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George Soros and his General Theory of Reflexivity

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There are a series of lectures George Soros has given via his Open Society Foundation, these took place at the Central European University (that he founded).

 

 

The one I want to open up for discussion here is the first of 5 in the series, it's named "General Theory of Reflexivity" and if you decide to watch it on youtube it's here;

 

 

or it can be found on the following link, the next link also includes a Q & A session following the talk;

 

http://www.soros.org...s-and-way-ahead

 

 

In order that you can make a positive contribution to this discussion

 

either,

 

you need to be familiar with reflexivity

 

or,

 

 

 

you need to be willing to learn more about it

 


 

Clearly I have an interest and have particular views on it, I will explain more about this in the next few days after the discussion develops some depth.

 

For the moment I would encourage you to watch the talk, since I believe you will get the idea better if you watch the whole talk however you could start the youtube video at 22 mins 14 seconds (it's 52 minutes long), if short on time, this is the part where he introduces his theory of reflexivity and explains what reflexivity is.

 

Those looking to participate more in this website's forum discussions or other topics are especially welcome to join in here now particularly those who have no previous knowledge of reflexivity, this is a great opportunity to hear from you.

 

Details on how tosign up and become a memberare found on the topic named "LURKERS ! GEI has a message for you.."

 

Regards and I hope you look forward to the discussion.

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General Theory of Reflexivity

 

Here is written version, where he explains it. This is an excerpt from an ft.com article that appears to be a transcript of the whole of the first lecture, I have only excerpted the salient section, which is the middle part of the lecture.

 

 

"So here it goes. Today I shall explain the concepts of fallibility and reflexivity in general terms. Tomorrow I shall apply them to the financial markets and after that, to politics. That will also bring in the concept of open society. In the fourth lecture I shall explore the difference between market values and moral values, and in the fifth I shall offer some predictions and prescriptions for the present moment in history.

 

 

I can state the core idea in two relatively simple propositions.

One is that in situations that have thinking participants, the participants' view of the world is always partial and distorted. That is the principle of fallibility. The other is that these distorted views can influence the situation to which they relate because false views lead to inappropriate actions. That is the principle of reflexivity. For instance, treating drug addicts as criminals creates criminal behavior. It misconstrues the problem and interferes with the proper treatment of addicts. As another example, declaring that government is bad tends to make for bad government.

 

 

Both fallibility and reflexivity are sheer common sense. So when my critics say that I am merely stating the obvious, they are right—but only up to a point. What makes my propositions interesting is that their significance has not been generally appreciated. The concept of reflexivity, in particular, has been studiously avoided and even denied by economic theory. So my conceptual framework deserves to be taken seriously—not because it constitutes a new discovery but because something as commonsensical as reflexivity has been so studiously ignored.

 

 

Recognizing reflexivity has been sacrificed to the vain pursuit of certainty in human affairs, most notably in economics, and yet, uncertainty is the key feature of human affairs. Economic theory is built on the concept of equilibrium, and that concept is in direct contradiction with the concept of reflexivity. As I shall show in the next lecture, the two concepts yield two entirely different interpretations of financial markets.

 

The concept of fallibility is far less controversial. It is generally recognized that the complexity of the world in which we live exceeds our capacity to comprehend it. I have no great new insights to offer. The main source of difficulties is that participants are part of the situation they have to deal with. Confronted by a reality of extreme complexity we are obliged to resort to various methods of simplification—generalizations, dichotomies, metaphors, decision-rules, moral precepts, to mention just a few. These mental constructs take on an existence of their own, further complicating the situation.

 

The structure of the brain is another source of distortions. Recent advances in brain science have begun to provide some insight into how the brain functions, and they have substantiated Hume's contention that reason is the slave of passion. The idea of a disembodied intellect or reason is a figment of our imagination.

 

The brain is bombarded by millions of sensory impulses but consciousness can process only seven or eight subjects concurrently. The impulses need to be condensed, ordered and interpreted under immense time pressure, and mistakes and distortions can't be avoided. Brain science adds many new details to my original contention that our understanding of the world in which we live is inherently imperfect.

