Day Trading: Devil's Den or Golden Egg Hen?
- by Ricky Kumar, 3/11/1999     (Part 3 of 4)

The two best examples we have of a long-term investor and a day trader are institutional fellows Warren Buffett and George Soros. Both are well known, have accumulated sizeable wealth through investment and command the respect of the markets. The main difference between the two being that the former is known for operating a long term buy and hold strategy. Warren Buffett (maverick investor and CEO of Berkshire Hathaway), is the second richest man in the world and arguably the most successful investor ever. He made his substantial multi-billion dollar fortune by purchasing shares in companies with easily understandable business whose earnings were 'virtually certain to be materially higher' 5 or 10 years down the line. He bought and held stock in well-known companies such as Coca-cola and Disney. More importantly, though, he held through the good times and through the bad times. He ignored the stock market and the short-term ups and downs that are a feature of corrections and crashes.

Billionaire financier, George Soros on the other hand, is famous as the man who broke the Bank of England by betting against the UK Government to force the devaluation of the pound in 1992. He tends to trade currencies, takes a much shorter view (closer to the style of a day trader) and has done so with great effect. Recent events are another matter, however. Quantum, Mr. Soros' legendary hedge fund, is said to be suffering a disastrous year after it gambled that US Internet stocks would crash this spring. Instead they climbed to even higher levels and the fund lost well over $700m.

Only recently have Internet stocks started to retreat - but not enough to rescue the fund from huge losses. Quantum is also reported to have lost several hundred million dollars earlier this year when it bet that the euro would rise against other currencies. It's not surprising that funds under his group's management fell from as much as $22bn to $13bn. Even worse news came last month when hedge fund Quota (managed for Soros by Nick Roditi) plunged by over a fifth of its value after an unexpected surge in the yen against the dollar. All of these incidents have damaged Soros' reputation, have sent clients running every which way but loose. Of course, they've also prompted US media to publish a great many photographs of Soros looking unhappy.

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Ricky Kumar is an entrepreneur, a private investor and editor at the Kyric Network. Visit his site and share your financial perspectives:

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