1, Soros and his reflexivity theory
The quantum fund (formerly known as the Double Eagle Fund) founded by Soros in 1969 has achieved an average annual rate of return of more than 30% in the next 30 years. His winning stunt is based on a unique philosophical theory-reflexivity theory.
Everyone's understanding of the market is different, and the expectation of the market is based on limited local information, which can also be said to be personal prejudice. Prejudice is the fundamental driving force of financial market, and the market is always biased and has two-way influence. Market participants look forward to the future according to the current market situation, and put their biased views into action, which not only changes the direction of market operation, but also deviates from the original; It also forms a new market-oriented pattern, thus generating new expectations. This cycle determines the direction of the financial market, and it is a dynamic, unbalanced and endlessly moving process like a tidal current. This interaction is called "reflexivity". The interaction between market state and participants' mentality is the mechanism of reflexivity theory.
The wind begins at the end of qingping. When prejudice is dispersed, it will have little impact on financial markets. Due to the butterfly effect and unbalanced follow-up, when prejudice is constantly expanding and strengthening in communication, it will push the market to develop in a certain direction, leading to the ups and downs of excessive speculation. That is, public prejudice makes the price deviate from the value and affects the valuation, which is either icing on the cake or worse. This typical rise and fall process of self-improvement at the beginning and self-frustration at the end is very consistent with the wave theory. The secret of successful speculation lies in recognizing the inevitability of changes in the situation and confirming the reversal of the market in time.
Reflexive theory is applicable to abnormal far equilibrium. In this state, there is excessive deviation between cognition and reality. As long as the existing conditions do not change significantly, cognition and reality will not tend to be consistent, and this reflexive double feedback mechanism will play a role, and there is obviously a reflexive double feedback mechanism in the financial market. The principle of financial market operation is similar to the scientific method, making decisions is like making scientific assumptions, and the actual situation is verification. Soros believes that the operation of financial markets is not a strict scientific experiment, and it is inaccurate. At best, it can only reach the level of alchemy. This is why he named his first book "Financial Alchemy".
However, the accuracy of this ambiguity is far better than the precise error brought by traditional financial theory. In the traditional financial theory, the buyer's selling decision in the market is based on ideal assumptions, and the trend of the financial market can be calculated by mathematical formulas. In the complicated and chaotic real world, it is impossible to have hypothetical environmental conditions. In fact, it is also the case. Most people are irrational and will not play cards according to the calculated data. A few rational poker players are wrong in the market. The pricing mechanism of the real economy is different from that of the virtual economy. The former uses the price-earnings ratio, while the latter uses the market dream rate. Under the action of the 28 th rule, the minority must obey the majority, and as a result, bad money drives out good money.
From 1980, Soros abandoned the unrealistic traditional theory and gradually formed his own theory. He believes that the rational expectation theory completely misinterprets the operating mechanism of financial markets, and it is wrong to think that financial markets can self-correct and tend to balance. Economic history is composed of episodes and stories, which are based on fallacies rather than truth, and truth represents opportunities for profit. Speculators only need to judge that the premise is wrong before the false trend is punctured and get out in time. Popular prejudice can be self-reinforcing, but it will not last, and eventually there will be a catastrophic rise or fall.
Soros is a truly international master. His trading thought transcends the traditional value investment and technical analysis, which is quite different from the popular quantitative model trading on Wall Street. Although it is difficult to establish a mathematical model and the theory of reflexivity can easily be mistaken for unscientific, it is actually wise to use fuzzy mathematics. It can be said that everyone is drunk and only one person wakes up!
The right theory guides the right action, and it takes ten years to sharpen a sword. 1992, Soros seized the opportunity to successfully attack the pound and made a profit of nearly $654,385 billion from the pound. He was called "the man who defeated the Bank of England". If you don't sing, it will be a blockbuster. This amazing move ended his life stage of hiding in the wild and the market, and he became a world-famous financial master. Like a dragon, he continues to shine in foreign exchange, futures, stocks and other markets.
