Has George Soros been reading SBM?!

George Soros

We suggested at the beginning of the year in our Feb edition of SBM (see here, page 76- http://issuu.com/spreadbetmagazine/docs/spreadbet_magazine_v13_generic) that it was an idea to short the “Aussie” v the pound in particular. We added to positions as the pair moved lower to the mid $1.40’s – a level not seen in over 30 years as the chart below shows (inverted). If you’ve not read the peice then take a look as it argues the case for a much higher FX rate ($1.70-1.80) pretty clearly.

It has been widely reported this week that George Soros has made around $60 million just this week by shorting the Australian dollar (nice work!), taking a position to the tune of around $3 billion. His move (if true) was prescient in correctly calling the RBA’s interest rate cut earlier this week. Although, so far the  Australian dollar, whilst yielding some ground this week, still remains stubbornly above parity against the greenback.

Stanley Druckenmiller (George Soros’ former right hand man) has now joined the growing chorus of bears calling the Australian dollar as being overvalued and primed for a fall. Druckenmiller believes the A$ is due for a sharp drop in value in the face of weaker terms of trade and record low interest rates. Bloomberg reported Druckenmiller commenting, “We think the Australian dollar will come down and come down hard.”

Stanley Druckenmiller

In 1992 it was Stanley Druckenmiller’s idea to famously short the pound when he headed up Soros Funds Management. George Soros was retired at the time and had handed day to day control of the hedge fund over to Stanley but, like all good self-made entrepreneurs, George couldn’t really let go of the business and continued to meddle. He saw himself as the ‘coach’ and Stanley the player. Anyway, what happened next became legend. Soros apparently said to Stanley if you are going to short the pound “let’s not mess around and have a serious go”. The rest is history as Soros became known as the “Man who broke the Bank of England” and reaping over £1bn in gains in the process – some day at the office!

We maintain our resolute short stance on the Aussie dollar. As with the likes of ABG & KAZ – we may be earlier but if your gearing is appropriate, your research correct and you have the patience, then “one has to be in it to win it” as when they move, they really move as Iamgold (another of our picks) illustrated v clearly yesterday…