 

 

 

The concept of reflexivity needs a little more explication. It applies exclusively to situations that have thinking participants. The participants' thinking serves two functions. One is to understand the world in which we live; I call this the cognitive function. The other is to change the situation to our advantage. I call this the participating or manipulative function. The two functions connect thinking and reality in opposite directions. In the cognitive function, reality is supposed to determine the participants' views; the direction of causation is from the world to the mind. By contrast, in the manipulative function, the direction of causation is from the mind to the world, that is to say, the intentions of the participants have an effect on the world. When both functions operate at the same time they can interfere with each other.

 

How? By depriving each function of the independent variable that would be needed to determine the value of the dependent variable. Because, when the independent variable of one function is the dependent variable of the other, neither function has a genuinely independent variable. This means that the cognitive function can't produce enough knowledge to serve as the basis of the participants' decisions. Similarly, the manipulative function can have an effect on the outcome, but can't determine it. In other words, the outcome is liable to diverge from the participants' intentions. There is bound to be some slippage between intentions and actions and further slippage between actions and outcomes. As a result, there is an element of uncertainty both in our understanding of reality and in the actual course of events.

 

To understand the uncertainties associated with reflexivity, we need to probe a little further. If the cognitive function operated in isolation without any interference from the manipulative function it could produce knowledge. Knowledge is represented by true statements. A statement is true if it corresponds to the facts—that is what the correspondence theory of truth tells us. But if there is interference from the manipulative function, the facts no longer serve as an independent criterion by which the truth of a statement can be judged because the correspondence may have been brought about by the statement changing the facts.

 

 

Consider the statement, "it is raining." That statement is true or false depending on whether it is, in fact, raining. Now consider the statement, "This is a revolutionary moment." That statement is reflexive, and its truth value depends on the impact it makes.

 

 

Reflexive statements have some affinity with the paradox of the liar, which is a self-referential statement. But while self-reference has been extensively analyzed, reflexivity has received much less attention. This is strange, because reflexivity has an impact on the real world, while self-reference is purely a linguistic phenomenon.

 

In the real world, the participants' thinking finds expression not only in statements but also, of course, in various forms of action and behavior. That makes reflexivity a very broad phenomenon that typically takes the form of feedback loops. The participants' views influence the course of events, and the course of events influences the participants' views. The influence is continuous and circular; that is what turns it into a feedback loop.

 

 

Reflexive feedback loops have not been rigorously analyzed and when I originally encountered them and tried to analyze them, I ran into various complications. The feedback loop is supposed to be a two-way connection between the participant's views and the actual course of events. But what about a two-way connection between the participants' views? And what about a solitary individual asking himself who he is and what he stands for and changing his behavior as a result of his reflections? In trying to resolve these difficulties I got so lost among the categories I created that one morning I couldn't understand what I had written the night before. That's when I gave up philosophy and devoted my efforts to making money.

 

 

To avoid that trap let me propose the following terminology. Let us distinguish between the objective and subjective aspects of reality. Thinking constitutes the subjective aspect, events the objective aspect. In other words, the subjective aspect covers what takes place in the minds of the participants, the objective aspect denotes what takes place in external reality. There is only one external reality but many different subjective views. Reflexivity can then connect any two or more aspects of reality, setting up two-way feedback loops between them. Exceptionally it may even occur with a single aspect of reality, as in the case of a solitary individual reflecting on his own identity. This may be described as "self-reflexivity." We may then distinguish between two broad categories: reflexive relationships which connect the subjective aspects and reflexive events which involve the objective aspect. Marriage is a reflexive relationship; the Crash of 2008 was a reflexive event. When reality has no subjective aspect, there can be no reflexivity.

 

 

Feedback loops can be either negative or positive. Negative feedback brings the participants' views and the actual situation closer together; positive feedback drives them further apart. In other words, a negative feedback process is self-correcting. It can go on forever and if there are no significant changes in external reality, it may eventually lead to an equilibrium where the participants' views come to correspond to the actual state of affairs. That is what is supposed to happen in financial markets. So equilibrium, which is the central case in economics, turns out to be an extreme case of negative feedback, a limiting case in my conceptual framework.

