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Beware of Guru Worship – George Soros Edition

Here’s an article in the Wall Street Journal citing how bearish George Soros is. Which is strange because I feel like I’ve read that somewhere. Many times. Over many years. So I went into the Google time machine and found that this article has been written in varying forms multiple times over the last 3+ years. Here’s one from 2013, from 2014, from 2015, from January 2016 near the market lows and then again yesterday. Yes, I read way too much financial news to be able to remember something like that. But what’s weird about this is that George Soros can’t really be that bearish based on the publicly available information we have.¹

First, Soros has largely stepped away from running Soros Fund Management. He’s apparently stepped into a more active role at times over the years, but I don’t think we can say “George Soros is bearish” because his fund does certain things. His fund is run more like a team unit these days so we have to question any citation of “George Soros” being too involved in anything with the fund.

More importantly, there’s no way to tell how the Soros fund is actually positioned. We’re getting a small glimpse into the portfolio from the public 13-F filings, but we have no idea what the derivative and other positions might say about the fund’s net exposure. All we see is the stock and option positions related to those positions. From what we can tell it looks like Soros Fund Management has at least a 9.5% position in puts on SPY, but is largely long individual stocks. From this we only know that Soros is net long with a fairly substantive hedge via the puts. So, a more accurate headline for all of these articles might have been:

“George Soros appears to be net long, owns a substantial hedge against the long portfolio, but we really don’t know and this information is probably useless to you.”

Of course, that doesn’t sell newspapers so that isn’t gonna work. Perhaps this headline from Daniel Lin works:

In all seriousness, the key lesson here is that we need to be very careful about how much we read into news headlines about market gurus. It’s very easy to get swept up in the idea that a wealthy investor knows more than the rest of us and that we should follow their disclosed moves as reported and after the fact. The financial media loves to use big names to grab headlines and page views. But in many cases you’re not getting the full story about what this investor is doing. And following their supposed positioning could lead to bad decisions and unnecessarily poor performance.

¹ – Note that I am not criticizing Soros here. I am just pointing out that Soros has probably done nothing worthy of criticism here. We simply don’t know how bearish or bullish he actually is based on his recent comments and publicly available information.