Surviving Markets: Why Great Investors Are Rare

After the crash of 1987, people seemed ready to write off George Soros. The master investor had been poorly positioned and caught off guard. Were stocks too high, Fortune had asked him earlier that year? Not necessarily, Soros argued. He was happy to ride the bull market and hedged himself by shorting the Japanese bubble where stocks were much more expensive. This turned out to be a bad case of basis risk: American stocks collapsed under a cascade of selling while the Japanese market held up better. To make matters worse, Soros had shorted Japan with futures trading in Hong Kong. When the Hong Kong exchange briefly stopped trading in the wake of the turmoil, Soros found himself in limbo, unable to close out his position as Japanese markets bounced back. Not only was he hurting on both his long and short positions, what made the situation dangerous was the leverage he used. Meanwhile, his protégé Druckenmiller had navigated the crash expertly, rapidly flipping back and forth between bei

After the crash of 1987, people seemed ready to write off George Soros. The master investor had been poorly positioned and caught off guard. Were stocks too high, Fortune had asked him earlier that year? Not necessarily, Soros argued. He was happy to ride the bull market and hedged himself by shorting the Japanese bubble where stocks were much more expensive. This turned out to be a bad case of basis risk: American stocks collapsed under a cascade of selling while the Japanese market held up better. To make matters worse, Soros had shorted Japan with futures trading in Hong Kong. When the Hong