With world financial markets roiled by developments including a rise in American interest rates and the breakdown of trade talks between Washington and Tokyo, some of the world's biggest and savviest investors have been knocked down a notch or two.
Among them is one of the biggest and savviest of all, financier George Soros.
Soros, 63, who has developed a reputation as an investment seer for his successful bets on currencies, gold and real estate, suffered a $600-million loss on Feb. 14, the first full day of trading after trade talks between the United States and Japan collapsed. His mistake was that he bet the wrong way on the direction of the Japanese yen's value relative to the dollar, his spokesman said Friday.
The loss, which stemmed from speculation on the Japanese yen, on stocks and on bond prices, erased nearly 5 percent of the $12-billion of assets held by Soros' Quantum Group, an intensely private collection of investment funds that are registered overseas and are closed to U.S. individuals and institutions. The losses, which occurred in six trading and real estate investment funds, ended a remarkable winning streak for Soros, of New York.
Soros' opinions have been so respected that his public predictions about currency movements have become self-fulfilling in several instances, even though he devotes most of his time to running his charitable foundation.
Much of the responsibility for strategy and day-to-day trading is in the hands of Stanley Druckenmiller, Soros' No. 2 man. It was in an interview with The Times of London, published Thursday, that Druckenmiller first confirmed the $600-million loss that had been rumored.
Druckenmiller and the Soros organization said they decided to talk about the loss because the amounts mentioned in rumors had varied widely.
Soros has been trading recently on a belief that the yen would continue to fall in value against the dollar, a strategy that had generally proved correct. But then he was caught unexpectedly in the fallout from the breakdown of trade talks between Japan and the United States on Feb. 11. When markets reopened the following Monday, the yen, which had been falling, suddenly surged as traders concluded that the United States would seek to push up the yen as a way to narrow the American trade deficit with Japan.
The Japanese currency closed in New York that day at 102.20 yen to the dollar, a change of nearly 5 percent.