When it comes to the name of the financial giant Soros, everyone knows it, and everyone knows it, and he and Warren Buffett can be listed as the two most famous financial players in the 20th century.
However, unlike Warren Buffett, who attaches great importance to value investing, Soros is famous for his superb short-selling skills.
Moreover, the target of his short selling is not one or two listed companies, but often buying and selling short on a currency, a country or even a region's financial market.
For example, Soros once sniped at the British pound and the Thai baht, which was a great success and became an important driver of the Asian financial crisis.
At that time, the international short-selling team led by Soros was unique, and governments around the world were talking about changing colors, for fear that they would become the next victim of this giant crocodile.
But such an unbeatable financial guru suffered two crushing defeats in the nineties of the last century, which forced him to swear to stay away from these two currencies from now on.
One of them is the renminbi, the reason is that Soros once wanted to short Hong Kong, but with the strong support of Chinese mainland, he touched a nose and finally withdrew with heavy losses.
The other, somewhat surprising, is the Russian ruble. What is even more surprising is that Soros did not fail in the process of shorting the ruble, but precisely lost all his money in the process of investing in Russia.
So, why did Soros, who has always been good at short-selling, choose Russia? Why did he suffer such a huge defeat in Russia? All this has to start with the collapse of the Soviet Union.
Invest in Russia
We know that after the collapse of the Soviet Union, the original republics, including Russia, experienced a very serious economic recession and financial turmoil, and investing in Russia at that time was definitely a high-risk and low-return thing.
But this is actually hindsight, in fact, when the Soviet Union was just dissolved, the Western world was generally optimistic about Russia's development prospects.
Because from the point of view of hardware conditions, Russia has inherited a large amount of Soviet legacy, with a vast territory, rich resources, a large population, developed education, and a remarkable level of science and technology.
Therefore, the West believes that the living conditions of the Soviet people in the past were not good, and it was completely a system problem, which limited the vitality of social development.
Now that the Soviet Union has collapsed and Russia has transformed into a Western system, with democratic dividends, of course, it will soar.
Moreover, there were no private or foreign companies in the Soviet Union before, and for international investors, this was a fertile land, and they were naturally willing to come in and invest. Among these investors is Soros.
In addition, in addition to business interests, there is another reason for Soros, and that is ideology.
Soros has been a very die-hard anti-communist since his youth, and in addition to making money, opposing communism has been his lifelong pursuit, and at some point, this idea has overridden economic calculations.
Soros has long financed dissidents in various socialist countries, which in the Cold War era had nothing to do with making money, and was entirely based on his personal philosophy.
Even if the Soviet Union collapses, Soros is not satisfied, he must also make sure that the system does not return, so he continues to invest in Russia, hoping that economic progress will completely kill those who are still nostalgic for the past.
So, not only did Soros invest, but he also spent hundreds of millions of dollars on philanthropy in Russia to help scientists, writers, and teachers survive the chaotic years that had just collapsed.
And in order to completely cut off the possibility of the rebirth of the Soviet Union, Soros was extremely supportive of Yeltsin. As early as 1993, Yeltsin's economic steward Chubais was in line with Soros.
At the time, Yeltsin was organizing a referendum on radical privatization reforms to remove legal obstacles to the sale of state assets.
In order to win the referendum, Chubais and Soros held a secret meeting.
Soros agreed to fund Yeltsin's election, and through Swiss banks, he secretly sent $1 million to Chubais's account to help Yeltsin advertise to silence dissenting voices. And Soros wants to use his philanthropic projects in Russia to expand his influence.
This kind of foreign capitalists' interference in the internal affairs of other countries, whether it is Yeltsin or Soros, is 100% illegal, but no one knew of such an underground deal at the time, and this is far from the last time Soros penetrates into Russian politics.
Yeltsin's subsequent economic reforms can only be described as a disaster, the Russian economic system was thrown into a mess, and a large number of Russians were reduced to abject poverty overnight.
Yeltsin's prestige was severely damaged by the poor economic situation, and in the months leading up to the 1996 presidential election, his approval ratings were in the single digits.
On the contrary, the support of the Russian Communist Party has been rising, and the leader, Zyuganov, has said that if he is elected, he will correct Yeltsin's mistakes in the past.
This makes Soros extremely worried, because what he fears most is the resurgence of the socialist system, and he even thinks that as long as Zyuganov is elected, Yeltsin will be "beheaded for public display", and the privatization reform and the "open society" that Soros has in mind will be in vain.
