There Is Nothing You Can Learn From George Soros

Geroge Soros Market Wizard

Earlier this week the Irish Times ran a piece celebrating the 84th birthday of one of the most successful — and arguably, most well-known — investors of the last century, George Soros.  (Hat-tip to my friend Josh Brown).

Soros’ prowess in the markets is legendary, so much so that deconstructing his process in order to learn the secret to his success has become a cottage industry in financial circles.  In the world of  “Market Wizards,” Soros is Saruman.  Tolkien baby…look it up.

However, in the Times’ article, his son Robert demystified the source of the Elder Soros’ alchemy in such a simple and definitive way that it may drive market historians to acts of self-immolation.

Apparently It all comes down to a pain.  In the back to be specific.

According to his son, Robert, Soros’s trading was always influenced by more than reflexivity. “My father will sit down and give you theories to explain why he does this or that”, he once said, “but I remember seeing it as a kid and thinking, ‘Jesus Christ, at least half of this is bullshit’.

“I mean, you know [that] the reason he changes his position on the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm and it’s this early warning sign.”

Soros has admitted to relying greatly on “animal instincts”, saying the onset of acute pain was often “a signal that there was something wrong in my portfolio”.

His decisions, then, “are really made using a combination of theory and instinct”.

That’s right.  Though you and I did our damnedest to read between the lines and glean some sort of insight from The Alchemy of Finance in the 80’s and again with Soros on Soros in the 90’s, it was all for naught.  Now we know the true source of this modern-day Tim The Enchanter’s genius.  Monty Python baby…..look it up.

This revelation might tempt some of you to adopt the same market style as Mr. Soros, a view I wholeheartedly endorse, as long as the profile fits.  It’s easy to see if a spasm based methodology is right for you by answering a few simple questions.

  1. Are you a passionate student of the market?
  2. Are you open to considering a wide range of investment themes?
  3. Have you ever booked a $1 billion dollar single-day profit by breaking a sovereign bank?
  4. Did you marry a 41-year junior third wife on your $22 million dollar Westchester estate while Paul Tudor Jones and Julian Robertson looked on?
  5. Have you booked over $40 billion in cumulative profits?
  6. Do you have a full head of hair well into your eighth decade on this planet?

If you answered “Yes” to 5 out of 6 of those questions, then by all means, adopt the “discomfort” approach to your investments.  Let your back pain, your trick knee, or even your throbbing headache from the 13 Jack and Cokes you threw back at the bar last night be the guide to your entries and exits.

For the rest of us who move in more mortal circles we will try to use objective, data driven, risk averse methods to move our thousands, and if lucky, millions, in and out of the market.  We’ll try not to let our fear nor our greed drive our decision-making process, and ascribe that pain in our back simply to less than optimal ergonomic choices in our office furniture.

Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading – The Best of the Best: Top Trading Tips For Our Times by clicking here.

3 Responses

  1. Pingback: Thursday links: investing favors | Abnormal Returns

  2. Brian,
    I love this. This one of your best, at least my favorite, blogs you’ve done on how the markets really work. No one wants to believe this type of stuff and I’ve always tried to convince people that what these big guys like Soros and Buffett do is immoral and/or criminal. Yeah they are such “great traders”, but that’s because of insider info like Buffet uses, or buying influence like Buffet and Soros both do. But I do love the pain in the back stuff and am willing to try that, just not with a full size trade.
    My point is that certainly none of us can trade like them, unless we follow in their wakes. Just like watching for shifts in volume for institutional moves, if we can know what Soros and Buffet are doing we can also profit. That means we have to think like criminals, akhemm, I mean like they do. So, listen to what Soros says, when he says he’s closing out all his gold positions and you have to ask yourself, Ah.., why would he tell the world he’s doing that? May…be… he’s getting ready to buy in the near future. He certainly isn’t really telling you his future moves. And likewise Buffet promotes his holdings as such great companies that when everyone starts to follow him for long enough he is selling them his shares at a profit. Yeah, Yeah, Sure, sure, Warren is such a Buy-&-Hold trader, but that’s only if he’s making money because he’ll cut a loser faster than any of us are willing. Why are we not so willing? Because we’re in it for the long haul like Warren Buffet!
    You’re right, we can’t learn from them, and they know it. But with a little bit of criminal mind reading, maybe we can trade like them by trading in the same direction as them.

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