Chapter 8 Chapter 8 Invest first and then watch the changes

"The way I operate is, I make a point and then test it in the market. When I'm at a disadvantage and the market is still going a certain way. I'm going to be very nervous and my back hurts. kind of a disadvantage. All of a sudden the pain went away. I felt so much better. That might just be the intuition." The first section is "beauty" and "five beauties" George Soros's theories only partially reveal his investing secrets, namely how he sees how financial markets work.Soros acknowledged this. However, this theory does not reveal how George Soros operated.

These secrets Soros still kept it in his head. Rational analysts think that's all there is to his theory, and then intuition does the work. "We seem to be doing analysis," Soros said, "and I believe in the analysis. However, there must be other factors here. As a trader, there is no doubt that I have achieved better results, and, there are some rational So there is some connection between the two. However, as a trader, I don't think my success proves my theory. It's not a scientific proof, and I think there must be other factors in it. " Just because Soros's theory did not fully reveal the secret of his success, people may say that he is just luckier than the average person.But serious analysts will not believe his explanation.Robert Miller was one of Soros's most seasoned associates and the deputy general manager of Erhold & Brechelard.Someone once told Miller inadvertently that Soros' ability to make money may be related to his gambler psychology of wanting to make a lot of money.Miller is unimpressed:

"No, it's not his ability to want to bet. Because he doesn't really see the market as a casino, he sees it as the state of the economy, and if he thinks it's going to be good, he's going to invest. It's a lot more complicated than rolling dice and hoping that both dice end up with a dot (a pair of dots). How Soros works is a comprehensive application of various capabilities.This combined ability may be unique. First, is his intelligence. While others are chasing a certain stock, a certain industrial group, or a certain commodity in the market, Soros is completely immersed in the analysis of the complex situation of global trade as always.Unlike most others, he has always been sensitive to the trends, movements and rhythms of the markets in the public speeches of the world's financial leaders and the decisions made by those leaders.He has a better understanding of cause and effect in the world economy than most.If event A happens, then event B will follow, and then event C will become inevitable.This way of thinking is not at all worthy of cynicism.In fact, this is one of the keys to Soros' recipe for success.

Secondly, he is quite courageous. No matter how calmly you explain the unimaginable amounts he bought and sold, he will deny how much courage he has, because he believes that the key to investing is knowing how to save yourself.Knowing how to save yourself means that sometimes it is more conservative to invest, and you should reduce losses when necessary, and you should always have a large amount of spare funds on hand.He likes to say: "If you're not doing well, well, the first step is to reduce your investment, but don't get your money back. When you reinvest, start with a small amount."

Again, Soros was doing a job that required inner tenacity. "I was sitting in his office while he was making billion-dollar investment decisions," said Daniel Doni, a public affairs commentator and director of the Jerusalem-based Center for Israel's Social and Economic Progress. "I was appalled. And he can't sleep well, he's invested so much, it's a gutsy decision to make, and maybe he's used to it." Soros is often compared to Warren Buffett, another of the most frequented investors in the Wall Street area, but the comparison shows that the two men are very different.

Buffett is good at and only good at - buying companies with assets at low prices - while Soros is more flexible, he will appear in and out of the financial market according to changes in the direction of the financial market, in order to act freely in the market in a timely manner.Buffett buys and sells stocks, while Soros deals in securities and usury.Hefeite focuses on individual companies, while Soros focuses on the development trend of the Golden Globe financial market. One of Soros's invaluable qualities is that he is not emotional when it comes to financial markets. In this sense he is an ascetic.

Others tend to bring an element of ego with them when they make rational decisions in the markets.And Soros understands: a wise investor must be calm.Claiming to be infallible is pointless.Your favorite stock may suddenly plummet, and these are tough times when it's best to admit that you made a mistake, which Soros often did. One day in 1974, Soros was playing tennis with an acquaintance when the phone rang. It was a broker in Tokyo who called, surreptitiously telling Soros that President Richard Nixon was mired in a Watergate scandal that would eventually force him out of office.The agent told him that the Japanese had reacted badly to the Nixon scandal. ．Soros bought a large stake in the Japanese stock market, and he had to make a decision to keep the status quo.Still quit.