 

 

By contrast, a positive feedback process is self-reinforcing. It cannot go on forever because eventually the participants' views would become so far removed from objective reality that the participants would have to recognize them as unrealistic. Nor can the iterative process occur without any change in the actual state of affairs, because it is in the nature of positive feedback that it reinforces whatever tendency prevails in the real world. Instead of equilibrium, we are faced with a dynamic disequilibrium or what may be described as far-from-equilibrium conditions. Usually in far-from-equilibrium situations the divergence between perceptions and reality leads to a climax which sets in motion a positive feedback process in the opposite direction. Such initially self-reinforcing but eventually self-defeating boom-bust processes or bubbles are characteristic of financial markets, but they can also be found in other spheres. There, I call them fertile fallacies—interpretations of reality that are distorted, yet produce results which reinforce the distortion."

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I will look at this more closely when I have more time...

 

However, I did have a copy of Soros' book, the Alchemy of Finance,

and I do recall "Reflexifivity" from the book.

 

A COMPLEX concept, which I can summarise this way:

 

A trend in place, tends to remain in place, and CAN DRAW ON FUNDAMENTALS to support itself.

 

I suppose an example might be: a Rising Property market:

 

...which can "support itself", by lifting rents.

How does this work?

Landlord who pay more for their properties, ask higher rents.

And if enough other landlords follow suit, the rent rise will stick

 

(I will say more after studying what you have written - but I wanted to support the thread. Thanks for starting it!)

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However, I did have a copy of Soros' book, the Alchemy of Finance,

and I do recall "Reflexifivity" from the book.

 

A COMPLEX concept, which I can summarise this way:

 

A trend in place, tends to remain in place, and CAN DRAW ON FUNDAMENTALS to support itself.

 

I suppose an example might be: a Rising Property market:

 

...which can "support itself", by lifting rents.

How does this work?

Landlord who pay more for their properties, ask higher rents.

And if enough other landlords follow suit, the rent rise will stick

 

 

I first became aware of Reflexivity from that book a few years ago, and for some time I thought I'd understood the concept properly, it's only more recently through replaying the relevant parts of that lecture, and by reading more that I now believe I understand it more fully.

 

The purpose of this thread is for others to learn more about Reflexivity and also to enhance my understanding of it too since through recent Google searches and reading articles it appears to be a misunderstood concept or not understood at all.

 

As an example as a Google trends chart shows that whilst it is part of human consciousness it is not growing in recognition (at least according to Google);

 

[Google trends charts like these show the frequency of searches for a specific term (worldwide), in this case reflexivity;]

reflexivity.png

 

The fact that it is a misunderstood concept or not understood at all is in fact exceptionally ironic since the concept of Reflexivity could not exist (or work) without fallibility being a regular feature of human understanding, and I'm quite sure that irony is not lost on George Soros. In fact you could argue the case that because it's generally misunderstood this means it's likely to be closer to the truth than most realise. Furthermore he seems to have difficulty getting the idea across and this is likely to have set up a reflexive relationship between him and those (the majority) that don't get it (and this may have a deleterious impact on his ability to explain it). But I don't want to bewilder people with this so the best way forward is for me to give my explanation of Reflexivity.

 

I disagree when you say it's a complex concept, I would say it only appears to be complex mainly as a result of us all being indoctrinated to think a certain way.

 

I agree that a real world example is a great way to explain it so I'll give my explanation of reflexivity firstly and then follow up with a real world example;

 

 

We are all
part of
reality. Included in this reality, clearly, is everything we recognise. So this means physical things, objects, people, mountains etc, it also means things we cannot see such as distant planets, stars etc;

 

Now let's call these things the
objective
aspects of reality.

 

However, we are also thinking beings, so therefore our thoughts are also part of this reality, however since our thoughts do not always correspond to the facts (ie are not reflected in reality) these are best considered as the
subjective
aspect of reality.

 

Now our minds really have two modes, or functions, if you like, one is to understand reality, that is
cognition
or the
cognitive function
, the other is to influence reality, that is to
manipulate
or the
manipulative function.

In order that we can operate in reality we need to use our
cognition
in order to try and understand it. Now since we are part of reality, and reality is highly complex, it is not possible to full understand reality.

