A George Soros Week
Love him or hate him, but there is little doubt that George Soros through luck, guts and smarts has created more wealth than 99.99% of us. This wealth creating machine has never been one to share his secrets, yet enough of his thoughts have been released to the world that we can take the market moving events last week and envision Mr. Soros and his team having a fun time deciding if these few events will change the direction of the markets and create an opportunity for profit.
Mr. Soros doesn't have much faith in me or you making very good investment decisions. It is his belief that individual investors have a flawed view of the market pricing methods that create a trend-following behavior, and this behavior creates his opportunities. In his words; ..."the more people are influenced by the market trends; and the greater the influence of trend-following speculation, the more uncertain the situations becomes." Finding that point in time when the trend changes offers the point of greatest profit potential.
The markets had their poorest showing in ten months last week. It began well enough, but on Tuesday night we learned that a "Republican" had been elected to the Senate, removing the Democrats super majority.
Before we started work on Wednesday, the Chinese banking authority let the world know that they were instructing a few of their major banks to curb lending. This was followed by increasing interest rates to curb both domestic growth and inflation.
As if that was not enough, our President decided our own major banks were not being very nice to the average citizen and needed to be punished by a new and yet unknown "tax" .
The week ended with another big announcement that the current Federal Reserve Chairman, Ben Bernanke, may not have enough votes to be reappointed.
These events by themselves are not really that important. You may be at odds with me on this, but a little slowing of the Chinese economy doesn't have much to do with interrupting the profit potential for most businesses in the developed world. The fact that our Senate has to work together in the future is a positive for us, while Mr. Obama's speech will not lead to much punishment. Oh, and Dr. Bernanke will be reappointed.
Yet in combination, these events could sway investors into a "profit protection" mode or give additional fire-power for those individuals still sitting on the sidelines with their cash deposited in their mattresses. Is this the inflection point? We don't think so. As far as George and the boys and girls at Quantum I bet that they are testing the waters, but will also come to the same conclusions.
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