Vivek Kaul
The Western central banks(primarily the Federal Reserve of United States and the Bank of England) have been printing money (or quantitative easing as they like to call it) at a very rapid rate since the start of the financial crisis in late 2008. The idea is to print and pump money into the financial system and thus ensure that there is a lot of money going around, leading to low interest rates.
At low interest rates people were expected to borrow and spend more. When they did that businesses would benefit and the economic growth would improve. But this theory hasn’t really worked as well as it was expected to.
The money that was and continues to be printee, has found its way into various financial markets around the world, leading to bubbles and at the same time benefiting those it wasn’t intended to. As Albert Grice of Societe Generale writes in a report titled Is the Fed blowing bubbles to cover up growing inequality…again? dated September 27, 2013 “Quantitative Easing(QE) has mainly helped the rich. The Bank of England admitted as much a year ago. Specifically it said that its QE programme had boosted the value of stocks and bonds by 25%, or about $970 billion. It then calculated that about 40 percent of those gains went to the richest 5 percent of British households.”
The situation is similar in the United States as well where the Federal Reserve prints $85 billion every month to keep interest rates low. As Gary Dorsch Editor, Global Money Trends newsletter, writes in his later newsletter dated October 3, 2013, “The Fed has always kept its foot pressed firmly on the monetary accelerator, and thus, keeping the speculative juices flowing. Over the past 1-½ years, the Fed has increased the…money supply by +10% to an all-time high of $12-trillion. In turn, traders have bid-up the combined value of NYSE and Nasdaq listed stocks to a record $22-trillion. That’s great news for the Richest-10% of Americans that own 80% of the shares on the stock exchanges.”
Hence, it is safe to say that bubbles across various financial markets have helped the rich get richer, which wasn’t the idea in the first place. Numbers confirm this story. As Emmanuel Saez, of University of California at Berkeley, points out in a note titled Striking it Richer: The Evolution of Top Incomes in the United States and dated September 3, 2013 “From 2009 to 2012, average real income per family grew modestly by 6.0%…However, the gains were very uneven. Top 1% incomes grew by 31.4% while bottom 99% incomes grew only by 0.4% from 2009 to 2012. Hence, the top 1% captured 95% of the income gains in the first three years.”
This rise in income inequality might be one reason why the Federal Reserve of United States continues to print money. As Edwards writes “while governments preside over economic policies that make the very rich even richer…the middle classes also need to be thrown a sop to disguise the fact they are not benefiting at all from economic growth.”
So how is the middle class offered a sop in disguise? This is done through an easy money policy of maintaining low interest rates by printing money. In the process, the home prices continue to go up and this ensures that the home owning middle class(which forms a significant portion of both the American and the British population) feels richer.
The S&P/Case-Shiller 20 City Home Index which measures the value of residential real estate in 20 metropolitan areas of the U.S., shows precisely that. Overall home price rose by 12.4% in July 2013, in comparison to July 2012. Home prices were up by 27.5% in Las Vegas. They were up 24.8%, 20.8% and 20.4%, in San Francisco, Los Angeles and San Diego, respectively.
A similar scenario seems to be playing out in Great Britain as well. As Edwards wrote in a report titled Fools dated September 19, 2013 “Evidence is mounting that easy money …in the UK housing market is leading to another explosion of prices, with London, as always, leading the way with double-digit house price inflation.”
Edwards further points out in another report titled If UK Chancellor George Osborne is a moron, Fitch’s Charlene Chu is a heroine dated June 4, 2013, that people have been unable to buy homes despite interest rates being at very low levels because the prices continue to remain very high. As he wrote “Young people today haven’t got a chance of buying a house at a reasonable price, even with rock bottom interest rates. The Nationwide Building Society data shows that the average first time buyer in London is paying over 50% of their take home pay in mortgage payments – and that is when interest rates are close to zero!”
Of course people who already own homes and form a major portion of the population are feeling richer. And thus income inequality is being addressed.
This mistake of propping up housing prices to make the middle class feel rich was one of the major reasons for the real estate bubble in the United States, which burst, before the start of the current financial crisis.
The top 1% of the households accounted for only 7.9% of total American wealth in 1976. This grew to 23.5% of the income by 2007. This was because the incomes of those in the top echelons was growing at a much faster rate.