Regrettably, the Bank of England later invited Soros as honorary director for many years, and admitted that the financial turmoil came from the accumulation of systemic risks, not from market manipulation, which showed a very open side of the western world society. In many closed and autocratic countries in the world, this is hard to understand.
Soros believes that in the field of social sciences, there is also such a reflexive connection. If you are poor, you will be immune, and if you are rich, you will help the world. He wants to do more important things and participate in the changes in the social and historical process. Because his reflexivity principle is suitable for macroeconomic and political analysis, and his successful influence on financial speculation, he has also made great achievements in the theoretical construction and practice of open society. Soros believes that the real world is colorful and changing all the time, and we can't fall into the rigid thinking mode of "one or the other", otherwise we will turn a blind eye to serious system errors. Indeed, what a civilized society needs most is an open mind.
2. Understanding Tao and Art
Analyzing Soros's speculative philosophy from complexity to simplicity: the reason for the change of financial market is very simple, that is, prejudice; Simple process, that is, interaction; The result is simple, it is ups and downs. The key is to seize the turning point of ups and downs and intervene. The pricing mechanism of speculative market is different from the real economy market, which is driven by emotions and expectations, rather than calculated by returns and discounts.
The essence of K-line is psychological line, which reflects the complex psychology of participants. So the stock market is not a barometer that can directly interpret the real economy, and the technical analysis is independent. When the vast majority of investors reach a consensus and take concerted action, they are on the verge of change. Highly consistent market expectations are actually false expectations! False expectations will be repeated and self-reinforcing. Every time the cumulative advantage of many parties keeps rising to overvalue until it turns down, and when the empty side has the advantage, it keeps falling to underestimate until it turns up! Extreme extreme is the connotation, and it is better to take advantage of it than to take advantage of it. The reason is very simple, it has existed since ancient times, but it is not easy to operate. We should not only observe the shape, but also distinguish the meaning and judge the situation. The risk of individual stocks is not systematic, but the trend of the market is systematic. In order to avoid non-systematic risks, speculation can only capture understandable inevitable gains, give up vague possible opportunities and avoid sudden losses.
Speculation is the highest state of investment. For investment, it is necessary to avoid systemic risks; For speculators, systematic risk can be fully utilized. Soros said that financial markets with public participation are all showing a one-way trend. Indeed, not only the stock market and foreign exchange market, but also the oil rose from more than 20 dollars per barrel to 147 and then fell to 35. Metals and even Pu 'er tea products all rose or fell unilaterally, and the market was always excessively biased. The trend of financial market does not tend to the recognized equilibrium state, but follows a one-way process in the main cycle. You can hitch a ride 99% of the time, but you must pay attention to the systemic risk of the inflection point of 1%, that is, you should spend 99% of your time and energy on the inflection point of 1%.
No one is absolutely right. Constantly discovering and correcting mistakes can increase the probability of correctness. Because people's cognitive limitations are inevitable, everyone is wrong, all guesses are wrong, and there is no best guess. Instead of walking in front of the market curve and winning in chaos, it is better to follow the curve and deal with it calmly. In actual participation, it is necessary to prepare multiple plans to avoid being caught off guard. Mediocre people emphasize their own correctness, while experts attach importance to their own shortcomings. He who knows others is wise, and he who knows himself is wise; The winner is strong, and the winner is strong.
Understanding is very important in dealing with people. "Tao" is philosophical logic, and "technique" is method and skill. Differences in thinking patterns will lead to different results. Soros used the word, winning big and losing small; Most people despise Tao and value skill, winning less and losing more. Only through in-depth study and research, from seeking "skills" to understanding "Tao" and from endless optimism to ignorance, can we have fun in the ever-changing financial market by building a complete framework for analyzing problems and understanding the speculative world.
In fact, it is not difficult to see that the core of Soros's ups and downs theory is that there is a causal relationship between ups and downs, which is similar to the core of wave theory. In a sense, it may be said that if you want to understand the operation principle of financial markets, you might as well read Soros first.