The Intrinsic Value Podcast - The Investor’s Podcast Network

MI375: How George Soros Beat the Markets: The Alchemy of Finance w/ Shawn O’Malley

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Oct 28, 2024

Dive into the life of George Soros, from his childhood in Nazi-occupied Hungary to becoming a hedge fund icon. Discover his revolutionary investment theory called reflexivity, which explores how market expectations influence prices. Learn how Soros made headlines by shorting the British pound and understand why he believes free markets have inherent flaws. The discussion also highlights Soros's approach to navigating market dynamics and the impact of collective beliefs on financial strategies. A fascinating look at the mind behind legendary market moves!

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ANECDOTE

Soros's Childhood Survival

George Soros, born into a Jewish family, faced Nazi occupation in Hungary.
His family survived by posing as Christians, with young Soros acting as an official's son.

ANECDOTE

Breaking the Bank of England

Soros is known for "breaking" the Bank of England.
He bet against the British pound, forcing the UK government to abandon its fixed exchange rate.

INSIGHT

Reflexivity Theory

Soros's reflexivity theory posits that market prices are driven by fallible ideas, not just fundamentals.
This creates feedback loops, leading to booms and busts as expectations influence outcomes.

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In today’s episode, Shawn O’Malley (@Shawn_OMalley_) discusses The Alchemy of Finance by George Soros. George Soros is a controversial political figure, but he is a legend on Wall Street. Many know him as the man who “broke the Bank of England” for his epic short bets against the British pound that broke its currency peg. Soros’s hedge fund is among the best performing ever, generating billions of dollars in wealth and giving rise to a number of Soros’s protégés who would make their own names for themselves.

You’ll learn about Soros’s life growing up in Nazi-occupied Hungary, how he went from immigrant to hedge fund titan, why philosophy and abstract thinking were critical to Soros’s success, Soros’s unique theory on investing called Reflexivity and how it has helped him throughout his career, which shortcomings Soros identified in markets, how he used reflexivity to profit from a boom in conglomerates, plus so much more!

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IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

02:18 - What it was like for George Soros growing up in Nazi-occupied Hungary

03:15 - How Soros went from immigrant to hedge fund titan

10:01 - What is reflexivity, and how did Soros use it

12:16 - Why markets are a place to test hypotheses

24:30 - Why Soros thinks free markets have shortcomings

26:33 - What value investors miss about reflexivity and stock prices

29:45 - How Soros profited from a boom in conglomerates using reflexivity

32:06 - What causes reversals in markets

And much, much more!

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
George Soros's book, The Alchemy of Finance.
George Soros's book, Soros on Soros: Staying Ahead of the Curve.
George Soros’s wiki.
How Soros broke the Bank of England.
Check out the books mentioned in the podcast here.
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