Mood Moves Soros

"Because markets do have moods."
--George Soros, testifying before Henry Waxman's committee on the importance of adjusting margin requirements to counter market tendencies during bubbles, which were inevitable in his opinion.  November 13, 2008

George Soros was among a number of hedge fund managers who spoke before Congress on Thursday.  His remarks caught my ear in part because it was George Soros making them.  But also because his thinking on how markets moved has always revolved around notions of excess and equilibrium. 

Increasingly, more and more people are paying attention to an older notion of how economies function, a boom/crash model familiar to economists of the 19th century, but largely abandoned in the century since.

Wtih regard to the week that was, as Barry Ritholtz of The Big Picture put it, if you believe in the retest theory, you are buying now.   (Check out my interview with Barry Ritholtz over at TradingMarkets.com!) There is a bet that stocks have bottomed, rallied, and now having retested that bottom, are likely to head higher for the next few weeks or months.

If buying stocks right this moment is something that you are not comfortable with, then congratulations, that is exactly you are supposed to feel.  One of the recommendations Alexander Elder once suggested to me this spring (also in one of our Big Saturday Interviews) had to do with recording not only the trades you make, but the subjective feelings that accompanied them.  Did you enter a trade or investment with confidence, or did you feel "forced" or compelled to make the move?  If so, where was that pressure coming from and why?

Right now traders are becoming accustomed to disappointment: housing, employment, retail sales ...  Whether or not we've run out of "stinkers," it is hard not to wonder if we haven't already traveled deep enough into our current excursion into despair.  Floor traders interviewed on Bloomberg on Friday weren't angry or panicked any more, the reporter said.  They were just tired.  To my way of thinking, it wouldn't be surprising to see a bear market rally born of this boredom

PDF of Soros's prepared remarkets here
http://clipsandcomment.com/wp-content/uploads/2008/11/soros-2008113.pdf

Trading the Big Picture: A Conversation with Barry Ritholtz http://www.tradingmarkets.com/.site/stocks/commentary/satinterview/Trading-the-Big-Picture-A-Conversation-with-Barry--79228.cfm