George Soros is a man who needs no introduction. The famous investor has been through enough bull and bear markets to teach any young whippersnapper a thing or two about how to properly invest. But without a doubt, Soros’ most famous trade is his shorting of the British pound back in 1992.
The upcoming book “More Money Than God,” written by Sebastian Mallaby, tells the tale of how Soros used his Quantum Fund to break the pound to pieces and pocket a billion dollars. The Atlantic has printed an excerpt from the novel, which has some interesting notes:
- The Bank of England’s plan was to aggressively buy the pound in hope that it would inspire confidence and stop speculators from destroying the currency.
- Germany’s central bank began to attack Britain, calling for a devaluation of the pound.
- Soros had AT LEAST $1.5 billion bet on the pound since August, 1992. The devaluation crisis occurred a month later in September.
- Instead of steadily building up a position in September of 1992, Soros told his lieutenants to “go for the jugular.”
- Investor Louis Moore Bacon worked with Soros to find ways to dump the pound.
- Britain had to raise interest rates to protect the pound, but Prime Minister John Major refused to authorise the hike. Ultimately, he capitulated.
The killer moment? When Soros found out just how badly his short selling had affected the Bank of England:
“I’ve learned we’ve just raised interest rates by two hundred basis points,” he said softly–a full two percentage points. Then he rose and shook Smick’s hand and left the room running.”