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You Can't Become Rich In Your Pocket Until You Become Rich In Your Mind | ||||
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Hired as an analyst, George Soros worked at first primarily with foreign securitiesThe Blind Leading the Blind In leaving for New York, George Soros acknowledged to himself once and for all that he was serious about a career in finance. The dream of becoming a philosopher would have to remain... a dream. Moving to New York automatically gave him a competitive advantage over his colleagues. Even though he did not set the world on fire in London, he had acquired knowledge of European financial markets. While experts on that subject were a dime a dozen in London, the people on Wall Street had little experience or understanding of European markets. From the moment he arrived in the United States, Soros was tagged as an expert in the field. Soros made the journey to New York with $5,000 to his name. A relative had given him 1,000 British pounds and asked him to invest the sum on his behalf. The $5,000 represented Soross share of the profits from that investment. That same year, 1956, Tivadar and Elizabeth Soros left Hungary, joining their two sons in the United States. Tivadar opened an espresso stand on Coney Island. It could not have been a pleasant experience for the Great Survivor. The small business failed, and Tivadar retired. (In the early 1960s Tivadar developed cancer. His father was so poor that George Soros had to find a surgeon who would handle the case gratis.) Soon after arriving in the United States, Soros found work through a London colleague. One phone call to one of the partners at F. M. Mayer on Soross behalf and Soros was an arbitrageur. Though arbitrage grew into one of the hottest financial games of the 1980s, three decades earlier it was pretty dull. No one staked out large investment positions hoping to make millions of dollars from corporate takeovers. That came in the go-go eighties. In the humdrum 1950s, traders like George Soros bought and sold the same securities in different markets, hoping to exploit small price discrepancies found through meticulous research. In time Soros became an analyst offering advice to American financial organizations about European securities. As he had expected, few on Wall Street had any interest, let alone great instinct for, investment trends in Europe. The 1950s were long before the current era of global trading, long before American investors began to sense that there was money to be made on the other side of the pond. At the time Europeans dealt only with Europeans, and Americans talked only with Americans. This parochialism worked to Soross advantage. Aiding him too was the fact that Western Europes economies were slowly beginning to recuperate from the devastation wrought by World War II. Soros was a pioneer, ahead of his time. The things George was doing 35 years ago have only come into fashion in the last decade here, observed Stanley Druckenmiller, Soross right-hand man since 1988. Nobody knew anything about [European securities] in the early 1960s, Soros recalled with a smile. So I could impute any earnings I wanted to the European companies I followed. It was strictly a case of the blind leading the blind. It was not surprising that during this time Soros would meet and marry someone of European background. As a newcomer to the United States, he knew relatively few American women. He met his future wife, the German-born Annalise, in Quogue, Long Island, near Westhampton. They were married in 1961. Still working at F. M. Mayer, Soros lived in a small apartment with her. (The Soroses separated in 1978 and were divorced three years after that. They had three children. In 1983, Soros married again. His bride was Susan Weber, 25 years his junior. They were married in a civil ceremony in Southampton. Late in 1985, Susan gave birth to their first son, Gregory-making George a father for the fourth time. A second son, Alexander, was born in 1987.) In 1959, Soros moved to Wertheim & Co., where he continued to devote his energies to European securities. Fortunately for him, Wertheim was one of the few American firms that engaged in overseas trading. Soros remained one of only a handful of Wall Street traders who arbitraged between London and New York. One of his first successful forays into the foreign financial markets occurred in 1960. Soros realized that the shares of the German insurance firm Allianz had been selling at a large discount from its asset value, thanks to the appreciation in the companys stock and real estate portfolios. He wrote a paper recommending that others invest in Allianz. Morgan Guaranty and the Dreyfus Fund liked his ideas and started to purchase sizable blocks of Allianz stock. Allianzs bosses were not pleased, and they wrote to Soross superiors at Wertheim. Your man has come to the wrong conclusion, they essentially wrote. In fact, he had not. The value of Allianzs stock tripled. Soross reputation grew. Soros looked forward to continued good luck even after the new administration of John F. Kennedy took office in January 1961. Kennedy, as it turned out, would prove a serious stumbling block for young Soros. Kennedys new Interest Equalization Tax essentially prevented American investors from purchasing