George Soros - The Alchemy of Finance (1987)

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Economics seeks to be a science. Science is supposed to be objective and it is difficult to be scientific when the subject matter, the participant in the economic process, lacks objectivity.

George Soros
Fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values

George Soros
I fancied myself as some kind of god or an economic reformer like Keynes

George Soros
The act of lending can change the value of the collateral

George Soros
Short term volatility is greatest at turning points and diminishes as a trend becomes established

George Soros
If we carry this line of argument to its logical conclusion, the meaning of life consists of the flaws in one's conceptions and what one does about them. Life can be seen as a fertile fallacy.

George Soros
The generally accepted view is that markets are always right — that is, market prices tend to discount future developments accurately even when it is unclear what those developments are. I start with the opposite view. I believe the market prices are always wrong in the sense that they present a biased view of the future.

George Soros
Money values do not simply mirror the state of affairs in the real world; valuation is a positive act that makes an impact on the course of events. Monetary and real phenomena are connected in a reflexive fashion; that is, they influence each other mutually. The reflexive relationship manifests itself most clearly in the use and abuse of credit.

George Soros
Making an investment decision is like formulating a scientific hypothesis and submitting it to a practical test. The main difference is that the hypothesis that underlies an investment decision is intended to make money and not to establish a universally valid generalization.

George Soros
Unfortunately, the more complex the system, the greater the room for error.

George Soros
The only thing that could hurt me is if my success encouraged me to return to my childhood fantasies of omnipotence - but that is not likely to happen as long as I remain engaged in the financial markets, because they constantly remind me of my limitations.

George Soros
The truth is, successful investing is a kind of alchemy.

George Soros
Once a trend is established it tends to persist and to run it's full course.

George Soros
The concept of a general equilibrium has no relevance to the real world (in other words, classical economics is an exercise in futility).

George Soros
My approach works not by making valid predictions but by allowing me to correct false ones.

George Soros
I would be lying, however, if I claimed that I could always formulate worthwhile hypotheses on the basis of my theoretical framework. Sometimes there were no reflexive processes to be found; sometimes I failed to find them; and, what was the most painful of all, sometimes I got them wrong. One way or another, I often invested without a worthwhile hypothesis and my activities were not very different from a random walk.

George Soros
I made two major discoveries in the course of writing: one is a reflexive connection between credit and collateral; the other is a reflexive relationship between regulators and the economies they regulate

George Soros
As I discovered, there is a great deal of similarity between a boom-bust process in the financial markets and the rise and fall of the Soviet system.

George Soros
If I had to sum up my practical skills, I would use one word: survival. And operating a hedge fund utilized my training in survival to the fullest.

George Soros
It is credit that matters, not money (in other words, monetarism is a false ideology).

George Soros
Economic theory is devoted to the study of equilibrium positions. The concept of equilibrium is very useful. It allows us to focus on the final outcome rather than the process that leads up to it. But the concept is also very deceptive. It has the aura of something empirical: since the adjustment process is supposed to lead to an equilibrium, an equilibrium position seems somehow implicit in our observations. That is not true. Equilibrium itself has rarely been observed in real life — market prices have a notorious habit of fluctuating.

George Soros