Motors.

"In both cases, some bondholders owned CDS and they stood to gain more by bankruptcy than by reorganization. "It's like buying life insurance on someone else's life and owning a license to kill," he concluded.

Soros' criticism echoes fellow investor Warren Buffet's description of derivatives in 2003 as "financial weapons of mass destruction." On derivatives in general, Soros said they should be as strictly regulated as stocks.

He said derivatives should be standardized and saw no case for custom-made derivatives, which he said only increased the profit margins of the financiers who tailored them.

[winston]

Soros Praises Hong Kong for Blocking Attack, China TV Reports By Bloomberg News

June 16 (Bloomberg) -- Billionaire investor George Soros praised the Hong Kong government for thwarting his attempts to undermine the city’s currency during the 1998 Asian financial crisis, according to an interview with the state-owned China Central Television.

“They actually did a very good job in defending the Hong Kong dollar, so they deserve credit,” Soros said during the interview broadcast June 14. “And my attack, if you call it that, was without success.”

Soros also said in the interview he didn’t feel any sense of guilt for his attack on the Hong Kong currency as he did it “according to the rules that prevail.”

The International Monetary Fund’s unit of account, Special Drawing Rights, is “very far” from becoming a world currency even if “that maybe a more suitable system for the world going forward,” Soros told the station in the interview.

China’s renminbi, or yuan, “could be an alternative” to the dollar as a world reserve currency and it “can be a very strong currency were it convertible,” Soros said. “But the Chinese government isn’t likely to make the renminbi convertible in the near term,” he said.

[greenhoney]

he caused a lot of misery and even suicides in the aftermath of the 97 crises all in the name of money. i wonder how he can sleep at night! it may be just 'business' to him, but others, its their life paid in blood.

[Musicwhiz]

Even though I respect Soros and his ability to make money, I can't say I like the guy very much.

[winston]

I dont think Soros thought about the consequences of his action during the AFC.

His actions are not too different from:-
1) the Oil Trader who drives out gasoline prices for everyone
2) the Property Speculator who drives up rental prices of low income families
3) the Short-Seller who drives a company bankrupt eg. Bear Stearns
4) the Grain Trader who drives up food prices for billions of low-income families
etc.

So either we make their activities illegal or if there are legal, than we just have to accept their actions.

[kennynah]

he wrote a whole philosophical book justifying his actions of 97.... a truckload of crap.... he is a great trader...just an immoral one...

[winston]

Soros says worst of global crisis is 'behind us'

WARSAW - The worst of the global economic crisis is over, multi-billionaire financier George Soros told Polish news channel TVN24 on Sunday, urging the creation of international regulations to oversee global markets.

[winston]

Breakfast With George Soros by Barrett Sheridan

This morning The Wall Street Journal hosted a breakfast with über-investor George Soros, the man who "broke the Bank of England" by betting against the pound and earning a billion dollars for himself in the process. Last year, in the midst of a declining market, he came out of retirement to take control of his Soros Fund Management, which was up nearly 10 percent in a year when the S&P 500 shed about 40 percent. Below are selected quotes and ideas:

On the origins of the crisis: A "super bubble" inflated over the last 35 years. Every time it looked set to pop, regulators took drastic action, only to allow it to continue inflating. How can we be confident it's pricked for good this time? "I think the evidence is pretty conclusive."

On the next steps: We are, for the first time, simultaneously concerned about both inflation and deflation. Since September, the Federal Reserve has expanded its balance sheet from $800 billion to about $10 trillion. "You have the makings of runaway inflation." Inflation fears are likely to force the Fed to raise interest rates, which will stomp on the "green shoots," curtail growth, and lead to stagflation. But, strangely, "I think that is the preferable outcome." The alternative is deflation, which would only worsen our "crushing" debt load.

On his trading strategy: He has returned to retirement and left day-to-day operation of his fund to others, but nonetheless has some thoughts. "This is not a time to have firm convictions"—in other words, big bets are for the foolhardy. "My theory is that the future is unpredictable. Therefore I'm not going to predict it," he said to laughter.

On new regulation: "Markets are imperfect, but regulators are more so." Nonetheless, future regulators need to actively seek to pop bubbles before they get out of control—something Greenspan consciously avoided doing. As speculation and leverage increase, regulators should raise margin requirements and take other actions to cool the economy (aside from merely tightening the money supply by raising interest rates).

On China: Having just returned from a trip to the Middle Kingdom, he says, "I see China as the big winner, the main beneficiary of the collapse of the international financial system...They are virtually untouched by this crisis." Their "state capitalism" has sheltered them from the worst effects of the collapse. "They don't have to nationalize the banks because they are nationalized."

On the dollar: "The dollar is a very weak currency except for all the others...If the Chinese allowed the renminbi to be convertible on the capital account, it would be very attractive—but they don't."

On China's dollar holdings: "I suspect they will diversify into commodities...I'd rather accumulate real assets than currencies."

On the state of politics today: "An open society is closely related to democracy, but not identical...When you have an electorate that is unwilling to face reality, it needs to be told stories." That's why the political discourse today "is not aimed at understanding reality, it is aimed at getting elected and manipulating reality."

On the media: "Media is a reflection of society, so you have the same problems as in the political sphere. On top of that, you had deregulation and thus concentration, which is not good—and I have to say that even though I am a guest of The Wall Street Journal."

http://blog.newsweek.com/blogs/wealthof ... soros.aspx