Thursday, 12 January 2017
While Carl Icahn infamously made a killing following the “surprise” Trump election, another prominent hedge fund manager was not nearly as lucky. According to the WSJ, “George Soros lost nearly $1 billion as a result of the stock-market rally spurred by Donald Trump’s surprise presidential election.”
Which, of course means, he only has $29 or so billion left.
As discussed in 2016, Soros returned to trading at Soros Fund Management LLC, which manages $30 billion for the Soros and his family. At the time, “Soros was cautious about the market going into November and became more bearish immediately after Mr. Trump’s election, according to people close to the matter.” In retrospect, that clearly proved a mistake as the market rallied on expectations that Trump’s policies will boost corporate earnings and the overall economy, even if such expectations may end up being premature. To be sure, Soros wasn’t alone as many other experts had predicted a tumble for stocks in the wake of the election, but instead the Dow Jones Industrial Average has climbed 9.3%.
As a result, the WSJ reports that Soros incurred losses approaching $1 billion. Mr. Soros adjusted his positions and exited many of his bearish bets late last year, avoiding further losses, the people added.
The broader portfolio held by Mr. Soros’s firm performed better, posting profits before and after the election from long-held investments in sectors including financials and industrials, according to people familiar with the firm. Those gains helped Soros Fund Management gain about 5% on the year.
Meanwhile, Soros’ former protege, Stanley Druckenmiller, who publicly changed his dour outlook on the economy following the Trump election which he said would prove positive for stocks and the economy, did far better, “and racked up sizable gains, according to people close to the matter.”
Mr. Druckenmiller, who left Mr. Soros’s firm in 2000 and now invests his own money, took a very different stance on the presidential election.
Days before the election, Mr. Druckenmiller predicted to an investor that if Mrs. Clinton emerged victorious the stock market likely would rally initially but then would fall. Mr. Druckenmiller said if Mr. Trump won the election, the opposite result likely would occur—stocks first would tumble and then soar. Mr. Druckenmiller’s call was prescient.
Druckenmiller, who told CNBC a day after the election that he sold all his gold on the night of the election, and exited bearish positions, became bullish on certain sectors of the stock market, and said he was shorting bonds globally and expected the dollar to rally against the euro. These trades have paid off as Mr. Druckenmiller’s firm, Duquesne Family Office LLC, scored gains of more than 10% in 2016.
In October, Mr. Druckenmiller told Reuters that he backed Republican candidates for Congress in the hope of creating a “firewall” against Mrs. Clinton’s likely economic policies, including more government control of health care. He also said Mr. Trump had an “unstable personality,” and Mr. Druckenmiller added that he might not vote in the presidential election.
As Peter Thiel told the NYT last night, many of Trump’s former hedge fund foes turned quite friendly as a result of the market rally that followed: “There were hedge fund people I spoke to about a week after the election. They hadn’t supported Trump. But all of a sudden, they sort of changed their minds. The stock market went up, and they were like, ‘Yes, actually, I don’t understand why I was against him all year long.’”
Of course, if and when the market turns lower, Trump’s newly minted hedge fund friends, may rise again.