His tennis partner noticed that he didn't break a sweat during the game, but now there were bead-sized beads of sweat on his forehead. He decides to sell.Without the slightest hesitation, he felt no need to consult with anyone else before making this major decision. This all happened in a folk. The whole process is like this. Alan Raphael has worked with Soros since the 1980s. He believes that Soros' asceticism cannot be found in other investors, and it is this asceticism that has made him. "There's nothing wrong with that. When Soros messes up, he'll get out of it. He won't say I'm right and they're wrong, he'll say I'm wrong. And then, come out. Because , if you hold this hapless stock, it will eat you slowly. All you can do is think about it - at night, in your own home. You will digest slowly and stay away from this stock completely "It's a job that requires tenacity. If it were simple, a policewoman dealing with traffic violations would do it. It follows many unusual rules, requires self-confidence and, above all, a lack of emotion."

Next, it is worth mentioning Soros' self-confidence.If Soros thinks he is right about an investment, there is nothing stopping him.No matter how many shares you invest, you will not be too much.Withdrawing is impotent.In Soros' book, the biggest mistake is not being bold but being too conservative. "Why so few?" was one of his favorite questions. In the end, it was his intuition. Know when to invest a large portion and when to withdraw the funds invested-when you meet the standard and when you don't.This is an unfathomable ability. "Fundamentally," Soros said, "the way I operate is to make a point and then test it in the market. When I'm at a disadvantage and the market is still going in a certain way, I will be very nervous, my back Pain. Then, I would go and remove that disadvantage, and all of a sudden the pain was gone. I felt so much better. That might just be the intuition.

"Propose a theoretical point of view and then test it in the market." Summing up Soros' investment skills, Morgan Stanley's Bo Rongwen said: "George's genius is that he has some kind of rules, he can observe the market very practically, and know what forces will affect the stock market price. He understands the rational and irrational aspects of the market, and he knows that he is not always right. When he is right and he can actually take advantage of an opportunity, he acts forcefully; when he is wrong, he minimizes his losses... when he When he is convinced he is right, he can be very confident, as he was in the British currency crisis in 1992."