One way to view reality is that it is a like the inside surface of a circle, since we are part of reality we are inside the circle. Since we are inside it we can only observe one part of it at a time, due to it's inate complexity. In the following diagram reality is represented by the inside surface of the circle. An individual is clearly inside reality but can only try to comprehend part of it (due to it's inate complexity)

 

Themind2.png

 

 

This is where the difficulties begin for us. Since we are inside reality but cannot see all of it at one point our
cognition
is
flawed
. Since our
cognition
of reality is flawed, our
understanding
of reality is
almost always
flawed, therefore the actions that we take on the basis of our
cognitive function
are almost always flawed.

So our understanding of reality is flawed, our cognition is flawed, therefore it follows that our actions based on our cognition are also inherently flawed. Our actions stem from our
manipulative function
.

Now there is a two way relationship between our cognition of reality and our manipulation of reality.

Reality to cognition is one way and manipulation to reality is another way. Since we are inside the circle we cannot fully understand reality and therefore our actions inside reality (based on imperfect understanding) are wrong and therefore have an impact on reality that we are not capable of fully understanding.

 

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The way I understood Soros' idea of reflexivity is it brought the mindset/ philosophical tradition of the Continent to bear on economics The 'dialectic' goes further back then Marx... and then there is 20th century 'phenomenology'... anyone familiar with these ideas sees their influence everywhere in Soros. Soros' ambition in his youth was to be an academic philosophy. When this didn't eventuate, he turned his mind to earthly riches. Earhly riches though are never enough, so we see Soros with his theory looking for a kind of immortality through literary fame.

 

I think Soros' approach is helpful considering it brings the insights of idealism, subjectivity, collective human nature/ behaviour etc into the discipline of economics. All of these tended to settle more for 'appearances' as opposed to 'reality'. Economics has largely been dominated by Anglo-saxon thought, which, from a more European perspective, tends to be too realist and objective in its eagerness to be respectable and scientific.

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Now there is a two way relationship between our cognition of reality and our manipulation of reality.

Reality to cognition is one way and manipulation to reality is another way. Since we are inside the circle we cannot fully understand reality and therefore our actions inside reality (based on imperfect understanding) are wrong and therefore have an impact on reality that we are not capable of fully understanding.

 

To continue where I left off I said the above;

 

Now Reflexivity is interesting in a number of ways, here's one of them;

 

The two way relationship between thinking and reality operates via the channels outlined in the diagram, so the cognitive function operates from reality to the mind and the manipulative function operates from the mind to reality. This is capable of setting up a two-way feedback loop between thinking and reality, or put another way the feedback loop is between the subjective and objective aspects of reality. In fact I would argue that this is the default setting. The feedback loop can operate in two directions.

So for example lets say you are a fan of baseball and you are very wealthy. You are a fan of the New York Yankees but you are a businessman and since you are very busy you are unable to follow the New York Yankees all of the time. Lets say that the games you go and see happen to be the ones where they win (but you are aware of the times where they do not win). You are impressed by their skills and you decide to donate $10 million to the club. The club manager wisely uses the $10 million to set up a new system to scout for new talent at the top colleges and universities in the US. This system ensures that the club secures the best new future talent for the club and pays dividends several years down the line since they secure contracts for the best young players. So, lets fast forward 8 years. At this point 2 players in the team have come from the scouting system that your funds enabled. You are very impressed by the the way the team is playing, part of this is down to the athleticism of the play and part of that is down to the 2 players that came from the scouting system that your funds enabled. You are currently happy, business is going well and your baseball team is playing well. You decide to donate a further $10 million. Again the manager wisely sets these funds aside for the scouting school that is now in place to look for new talent. This reinforces the system and leads to further new talent being brought on board.

This is an example of a reflexive relationship between a businessman and his favourite baseball team (A positive feedback loop). He has imperfect understanding of the situation (he is more influenced by the games he watches which are wins, rather than the games he doesn't which are losses). His imperfect understanding led him to donate funds to the club, and had a positive impact on the future play of the team, that in consequence led him to donate further funds to the club after 8 years, which further reinforced his imperfect understanding that the baseball team are a good team and play well.

