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 enlarge | Author: George Soros
Publisher: PublicAffairs
Category: Book
List Price: $22.95
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Rating:  47 reviews
Sales Rank: 181
Media: Hardcover
Pages: 208
Number Of Items: 1
Shipping Weight (lbs): 0.7
Dimensions (in): 7.6 x 5.4 x 0.8
ISBN: 1586486837
Dewey Decimal Number: 332.0973
EAN: 9781586486839
ASIN: 1586486837
Publication Date: May 5, 2008
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 Theorists Abound September 15, 2008
Aram (Pasadena, CA)
1 out of 1 found this review helpful
Whether we find ourselves in the aftermath or the subprime mortgage crisis, or still very much in the development of its full repercussions, there has been no shortage of industry icons trying to make sense of a catastrophic series of events that were not foreseen by an army of proprietary risk models that failed to forecast a fundamental weakness in debt markets.
Enter George Soros, the philosopher turned money manager whose special brand of socioeconomic theory stands in the face of three centuries of equilibrium theory since its birth in the pages of Adam Smith's Wealth of Nations. His theory of reflexivity propounds the idea of a two-way connection between objective and subjective aspects of reality that essentially alter each other in a reflexive manner. This abstract concept has been aptly applied to the financial markets in his 1987 text, The Alchemy of Finance, and all the more so to a general insight into the instabilities of the lending industry, specifically our most recent turn of events, in The New Paradigm for Financial Markets (2008).
While his opinions have been constantly scrutinized in academic circles for completely disregarding equilibrium theory and rational expectations, now may be the time to give reflexivity its fair due. It may not have the theoretical predictive power of traditional economic theory, but it surely makes more intuitive sense to even the most detached bystander in such "far-from-equilibrium" situations as the one in which we are currently enmeshed. There is a certain ease in being able to analyze the circumstances of an asset bubble in hindsight, be it observing the skyrocketing numbers of debt-to-GDP and specifically a housing boom as a result of negative real interest rates following the attacks on the World Trade Center, but few have been prepared to challenge the very infrastructure of the financial markets themselves.
Mr. Soros has some piercing words for the apparent efficiencies of free-market lending, especially in the context of an economy that has embraced financial services as their competitive advantage in a globalized market. The perpetrators of this crisis have, indeed, been the torchbearers of a free market ideology that has forged a religious following. Whether the time has come to add some disclaimers to an ideology peculiarly susceptible to such drastic booms and busts of the last few decades, it is up to the convincing manner in which Mr. Soros passionately states his case against its most passionate disciples. If that is not enough, he would have to resort to allowing his performance record of the last 40 years speak for itself.
Insightful for the layman but not so much for those with backgrounds in economics September 8, 2008
Yoda (Hadera, Israel)
2 out of 2 found this review helpful
Soros' book offers quite a few insights into the financial markets for the layman but not so many for those with backgrounds in economics and financial markets (academic or practical). In short, the book's most important insights are (not necessarily in order of importance):
1) Soros' views on what he calls "reflexivity". He posits that the current prevailing paradigms in economics that stress that supply and demand are independent of the actions of market participants is flawed AND that, contrary to rational expectations theory, markets may not reflect economic fundamentals (i.e., may instead reflect "herd mentality"). Soros' view is not new with respect to what he has written in past. For more detailed discussion on "reflexivity" one should refer to his "Alchemy of Finance". With respect to behavior economics one would learn much more reading one of Schiller's books (i.e., Irrational Exhuberance or Market Volatility). They discuss the gap between actions based on economic fundamentals and psychological factors in much greater depth. However, the fact that he even provides such a critique is mind opening even to those who have had many years of education in undergraduate economics. It forces one to question the all important assumption of "rational expectations" and the assumption that in economic markets the actions of the economic actors and the results in markets are independent of each other. These assumptions undermine modern micro, macroeconomic and financial market theory and seriously need to be examined.
2) Soros provides his views as to the causes of the current financial bubble (i.e., a combination of high leverage, cheap credit, introduction of many financial instruments that have not been that well understood and corporate malfeasance). If you are student of economic history this is nothing new.
