The Hindu Business Line : Investment Nuggets

George Soros is considered the greatest hedge-fund investor in modern times and a philosophical speculator, whose expertise mainly lies in currency speculation. He is known as "The Man Who Broke the Bank of England" after he bet against the Pound Sterling in 1992. In 2000, Soros retired from active investing.

The Quantum Fund managed by him was generally recognised as one of the most successful investment funds ever, returning, on an average, 31 per cent annually throughout its 30-year history (up to 1999).

Once we realise that imperfect understanding is the human condition, there is no shame in being wrong, only in failing to correct our mistakes.

Stock market bubbles don't grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.

The more the theory of efficient markets is believed, the less efficient the markets become. Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected. The markets are always on the side of exuberance or fear. Right now greed has the better of it, which is rather nice as long as it doesn't get out of hand.

This asymmetry in the treatment of lenders and borrowers is a major source of instability in the global capitalist system and it needs to be corrected.

In my old age, I have become somewhat conservative ... But we will probably have a more mediocre performance because of the multi-manager structure because, to some extent, managers can cancel each other out.

I expect by '07, there will be a significant decline in US consumer spending, and I don't see what will take its place, because it is so important as the motor of the world economy.

It's not whether you're right or wrong that is important, but how much money you make when you're right and how much you lose when you're wrong.

The worse a situation becomes, the less it takes to turn it around and the bigger the upside.

I believe we are currently in the midst of a gigantic real-estate bubble. It was caused by the determination of the Federal Reserve Bank not to allow a stock market decline in 2001 to turn into a self-reinforcing rout. The federal funds rate was lowered to 1 per cent. Mortgage institutions encouraged mortgage holders to refinance their mortgages and withdraw the excess equity. They lowered their lending standards and introduced new products such as adjustable rate mortgages (ARMs), "interest only" mortgages, and promotional "teaser rates". All this encouraged speculation in residential housing units. House prices started to rise at double-digit rates. This served to reinforce speculation, and the rise in house prices made the owners feel rich; the result was a consumption boom that has sustained the economy in recent years. Again, the bubble can be attributed to a short-circuit between the value of assets and the act of valuation. This short-circuit is called the wealth effect. (Read more about this in his latest book "The Age of Fallibility")

More Stories on : People | Investments | Stock Markets | Young Investor

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page