George Soros and the Superbubble

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profette_IHB

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From the <em>NY Times</em>:



"At the age of 77, Mr. Soros, one the world?s most successful investors and richest men, leapt out of retirement last summer to safeguard his fortune and legacy. Alarmed by the unfolding crisis in the financial markets, he once again began trading for his giant hedge fund ? and won big while so many others lost.



Mr. Soros has always been a controversial figure. But he is becoming more so with a new, dire forecast for the world economy. Last week he rushed out a book, his 10th, warning that the financial pain has only just begun.



?I consider this the biggest financial crisis of my lifetime,? Mr. Soros said during an interview Monday in his office overlooking Central Park. A ?superbubble? that has been swelling for a quarter of a century is finally bursting, he said.



Mr. Soros, whose daring, controversial trades came to symbolize global capitalism in the 1990s, is now busy promoting his book, ?The New Paradigm for Financial Markets,? which goes on sale next month. An electronic version is already available online.



And yet this is not the first time that Mr. Soros has prophesied doom. In 1998, he published a book predicting a global economic collapse that never came.



Mr. Soros thinks that this time he is right. Now in his eighth decade, he yearns to be remembered not only as a great trader but also as a great thinker. The market theory he has promoted for two decades and espoused most of his life ? something he calls ?reflexivity? ? is still dismissed by many economists. The idea is that people?s biases and actions can affect the direction of the underlying economy, undermining the conventional theory that markets tend toward some sort of equilibrium.



Mr. Soros said all aspects of his life ? finance, philanthropy, even politics ? are driven by reflexivity, which has to do with the feedback loop between people?s understanding of reality and their own actions. Society as a whole could learn from his theory, he said. ?To make a contribution to our understanding of reality would be my greatest accomplishment,? he said.



<a href="http://www.nytimes.com/2008/04/11/business/11soros.html?_r=1&ref=business&oref=slogin#">more</a>
 
Soros has done a lot of good with his money over the years, fostering a lot of political change. But his legacy is going to remain that of a ruthless trader who chose personal gain over the welfare of nations because he can't resist taking advantage of a profit opportunity.
 
[quote author="Nude" date=1207981073]Soros has done a lot of good with his money over the years, fostering a lot of political change. But his legacy is going to remain that of a ruthless trader who chose personal gain over the welfare of nations because he can't resist taking advantage of a profit opportunity.</blockquote>


What is so bad about this? I mean, <a href="http://www.housingwire.com/2008/04/08/paulson-has-record-year-shorting-mortgages/">look at Paulson</a>, and you mean to tell me if you had the ability to do what he did... you wouldn't? I'm not saying it is the "right" thing to do, but our markets have always been about those who know how to take advantage of them. The securities acts of 1933 and 1934 were designed, and were basically written by an infamous family name, because he took advantage of his knowledge of the profit opportunity. Most have forgotten that part of the legacy, and IMO, that is the worst thing that family ever did. And yet, I would hesitate to profit from Kool-Aid drinking society. Er, wait... I already have.
 
[quote author="graphrix" date=1208011995][quote author="Nude" date=1207981073]Soros has done a lot of good with his money over the years, fostering a lot of political change. But his legacy is going to remain that of a ruthless trader who chose personal gain over the welfare of nations because he can't resist taking advantage of a profit opportunity.</blockquote>


What is so bad about this? I mean, <a href="http://www.housingwire.com/2008/04/08/paulson-has-record-year-shorting-mortgages/">look at Paulson</a>, and you mean to tell me if you had the ability to do what he did... you wouldn't? I'm not saying it is the "right" thing to do, but our markets have always been about those who know how to take advantage of them. The securities acts of 1933 and 1934 were designed, and were basically written by an infamous family name, because he took advantage of his knowledge of the profit opportunity. Most have forgotten that part of the legacy, and IMO, that is the worst thing that family ever did. And yet, I would hesitate to profit from Kool-Aid drinking society. Er, wait... I already have.</blockquote>
Soros is, first and foremost, a currency trader. Twice he has actively traded in order to weaken a nation's currency (Thailand and Britain) just because he was in a position to be able to do so. That is different than taking profit on one side or the other of a stock move. Soros, despite his claims, moves currency markets with a whisper because people follow him. He's openly hostile to the current administration, has published statements that he doesn't see the dollar remaining the world's currency, and is positioning his hedgefund to increase the pressure on the dollar. Paulson bet that that the bubble was going to pop, but he didn't do anything to make it happen. You might have profited from shorting stocks, but you couldn't force the stock price to change by putting on that trade. J.P. Morgan had cash when everyone else was broke, which he used to try to avoid a complete meltdown, but the return on that investment was realized until the 50's and he didn't do anything to precipitate the collapse. Contrast that with Soros, who can only make money by causing the change that will profit him, and "what is so bad" about him becomes perfectly clear.
 
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