Interesting interview with George Soros:
WSJ: You argue that the crises we’ve experienced in the past 25 years have been, in retrospect, "testing events" that convince us the system is stable, encourage us to take even bigger risks, leading to one, cataclysmic collapse. Could this be just another testing event?
Mr. Soros: Each time the authorities saved us, that reinforced the belief that markets are self-correcting. Each time when you bail out the economy, you need to find a new motor, a new source of credit and a new instrument that allows for the credit expansion. [It’s] difficult to imagine what you can do when you are already lending effectively 100% on inflated house prices.
I have a record of crying wolf at these times. I did it first in "The Alchemy of Finance" [in 1987], then in "The Crisis of Global Capitalism" [in 1998] and now in this book. So it’s three books predicting disaster. [After] the boy cried wolf three times … the wolf really came. If we can sail through this without a recession, then the superbubble story is seriously impacted … I [will] have cried wolf again. Unfortunately, if you go into a recession, [it is not] proof of reflexivity, or vice versa.
WSJ: How is that you are rich despite your world view having been wrong so far?
Mr. Soros: I’m only rich because I know when I’m wrong.
There are no more important or truer words in trading than this: Bad trade, I was wrong, sell out the position. (That sounds strangely familiar) Soros makes it clear that he understands that quite well.
The whole interview is worth a few minutes of your precious weekend time . . .
Hey Greg! Your cube’s desk looks awfully clean . . . Oh, that’s right — I almost forgot!
Soros, the Man Who Cries Wolf, Now Is Warning of a ‘Superbubble’
WSJ, June 21, 2008; Page B1