The rate of growth of income for the period for those in the top 1% was at 4.4% per year. The remaining 99% grew at 0.6% per year. What is even more interesting is the fact that the difference was even more pronounced since the 1990s.
Between 1993 and 2000, the income of the top 1% grew at the rate of 10.3% per year, and the income of the remaining 99% grew at 2.7% per year. Between 2002 and 2007, the income for the top 1% grew at the rate of 10.1% per year. For the remaining it grew at a minuscule 1.3% per year. In fact the wealthiest 0.1% of the population accounted for 2.6% of American wealth in 1976. This had gone up to 12.3% in 2007.
But it was not only the super rich who were getting richer. Even those below them were doing quite well for themselves. In 1976, the top 10% of households earned around 33% of the national income, by 2007 this had reached 50% of the national income.
American politicians addressed this inequality in their own way by making sure that money was available at low interest rates. As Raghuram Rajan writes in Fault Lines: How Hidden Fractures Still Threaten the World Economy “Politicians have therefore looked for other ways to improve the lives of their voters. Since the early 1980s, the most seductive answer has been easier credit. In some ways, it is the path of least resistance…Politicians love to have banks expand housing credit, for all credit achieves many goals at the same time. It pushes up house prices, making households feel wealthier, and allows them to finance more consumption. It creates more profits and jobs in the financial sector as well as in real estate brokerage and housing construction. And everything is safe – as safe as houses – at least for a while.”
Of course this is really not a solution to the problem of addressing inequality. It only makes people feel richer for a short period of time till the home prices keep rising and the bubble becomes bigger. But eventually the bubble bursts.
The irony is that people refuse to learn from their mistakes. The same mistake of propping up home prices is being made all over again.
The article originally appeared on www.firstpost.com on October 3, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)
Bubbles
Why the Federal Reserve wants to continue blowing bubbles
Vivek Kaul
The decision of the Federal Reserve of United States to continue printing money to revive the American economy, has gone against what most experts and analysts had been predicting. The Federal Reserve had also been saying that it plans to start going slow on money printing sooner, rather than later. But that hasn’t turned out to be the case. So what happened there?
When in doubt I like to quote John Maynard Keynes. As Keynes once said “Both when they are right and when they are wrong, the ideas of economists and political philosophers are more powerful than is commonly understood. Indeed, the world is ruled by little else.” The current generation of economists in the United States and other parts of the world are heavily influenced by Milton Friedman and his thinking on the Great Depression.
Ben Bernanke, the current Chairman of the Federal Reserve of United States is no exception to this. He is acknowledged as one of the leading experts of the world on the Great Depression that hit the United States in 1929 and then spread to other parts of the world.
In 1963, Milton Friedman along with Anna J. Schwartz, wrote A Monetary History of United States, 1867-1960. What Friedman and Schwartz basically argued was that the Federal Reserve System ensured that what was just a stock market crash became the Great Depression.
Between 1929 and 1933 more than 7,500 banks with deposits amounting to nearly $5.7billion went bankrupt. With banks going bankrupt, the depositors money was either stuck or totally gone. Under this situation, they cut down on their expenditure further, to try and build their savings again.
If the Federal Reserve had pumped more money into the banking system at that point of time, enough confidence would have been created among the depositors who had lost their money and the Great Depression could have been avoided.
This thinking on the Great Depression came to dominate the American economic establishment over the years. In fact, such has been Friedman’s influence on the prevailing economic thinking that Ben Bernanke said the following at a conference to mark the ninetieth birthday celebrations of Friedman in 2002. “I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
At that point of time Bernanke was a member of the board of governors of the Federal Reserve System. What Bernanke was effectively saying was that in the days and years to come, at the slightest sign of trouble, the Federal Reserve of United States would flood the financial system with money, as Friedman had suggested. That is precisely what Bernanke and the American government did once the financial crisis broke out in late 2008. And they have continued to do so ever since. Hence, their decision to continue with it shouldn’t come as a surprise because by doing what they are, the thinking is that they are trying avoid another Great Depression like situation.
Currently, the Federal Reserve prints $85 billion every month. It pumps this money into the financial system by buying government bonds and mortgage backed securities. The idea is that by flooding the financial system with money, the Federal Reserve will ensure that interest rates will continue to remain low. And at lower interest rates people are more likely to borrow and spend. When people spend more money, businesses are likely to benefit and this will help economic growth.
