George Soros Loves Lehman Brothers (!)

George Soros is a complicated man. If you've ever read any of his books, you know what I mean; he's one-third Warren Buffett, one-third Karl Popper, and one-third UNICEF. It's quite an eclectic mix, one that can leave investors who follow his moves in a scramble to understand the method of his madness.

This is one of those situations.

Soros recently disclosed a sizable stake in Lehman Brothers (NYSE: LEH  ) , nearly 10 million shares. That might not be a huge surprise; Lehman has been clobbered to such a pulp that it's hard to justify its price, absent a looming collapse. Its current price, less than half of book value, is a fat discount from peers like Goldman Sachs (NYSE: GS  ) , Merrill Lynch (NYSE: MER  ) , and Morgan Stanley (NYSE: MS  ) -- perhaps rightfully so. Of course, one man's trash is another man's treasure, and Soros is scooping up shares he apparently sees as cheap.

But isn't this the same guy who said ...
Confused? So am I. Soros has been one of the most vocal critics of financial firms. The first page of his latest book warns: "We are in the midst of the worst financial crisis since the 1930s. In some ways it resembles other crises that have occurred ... but there is a profound difference: the current crisis marks the end of an era of credit expansion ..." Earlier this year, he described the threads of credit default swaps linking financial firms together as "a sword of Damocles that is bound to fall." Yikes.

That isn't the kind of language you'd expect to hear from someone bullish on a company like Lehman. Short of a complete turnaround in opinion, what else could possibly explain his move?

Two possibilities come to mind. Either this is a short-term trade Soros plans on ditching if Lehman makes a quick rebound (in fact, it already has -- shares are up more than 10% since bottoming out in July), or it's a bet that recapitalization moves will shore up Lehman's balance sheet enough to justify trading closer to its peers. As for the latter, some feel the extreme negativity that has annihilated Lehman's shares might be overblown, and that the hedges it has put in place to stabilize assets could mellow things out. Given the outrageous amount of negativity, any news that's slightly positive is bound to be significantly positive for Lehman's shares.

Don't get too excited here
Having Soros in Lehman's corner is a tremendous vote of confidence, but be careful here. If you're eager to follow Soros, it's probably better to read his outlook on financial companies, rather than follow his trading moves. He's voiced his opinion about their future, and it's terrible at best. If your only justification for owning Lehman is because Soros does, too, you might be setting yourself up for trouble. After all, he won't tell you when he plans on selling.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares of any of the companies mentioned in this article. The Fool has a multifaceted disclosure policy.


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  • Report this Comment On October 10, 2008, at 9:50 AM, smcecil wrote:

    Et tu, Motley Fool. You too are owned by Soros! And all his sites have the best SEO -- you want information on anything -- and you end up getting it from the mouth of Soros cronies first. So, if your not smart enough to keep digging for other information -- all you get is what Soros wants you to know -- and you fall into his trap.

    All over the Internet in mid August -- you could red about how much Soros loves Lehman -- and his suspiciously well puplicized and massive buy which made the Lehman stock soar.

    Then three weeks later the bank falls. Interesting. No, not so interesting or different -- this is what he does. He caused whole markets to crash for the purpose of furthering his ego-maniacal world view. He facilitates this by taking over the media, collapsing economies and buying election. Asia, the UK, Russia, South America -- and now our beloved once free US.

    Funny, if you try to look around to find out how Soros (and friends) ended up with the Lehman fall -- you can read the manipulative wording "Soros might have lost", "he likely lost" -- but try to find any numbers and facts publicized and you won't -- and Soros spokepeople declined to comment about their portfolio following the Lehman fall.

    This is what this guy does: control the media, destroy economies, buy elections -- seems like a simple enough formula. You'd think people would catch on.

  • Report this Comment On October 10, 2008, at 9:56 AM, smcecil wrote:

    Furthermore, he also manipulated the Democrats (who Soros owns and who control congress) to block and fixes for the housing crisis. How do I know this:

    1) He's a genius who predicts bubbles (in his own words and I have no doubt of it).

    2) He owns the Democrats (in the words of his moveon.org -- this is not me making it up).

    So, if you can predict bubbles wouldn't you have the people you control fix the bubble rather than block efforts to fix it and deny it exists.

    Why didn't he -- because he and his friends -- created the bubble and benefiteed from it -- then the caused it to break with perfect timing.

    This is what he does people. Read about financial crisis around the world over the past 20 years -- who's hands were in it -- who benefitted either monitarily or societally (he's able to swoop in and recreate societies as a result of these crashes) -- and often both.

    This is what SOROS DOES!! Wake up!

  • Report this Comment On October 10, 2008, at 10:01 AM, smcecil wrote:

    And another thing. How are we supposed to have faith in the markets?

    Now that I know that these massive omi-present, omniscient, omnipotent speculators (or whatever you want to call these characters) like Soros and his off-shore friends are manipulating the markets all over the world, how can I invest?!

    Knowing that all reason and logic I might have once tried to use in stock purchases is mute, when a guy like Soros can come in with one fell swoop and wipe out my hard-earned savings, my childrens' college fund, my retirment, my American dream. How can I ever trust again?

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