 

 

So we are constantly taking actions based on an imperfect understanding of reality. Our perception is flawed and for the most part it is always flawed.

Lets take the example a step further;

 

Now the businessman is extremely successful in the business world, he has plenty of funds to play with (hence his dual donations to his favourite baseball team). After total donations of $20 million and 10 years from the initial donation he is cognisant of the fact that he has had a significant impact on the team. He begins to think he can transfer his success in the business world to the world of baseball. He buys a majority shareholding in the baseball club and following a disagreement with the manager he takes over the management of the team, since his understanding of baseball is more limited than the previous manager the baseball team performs poorly, their results suffer, and the baseball team start to lose more games than they win.

So this reflexive relationship, whilst initially a positive feedback loop, has become a negative feedback loop.

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THE SWINGING RARELY STOPS - I will explain in my own words...

 

"the concept of equilibrium, and that concept is in direct contradiction with the concept of reflexivity. As I shall show in the next lecture, the two concepts yield two entirely different interpretations of financial markets..."

 

Sentiment and momentum pushes a price in one direction UNTIL THEY HIT AN EXTREME away from fair value,

then they swing back the other way, gathering momentum as they go.

 

"Equilibrium" is boring /

and buyers and sellers generally chase momentum, rather than trading at equilibrium prices

 

Warren Buffet said:

"In the short term: the stock market is a VOTING machine.

But in the long term, it is a WEIGHING machine."

 

Warren is recognizing the power of emotion/sentiment.

People BET or Vote backing winners, and avoid losers, pushing things to extremes.

Then the Weighing mechanism kicks in.

 

WHERE DO YOU THINK THIS STOCK IS... in relation to its "weighed"/intrinsic value ???

 

PFN.t / Pacific Northwest Capital ... update

=====

pfn.png

 

PFN: PGM deposits in Sudbury, Ont., Proj. generator w/ JVs. / Cash: $xxmn -04/12

+ Chmn. Harry Barr is overpaid at $500Kpa., plus makes more from other co'x

+ Cash + investments = $x mn / = $0.XX per share. Valuable PGM's at zero

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The way I understood Soros' idea of reflexivity is it brought the mindset/ philosophical tradition of the Continent to bear on economics The 'dialectic' goes further back then Marx... and then there is 20th century 'phenomenology'... anyone familiar with these ideas sees their influence everywhere in Soros. Soros' ambition in his youth was to be an academic philosophy. When this didn't eventuate, he turned his mind to earthly riches. Earhly riches though are never enough, so we see Soros with his theory looking for a kind of immortality through literary fame.

 

I think Soros' approach is helpful considering it brings the insights of idealism, subjectivity, collective human nature/ behaviour etc into the discipline of economics. All of these tended to settle more for 'appearances' as opposed to 'reality'. Economics has largely been dominated by Anglo-saxon thought, which, from a more European perspective, tends to be too realist and objective in its eagerness to be respectable and scientific.

 

Well, romans, this thread is intended to dissect Reflexivity, not the intentions of the theorist. This theory of his is really a further development of Karl Popper's theories. Although I do tend to appreciate much of what he has done, I would much rather remove that from the equation and just focus this discussion on Reflexivity, if you don't mind. I am a critical observer of things, I am trying to establish whether it exists (Reflexivity), how it operates and whether my understanding is correct or not. That is best established by seeing whether other people agree with me.

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PD,

You must be really keen on this Reflexivity idea.

What sort of crazy time is it for you there?

To be posting here at whatever hour it is must mean you are a bit "into" this idea right now

 

To me, the Soros concept explains Swing Trading, and why it works

 

pfn.png

 

For this stock, you want to Buy when you can Buy at or below: Cash+Investments = "Equilibrium"

 

That is how I like to trade too !

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PD,

You must be really keen on this Reflexivity idea.

What sort of crazy time is it for you there?

To be posting here at whatever hour it is must mean you are a bit "into" this idea right now

 

To me, the Soros concept explains Swing Trading, and why it works

 

pfn.png

 

For this stock, you want to Buy when you can Buy at or below: Cash+Investments = "Equilibrium"

 

That is how I like to trade too !

