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Tuesday, July 26, 2011

George Soros "Retires" from Hedge Fund Business



In a surprising announcement this week, billionaire George Soros – equity manager of one of the largest hedge funds in the world – said he will be returning his investor’s money and changing his hedge fund to a private fund for himself and his family.

Soros’ decision is primarily due to new regulations which will make hedge funds more transparent and trade-restricted than they used to be.

Like most great investors and traders, Soros spends a lot of time contemplating human psychology and logical thinking (or lack thereof), and making big bets based on his analysis. Recently, Soros noticed that although the price of gold had been rising for weeks, silver had not experienced the same boom. Recognizing that at some point silver would have to jump as well, Soros bought large quantities; and, he was right. After a parabolic rise in the price of silver Soros sold out, partially causing the subsequent drop.

Soros is for some a shadowy and mysterious figure. He has one of the most extreme cases of clinical narcissism I’ve ever seen, and in fact he recognizes this. Though he doesn’t actually say “I have a narcissistic disorder,” he does describe himself as having “messianic tendencies” (i.e. the tendency to think he’s god). To his credit, he realizes that this is a belief he should try to suppress, even if he is an internationally famous billionaire.

Soros’ main contribution to the world of investing is a semi-philosophical concept called “reflexivity.” In a nutshell, reflexivity is the idea that while facts and circumstances generally create results, expectations and interpretations of facts can create results of their own. For example, even if a company is in good financial condition, if everyone believes the company is on the verge of bankruptcy they will sell off the stock and cause the price to plummet, thereby causing the financial instability they were worried about in the first place. According to Soros, understanding reflexivity is key to making superior investment decisions: I don't disagree.

These days, Soros gives a great deal of money to philanthropic organizations, mainly those that promote human rights, logical thinking and open-mindedness.

Soros’ logical demeanour and flexible way of thinking tends to drive doctrine-following and/or illogical people absolutely insane. Dorky talk-show host Glenn Beck, for instance, considers Soros a mortal enemy (Beck calls Soros “Spooky Dude,” mocking his Eastern-European accent in a Dracula-like fashion). The fact that Beck regards himself as Soros’ intellectual equal only adds to the hilarity.

Hopefully, retiring from public investing will give Soros more time to write and lecture. If so, I am looking forward to it.

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Lecture on Reflexivity (starts at 16:45 - prior is introduction).

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See also:

Glenn Beck "exposes" George Soros


Jon Stewart mocks Glenn Beck