WSJ Interview: George Soros

Saturday, June 21, 2008 | 09:38 AM

Interesting interview with George Soros:

WSJ: You argue that the crises we've experienced in the past 25 years have been, in retrospect, "testing events" that convince us the system is stable, encourage us to take even bigger risks, leading to one, cataclysmic collapse. Could this be just another testing event?

Mr. Soros: Each time the authorities saved us, that reinforced the belief that markets are self-correcting. Each time when you bail out the economy, you need to find a new motor, a new source of credit and a new instrument that allows for the credit expansion. [It's] difficult to imagine what you can do when you are already lending effectively 100% on inflated house prices.

I have a record of crying wolf at these times. I did it first in "The Alchemy of Finance" [in 1987], then in "The Crisis of Global Capitalism" [in 1998] and now in this book. So it's three books predicting disaster. [After] the boy cried wolf three times ... the wolf really came. If we can sail through this without a recession, then the superbubble story is seriously impacted ... I [will] have cried wolf again. Unfortunately, if you go into a recession, [it is not] proof of reflexivity, or vice versa.

WSJ: How is that you are rich despite your world view having been wrong so far?

Mr. Soros: I'm only rich because I know when I'm wrong.

There are no more important or truer words in trading than this: Bad trade, I was wrong, sell out the position. (That sounds strangely familiar) Soros makes it clear that he understands that quite well.

The whole interview is worth a few minutes of your precious weekend time . . .

Video

Hey Greg! Your cube's desk looks awfully clean . . .  Oh, that's right -- I almost forgot!

>

Source:
Soros, the Man Who Cries Wolf, Now Is Warning of a 'Superbubble'
GREG IP
WSJ, June 21, 2008; Page B1
http://online.wsj.com/article/SB121400427331093457.html

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Saturday, June 21, 2008 | 09:38 AM | Permalink | Comments (34) | TrackBack (0)
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He's probably referring to the oceans of money sloshing around the world that flits from home to home, with each home crashing as soon as the flow goes to another place capable of being pumped up. As long as the money stays predominantly in paper rather than assets that add to real wealth, he is potentially correct. Additionally, the assets need to be valued fairly, and not as million dollar tulips.

The current fad is oil. The balloon will probably last until regulators and Congress blow it up. This will happen no earlier than late this year. The influence of the ocean with respect to oil is parasitic ... it looks like it belongs but it really doesn't.

The explosion will be mighty, but the recovery will be a quick bounce as soon as the cash is placed in a new self-fulfilling prophecy of an investment.

The oil bubble will be regarded as the worst financial event in the history of the world ... until the next explosion somewhere else. Personally, I am wondering how the pundits and experts who all claimed that there is nothing special going on here will reply to the burst and the aftermath? I suspect they will act as pompous idiots who are shocked and surprised, and then change the subject.

Posted by: cinefoz | Jun 21, 2008 9:59:19 AM

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