The Alchemy of Finance: Reading the Mind of the Market 2nd Edition

6 customer reviews
ISBN-13: 978-0471043133
ISBN-10: 0471043133
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The Alchemy of Finance: Reading the Mind of the Market + The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) (Collins Business Essentials)
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Editorial Reviews

Review

"An extraordinary...inside look into the decision-making process of the most successful money manager of our time. Fantastic."
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Product Details

  • Hardcover: 367 pages
  • Publisher: Wiley; 2 edition (May 17, 1994)
  • Language: English
  • ISBN-10: 0471043133
  • ISBN-13: 978-0471043133
  • Product Dimensions: 6.3 x 1.2 x 9.3 inches
  • Shipping Weight: 1.7 pounds (View shipping rates and policies)
  • Average Customer Review: 4.3 out of 5 stars  See all reviews (6 customer reviews)
  • Amazon Best Sellers Rank: #434,871 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

4 of 4 people found the following review helpful By M BRINSLEY on January 22, 2012
Format: Hardcover
People get frustrated with this book because they secretly expect a book on how to make billions. Then they complain because the reading is tough. You will see Soros exploit global capital flows, currencies, interest rates and the stock market to amass billions and a near-impossible trading record. You see a powerful mind tease out the complexities of finance, understand how he saw what others missed and receive huge insight into the most complex financial issues of the modern age. Maybe, in the process, you will get ahead curve yourself. I learned an enormous amount. The book does not give itself easily, but I found it enormously rewarding and recommend it highly.
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1 of 1 people found the following review helpful By Baraniecki Mark Stuart on January 10, 2010
Format: Hardcover
There is something disreputable about speculation, with George Soros having the name of the speculator par excellence. Unfortunately for the book he really did help push sterling out of the ERM creating a lot of excitement and adding to a fortune of billions of dollars in the process.

Political / financial thrillers are made of this kind of material so one would suppose that the people who bought the book did so to relive the action or maybe (hopefully) to learn the art for themselves. They'll all be disappointed since Soros comes across as a politico/economic theorist with The Alchemy of Finance reading more like a set of (interesting) academic articles.

He highlights an aspect of economic or rather historical events that doesn't appear in economics textbooks giving it the awkward name of "reflexivity". His view is that the standard classical text (from Adam Smith) only paints part of the picture of economic change, namely that part of change that takes place in an orderly stable environment.

In the standard terminology things tend to move towards an equilibrium as consumers and producers adjust to present market conditions with a closer approximation to equilibrium being the efficient "good thing". Soros's insight (rediscovery) is that a real approach to the ideal of equilibrium implies a stagnation and freezing of change in society. His healthy norm therefore becomes a world of permanent disequilibrium as prices and production never stabilise, being constantly overtaken by changing tastes and technology.

"Reflexivity" is more a case of instability taking on a life of its own that may or may not be positive. The essential element is that a feedback process is set in motion that is the exact opposite of an equilibrium seeking system.
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Format: Hardcover
In the chapter titled "Theory of Reflexivity." Mr. Soros begins the book by stating that market participants continuously adjust and prices fluctuate, making equilibrium unreachable. Economic theory uses assumptions and distortions to represent equilibrium as reality through logical manipulation. Perfect competition held back by the influence of future prices on participants, and the attraction of rising prices to buyers.

The difference between a participant and a natural scientist is that the scientist attempts to not interfere while participants try to mold situations to their own satisfaction. The deductive nomological model does not apply to situations with thinking participants.

There is a shoelace connection between perceptions and facts. The cognitive function continuously affects the participating function and vice versa.

Stock market valuations influence values through repurchase of shares and options, mergers, acquisitions, going public, private etc...

Two points made in the beginning chapters are that:

1) Markets are biased in one direction or another.
2) Markets influence events that they anticipate.
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