 

 

 

You're right.

 

 

The real world example I prefer is that of Silver in April 2011, this is a classic example of Reflexivity at work;

 

 

 

Silver futures

 

Screenshot2011-04-22at083252.png

 

The blue bands running across this chart show magnitude of volume for each price level, so the further the blue bands are to the right, the higher the volume traded at that price level. It shows volume plotted in profile across price.

 

Using the volume shown at the bottom of the chart, since the start of the year it appears to have been generally constant and around the start of April has accelerated higher. It looks very bullish. Contrast this to the volume profile, it's trending lower as the price has accelerated from $37 until $46.

 

We see the same traits in SLV and SIVR.

 

SLV

SLV-1.png

 

SIVR

SIVR.png

 

 

This leads me to think that from $37 upwards, the activity in the market may have been from speculators, johnny come latelys seeking to capitalise on the $50 level. I'm a silver bull, but I would prefer to see these late comers shaken out of the market, and a more consistent price appreciation. Silver has gone up more than 250% in 8 months.

 

 

A comment I saw on Zerohedge;

 

 

 

 

And finally;

 

 

 

"$1,000 OUNCE SILVER IS CONSERVATIVE" (Really?)

 

Only in a hyper-inflationary event.

 

There seems to be a detachment from reality here, it reminds me of the wild high estimates of oil during the spectacular 2008 rally.

 

 

The reflexive relationship was between the price of silver, the fundamentals of silver and the perception of the participants in the market. Each of the 3 components in that relationship reflexively influenced each other, forming a positive feedback loop, each component reinforced each other.

 

 

A symptom of the end of a reflexive process (where it is a positive feedback loop) is a;

 

Detachment from reality

For those that are unaware, the price of Silver then collapsed since the perception of reality had diverged too far from actual reality.

I am interested in this since as I mentioned before there are a few elements to Reflexivity. I'm deliberately avoiding classifying it since I want to see if someone else understands it at the same level. Once I've developed this further I want to look at a separate topic that is intended to quantify reflexive processes, and from that then develop a new strategy to trade the futures markets.

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Nice work !

 

I think we are each using our charting techniques, to search for the sort of "Excess" that represents a danger over-valuation, or mania, or "detachment from reality".

 

And I think you have it exactly right : We see that when people decide that the old methods of valuation are no longer useful. And so, we got this:

 

+ With Silver: on its way to $48 - Then people started thinking that because of a suppose "short squeeze on JPM" Silver would go to wild prices never seen before, and the dreamworld of the hyperbulls had arrived

 

+ With Facebook: at the time of its IPO at $34 - Then people were thinking that FB's users base and reputation somehow made it worth an absurd PE ratio of something near 100, when very fine growth stocks like Google had gone public with a PE near 15 times current earnings, and Google proved to have excellent growth once public - something that FB has not yet shown.

 

+ With Pacific Northwest Capital - see chart:

 

pfn.png

(The new higher price level was not "accepted" by higher volume - volume fell.)

 

In the case of quoted stocks and commodities, those detachments from reality most often are associated with parabolic price moves.

 

SLV / Silver etf ... update

 

slvv.png

 

What happens in a parabolic move is: the price move FEEDS ON ITSELF, and people are buying because the price is rising, not because they can value the stock or commodity using tried and test historical valuation techniques. In effect, people say: "I won't sell because it is going up too fast, and I no longer know at what price to sell. And buyers are attracted by the same momentum. As you point out, those tend to be SPECULATORS chasing pure momentum, not long term, value-oriented buyers.

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Ok so for silver at least one identification of a detachment from reality that indicated the coming END of a reflexive process was Bix Weir's absurd notion that "$1000 silver is conservative".

 

For Facebook it was a wildly high P/E ratio, but what was it for Pacific Northwest Capital?

 

The point I'm making is that once you spot opinions that seem way detached from reality, and that is matched to an apparent valuation that seems way off, whether it be price from a price chart or P/E or whatever, then that it is very strong indication that the END of a reflexive process may be coming and that means a large correction in the price.