The risk is that with so much money going around in the financial system, it could lead to high inflation, as history has shown time and again. To guard against this risk the Federal Reserve has been talking about slowing down its money printing (or what it calls tapering) in the days to come.
Ben Bernanke, the Chairman of the Federal Reserve, first hinted about it in a testimony to the Joint Economic Committee of the American Congress on May 23, 2013.
As he said “if we see continued improvement and we have confidence that that is going to be sustained, then we could in — in the next few meetings — we could take a step down in our pace of purchases.” As explained earlier, the Federal Reserve puts money into the financial system by buying bonds (or what Bernanke calls purchases in the above statement).
Bernanke had hinted at the same again while speaking to the media on June 19, 2013, Bernanke said “If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year…And if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.”
Given this, the market was expecting that the Federal Reserve will start to go slow on money printing, sooner rather than later. But that hasn’t happened. The consensus was that the Federal Reserve will start by cutting down around $10 billion of money printing i.e. reduce the money it prints every month to around $75 billion from the current $85 billion.
So why has the Federal Reserve decided to continue to print as much money as it had in the past, despite hinting against it in the past? Bernanke in a press conference yesterday said that conditions in the job market where still far from the Federal Reserve would like to see. The Federal Reserve was also concerned that if it goes slow on money printing it could have the effect of slowing growth. “In light of these uncertainties, the committee decided to await more evidence that the recovery’s progress will be sustained before adjusting the pace of asset purchases,” Bernanke said.
Let’s try and understand this in a little more detail. Federal Reserve’s one big bet to get the American economy up and running again has been in trying to revive the real estate sector which has suffered big time in the aftermath of the financial crisis.
This is one of the major reasons why the Federal Reserve has been printing money to keep interest rates low. But home loan(or mortgages as they are called in the US) interest rates have been going up since Bernanke talked about going slow on money printing. As the CS Monitor points out “Since Fed Chairman Ben Bernanke first mentioned the possibility of scaling back the Fed’s purchases this past June, the average rate for a 30-year fixed rate mortgage has surged over 100 basis points –sitting at 4.6 percent as of last week – and certain market indicators are showing signs of slowdown.” This has led to the number of applications for home loans falling in recent weeks.
Also, as interest rates have gone up some have EMIs. As an article in the USA today points out “after a mere hint of new policy spiked mortgage rates enough to add $120 a month, or 16%, to the monthly payment on the median-priced U.S. House.”
Higher interest rates leading to higher EMIs on home loans, obviously jeopardises the entire idea of trying to revive the real estate sector. New home sales in the United States dropped 13% in July. And this doesn’t help job creation. As the USA Today points out “At more than 4 jobs per new single-family home, that means a normal recovery in housing — not a 2005-like bubble — would add 3 million jobs…Moody’s Analytics says. Quick arithmetic tells you that 3 million new jobs would take 1.9 percentage points off the unemployment rate.”
And that is the real reason why the Federal Reserve has decided to continue printing $85 billion every month. Of course, one side effect of this is that a lot of this money will find its way into financial and other asset markets all around the world.
Investors addicted to “easy money” will continue to borrow money available at very low interest rates and invest in financial and other markets around the world. So the big bubbles will only get bigger. As economist Bill Bonner writes in a recent column “Works of art are selling for astronomical prices. High-end palaces and antique cars are setting new records. Is this reckless money hitting the stock market too?”
Or as a global fund manager told me recently “If you look at Sotheby’s and Christie’s, in the art market, they are doing extremely well. The same is true about the property market. Prices have gone up to $100,000 in places which are in the middle of a jungle in Africa. Why? There is no communication. No power lines there.”
The answer is very simple. The “easy money” being provided by the Federal Reserve will continue showing up in all kinds of places.
The article originally appeared on www.firstpost.com on September 19, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek)
Why the markets are reading too much into Larry Summers' withdrawal from Fed race
Vivek Kaul
Larry Summers withdrew from the race to become the next Chairman of the Federal Reserve of United States on September 15, 2013. He was believed to be American President Barack Obama’s favourite candidate. (To read why he withdrew from the race click here)
The markets around the world immediately cheered his withdrawal. This happened primarily because Summers was widely seen to be what in central bank speak is termed as a ‘hawk’. A hawk is someone who is likely to raise interest rates and cut down on money supply.