3) Soros also provides his advice as to how to mitigate (at least partially) the problems caused by the latest bubble, in particular liquidity in the housing bubble. He stated in the book (written in early 2008) that the Federal Govt. would almost inevitably have to step in to provide liguidity in the housing, banking and other financial sectors (i.e., large investment banks or what may also be called "market makers"). The weekend of September 7, 2008, he was proven correct regarding with respect to the Government's bailout of Fannie and Sallie Mae. Earlier the government had to prop up some of the larger investment bankers. He argued that not doing so would lead to massive contraction in liquidity surrounding the markets, particularly housing markets, with implications much like those leading to the Great Depression.
4) Related to item 3 above, he calls for greater regulation of financial markets due to the risks implied in high leverage, liguidity crunches, nd the inherent risks of high leverage financial instruments being introduced (especially in early stages when they are least understood - much like Collaterized Debt Obligations). With respect to CDOs, his fears were born out in mid and late 2008. It turns out that many of the participants in that market really did not have a grasp on the risks. This even included the rating agencies that were supposed to have graded these instruments (in reality they did a very poor job hence leading poor quality debt being given a higher rating and being passed on from banks and fianncial entities issuing them to other market participants).
If you have a good economics background (especially in economic history and financial instruments), items beyond 1) are not that profound. For layman, however, his views are probably of quite a bit of value.
The one weakness of the book is his lack of a much more detailed disucssion regarding poor audit work by the large accounting firms and the poor credit ratings issued by the major credit agencies. For a great discussion of the former one should read Boogle's The Battle for the Soul of Capitalism. Unfortunately few, if any, decent books for the layman have yet to come out (as of September 2008) on credit agency ratings poor performance and the resulting implications for the credit markets. Something is desperately needed here.
 Buy it. September 1, 2008
Jedidiah McClure (San Diego, CA)
2 out of 2 found this review helpful
This book will take you a long way in understanding what just happened in the financial markets and with the housing bust.
Whether or not you want to buy Soro's theory of 'reflexivity' as 'the new paradigm' is up to you, but he does make the simple and accurate point that any economic theory that had human beings objectively describing the world and then making decisions based on that 'accurate' intelligence is a silly theory.
Market fundamentals? Those are actually our perception of market fundamentals, so if we delude ourselves about those fundamentals(housing prices will never come down, the dow is going to 30,000) then we mis-take the markets. And people can be delusional as all hell if you haven't noticed. It just keeps on happening...
Soros describes bubbling phenomena with his 'far-from-equilibrium' theory. He gives an 8-stage descriptive theory of bubbles (pg. 65-66) that is, in and of itself, enough reason to buy this book. Look at gold in the 1970s...it followed the exact pattern.
This text advanced my understanding of how markets work and why it is that human idiocy is such an important variable. George wants to explain how this idiocy can actually drive a market, and I appreciate the attempt.
Soros also lets his political opinions be known, but so what. You don't have to agree with him.
Awesome outline August 31, 2008
M. Pu (Tampa, USA)
A good summary of Who's Soros and what's his take for the market--past and future. Most helpful is his insight on the big picture, which could lead to good investment ideas even if he doesn't provide any specific tip.
Practical insights and new rules from George Soros August 14, 2008
Rolf Dobelli (Luzern Switzerland)
2 out of 2 found this review helpful
Legendary financier George Soros is worried. The financial markets face the worst credit crisis since the Depression and their existing paradigm needs to be replaced. The new paradigm Soros recommends is based on what he calls the "theory of reflexivity." This book-length essay provides a crash course in the billionaire investor's philosophy and view of financial markets, the origins and consequences of the current credit crunch, the boom-bust model and the behavior of market participants. Soros intersperses his market analysis with enough personal details from his early life and career to keep the book lively. He is also quite vocal in his political beliefs; Democrats will probably appreciate the case he makes against President George W. Bush's administration and its policies. One weakness of the book, other than its repetitiveness as Soros explains his theory, is that he relies heavily on technical and financial jargon, which makes it tough to penetrate and may prove a barrier to some readers. Ironically, he seems to be fully aware of this shortcoming when he writes that readers may find one of his particularly theoretical chapters to be "somewhat repetitive and hard-going." Nevertheless, his warm personal voice and the depth of his financial experience, which spans more than half a decade, is hard to match. Thus, getAbstract notes that this book has much to offer executives, investors, and students of financial markets and theory. (As is true of every Abstract, the following views are those of the author and not of getAbstract.)
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