Soros vs. Robertson

by Kevin Muir


In the 1990s I was a geeky kid sitting on, what was then, by far the best equity desk in Canada.  It was an incredible seat to be educated in the finer details of trading.   And I was doubly fortunate because my superior, who was probably 7 or 8 years older than I, was being groomed by one of the greatest traders who has ever walked down Bay Street.  Sitting there, doing my menial trading duties, I listened and most importantly… I learned.  It was during this period I saw two legendary hedge fund titans battle in a way that still leaves me with awe.  This is the story of that showdown and why it cemented in my mind why George Soros is the greatest trader that has ever lived.

It all started one day when the big boss received a call ‘overhead’.  On an institutional trading desk most trades are communicated through what we call direct lines.  These lines instantly ring at the institutional client’s trading desk without having to dial the number.  They are in essence dedicated lines to your best clients.  The ‘overhead’ lines were regular numbers that were usually limited to calls from wives, girlfriends (hopefully not at the same time) and the occasional client who didn’t give you enough business to justify a direct line.

I remember this call distinctly because our big boss received so few calls.  He usually sat at the end of the desk and surveyed his kingdom.  Every now and then he would take a massive position, or steer our desk through some liability, but on the whole, he did more big picture thinking and supervising.  It was unusual for him to get a call, and even more so when he went into whisper mode so no one could overhear him.  The call went on for a bit and when it finally ended, the big boss got up and came over to my direct superior with instructions.

“Start buying Methanex,” he said.

“Sure, how much?” my boss replied.

“Just start buying everything you can,” was all he replied.

So my boss stamped a blue ticket and started buying every bit of stock he could.  This went on all day.  He took every offer he could see.  He avoided buying from directly from our clients because he knew with an order like this, any sales would quickly be offside as the price would continually rise as he kept buying it.  The numbers start adding up.  I think at 1.5 million he got a little worried and checked with the big boss.

“I have bought one and a half”, he said, “keep going?”

“Yup” was all that the big boss replied.

So my superior kept going…

At the end of the day he reported the fill to the big boss.  “I bought 3,212,000 at $8.5772.”

“OK.  Tomorrow, do it again,” came back.

“Again?  Jesus, how big is the order?”

“Let’s put it this way, I was told to buy and that the client would tell me when I started getting close,” the big boss responded.

So for the next few days I sat and watched as my direct superior bought every bit of Methanex he could lay his hands on.  I kept thinking that the order was due to be filled any moment, but I was wrong.

This went on for weeks.

At one point I mustered up the courage to ask my boss who the client was.  “Tiger” was all he responded, like it needed no more explanation than that.

I had no clue who “Tiger” was.  I was used to client names like Ontario Teachers or Investors Group – names I saw in my every day life.  Tiger sounded more like the name of an Indie rock band than a client.

In those days there was no easily accessible Google, so I went home and fired up my 24k modem and connected to AOL to find out more about Tiger.  I quickly realized it was the hedge fund of the legendary Julian Robertson.  Roberston was one of the original pioneers in the hedge fund industry.  Along with Michael Steindhart, Bruce Kovner and George Soros, Julian Robertson will forever be known as one of the founders of the hedge fund industry.

Over the next few months I kept waiting for the order to end.  But it didn’t.  We just kept buying it every day.  Relentlessly.  Some days we bought more than others.  But we bought it each and every day.

As you would expect, the stock went up… a lot.

Along the way we started doing some bigger block trades as we figured our traditional institutional clients now understood the nature of our buying (never ending).  Canadian clients would offer us big pieces up an eighth or a quarter (yes, back then we traded in eighths).  The big boss would check in with Tiger.

“We can offer you two and a half up a quarter, at 15 and a eighth,” the big boss would say into the phone.  Then slowly, he would nod to my boss, who would then buy everything he could up to the new price level and cross the stock from our seller.  After a few months it seemed like there were no more clients with any stock left to sell to Tiger.

We kept buying with no signs we were close to the much anticipated ‘we will tell you when you get close’ hint.

Then the call came.

Just like before, it came ‘overhead’ to the big boss.  Just like before, he went into whisper mode.  After the conversation, he asked my direct superior to tally what he had bought for the day and stop buying.

Here it is we all thought – Tiger has finally finished buying.

But no, we were wrong.  The call was from a new client.  This client was a short seller in size and wanted to do a big print.

Over the next few days we saw the big boss make several whispered phone calls to both clients.  Methanex started drifting lower as we were no longer buying it.

Then it happened.  After one of the calls, the big boss barked an announcement to the whole desk.

“We are going up on 11 and a half million Methanex at 20 and a quarter, we come out a better seller.  Yes, I know that is down a dollar and a half from the last trade.  Tiger is filled and done buying.  Quantum is the seller and has more to go!  It is a short sale, so we need to walk the quote down.”

Even I didn’t need to logon to AOL to figure out who Quantum was…  After watching this stock get rammed higher by Tiger for months, George Soros had decided that enough was enough.  Soros plugged Robertson.  He showed amazing insight to realize that shorting the stock down a dollar and a half from the previous price was still a great sale due to the fact that Tiger was largely responsible for the inflated quote.  It was a truly brilliant trade.

Methanex never again saw levels anywhere near the prices where Quantum made the initial sale.  It went lower for years thereafter.  We never did get the buy order when George covered the short, but I like to think that he bought it at the low…


submitted by Kevin Muir