Summers had said in April this year that “QE in my view is less efficacious for the real economy than most people suppose.” QE stands for quantitative easing and refers to the money that the Federal Reserve of United States, the American central bank, has been printing and pumping into the financial system, in the hope of getting the American economy up and running again.
The idea here is that by flooding the financial system with money, the interest rates will continue to remain low, thus encouraging people to borrow and spend more. With people spending more money, businesses will perform better, and the economic growth would come back.
Summers, it is believed, thinks that the government directly spending money through stimulus programmes, would have a greater impact on the economic growth in comparison to the Federal Reserve maintaining low interest rates by printing money and hoping that people borrow and spend more money.
The markets believed that Summers would stop printing money faster than Janet Yellen, the current Vice-Chairwoman of the Federal Reserve, who is now the front runner for the top job at the Federal Reserve.
Currently, the Federal Reserve prints $85 billion every month, which it pumps into the financial system by buying bonds. Ben Bernanke, the current Chairman of the Federal Reserve of United States, has indicated over the last few months that the Federal Reserve will go slow on money printing in the days to come.
This is a big worry for the markets. The idea behind all the money that is being printed has been that at low interest rates people will borrow and spend more money, and thus economic growth will return. But more than that what has happened is that investors have borrowed money available at very low interest rates and invested it in financial and other markets around the world.
This has led to big bubbles in these markets. As economist Bill Bonner writes “Works of art are selling for astronomical prices. High-end palaces and antique cars are setting new records. Is this reckless money hitting the stock market too?” Easy money is showing up in all kinds of places.
If the Federal Reserve goes slow on money printing, interest rates are likely to spike, making it difficult for investors who have enjoyed the benefits of the ‘dollar carry trade’ to continue enjoying it. Summers, the markets had come to believe, was more likely to stop money printing faster than any other candidate. And now that he is out of the race, the era of ‘easy money’ policies is likely to continue for a slightly longer period.
The situation needs a slightly more nuanced reading than this. As Martin Fridson writes on Forbes.com “The main, rather thin basis for portraying Summers as a hawk was a single remark he made in April about the Fed’s quantitative easing (QE) program: “QE in my view is less efficacious for the real economy than most people suppose.” This was not a major, formal policy statement, but a comment within an official summary of Summers’ remarks at a conference.”
Also, the Federal Reserve’s own research has showed as much. More than that even if a economist believes that quantitative easing hasn’t been effective, that doesn’t mean that he also believes that the Federal Reserve should go slow on it.
As Nobel Prize winning economist Paul Krugman writes in a recent column in the New York Times “One answer is the belief that these purchases…are, in the end, not very effective. There’s a fair bit of evidence in support of that belief.” The Federal Reserve puts the money that it prints into the financial system by buying bonds.
Even though, Krugman believes that quantitative easing hasn’t been very effective, he still recommends that it is important to continue with it. “Time for the Fed to take its foot off the gas pedal?” asks Krugman and then goes onto explain why that would not be the right thing to do.
He feels that any suggestion of the Federal Reserve going slow on money printing is going to lead to the long term interest rates in the United States going up. And this can’t be good for the overall American economy, which has just started to show some signs of revival.
Hence, the point here is that even though economists may understand that money printing has not been very effective, at the same time they may not want to go slow on it.
Summers also thinks that government stimulus programmes are likely to be more effective, there was not much that he could do about it. Any extra spending by the American government would mean it would have to borrow more money. This would be a problem given that the government has almost touched its debt limit of $16.7 trillion. As the Reuters reports “The government has been scraping up against its $16.7 trillion debt limit since May but has avoided defaulting on any bills by employing emergency measures to manage its cash, such as suspending investments in pension funds for federal workers.”
And more than that the Republicans don’t seem to be in any mood to let the government increase its spending. As an Associated Press news report points out “What’s more, massive fiscal stimulus is highly unlikely given opposition from congressional Republicans to increased spending.”
