George Soros is a living legend in the world of the economy. The Hungarian American investor and philanthropist are famous for his avant-garde ideas and beliefs in the field. George Soros’s philosophy has also been a legend in the investment world.
Many famous investors respect George Soros’ Quantum Fund for the outstanding feats it has accomplished since its establishment. His strategies, despite some being unusual from the popular beliefs, are proven to work.
Soros’ strategies resemble his method astute way of perceiving a short-term market. One of his most renowned strategies is the global macro strategy. It is an act of making a huge bet in a single trade according to macroeconomic analysis.
Behind his eccentric trading strategies, his philosophy contradicts traditional ideas of an emotional balance based market environment. Instead of believing that markets affect market participants, he thinks that it is the opposite.
Accordingly, Soros names his philosophy by reflex. Many experts believe that his idea is, furthermore, still relevant to this day.
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George Soros and the Reflexivity
Put simply, the crux of Soros’ reflex connotes that a feedback loop exists in the economy. According to him, investors’ perceptions affect the markets and the markets affect investors’ perceptions, making it a never-ending cycle.
Furthermore, Soros is under the impression that investors actually do not generate decisions according to reality. Instead, investors simulate reality, enabling them to decide something following their perception of reality.
The phenomena permit investors to gradually shape up the price. The price, afterward, slowly deviates from the emotional balance which is a shared-idea of numerous mainstream economic theories.
As an instance of his theory, Soros situates a situation in a property investment business. Housing price is a good illustration of his belief.
When an investor invests in a property, he makes the property attractive, surely with a competitive price. People, driven by the urge to buy, purchase the property, resulting in higher demand in the property.
The investor, then, invests in more properties at a more costly price. People, which demand more properties, buy them. The same cycle goes on and on. It will not stop until the price deviates from the actual price as a result of perception over reality.