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Soros: Always Assume Market is Wrong

By Julie Crawshaw   |   Wednesday, 14 Jan 2009 09:11 AM

The idea that we should be able to predict the future is nonsense, says George Soros, because the future is shaped by uncontrollable decisions people make in the present.

"I find it very disturbing that with all my deep understanding, I don't get the market right," Soros said during a recent forum at MIT.

"As a working hypothesis, it's always better to assume the market is wrong," he says. "The belief that markets can correct their own mistakes is absolutely ridiculous."

The problem, Soros asserts, is that markets do not exist in a vacuum.

Investors introduce friction, inevitably influencing outcomes for better or worse.

“Actions have unintended consequences,” he says. “People go on dancing even though they realize the music is about to stop.”

Thus markets will always tend toward bubbles, Soros notes, adding that the most common bubble is real estate, a sector that suffers from the misconception that value is “independent of the willingness to lend.”

Unfortunately, most people get their information about real estate values from realtors, whose primary mission is advancing their own interests, says Lawrence Roberts, author of "The Great Housing Bubble."

Roberts wants the SEC to regulate the National Association of Realtors the way it regulates financial advisers.

"Realtors are currently able to make any statement they wish regarding the investment potential of real estate, no matter how ridiculous," Roberts told The Wall Street Journal.

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The idea that we should be able to predict the future is nonsense, says George Soros, because the future is shaped by uncontrollable decisions people make in the present."I find it very disturbing that with all my deep understanding, I don't get the market right," Soros...
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