Crouch End

There is something disreputable about speculation, with George Soros having the name of the speculator par excellence. Unfortunately for the book he really did help push sterling out of the ERM creating a lot of excitement and adding to a fortune of billions of dollars in the process. Political / financial thrillers are made of this kind of material so one would suppose that the people who bought the book did so to relive the action or maybe (hopefully) to learn the art for themselves. They'll all be disappointed since Soros comes across as a politico/economic theorist with The Alchemy of Finance reading more like a set of (interesting) academic articles. He highlights an aspect of economic or rather historical events that doesn't appear in economics textbooks giving it the awkward name of "reflexivity". His view is that the standard classical text (from Adam Smith) only paints part of the picture of economic change, namely that part of change that takes place in an orderly stable environment. In the standard terminology things tend to move towards an equilibrium as consumers and producers adjust to present market conditions with a closer approximation to equilibrium being the efficient "good thing". Soros's insight (rediscovery) is that a real approach to the ideal of equilibrium implies a stagnation and freezing of change in society. His healthy norm therefore becomes a world of permanent disequilibrium as prices and production never stabilise, being constantly overtaken by changing tastes and technology. "Reflexivity" is more a case of instability taking on a life of its own that may or may not be positive. The essential element is that a feedback process is set in motion that is the exact opposite of an equilibrium seeking system. A boom in stock prices will tend to get more extreme as it progresses making new capital abnormally cheap, encouraging excess investment and giving a false picture of real demand. In a sense, the first stages square with the traditional equilibrium seeking concepts of entry and exit but the latter stages are shown by Soros to be the destabilising aspects - as he says, "My point is that there are occasions when the bias affects not only market prices but also the so-called fundamentals. This is when reflexivity becomes important." In the preface to the later 1994 edition he draws back from the wider application of economic reflexivity that he was initially proposing, accepting that conventional equilibrium analysis holds true much of the time and he also generalises the idea to non-economic events. This is surely a landmark book, not only in economics.

Critical Praise . . .

"The Alchemy joins Reminiscences of a Stock Operator as a timeless instructional guide of the marketplace." - Paul Tudor Jones from the Foreword

"An extraordinary . . . inside look into the decision-making process of the most successful money manager of our time. Fantastic."- The Wall Street Journal

"A breathtakingly brilliant book. Soros is one of the core of masters . . . who can actually begin to digest the astonishing complexity . . . of the game of finance in recent years."- Esquire

"A seminal investment book . . . it should be read, underlined, and thought about page-by-page, concept-by-idea. . . . He's the best pure investor ever . . . probably the finest analyst of the world in our time." - Barton M. Biggs, Morgan Stanley

George Soros is unquestionably the most powerful and profitable investor in the world today. Dubbed by BusinessWeek as "The Man Who Moves Markets," Soros has made a billion dollars going up against the British pound. Soros is not merely a man of finance, but a thinker to reckon with as well. Now, in The Alchemy of Finance, this extraordinary man reveals the investment strategies that have made him "a superstar among money managers" (The New York Times).

Paul Tudor Jones

The Alchemy joins Reminiscences of a Stock Operator as a timeless instructional guide of the marketplace.

This is a remarkable book by a remarkable man. Billionaire George Soros is one of the most notorious, successful speculators of the 20th century and one of the most freehanded philanthropists. Here he outlines a theory that leads to the conclusion that markets are not morally good, that the financial system is rigged to protect the interests of the rich and powerful, and that economics is a spurious science. Much can be said in criticism of this book. It is replete with logical fallacies, muddies the arguments of those with whom the author disagrees, sets up straw men, and does not take adequate account of work done by philosophers and psychologists in some of the areas the author explores. But, getAbstract finds that there is also a great deal of good that can be said. Soros is an original thinker, at his best when he is talking about his own direct experience. He is straightforward about how his ideas have changed, and about his trading and forecasting errors. And why shouldn't he be, when, as he says, his errors are the keys to his success? Soros reveals the investment strategies that have made him the most powerful and profitable investor in the world today. He provides an excellent guide of the marketplace, along with the specific economic and political history of recent times. I started the original introduction by saying that in a very real sense this book represents my life's work.