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Books : The Alchemy of Finance: Reading the Mind of the Market (Wiley Investment Classics (Paperback))
Rating: 
- Not all lead turns into gold
Probably this book went way over my head.
The one insight I think I got from it was that during the tech boom, many of the new products were appearing, not because of some fundamental increase in the rate of innovation brought on by the Web, but because of all the money pouring into startups because investors believed the Web would lead to such innovations for technological reasons. A phenomena Soros calls "reflexivity", I guess. But even without knowing that it seemed clear a boom was in progress that would eventually bust. But how to know when? It doesn't seem this book or Soros could tell you.
I hear Soros became a billionaire through his investments and that seemed well beyond a chance event, but I didn't understand anything in this book to explain how that happened. Speculations about global politics and finance, then a big dash of intuition, and then at times a gain, at times a loss. I don't follow in Soros's case why his gains exceeded his losses. There are others who don't believe in unbiased marketes, why didn't they similarly profit to such an extent. And just knowing that markets are biased, how does it tell you how to time? Perhaps Soros benefitted from adjusting his market positions quickly if his assumptions weren't confirmed by the market: would that help and to such an extent?
It's not clear to me that Soros' explanations in this book are closely related, if at all, to his successes. It may be helpful to be exposed to his mindset, if this book does that, but, after finishing it, it isn't clear how to apply what I've read. I won't not recommend this book, because I may very well be missing a lot of what it says. Other people's books may not make you a billionaire. But I haven't figured out whether this one will make me one or even allow me to pay for a new car. "The Alchemy of Finance" seems to be about bold gambling I wouldn't want to do with any money I may someday need.
Rating:
- Wizard of Finance
Soros explains here his key analytical principle of reflexivity - essentially a positive feedback loop - in the context of boom-bust cycles in financial markets and economies, and its applications in his extraordinarily successful "global macro" trading system during the 1970s, 80s, and early 90s.
He gives unique contrarian insights into our understanding of supposedly cut-and-dried economic and financial ideas, such as his trenchant denial of the efficient markets hypothesis and financial markets equilibria. He draws surprising links between economic phenomena which hitherto were supposed to be independent of each other, the best example being his emphasis on the propensity for bank lending to reflexively influence the collateral values of the financial assets which it finances in such a way as to lead to a boom-bust cycle.
That mainstream economists would quibble with Soros's ideas are to be expected, for economists are known for being unreasonably disputatious and uncommonly sensitive to outsiders' criticisms of their theoretical sacred cows. But in the analysis of market trends and dislocations, and trading opportunities, I know where I would put my money, given a choice between academic economists and Soros.
Success speaks for itself. Soros applied his theories so successfully that he became the most successful hedge fund manager ever, his flagship Quantum Fund generating an average annual return of 30%+ between 1969 and 1995.
One cannot but admire his tremendous courage, for example, in taking on the Bank of England and breaking its back, as it were, in his famous 10 billion dollar Sterling short trade in 1992 which netted him a cool billion, and made him a legend among traders and feared by central bankers worldwide. His honesty in admitting his missteps, and coolness with which he analysed his failures, is equally impressive, and sets an example for all professional investors.
George Soros is a not just a legend, but a genius with one of the finest analytical minds of his time. He elevated trading to a fine art, an alchemy of which he was an inimitable wizard.
- Not all lead turns into goldProbably this book went way over my head.
The one insight I think I got from it was that during the tech boom, many of the new products were appearing, not because of some fundamental increase in the rate of innovation brought on by the Web, but because of all the money pouring into startups because investors believed the Web would lead to such innovations for technological reasons. A phenomena Soros calls "reflexivity", I guess. But even without knowing that it seemed clear a boom was in progress that would eventually bust. But how to know when? It doesn't seem this book or Soros could tell you.
I hear Soros became a billionaire through his investments and that seemed well beyond a chance event, but I didn't understand anything in this book to explain how that happened. Speculations about global politics and finance, then a big dash of intuition, and then at times a gain, at times a loss. I don't follow in Soros's case why his gains exceeded his losses. There are others who don't believe in unbiased marketes, why didn't they similarly profit to such an extent. And just knowing that markets are biased, how does it tell you how to time? Perhaps Soros benefitted from adjusting his market positions quickly if his assumptions weren't confirmed by the market: would that help and to such an extent?
It's not clear to me that Soros' explanations in this book are closely related, if at all, to his successes. It may be helpful to be exposed to his mindset, if this book does that, but, after finishing it, it isn't clear how to apply what I've read. I won't not recommend this book, because I may very well be missing a lot of what it says. Other people's books may not make you a billionaire. But I haven't figured out whether this one will make me one or even allow me to pay for a new car. "The Alchemy of Finance" seems to be about bold gambling I wouldn't want to do with any money I may someday need.
Rating:
- Wizard of FinanceSoros explains here his key analytical principle of reflexivity - essentially a positive feedback loop - in the context of boom-bust cycles in financial markets and economies, and its applications in his extraordinarily successful "global macro" trading system during the 1970s, 80s, and early 90s.
He gives unique contrarian insights into our understanding of supposedly cut-and-dried economic and financial ideas, such as his trenchant denial of the efficient markets hypothesis and financial markets equilibria. He draws surprising links between economic phenomena which hitherto were supposed to be independent of each other, the best example being his emphasis on the propensity for bank lending to reflexively influence the collateral values of the financial assets which it finances in such a way as to lead to a boom-bust cycle.
That mainstream economists would quibble with Soros's ideas are to be expected, for economists are known for being unreasonably disputatious and uncommonly sensitive to outsiders' criticisms of their theoretical sacred cows. But in the analysis of market trends and dislocations, and trading opportunities, I know where I would put my money, given a choice between academic economists and Soros.
Success speaks for itself. Soros applied his theories so successfully that he became the most successful hedge fund manager ever, his flagship Quantum Fund generating an average annual return of 30%+ between 1969 and 1995.
One cannot but admire his tremendous courage, for example, in taking on the Bank of England and breaking its back, as it were, in his famous 10 billion dollar Sterling short trade in 1992 which netted him a cool billion, and made him a legend among traders and feared by central bankers worldwide. His honesty in admitting his missteps, and coolness with which he analysed his failures, is equally impressive, and sets an example for all professional investors.
George Soros is a not just a legend, but a genius with one of the finest analytical minds of his time. He elevated trading to a fine art, an alchemy of which he was an inimitable wizard.