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George Soros' Best Investment Advice

The Best Investment Advice George Soros Ever Gave.  Here it is:


“Economic history is a never-ending series of episodes based on falsehoods and lies, not truths.  It represents the path to big money.  The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited.”  ~ George Soros
Think about that statement for a minute. For everyone who is in the so-called bear camp, and thinks the current “recovery” belongs in quotation marks, this is an exceptionally meaningful quote.
Of course, everyone who has been bearish on the markets since 2009 has largely lost money, and been quite aggravated in the process. Had trillions in stimulus and quantitative easing not been injected into the economy (the big banks for the latter), our economy would have simply restructured and our markets would have bottomed at values far lower than they did. Bearish market participants have been investing with the philosophy that this will still happen.
Many bearish market participants have recognized the dynamic that there are long-term structural deficit and various economic issues, and that the economy is simply being goosed by trillions in cash and dangerously low interest rates. In other words, the bears scream that “the economy is unsustainable;” If and when rates rise, servicing trillions in debt is going to require even more debt issuance, leading to ever higher rates and a crowding out of the private sector. At this point, people draw different conclusions as to what happens next.
Others note that the euro is going to break apart, and it too is only being held together by programs like LTRO and other central bank intervention.
Regardless, many have come to the conclusion that our equity markets are fundamentally overvalued and do not discount the structural issues we face. The best argument I’ve heard for overvaluation is that corporate profit margins will contract rapidly when the U.S. government needs to start cutting its budget; we may be approaching that day with the creeping “fiscal cliff” at the end of the year. (more…)