Therefore, how to help Yeltsin retain the presidency has become Soros's first priority.
Soros, along with Russia's seven oligarchs, gave hundreds of millions of dollars to Yeltsin's campaign to help them bribe journalists, hype up, and smear and slander their opponents.
With the blessing of money, Yeltsin and others tried their best to come up with various methods, and in the end they turned defeat into victory and were successfully re-elected.
But just as Soros and his Russian friends were celebrating, a crisis was looming.
Robber capitalism
As we all know, Russia had seven oligarchs in the nineties, and these oligarchs bought state-owned assets at ultra-low prices through their networks, and all of them made a lot of money.
Soros knows all these oligarchs, and even friends with one or two of them.
And for Soros, the Russian oligarchs' means of making profits can be said to be an eye-opener for him.
For example, Berezovsky, the head of the seven oligarchs, was ready to buy Siberian Oil Company at auction in 1995, but he didn't have that much cash in his pocket, so he went to New York and asked Soros for $10 million to $15 million with a thick pile of documents.
Berezovsky told Soros that he would win the bid for almost $100 million.
But in Soros's view, buying the huge Siberian oil company for a mere $100 million is a dream. For Soros, this is a meat bun beating a dog and never going back, so he said to Berezovsky, "I can't lend you a dollar."
But the result surprised Soros, on the day of the auction, the starting price of the oil company was 100 million US dollars, and Berezovsky only managed to win it with 300,000 more. A few years later, the company was worth more than $1 billion.
Needless to say, it is Berezovsky's Kremlin network at work. But Soros has also been up and down in the business world for decades, and he has really never seen such an unscrupulous way of playing, which is not only to break through the upper limit of imagination, but also to break through the bottom line of morality.
And this is not an isolated case, the seven oligarchs basically follow the same method, looting all kinds of high-quality assets in Russia.
Especially after Yeltsin was elected for the second time, the oligarchs who believed in their own merits were even more lawless, ugly in appearance, and inferior in means, so that even Soros couldn't help but criticize a few words.
"Russia moved from an excessive Soviet system to excessive liberal capitalism, or rather, to bandit capitalism," he said. ”
Regarding the Russian oligarchs, Soros said: "Their approach is primitive and insatiable. ”
But we know that capital is profit-seeking, and although Soros despises this practice, the Russian friends are making great progress, which eventually stimulates Soros to play this auction game together.
In 1997, Soros accepted the invitation of the oligarch Potanin and shelled out a huge sum of $980 million to buy the Russian Communications Investment Company, which was being auctioned.
But the situation in Russia changed subtly at this time.
At that time, the oligarchs had already aroused the anger of the heavens and the people, including the Yeltsin government, who were extremely dissatisfied with their greed, especially the oligarchs openly and secretly revealed a tendency to seize the power of the state, which made the officials even more angry.
In addition, there are also contradictions within the oligarchs, this communication investment company to be auctioned, in addition to Potanin, is also favored by another oligarch Gusinsky, the two sides are deadlocked, and no one is willing to back down.
Yeltsin's chief butler Chubais just took advantage of this opportunity to sit on the mountain and watch the tiger fight, resolutely disagreeing with the coordination behind the scenes, and must let the two sides enter the bidding process and fight for a victory or defeat with real money.
After that, the news of the auction became more and more hyped, and the whole of Russia was watching with bated breath to see who would be the final winner, and who would not be able to bear the pressure and admit defeat.
At this point, it is no longer a simple business competition, but a pinnacle battle for both sides to gamble on reputation.
So the two of them are trying their best to pull investment everywhere, for fear that the other party's final offer will be higher than their own, and as a result, no one cares about how much the communication investment company is actually worth.
Soros hardly knew about these inside information in advance, otherwise he would have gotten out as soon as possible with his shrewdness, instead of continuing to enthusiastically help Potanen attract a large number of international capital investments.
In the end, Telecom Investments started at $1.2 billion, and Potanin and Gusinsky, with one bidding $1.87 billion and the other $1.71 billion, both set a record for the auction of Russian assets.
But it turned out that the company was simply not worth that much money, and Potanin and Soros simply couldn't find a second buyer willing to take over, which led to their loss of money. Soros later regarded this auction as the worst investment of his life.
But what happened later was even more than Soros expected.
Because of this auction war, the contradictions between the oligarchs and the government, between the oligarchs and the oligarchs, completely broke out.
