Soros says rebound a bear-market rally

Thu May 22, 2008

By Laurence Fletcher

LONDON (Reuters) - Billionaire hedge fund manager George Soros said on Wednesday the current rebound in stock markets is only a bear market rally because monetary authorities are unlikely to be able to handle the credit crisis.

Soros told a seminar at the London School of Economics, "The prevailing market opinion is that this crisis is like previous ones. ... Markets have been rallying on that. But I think it's actually just a bear market rally based on a false conception the authorities can handle all these crises.

"This time the ability of the authorities to handle the crisis is constrained -- they'll not be able to avoid a recession," he said.

His comments come after a rebound in global stock markets, helped by the takeover of U.S. investment bank Bear Stearns (BSC.N: Quote, Profile, Research) in March by JPMorgan Chase & Co (JPM.N: Quote, Profile, Research), which averted a feared Bear bankruptcy. The FTSE 100 .FTSE, for example has risen from less than 5,500 in March to around 6,200 currently.

Hungarian-born Soros, famous for a speculative attack on the Bank of England that made him more than $1 billion, said that while it was unlikely the global economy would head into a Japan-style downturn, a pick-up in growth at the end of this year was similarly unlikely.

"Certainly the idea that the economy is going to recover (at the end of this year) is totally unrealistic," he said.

According to Alpha Magazine, Soros earned $2.9 billion (1.5 billion pounds) last year after his Quantum Endowment fund returned 32 percent.

© Thomson Reuters 2008