foreign securities. The change of policy was earth-shattering for Soros. But not enough to send him packing. On December 18, 1961, he had become a naturalized American citizen. He was in the United States to stay. Soros, now 33 years old, still teetered between a career as a philosopher and a career in investments. The Kennedy policy presented Soros with one more opportunity to try his hand at the thing he seemed to love most-thinking and writing about the fundamental questions of life. Beginning in 1961, Soros had been devoting his evenings and weekends to redrafting The Burden of Consciousness, hoping somehow to polish the manuscript sufficiently so that it could find a publisher. The experience was even more perplexing than when he had sat down to write the tome in the first place. Finally, in 1963, he sent the manuscript to Karl Popper. To win the masters approval would have been a feather in Soross cap. Having the well-known Popper on his side seemed a crucial step in getting the book published. Although he did not recall who Soros was, Popper still reacted warmly to the manuscript. When it became clear to the LSE philosopher that Soros had roots in communist Eastern Europe, however, Popper professed disappointment. He had been led to believe that Soros was an American; the philosopher was thrilled that someone who had not experienced totalitarian rule could understand what he was talking about. Discovering that Soros was Hungarian and had met the Nazis and communists firsthand, Popper thought less of the manuscript. He encouraged Soros to continue to think through his ideas. Soros never acknowledged what made him decide to shelve the writing project once again, though Poppers lukewarm response to the manuscript may have influenced his decision. Writing the book was, and always would be, a labor of love for Soros. He has never revealed whether he showed the manuscript to any publishers. All that he has said was that he found the book wanting and therefore it never saw print. So Soros returned to moneymaking on Wall Street. The muse, however, did not desert him entirely. In ensuing years, he relied on what he had poured into that small, unpublished book for the main ideas that went into later books that did get published. In 1963, Soros began working at Arnhold & S. Bleichroeder. One of the leading American houses trading in foreign securities, Arnhold was a natural home for Soros. With roots in Dresden, it was founded in the early nineteenth century. The man who hired Soros, Stephen Kellen, spoke with a thick European accent, as did other members of the firm. Though the street signs said Wall Street, Soros must some days have thought hed tapped his heels and was back in Europe. Kellen was high on Soros from the start. I always hope anybody I hire will be good, but he was clearly outstanding. Hired as an analyst, Soros worked at first primarily with foreign securities. With his network of contacts in Europe, and his ability to speak a number of European languages, including French and German, Soros was the natural person to venture into this realm. Arbitrage required both knowledge and courage, but most American traders, insular and unwilling to expand their horizons, lacked both. Not George Soros. Americans preferred selling American stocks. At least with American firms it was possible to pronounce their names. That was not the case with European firms. Soros not only could pronounce the names of the firms, he knew the owners. In 1967, he became director of the firms research department. Feeling his way on the American scene, trying to make his mark, Soros displayed a certain insecurity in dealing with colleagues. One of these, insisting upon anonymity, recalled a Soros habit of taking credit for trades that went well but passing off the blame to others for those that went poorly. Edgar Astaire, Soross London partner in 1994, knew him in the 1960s as a complicated, secretive fellow. You saw that he was clever, able, a very clear thinker-and very confident. You sensed that he didnt seem to be a man of particular stature. Hes a bit shy. You dont know what hes thinking. Hes a good psychologist. Hes quite perceptive... He was shy so he adopted a low profile. He made sure that others didnt get to know what his personality was like. He often says contradictory things for effect. He pontificates a lot of nonsense. He sometimes just says things for himself. Hes not loveable. Not loveable, but shrewd in his analysis of investments. Arthur Lerner, who worked with Soros in the 1960s at Arnhold & S. Bleichroeder, remembered the Soros touch in those days. Having graduated from Columbia University, Lerner in 1964 joined the Bank of New Yorks research department. One industry that Lerner tracked was trucking. That happened to be Soross beat at Arnhold, and occasionally Soros, a broker for the bank, would drop by to see Lerner and his boss, Mike Danko, to discuss what stocks to buy. Somehow, Lerner recalled, Soros always steered the conversation away from the narrow field of trucking toward the worldwide situation. George was always talking about the big picture. Doing well with foreign securities boosted Soross self-confidence. He began thinking about starting his own investment fund - and trying to make money for other people. |
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