>From: Louis Proyect <lnp3 at panix.com>
>Reply-To: marxism at lists.panix.com
>To: marxism at lists.panix.com, pen-l at galaxy.csuchico.edu
>Subject: "The music has stopped but people are still dancing"
>Date: Sat, 29 Apr 2000 09:23:00 -0400
>
>New York Times, April 29, 2000
>
>Huge Losses Move Soros to Revamp Empire
>
>By DANNY HAKIM
>
>After absorbing huge losses in recent weeks, the financier George Soros
>said yesterday that he was reorganizing his investment empire and would
>abandon many of the high-risk investment techniques that made him a
>billionaire many times over and rewarded his wealthy investors handsomely.
>He also warned investors who stick with him to expect lower returns.
>
>With bets that went sour on technology stocks and on Europe's new currency,
>the five funds run by Soros Fund Management have suffered a 20 percent
>decline this year and, at $14.4 billion, are down roughly a third from a
>peak of $22 billion in August 1998.
>
>In a letter sent yesterday to shareholders and at a news conference, Mr.
>Soros said that his two top money managers would leave their posts shortly.
>Stanley F. Druckenmiller, the manager of Mr. Soros's flagship $8.2 billion
>Quantum Fund since 1989, will retire, as will S. Nicholas Roditi, manager
>of the $1.3 billion Quota Fund. Mr. Soros, who is 69, also said he would
>reorganize Quantum into a group of smaller funds and change his investment
>style to eliminate some of the risk and reduce the potential for reward.
>
>"Maybe I don't understand the market," Mr. Soros said at the news
>conference. "Maybe the music has stopped but people are still dancing."
>
>For his own part, he said: "I am anxious to reduce my market exposure and
>be more conservative. We will accept lower returns because we will cut the
>risk profile."
>
>The moves were further signs of the turmoil affecting financial markets and
>the inability of once-storied money managers to prosper amid the
>volatility. At the end of March, Julian H. Robertson Jr., 67, chairman of
>the Tiger Management investment company, railed that "we are in a market
>where reason does not prevail" and announced that he was dismantling his
>fund group after eschewing technology stocks and sustaining significant
>losses.
>
>Unlike Mr. Robertson, Mr. Druckenmiller, 46, made an aggressive move into
>technology stocks in mid-1999 after facing a decline of about 20 percent
>early last year. But in the sharp slide of the technology-heavy Nasdaq
>composite index this month, Mr. Druckenmiller still had many of those bets
>in place.
>
>"I screwed up; I overplayed my hand," said Mr. Druckenmiller, whose Quantum
>Fund has fallen 22 percent this year, through Wednesday. "I should have
>sold in February."
>
>In addition to the damage from technology bets, which included Microsoft,
>Sun Microsystems and Qualcomm among others, the Quantum Fund was wounded by
>currency bets, Mr. Druckenmiller said. The bets, according to one expert,
>essentially took the view that the euro would perform well against the
>dollar, an assumption that proved wrong. Mr. Druckenmiller said he had been
>jettisoning his positions over the last three to four weeks, and one top
>money manager, Lawrence A. Bowman, who runs the $5 billion Bowman Capital
>Management, said that such selling of Quantum's technology positions
>contributed to the recent slide of technology stocks.
>
>"You can't sell a couple billion dollars' worth of tech stocks without
>impacting the market," Mr. Bowman said. "We've heard that they have
>liquidated 80 percent of their positions."
>
>(clip)
>
>Yesterday, Mr. Soros was questioning whether the vicissitudes of the modern
>market were transforming the hedge fund industry in ways that made it less
>practical to run a so-called macro fund, which is free to use a wide
>variety of financial instruments in any area of the world.
>
>"A large hedge fund like Quantum Fund is no longer the best way to manage
>money," Mr. Soros wrote in his letter to shareholders. "Quantum is far too
>big and its activities too closely watched by the market to be able to
>operate successfully."
>
>Still, do not expect Mr. Soros's Quantum Endowment to be a so-called
>widows-and-orphans fund that caters to risk-averse investors. One reporter
>at the news conference asked if the tamer Quantum Endowment would function
>more like an annuity, a low-risk investment sold by the insurance industry.
>The idea elicited a laugh from the otherwise sober Mr. Druckenmiller.
>
>"For God's sake," he said, pointing to his boss. "This is George Soros."
>
>
>Louis Proyect
>Marxism mailing list: http://www.marxmail.org/
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