Given these reasons it is highly unlikely that Larry Summers would have been able to do anything dramatically different from what the Bernanke led Federal Reserve is currently doing or from what the Yellen led Federal Reserve(which is how it seems like right now) might do in the days to come. As Fridson writes on Forbes.com “My point is rather that the range of policy options will be limited for whoever steps into Ben Bernanke’s shoes. Barack Obama was never going to nominate a Fed chairman who would diverge from the narrow list of realistic choices regarding interest rates.”
(Vivek Kaul is a writer. He tweets @kaul_vivek)
Reuters bumps off George Soros, turns out he is alive and supposedly shorting gold
Vivek Kaul
George Soros rest in peace. That’s what the news agency Thomson Reuters wanted us to believe when it released a 1,122 word long pre-written obituary of the famed hedge fund manager at 5.41pm eastern standard time in the United States, yesterday evening (or a little after 4 am Indian Standard Time (IST) today morning).
What gave away the mistake was the following paragraph: “George Soros, who died XXX at age XXX, was a predatory and hugely successful financier and investor, who argued paradoxically for years against the same sort of free-wheeling capitalism that made him billions.”
The dummy triple X’s made it clear that Thomson Reuters had put out the obituary by mistake. It is normal for news agencies to keep obituaries prepared in advance, but on the rarest occasions like this one they get released before the death of the person.
The obituary as can be made out from the paragraph reproduced above wasn’t kind to Soros. Someone like Soros, who has made the kind of money that he has, doing what he does best i.e. bet against countries and big bubbles, as and when he does die, isn’t going to inspire obituary writers to write nostalgia infused pieces, anyway.
The pre-written obituary did manage to list out some of Soros’ big achievements. “He was known as ‘the man who broke the Bank of England’ for selling short the British pound in 1992,” the second paragraph of the obituary read.
In fact this was the trade that made Soros famous. The story behind the trade is very interesting. On October 24, 1992, Soros was in London and was leaving his house to play tennis. As soon as he got out of his house, he was besieged by a slew of journalists and photographs. All they wanted to know was whether he had made a billion by betting against a pound. Earlier in the day The Daily Mail had carried a story on Soros with the headline “I Made a Billion as the Pound Crashed.” Soros soon found out about the newspaper report.
What is not very well known is the fact that the idea of betting against the pound wasn’t Soros’. Though once he came to know of it and was convinced about it, he went full tilt with the trade. The idea for the trade essentially came from Stanley Druckenmiller who was the chief trader and strategist of George Soros’ Quantum Fund.
As Michael Kaufman writes in Soros – The Life and Times of a Messianic Billionaire “In 1992 Druckenmiller calculated that, despite public assurances to the contrary, the Bank of England would not be able to avoid devaluating the pound. He called Soros to discuss his thinking. “I told him why I thought the pound could collapse and the reasons I had and I told him the amount I was going to do. I did not get a scolding, but I got something close to a scolding, which was, well, if you believe all that, why are you betting only two or three billion.” With Soros’ encouragement, Druckenmiller more than tripled his original stake.”
So Soros bet big on the pound being devalued and had a position of $10 billion on the British pound. The trade essentially involved short selling the British pound and later buying it back once it was devalued. And that is what happened. He eventually ended up making $1 billion on the entire trade. Soros later stated that he wanted to execute an even bigger trade and borrow and sell British pounds worth around $15 billion.
Kaufman made a very important conclusion about Soros on the basis of this trade. “There are thousands of people who are good at analysis and hundreds who re good at predicting trends, but when you get down to using that information, pulling the trigger, putting it on the line to make what you are supposed to make, you are down less than a handful…You know, the ugly way to describe it would be ‘balls.’ To be willing at the right moment in time put it all on the line. That is not something, in my opinion, that can be learned. It is totally intuitive, and it is an art, not in any way a science,” he writes. So while everyone might do the right analysis, it takes a man with balls like Soros to get up and trade big on it.
Soros is great at making big macro-economic calls. Other than betting against the British pound, he also is said to have short sold the Thai baht and the Malaysian ringitt in 1997, and made a killing in the process. Both the baht and the ringitt were then pegged against the dollar. The baht was fixed at 25 to a dollar and 2.5 ringitt made a dollar.
Soros is said to have successfully bet against these currencies by short selling them. Short selling essentially involves borrowing a particular asset, selling it in the hope that its price falls, buying it at a lower price and thus making a profit out of the whole trade.
