I recently read a new book by George Soros. The book is called The New Paradigm for Financial Market: The Credit Crisis of 2008 and What It Means. This book tells us about Soros' point of view about the current financial crisis, his unique approach, based on his philosophy of human cognition and reflexivity, to explaining the reasons behind the crisis, and the functioning of the general financial market in a historical context.

I strongly recommend this book to anyone who is interested in understanding the current crisis from different perspectives and I am willing to join discussions with them.

I borrowed this book from UNSW Library in August and it was recalled by another person in late September. I think I was very lucky to be the first reader of this book collected by the library. I happened to see this book in UNSW Bookshop when I was buying textbooks. It cost over $30 but was very thin. I wasn’t crazy enough at that time to buy it without a thought. Searching the library’s website became my best choice. Fortunately I found it listed, but not on the shelf yet. It took me about a month (maybe not that long but I did feel like that) to finally find it available for borrowing.

Reading this book was really my most enjoyable time at the beginning of this semester, when I was not yet being hammered by exams and assignments. I only read the whole book once and some parts twice. I was thinking I’d be keeping renewing the book and make it mine >-<. However someone finally recalled it. I left a message in the book to share my happiness with the next reader who may also find the book an exciting master piece and expressed my willingness for open discussions.

After about 2 weeks, I received the following email from Michael Isidro:

Dear Bill Wang,

Apologies for having recalled the book! Unfortunately my time was cut short too because it seems everyone wants to read it now.

I sympathize with the emphases you placed in your underlinings in the book. Soros has an uncanny way of simplifying his philosophy into a philosophical theory of human cognition. I am currently reading 'Alchemy of Finance'.

I avidly watch the stock market and have been attempting to allocate as best I can an optimal allocation as a result of the downturn. What are your views on where the markets are headed?

Looking forward to hearing from you,

Michael Isidro

I was very excited to receive such a quick feedback from someone who also liked reading Soros’ books. I returned to him with an email today:

Hi Michael,

I am so glad to hear from you!

I think we can actually buy this book in the UNSW Bookshop. Actually I happened to see this book in the bookshop and then started searching for it in the library. It took me about a month to finally see the book become available in UNSW library for the first time^^. However it worth buying as a collection, I reckon.

Soros was actually a philosophy student of Karl Popper when he was doing his Bachelor degree in London School of Economics. His philosophy framework was developed out of the financial market but found its well application there when he became a professional participant and carried out the tests, as demonstrated in Alchemy of Finance, the one we are both reading currently ^----^.

His philosophy and assertion of the market as inherently biased and the existence of reflexivity sound very appealing to me. I am currently doing a course called Financial Theories, lectured by Professor David Feldman. I found it so funny to study two conflicting theories at the same time: one is based on fundamentalism and market equilibrium and the other one is totally against them. What are you currently doing? Are you still a student or a staff in UNSW?

At the time being, I don’t have any investments in the market but cash as I still can not see a turning time but such an unprecedented volatility. Currently I believe that the decreasing market values of financial institutions and other firms have reflexive impacts on their fundamentals, such as earning abilities, credit ratings, financing and M&As. This is a vivid case of Soros proposition that the expectations of the future, in this case market prices, are by themselves changing the future, in this case the destiny of the firms. Fundamentalism may call the current situation a liquidity problem and if we give the market enough time, the market prices will eventually reflect the true value of underlying assets, as explained by my professor in class. However I do agree with Soros that the true values are being changed by the plumping market prices. There could be a lot of arguments about this though.

The central banks are acting together to inject liquidity in the world’s economies. If the fundamentals were not to be influenced by market expectations, or say the market prices are just one-way reflection of firms’ future cash flows, the liquidity injection should offer a leeway to the market to enable it finally find back the unaffected fundamentals. So far what we can see is still a keep-going-down market. I would like to wait together with you to see what’s going to happen in the following months ^^.

I really appreciate that you left that slip of paper in the book. I am looking forward to discussion with you guys our ideas on the book and the market. If you don’t mind I’d like to add you to my msn contacts and hopefully Facebook^^

Wish you a lovely day

Kind regards.

Bill

I am really looking forward to his reply and other readers’ feedbacks, if possible, as sharing ideas with people of mutual interests is really fascinating.

Today’s blog maybe a bit too long and time consuming, but I think it is worthwhile.

I want to end it by a joke I read on Nick’s Xiaonei today, it’s so funny!

A: What is optimism?

B: A banker is ironing 5 shirts on Sunday Night.