6 ms·

Soros: "superbubble" that has been swelling for a quarter of a century is finally bursting

28 points by nickb 19y ago

mnemonicsloth 19y ago
"Why current event X supports my politics"
yters 19y ago
I always took it for granted economists believed people's attitude had a significant influence on the market. In fact, this is probably why they say the opposite, so people don't go crazy. Similar to how telling people they don't have free will makes them more complacent. Interesting how the feedback loop goes both ways so reality resembles what people say. An argument can seem self fulfilling. However, this is not po-mo in the sense that reality is what people think it is, though, because people don't really lose their free will.
- nostrademons 19y ago
  "In the short run, the stock market is a voting machine. In the long run, it's a weighing machine." -- Benjamin Graham There's quite a lot of evidence that people's attitude affects the economy in the short run. The whole investing discipline of technical analysis rests on this, as do the schools of Keynesianism and Austrian macroeconomics. But in the long run, people's basics needs always win out. You may believe that prices are going to fall and so it's better to spend your money later rather than sooner, but eventually you still have to eat. Or you might figure that stock prices are falling, yet companies are now spinning off so much in dividends that it's worth investing just for the dividend stream. These effects tend to put a floor (or ceiling, for bubbles) on any short-term psychological movements. The tricky part is figuring out where the short term meets the long term. If people could do that reliably, they'd be millionaires in short order. But it's very difficult to time the point where "Everybody else expects prices to go down, so they will" meets "But they're really low, so the fundamentals look too good to pass up."
  - yters 19y ago
    That works as long as a panic attack doesn't cause any kind of irreperable systemic shock. But I guess such a thing is unlikely. Such an event would have to be worldwide, otherwise the equilibrium you mention results.
henning 19y ago
How to sell books: attach vague, untestable doomsday claims to it.
- kingkongrevenge 19y ago
  > How to sell books: attach vague, untestable doomsday claims to it Perhaps true now, but not true three years ago. Three years ago all the people who saw a crisis brewing were completely ignored. If you wanted popular attention you had to crow about making fast money in finance or by flipping houses.
- yters 19y ago
  It's testable in the long run. Considering he wants to be remembered as an intellectual, it'd be a bad move to purposefully make a big claim that's quite likely to be false. As for selling books, the guy's one of the richest people in the world...
  - nostrademons 19y ago
    Only if he attaches a specific time frame to the prediction. In the long run, "we're headed for doomsday" is a tautology, if only because of the eventual heat death of the universe. But unless you can say "Doomsday will happen in the first quarter of 2012, and the market will continue rising until then", it's not much of a prediction. A broken clock is right twice a day.
  - yters 19y ago
    Not sure why he wants to be like Hegel and Keynes though.
  - yummyfajitas 19y ago
    Lets say he attaches 10% odds to this happening. He makes a fantastic prediction. 10% chance he is remembered forever (he predicted a black swan, what foresight!), 90% chance of nothing. He makes no fantastic predictions, just "the future will probably be much like the present". 0% chance he is remembered forever (he predicted no major change, big whoop). 10% > 0%. It may be a very good move to make big, ridiculous claims.
zkinion 19y ago
I loved reading some of his books like Alchemy of Finance, and Soros on Soros. The ironic thing is he speaks a lot about reflexivity, where market's participants views on an outcome actually end up affecting that outcome itself.
- kingkongrevenge 19y ago
  This is the fundamental insight of the Austrian school of economics. Economists had fixated on finding predictable mathematical relationships between observable macroeconomic variables: Laffer curve, Phillips curve, etc. Mises said that ultimately the economy can not be modeled from data because human behavior is too dynamic. History has proven him correct. The econometric discoveries once heralded as potential "laws" of macroeconomics have all faired poorly against the data over time. His own insights derived from praxeology have held up well. This failure of econometrics is at the root of the current crisis. All the model based derivative valuations and risk management tools worked ... until they didn't. Same thing with the LTCM crisis. You just can't substitute regression analysis for thinking.
agentbleu 19y ago
I find it astonishing that many here seem so ignorant of the looming crisis and the consequences. In a twisted way I actually welcome the turbulence that it will bring, many have been in recession for years, so it wont make much difference to them, but all you who are looking forward to VC backing should be a little more concerned. Mind you, most of the ideas that are currently being backed seem little more than pipe dreams, and as for a 15 billion dollar valuation of FB, I think that has some merit, of course I also predict that a couple of years where inflation of US dollar outstrips that of zimbabway.
- wanorris 19y ago
  Talking about a large-scale financial crisis that you have long foreseen unlike everyone else and failing to provide any supporting evidence (or even analysis) makes you indistinguishable from a crank. If you are not a crank, you're going to have to provide more evidence or analysis to be taken seriously.
  - david927 19y ago
    I've also seen it coming for a long time and can point to every friend and relative as a reference. That whole time, for the last year and a half especially, I was always thought to be a crank. Now that it's happening, I'm a crank because it seems impossible to predict? Remember, a black swan isn't unpredictable; it's only unpredictable to the majority. The turkey spends two years thinking the butcher is the greatest guy in the world, until the last day -- the black swan. But to the butcher, it's not a black swan at all. I don't know about agentbleu, but I don't have evidence to support my conclusion. I only read the news and used Google. I assure you that Soros has it right and this will end up being worse than the Great Depression.
    - davidw 19y ago
      1) Black swans, according to Taleb are not predictable. That's what he keeps repeating. He doesn't lay any claim to superior prediction capabilities. He merely says that they occur more often than people think, and invested accordingly. He does mention that some are predictable for some people, but I don't think financial markets fall into that category outside of special cases like insider trading. 2) How can people vote up and take seriously a comment like "where inflation of US dollar outstrips that of zimbabway." [sic] ? Do you really believe that? I too vote: "not hacker news". Other sites have plenty of "doom! gloom!" stories if that's your thing.
mdemare 19y ago
This article from the economist has more meat: http://www.economist.com/finance/displaystory.cfm?story_id=10992042 http://www.economist.com/finance/displaystory.cfm?story_id=1...
- mdemare 19y ago
  Money quotes: "Essentially, it says that financial markets have built-in biases which have an impact not only on prices but also, in extreme times, the fundamentals themselves. In such moments, market events affect as well as reflect supply and demand." "But this crisis is profoundly different from its predecessors, he argues—at least, all those since the Depression—because two bubbles are coinciding: a “straightforward” one in housing, pumped up by low interest rates in the wake of the dotcom collapse; and a longer-term, more complicated “super-bubble” fed by globalisation, deregulation and decades of credit expansion, which is taking in commodities, currencies and more besides." “[S]hort US and European stocks, US ten-year government bonds, and the US dollar; long Chinese, Indian and Gulf States stocks and non-US currencies.”
deleted 19y ago
[deleted]
attack 19y ago
Not hacker news.
wallflower 19y ago
T. Boone Pickens, an oil-made billionaire, has been saying that daily global oil production has peaked. He's been right (and made hundreds of millions off his predictions) before. Transcript of Steve Forbes and T. Boone Pickens Debate Peak Oil [DOC] http://tinyurl.com/6lqtgu http://tinyurl.com/6lqtgu
patrickg-zill 19y ago
Wouldn't another explanation for a bubble in housing be the demographics behind the baby boomers selling their homes and moving into retirement communities, or even (I am not gloating) starting to die?
startingup 19y ago
I basically agree with the Soros thesis. The fact that it has dire implications for many of us should not blind us to the reality of an out-of-whack global economy. To give one indication of the scale of imbalance, global reserves of dollars has gone up several fold, to $5+ trillion in the past few years. This is about the clearest evidence of the US devaluing its reserve currency status, through excess issuance of paper claims on itself.

