Words With Grace Praise All

30Nov/16Off

Despite Clinton loss, you can still bet on George Soros

George Soros is one of the greatest financial geniuses of modern times. He's amassed a fortune of nearly $25 billion starting from virtually nothing. For someone who became one of the richest men in the world, he toiled for a surprisingly long time without great success. For much of his early adulthood, he even had little interest in becoming wealthy. He sought only to make $500,000 so he could pursue a career in academia.

From bankrupt to the Bank of England

Unlike many who ultimately make it to billionaire status, George Soros had no family connections. His father was a modestly successful, middle-class lawyer but ultimately had no effect on the younger Soros' career.

After graduating from the London School of Economics, Soros found it difficult to land his first financial job. For a number of years he grinded out a living as a low-end salesman. At 24, and a few years out of college, he finally landed his first financial job. For the next sixteen years, he bounced from job to job, often taking far more interest in his study of philosophy than of the exigencies of work. By 1973, Soros had finally established his own true hedge fund. But with just $12 million in capital, it was a small-time affair.

He focused his investing strategies around a unique philosophy, elaborated by his mentor Karl Popper, upon which Soros had labored to expand. He called this philosophy reflexivity. In essence, reflexivity postulates that markets are made up of agents whose decisions are not always rational. In fact, those agents’ decisions are often affected by the decisions of other agents, like themselves, who are participants in the markets. This can lead to feedback loops such as bubbles and crashes where movements in prices become totally decoupled from the underlying economics of the assets being traded.

In short, reflexivity can be stated as "markets aren't always rational". This simple observation may seem almost unmentionably obvious and reflects the thoughts of many successful investors from Warren Buffet to James Simons. However at the time, it ran counter to the prevailing wisdom in academic departments around the globe that markets are always efficient.  This obviously flawed formulation leads to so many wrong conclusions that, once Soros devised a system to exploit them, he was able to post perhaps the best returns of any investor in history over a forty-plus year period.

Soros went on to make legendary trades including the one for which he is credited with "breaking the Bank of England". This single trade yielded him a one billion pound profit in a single day. It's difficult to calculate his actual returns because he's given away so much money. But he's widely acknowledged by his peers as among the greatest investors ever.

George Soros is believed to have invested in Hillary Clinton's campaign despite serious misgivings about her chances of success. It was a purely ideological play. So even considering his $25 million investment in the doomed Clinton campaign, you can bet on Soros to keep racking up big wins on whichever contests he focuses his immense talents.

Read more:
@georgesoros
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