When Soros supposedly short sold the baht, the Thai baht central bank would have initially bought the baht by selling dollars. This helped maintain the peg between the dollar and the baht. The trouble was that the Thai central bank had only a limited number of dollars to sell. And once they ran out of dollars they had to let the baht fall in value against the dollar, which is what Soros wanted, and thus he made a killing. The same logic would have worked in case of the Malaysian Ringitt as well.
As the third paragraph of the Reuters obituary pointed out “His Soros Fund Management was widely blamed for helping trigger the Asian financial crisis of 1997.”
Soros has the ability to make big macro-economic calls. But he never a good stock picker. As Aswath Damodaran professor of finance at the New York University’s Stern School of Business,told me in an interview sometime back “Soros has never been a great micro investor. He has made his money on macro bets. He has never been a great stock picker. For him it has got to be massive macro bubbles, an asset class that gets overpriced or underpriced.”
In that sense Soros is different from the class of investors who believe in buying financial assets which are supposedly underpriced and then holding onto it in the time to come. Soros works in the opposite way. He either likes entering a bubble early or shorting them once they have got on for too long. As he writes in The New Paradigm for Financial Markets “Nothing is quite as profitable as investing in an early-stage bubble.” In fact one his favourite quips is “when I see a bubble, I invest”.
What works in Soros’ case is that he is able to exit just before the tide turns. As he has honestly admitted to in the past: “I don’t have a particular style of investing, or, more exactly, I try to change my style to fit the conditions…I assume that markets are always wrong…Most of the time we are punished if we go against the trend. Only at inflection point are we rewarded.”
And his ability to exit just before the tide turns or what he calls an inflection point, was most recently at play in case of gold. Soros is said to have made a lot of money by betting correctly on gold in the last ten years. He is recently said to have cut his gold holdings before the price of the yellow metal started to fall and now there are even rumors that he is shorting gold big-time and making a killing doing the same.
In his latest interview he was very vague on gold as any good trader would expected to be. As he told South China Morning Post when asked what was his view on gold “That’s a complicated question. It has disappointed the public, because it is meant to be the ultimate safe haven. But when the euro was close to collapsing in the last year, actually gold went down, because if people needed to sell something, they could sell gold. Therefore they sold gold. So gold went down together with everything else. Gold was destroyed as a safe haven, proved to be unsafe. Because of the disappointment, most people are reducing their holdings of gold. But the central banks will continue to buy them, so I don’t expect gold to go down. If you have the prospect of a crisis, you will have occasional flurries or jumps. So gold is very volatile on a day-to-day basis, no trend on a longer-term basis.”
In recent times Soros has tried to set his legacy right by projecting himself as not just a ‘greedy’ hedge fund manager who has made tonnes of money but as a thought leader. As he told the US Congress a few years back: “The main difference between me and other people who have amassed this kind of money is that I am primarily interested in ideas, and I don’t have much personal use for money. But I hate to think what would have happened if I hadn’t made money: My ideas would not have gotten much play. I wish I could write a book that will be read as long as our civilization lasts…I would value it much more highly than business success.”
Soros has written several books in which he has fancied himself as a philosopher who is a firm believer in the Theory of Reflexivity, originally proposed by Karl Popper. Soros has explained this theory in great detail in some of his books and has even gone into some detail on how it helps him make investment decisions.
As he writes in The New Paradigm for Financial Markets “People are participants, not just observers, and the knowledge they can acquire is not sufficient to guide their actions. They cannot base their decisions on knowledge alone…People’s understanding is inherently imperfect because they are a part of reality and a part cannot fully comprehend the whole…One must put oneself in the position of a detached observer. The human mind has worked wonders in trying to reach that position, but in the end it cannot fully comprehend the fact that it is part of the situation it seeks to comprehend.”
And this understanding Soros feels helps him make the investment decisions that he does. But that is something that his eldest son Robert, doesn’t agree with. As he puts it “My father will sit down and give you theories to explain why he does this or that. But I remember seeing it as a kid and thinking, Jesus Christ, at least half of this is bullshit, I mean, you know the reason he changes his position in 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 his early warning sign.”
So much for all the philosophy of investing. It’s the back pain which gets Soros going.
The article originally appeared on www.firstpost.com on April 19,2013.
(Vivek Kaul is a writer. He tweets @kaul_vivek)