28 points by nickb 19y ago

"Why current event X supports my politics"

yters 19y ago

I always took it for granted economists believed people's attitude had a significant influence on the market. In fact, this is probably why they say the opposite, so people don't go crazy. Similar to how telling people they don't have free will makes them more complacent. Interesting how the feedback loop goes both ways so reality resembles what people say. An argument can seem self fulfilling. However, this is not po-mo in the sense that reality is what people think it is, though, because people don't really lose their free will.

nostrademons 19y ago
"In the short run, the stock market is a voting machine. In the long run, it's a weighing machine." -- Benjamin Graham There's quite a lot of evidence that people's attitude affects the economy in the short run. The whole investing discipline of technical analysis rests on this, as do the schools of Keynesianism and Austrian macroeconomics. But in the long run, people's basics needs always win out. You may believe that prices are going to fall and so it's better to spend your money later rather than sooner, but eventually you still have to eat. Or you might figure that stock prices are falling, yet companies are now spinning off so much in dividends that it's worth investing just for the dividend stream. These effects tend to put a floor (or ceiling, for bubbles) on any short-term psychological movements. The tricky part is figuring out where the short term meets the long term. If people could do that reliably, they'd be millionaires in short order. But it's very difficult to time the point where "Everybody else expects prices to go down, so they will" meets "But they're really low, so the fundamentals look too good to pass up."
- yters 19y ago
  That works as long as a panic attack doesn't cause any kind of irreperable systemic shock. But I guess such a thing is unlikely. Such an event would have to be worldwide, otherwise the equilibrium you mention results.

henning 19y ago

How to sell books: attach vague, untestable doomsday claims to it.

kingkongrevenge 19y ago
> How to sell books: attach vague, untestable doomsday claims to it Perhaps true now, but not true three years ago. Three years ago all the people who saw a crisis brewing were completely ignored. If you wanted popular attention you had to crow about making fast money in finance or by flipping houses.
yters 19y ago
It's testable in the long run. Considering he wants to be remembered as an intellectual, it'd be a bad move to purposefully make a big claim that's quite likely to be false. As for selling books, the guy's one of the richest people in the world...
- nostrademons 19y ago
  Only if he attaches a specific time frame to the prediction. In the long run, "we're headed for doomsday" is a tautology, if only because of the eventual heat death of the universe. But unless you can say "Doomsday will happen in the first quarter of 2012, and the market will continue rising until then", it's not much of a prediction. A broken clock is right twice a day.
- yters 19y ago
  Not sure why he wants to be like Hegel and Keynes though.
- yummyfajitas 19y ago
  Lets say he attaches 10% odds to this happening. He makes a fantastic prediction. 10% chance he is remembered forever (he predicted a black swan, what foresight!), 90% chance of nothing. He makes no fantastic predictions, just "the future will probably be much like the present". 0% chance he is remembered forever (he predicted no major change, big whoop). 10% > 0%. It may be a very good move to make big, ridiculous claims.