Part of Soros' intuition came from an insight into this or that aspect of the stock market.This is something one cannot learn in school.This is not a compulsory course at LSE.This is a gift that ordinary people do not have) Soros did.His London partner, Vendegar Ashtar, had no trouble pinpointing the reasons for Soros' success: "The key to his success is his psychology. He understands the herd instinct. He is like a merchandiser who knows what people like at the moment." Section 2 Upper Route Perhaps the most distinctive feature of Soros, and the characteristic that best explains his investing potential, is his ability to become a member of a very exclusive club of leaders in international finance. Ordinary people cannot apply for membership in this club.Most members are political and economic leaders of developed countries: former prime ministers, finance ministers, heads of central banks, etc.It is roughly estimated that the total number of members does not exceed 2,000, and they are scattered all over the world. Because Soros is not an elected leader, he cannot have the same status as everyone else.But as investors like Soros gained more influence in the markets and economic forces shifted the perceptions of politicians, Soros's position grew. be improved more and more.They also want to know him and hear his views on the world economy.Most importantly, they wanted to know what he was trying to achieve.Of course, Soros is also very interested in what decisions these leaders from different countries will make. Very few investors like Soros have been able to enter this club in this way.Others could only read about these leaders in newspapers and magazines, but Soros had direct access to them.He might have breakfast with a finance minister, lunch with a central banker, or call a former prime minister to say hello. For example, one day in the early 1980s, Soros appeared at the Bank of England, and he was brought in to talk about his views on reviving financial markets through tightening monetary conditions. In 1980, he bought a billion dollars worth of British government bonds. Profitable. Therefore, he attracted the interest of the bank. It wasn't just his financial acumen that made Soros the leader of the global financial network.Since the mid-1980s, he has been enthusiastic about Eastern Europe, and then established a foundation in the former Soviet Union as a means to promote an open society. He has all the more reasons to have close contacts with political and economic leaders, especially in Europe. It has become commonplace for Soros to invite a cabinet minister to his foundation, or to drop by a political leader before attending a foundation board meeting. In November 1993, writer Michel Reves paid a 2-week visit to his foundation.Soros boasted that he met the president of Moldova in the morning and the president of Bulgaria in the evening. "Look, one president has breakfast with me, and another president has dinner with me." Obviously, this situation gave Soros a big advantage over other investors.certainly.Breakfast with government officials won't give Soros a precise idea of ​​when a country will devalue its currency or boost its profits.Financial leaders don't make such deals for fried eggs and bread, not even to George Soros, or to be more precise, especially to someone like George Soros. But proximity to these leaders gave Soros insight into events that no one else could or could grasp.He may have to wait months to act on information that would be useful at a meeting, perhaps a treasury minister slipped it in casually over lunch.This advantage is that when other people read the news in the newspapers, he has already got the information out of his head and put it into practice because of his contacts with the Secretary of the Treasury. As George Mallus, director of international economics at Warburg Securities in London, said: "Soros had a real understanding of world events and world processes. His European background made him stand out from his contemporaries. Combinations of the world have an unusual perspective, especially with regard to German unity, and various other views of Europe... He has what the Germans call "world insight", which cannot be defined by one or the other It is a combination of national and domestic perspectives. What he does is the overall design, which he calls opportunities. "One of Solo's great secrets was his contacts with world leaders." This world view makes Soros extremely confident. "He's not a guy who's smug about what he's accomplished," says James Marquez, Soros' aide in the 1980s. "He likes to say hey, man, that's the way it's supposed to happen." "You may hear him use phrases like it's obvious, or it's bound to happen, or the reason for this is simple and straightforward, and so on. Others see the trees, but he sees the forest. What other investors lack is not just the trump card of being a member of this exclusive club of world leaders.Even if they were included, other investors probably wouldn't spend as much time with world leaders as Soros did. Other investors are more used to the frantic pace of the social scene.Most people use it as a pastime, dealing with these world leaders.Some even see it as a waste of time.But Soros understood the need for this kind of networking, and he saw the value in activities outside the office; not just access to the makers of these important decisions, but time to think.Soros knows how to operate, as he said: "To be successful, you must have plenty of free time on your hands. "To be successful, you have to have plenty of free time." Bo Rong Wen, a friend of Soros, believes that this "calm and unhurried approach" is very important to life and to the financial field. Wen said "he felt he shouldn't be dependent on other people. Some people give instructions to agents all day. He thinks time should not be spent in this way, but to talk to people who really help you , and to think, to read, to react. He looks for people with philosophical sensibilities, and dismisses people who just make a lot of money and don't think. He doesn't think he has to do these things in his office . "Once, he said something meaningful to me: Bo Rong, your problem is that