A Guiding Light Through the Darkness?

I know...I know.....the title of this post is pretty corny. I was shocked and excited to find out that George Soros released a new book just this past Wednesday titled "The Credit Crisis of 2008." Soros is one of my all time heroes in terms of his accomplishments and ability to analyze this complex world of ours through a unique looking glass. He has written many books over the past 20 years but none of them deal directly with the financial markets.

He has written extensively regarding George Bush and a failure of the United States politically, but the last book that he wrote regarding the economy, investing, financial markets was in 1987 and was titled "The Alchemy of Finance." This is a classic classic book on investing, trading, speculation and I have read it several times. I don't think that it is pure coincidence that Soros decided this spring to publish a new book about his view of the financial future of our country / the world. I also don't think it is a coincidence that Soros has taken control of managing the wealth of his foundation again after a 7 year hiatus after farming it out to external managers back in 2000.

This is an unprecedented time of change in the world and just as Soros perceives huge risks this time around, I am also sure he is back because he sees the opportunities for huge speculative profits for those who grasp the implications of these changes and are willing to take the associated risks.

I have read the new book already and I think the ideas in it are excellent. Still, even for Soros who has challenges with the English language, I thought it was poorly written. The theoretical part where he discusses his theory of reflexivity is a very significant and essential part of his discussion but it is still very murky reading. Despite trying to discuss the concept for 20 years and explaining how important the theory is - Soros basically reprinted his previous discussions on the topic. This would not be a problem except for the fact that the explanations were never sufficiently clear in his previous works.

So Im thinking that it might be an interesting exercise to write a few posts over the coming weeks concerning the theory of reflexivity and Soros' expectations regarding the forthcoming five years and what is in store for both America and the financial markets. Soros repeats ad infinitum how important the theory of reflexivity is, but what use is the theory if he is the only one that understands it and can apply it? Also, what use is the theory if 100 people apply it very differently and it yields no uniform results other than to make us more conscious of our own limited understanding of the events unfolding before us.

Anyways let's give Soros the benefit of the doubt here and assume based on his track record that he has something useful to say here and it is worth trying to understand. I will not do a chapter by chapter summary / book review. Instead I think I will break the posts into a discussion of the theory and then Soro's application of that theory to the current crisis. My aim will be more than to just paraphrase. I'm hoping that we can dissect the "theory" of reflexivity a bit deeper in order to see how much is there. We will also try to use plain English for the discussion!!!

Regards,

BG