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The Thesis
Soros identified that several Asian currencies were overvalued and pegged at unsustainable levels, applying the same framework he used against the British pound five years earlier.
The Story
In 1997, George Soros and the Quantum Fund applied the same analytical framework that had broken the Bank of England to the overvalued currencies of Southeast Asia. Several countries — Thailand, Malaysia, Indonesia, South Korea — maintained currency pegs that were increasingly difficult to defend as capital flowed out and current account deficits widened. Soros built short positions against the Thai baht and other regional currencies.
When Thailand was forced to float the baht in July 1997, triggering the Asian Financial Crisis, Soros's fund profited handsomely — reportedly earning over $750 million. The crisis spread throughout the region as currency pegs collapsed one after another. While Soros was vilified by some Asian leaders (Malaysian PM Mahathir called him a "moron"), the fundamental analysis was sound: unsustainable pegs eventually break, and investors who identify them early can profit from the inevitable adjustment.
Key Insight
When a trade thesis works in one market, look for the same pattern elsewhere — unsustainable currency pegs share the same structural vulnerabilities regardless of geography.
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See how Glen Bradford applies these principles to his own investing. Long Fannie Mae & Freddie Mac junior preferred — conviction meets patience.