zkinion 19y ago

I loved reading some of his books like Alchemy of Finance, and Soros on Soros. The ironic thing is he speaks a lot about reflexivity, where market's participants views on an outcome actually end up affecting that outcome itself.

kingkongrevenge 19y ago
This is the fundamental insight of the Austrian school of economics. Economists had fixated on finding predictable mathematical relationships between observable macroeconomic variables: Laffer curve, Phillips curve, etc. Mises said that ultimately the economy can not be modeled from data because human behavior is too dynamic. History has proven him correct. The econometric discoveries once heralded as potential "laws" of macroeconomics have all faired poorly against the data over time. His own insights derived from praxeology have held up well. This failure of econometrics is at the root of the current crisis. All the model based derivative valuations and risk management tools worked ... until they didn't. Same thing with the LTCM crisis. You just can't substitute regression analysis for thinking.

agentbleu 19y ago

I find it astonishing that many here seem so ignorant of the looming crisis and the consequences. In a twisted way I actually welcome the turbulence that it will bring, many have been in recession for years, so it wont make much difference to them, but all you who are looking forward to VC backing should be a little more concerned. Mind you, most of the ideas that are currently being backed seem little more than pipe dreams, and as for a 15 billion dollar valuation of FB, I think that has some merit, of course I also predict that a couple of years where inflation of US dollar outstrips that of zimbabway.

wanorris 19y ago
Talking about a large-scale financial crisis that you have long foreseen unlike everyone else and failing to provide any supporting evidence (or even analysis) makes you indistinguishable from a crank. If you are not a crank, you're going to have to provide more evidence or analysis to be taken seriously.
- david927 19y ago
  I've also seen it coming for a long time and can point to every friend and relative as a reference. That whole time, for the last year and a half especially, I was always thought to be a crank. Now that it's happening, I'm a crank because it seems impossible to predict? Remember, a black swan isn't unpredictable; it's only unpredictable to the majority. The turkey spends two years thinking the butcher is the greatest guy in the world, until the last day -- the black swan. But to the butcher, it's not a black swan at all. I don't know about agentbleu, but I don't have evidence to support my conclusion. I only read the news and used Google. I assure you that Soros has it right and this will end up being worse than the Great Depression.
  - davidw 19y ago
    1) Black swans, according to Taleb are not predictable. That's what he keeps repeating. He doesn't lay any claim to superior prediction capabilities. He merely says that they occur more often than people think, and invested accordingly. He does mention that some are predictable for some people, but I don't think financial markets fall into that category outside of special cases like insider trading. 2) How can people vote up and take seriously a comment like "where inflation of US dollar outstrips that of zimbabway." [sic] ? Do you really believe that? I too vote: "not hacker news". Other sites have plenty of "doom! gloom!" stories if that's your thing.

mdemare 19y ago

This article from the economist has more meat: http://www.economist.com/finance/displaystory.cfm?story_id=10992042 http://www.economist.com/finance/displaystory.cfm?story_id=1...

mdemare 19y ago
Money quotes: "Essentially, it says that financial markets have built-in biases which have an impact not only on prices but also, in extreme times, the fundamentals themselves. In such moments, market events affect as well as reflect supply and demand." "But this crisis is profoundly different from its predecessors, he argues—at least, all those since the Depression—because two bubbles are coinciding: a “straightforward” one in housing, pumped up by low interest rates in the wake of the dotcom collapse; and a longer-term, more complicated “super-bubble” fed by globalisation, deregulation and decades of credit expansion, which is taking in commodities, currencies and more besides." “[S]hort US and European stocks, US ten-year government bonds, and the US dollar; long Chinese, Indian and Gulf States stocks and non-US currencies.”

deleted 19y ago

[deleted]

attack 19y ago

Not hacker news.

wallflower 19y ago

T. Boone Pickens, an oil-made billionaire, has been saying that daily global oil production has peaked. He's been right (and made hundreds of millions off his predictions) before. Transcript of Steve Forbes and T. Boone Pickens Debate Peak Oil [DOC] http://tinyurl.com/6lqtgu http://tinyurl.com/6lqtgu

patrickg-zill 19y ago

Wouldn't another explanation for a bubble in housing be the demographics behind the baby boomers selling their homes and moving into retirement communities, or even (I am not gloating) starting to die?

startingup 19y ago

I basically agree with the Soros thesis. The fact that it has dire implications for many of us should not blind us to the reality of an out-of-whack global economy. To give one indication of the scale of imbalance, global reserves of dollars has gone up several fold, to $5+ trillion in the past few years. This is about the clearest evidence of the US devaluing its reserve currency status, through excess issuance of paper claims on itself.