On the one hand, led by Berezovsky, they believed that Potanin won the auction because of Chubais's favoritism, so they began to launch a fierce attack on them.
On the other side, Chubais was not a fuel-efficient lamp, and immediately fired back, and the two sides were at loggerheads for a while, and the fight was inseparable.
And although Soros suffered heavy losses in this auction, his pattern is much higher than that of the oligarchs. He advised Berezovsky to stop attacking each other, saying that with his current fortune, he was rich enough, so why bother to act so rashly?
Berezovsky, on the other hand, told Soros that it was not a question of whether to make money or not, but a question of "struggle", and either Berezovsky would destroy them or "be ruined by them."
In the end, Soros could only lament: "There is no way to turn a robber capitalist into a legitimate capitalist." ”
Gloomy exit
Soros was deeply helpless with his oligarchic friends, but he still maintained a glimmer of expectation for the Russian government at that time.
Because from 1997 onwards, the Yeltsin government seemed to have some breath of reform.
In addition to the aforementioned Chubais's struggle against the oligarchs, the young reformist politician Nemtsov was promoted to deputy prime minister.
From the very beginning, Nemtsov's own goal was to eliminate "bandit capitalism". From the moment he took office, he began to crack down on secret transactions and collusion between officials and businessmen, and for this reason he did not hesitate to require all senior officials to disclose their income.
Chubais and Nemtsov also intend to abolish "chartered banks" and demand that the oligarchs stop their old brutal money-making methods and compete with each other in an open and transparent environment.
Soros admired the attitude of the reformers, so when Nemtsov personally invited him to expand investment, Soros readily agreed, and his support for the government did not stop there.
In mid-1997, the Russian government was so short of cash that it could not even afford to pay the salaries and pensions of civil servants. In this case, it was Soros who directly took out hundreds of millions of dollars in his personal name to solve the government's urgent needs.
At that time, Soros's total investment in Russia had reached $2.5 billion, making him the largest private investor in Russia by the West. At the same time, there was also a huge influx of Western investment into Russia, and they were attracted by the myth of the oligarchs getting rich and couldn't wait to come in and get a piece of the pie.
It turns out that in the face of amazing profits, even professional investment companies will be carried away. They no longer carefully evaluate every transaction, but think that what they buy is what they earn, and a lot of hot money enters the Russian market.
But this financial boom has caused Russia's inflation rate to soar, the ruble has begun to depreciate sharply, and the government has been in a state of making ends meet.
High inflation and the depreciation of the ruble have left the government with no confidence to start the printing press, so it has resorted to short-term bonds to raise funds. And because the Russian government is so credibility that it can only attract investors with high interest rates.
As a result, a vicious circle was formed, in which the more you borrow, the poorer you get, the poorer you borrow, and in 1997, more than 90 percent of the government's revenue had to be used to repay debts.
The leak coincided with overnight rains, the Asian financial crisis erupted, oil prices plummeted, and foreign investors raced to demand that the Russian government cash in on its bonds. As a result, the government found that the new bonds could no longer be repaid, and in 1998, Russia's debt crisis exploded, and billions of dollars in arrears became completely rotten.
The national economic crisis has reappeared, and all investors are panicking, stomping on each other and trying to flee Russia.
Soros was equally anxious at this time, contacting the U.S. Treasury Department, making phone calls, soliciting international aid everywhere, and trying to stop the economy from collapsing — not only for Russia, but for himself.
In August 1998, Soros published an open letter in the Financial Times in vain, calling on Western countries to inject $15 billion as soon as possible. Moreover, he realized that it was no longer possible to protect the ruble and the economy, so he called on Russia to take the initiative to promote the depreciation of the rupee, so as to obtain more reasonable support for the dollar.
But the distress letter did not ask for help, but only fueled panic in the market. On that day, the Russian stock market plummeted, and people lined up in front of the banks, all wanting to exchange rubles for dollars as soon as possible.
After all, no one can stop the crisis, and the free fall of the economy has left investors from all over the world with no return, and Soros finally withdrew from the Russian market.
Later, according to the media, Soros lost as much as $2 billion in this crisis, and his colleagues who were closer to him said that they did not lose so much, mainly in the communications investment company lost hundreds of millions of dollars.
As for how much he lost, Soros himself never made it clear. It was only at the end of the 20th century that when he announced his withdrawal from Russia, he stated that his "mission", after donating hundreds of millions of dollars to Russia in the 90s, "was over."