Billionaire market speculator and philanthropist George Soros bought about $2 billion worth of European bonds from now-bankrupt MF Global — the same debt that pushed the firm to collapse, according to The Wall Street Journal.
When MF Global filed for bankruptcy, the firm sold part of the bonds but still had about $4.8 billion worth of them on its books, CNBC reports.
They were turned over to KPMG, MF Global’s bankruptcy administrator in London; they were then offered to big investors by MF Global’s London clearing house, LCH Clearnet, the Journal said, quoting a KPMG spokeswoman.
When KPMG offered the bankrupts firm’s European debt to a variety of big investors, most of them passed. However, they were able to find one investor willing to buy the bonds at rock-bottom prices: George Soros.
A spokesman for Soros declined to give details about the company’s positions.
“While our firm is always in the market, we have a policy of not disclosing details of our positions,” the spokesman told the Wall Street Journal.
KPMG told the Journal that the overwhelming majority of the European sovereign debt portfolio was liquidated by LCH before the second week in November, reports CNBC.
Does this signal that Soros is confident that the eurozone will recover from its financial crisis?
If it does, it would seem odd, considering that earlier this week he said that European debt crisis is putting the global financial system in a “self-reinforcing process of disintegration.”
Furthermore, borrowing costs for Italy and Spain recently hit record highs and interest rates on 10-year bonds of countries such as France and Belgium, which are considered more financially sound, spiked last month, reports the Huffington Post.
So what’s the angle? Why risk $2 billion in these bonds?
Keep in mind that this is not the first risky investment made by Soros. Recall the enormous profit he made by gambling on Britain’s Black Wednesday. Furthermore, Soros, who has an estimated net worth of $14.2 billion, returned an average 30.5 percent per year on his investments between 1969 and 2000, according to Seeking Alpha.
Clearly, he knows what he’s doing.
In fact, his reputation for picking winner and losers is so great, and so many investors watch and mimic his moves, that his investments have the power to adversely or positively effect the markets.
“He dumped almost all of his $800 million stake in gold in the first quarter of this year as some other hedge funds did the same,” reports the HuffPo. Of course, after this happened, “a commodities slump followed later in the year, which some blamed in part on reports that Soros was liquidating his holdings.”
Knowing that he has a tendency to take risks, and that his gambles usually pay off, one has to ask: what’s the angle? Does he really see a eurozone recovery?
Watch Soros discuss the “engine of growth,” how he thinks we can get out the global recession/depression, and how global warming poses a “threat to civilization”: