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The Alchemy of Finance: Reading the Mind of the Market

Book by George Soros · 13 quotes · Investing, Hypothesis, Always Wrong

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The Alchemy of Finance: Reading the Mind of the Market Quotes

“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.”

“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.”

“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.”

“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.”

“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.”