you go to work every day, and you think that since I come to work, I should do something. I don't go to work every day. Going to work. I only go to work when I feel the need to ... and I actually get to do something on the day. And you go to work and do something every day so you don't realize there's a special day." Section 3 Market Swimming, Self-Education How did Soros spend his days? A typical day starts at 8 or 8:30 am.He was in meetings all day or not, but, at any time, his company managers were free to come and go and talk about investing in shares. Soros takes a one-on-one approach, in which he talks with company executives personally.He hates meetings.Sometimes, after hearing what a manager thinks, Soros may suggest that he or she call another with an opposing view.Alan Raphael, who worked with Soros from 1984 to 1988, said: "If you like something, he will let you talk to another person who doesn't like it. He always wants to keep it consistent." It's an intellectual friction. He'll think carefully about a stake in an investment. You'll have to think, think, think again. Circumstances change, prices change, things change, and as a company manager, you don't Had to think twice about it in general." Next, there may be such a conversation. Raphael might say to him: "This investment ratio has already been calculated." Soros: "Do you think you should sell some?" Raphael: "No." Soros: "Would you like to buy more?" Back and forth, this ratio had to be re-examined. "What makes Soros great is that he gets to the heart of the issue," Raphael said. "And then he looks at the chart and says yes." When the time came to make a decision, he didn't think for more than fifteen minutes. Like Raphael and some company managers one by one: not everything has to go through Soros, and a small amount of shares, say 5 million US dollars, can be established directly without going through Soros. Raphael said, "However, it has to be really in your favor to talk to Soros, because he's too shrewd." For Soros, the key to his investment success lies in his compensatory self-help skills.Self-help as a practical experience can be difficult to understand, but for Soros it helps illustrate his achievement.For example, in "Tianshichengjin" he wrote: "When I was a teenager, the Second World War taught me a lesson that I will never forget. Fortunately, my father had high self-help skills , a war fugitive who survived the Russian Revolution." In the same book, he goes on to talk about setting up a hedging firm to test his self-help skills to the fullest, "This leverage device, if it works well, can produce fantastic results. But if things go against your would fail miserably. The hardest part of judging what level of risk is safe. There is no overall good measure, and each situation must be judged on its own merits. And ultimately analysis, you must rely on your instinct to save yourself." An example of taking instinctive self-help actions occurred in the October 1987 stock market catastrophe.According to the review after the fact, it is too early for Soros to exit some project investment shares.However, in the view of James Marquis, George Soros gave up the fight in order to fight better the next day.When Soros suffered huge losses by exiting too early, he prevented further deterioration. "It's very hard for a lot of people to come to terms with such a consequence," Marquis said. "However, Soros was able to do it because he believed he could make up for the losses. Of course he did, and in 1987 Then he had a huge success. I think that's an example for all of us." Section 4 Invest according to feeling It is precisely because Soros has such characteristics-brain power, courage, stoic asceticism and instinct, which makes him special.His "feedback" theory was his reform counter for measuring the market.It couldn't tell him exactly what target to aim at, or when it was most critical, but the theory could tell him where the gun should be pointed and give him the means to seize potential opportunities. Then, it is his own characteristics that come into play, making him point more precisely at the target. Next, Soros would act.He does it, but not in a crude way, but by testing, probing, trying to decide whether what he thinks is right is in fact true.He will put forward a hypothesis, and based on this, decide the proportion of investment shares.Then, to see if this hypothesis works.If it works, he will increase the proportion of such stocks.His confidence in a stock depends entirely on the number of shares he holds.If this hypothesis happened to be invalid, he did not hesitate to withdraw his investment.He was always looking for situations in which to formulate a hypothesis. As Marquez recalls: "George used to say invest first and see later. It meant forming a hypothesis, making fundamental investments, testing that hypothesis. Let the market prove whether you were right or wrong. " Soros' favorite strategy, in essence, can be called "feeling" in the market.Soros used this technique only occasionally.In the 80s, when he worked with Marquis, he didn't even tell Marquis. After much discussion, the two finally decided to take the plunge. At that time, Marquis devised a less impactful scheme, setting aside a large amount of money for a share investment. "Well," Soros said, "if I want to buy a $300 million stake, I'll start off with $5,000." "Invest first, then observe." "I know," Soros replied, "but first I have to get a feel for what the market is like. I want to see how I feel as a seller. As a seller, if you feel good, it's easy to put I'd be more of a buyer if those bonds sold. But I'm not sure I'd be a buyer if they were really hard to sell." Not all of Soros' theories and strategies are infallible.Some people see it that way.They saw his investment performance and thought that such a shrewd person could avoid making mistakes. Soros was amused by that thought: "People think I'm infallible, which is a complete misunderstanding. I frankly say that I make as many mistakes as anyone else about everything. My superman, though, is that I can recognize my mistakes. That is the secret of success. The key to my inability is to recognize the inherent errors of the human mind."