Quote for the Week
There are myriad feedback loops at work in financial markets at any point of time. Some of them are positive, others negative. As long as they are more or less in balance they cancel out each other and market fluctuations do not have a definite direction. I compare these swings to the waves sloshing around in a swimming pool as opposed to the tides and currents that may prevail when positive feedbacks preponderate. Since positive feedbacks are self-reinforcing occasionally they may become so big that they overshadow all other happenings in the market.
Negative feedback loops tend to be more ubiquitous but positive feedback loops are more interesting because they can cause big moves both in market prices and in the underlying fundamentals. A positive feedback process that runs its full course is initially self-reinforcing in one direction, but eventually it is liable to reach a climax or reversal point, after which it becomes self-reinforcing in the opposite direction. But positive feedback processes do not necessarily run their full course; they may be aborted at any time by negative feedback. — George Soros (source)
From the Archives
Last Call
- Which Asset Has the Best Bubble Potential? – Behavioural Investment
- The Psychology of Viral Technologies – Every
- Fees Matter, Frequent Fees Matter More – Klement on Investing
- Warren Buffett’s Reading List: John Maynard Keynes & A Beauty Contest – Kingswell
- A Perfect Storm – Panic of 1907 and Birth of the Federal Reserve – Periscope
- Cliff Asness: Bigger Extremes, Better Returns (video) – Excess Returns
- The Influence of Bell Labs – Construction Physics
- How to Measure Molecules – Asimov Press
- Climate Change Is Altering Animals’ Colors – Scientific American
- Chimpanzees Could Never Randomly Type the Complete Works of Shakespeare – Smithsonian