 

If you then identify the components in the reflexive process and look out for the trigger that would cause it to break down and go into reverse (from a positive feedback loop to a negative feedback loop), then you are ahead of the game.

 

In the case of silver it was the increases in margin requirements by the CME.

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Ok so for silver at least one identification of a detachment from reality that indicated the coming END of a reflexive process was Bix Weir's absurd notion that "$1000 silver is conservative".

 

For Facebook it was a wildly high P/E ratio, but what was it for Pacific Northwest Capital?

 

Rising Platinum prices,

and BIG HOPES around PFN buying out its partner in their Palladium/ Platinum project at River Valley

 

(NOTES):

 

======

1. The big run-up started in late Jan 2011 - from under $0.15, to $0.40 by late April'11. During the same time, PTM/Platinum was in the range of about $20 to $23 (x85 equivalent to $1700 to $1955)

2. On Jan.24, 2011, PFN announced a jump in Resources estimates to 364k Gold oz. (at 1.05g/t) Indicated and 247k oz. (at 0.92g/t) Inferred on its Destiny Gold project near Val-d'Or. (PFN has an option to buy 60%, from Alto Ventures.)

 

pfn.png

 

3. The "Good News" on buying out AngloAmerican was released Jan.31, 2011. For its 50% interest in the River Valley PGM project, AA got 8.11 million PFN shares - that was a 12% stake at the time. The RV project had a Indicated deposit of 353k oz Palladium, 117k oz. Platinum, and 20k oz. of Gold - plus about twice those amounts additional on an Inferred basis.

 

4. Chatboard comments were (very positive)? at the time.

5. From late Sep.11 , PTM fell from $22 to $16 (about - 27%), making a low in Dec. 2011, near $16 (PLAT: $1350 )

6. And PFN drifted down to under $0.20 by late Sept, and then slid with Platinum down to $0.10 in Dec.2011

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It might be interesting try and identify a situation where reflexivity is involved in real time, prior to the detachment from reality phase (or perhaps during). There needs to be a misconception present for it to develop into a reflexive positive feedback loop so;

 

Perhaps the one at the moment is the current run of quantitative easing, now that we have the third edition this may have reinforced a misconception among market participants that if future growth/economy/jobs doesn't meed expectations then Bernanke with always come along with another round of QE. It seems that Bernanke is trying to influence the economy using the markets whereas in reality the economy is driving Bernanke to influence the markets. Has this created a bond market that is detached from reality?;

 

30 year Tbond futures;

TBonds.png

If it continues it's upward trajectory the answer is probably yes. Perhaps this is the middle stage of a bond bubble? People were very bearish before the bond rally started. So gold, stocks and bonds to rally but the bond rally will be a continuing bubble?

 

I suppose what we need to see are increasingly more bullish stories on bonds and perhaps an increase in the pace of price rises.....

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Mining Exploration stocks can be like LOTTERY TICKETS

 

Here's an example from yesterday of a stock I own that was up +163% in a single day.

 

Only time will show if this "fabulous" drill result is the discovery of something huge, or just a tantalizing taste, a mere delusion

I did "get a bid" on one of my stocks yesterday

 

TNR.v / TNR Gold ... update

 

tnr.png

 

TNR : $0.145 +0.09

Open: 0.115 / High: 0.145 / Low: 0.095

Volume: 4,658,660

Percent Change: +163.64%

 

They announced some fabulous drill results - a LONG interval of 1.25g/t

TNR GOLD INTERSECTS 242 METRES OF 1.25 G/T GOLD ON NEW GEOPHYSICAL TARGET AT SHOTGUN

 

Where do you fit in a price move like this ?

 

What do I do?

I sell some to recover my original capital, so I can take a free ride

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Here's a Pattern to Look for at LOWS

 

64275758.gif

 

STEPS to Forming an Important Bottom

=====

1) The stock reaches Undervalued Levels

2) The Downtrend line is broken

3) Minor MA's (8d, 21d) move higher

4) The downtrending 76d MA is exceeded

5) Confirmation as 8d,21d MA's break 76d.MA

6) Jump in Volume on price jump

7) Retracement on lighter volume, to retest Jump point

 

A CLASSIC BUY !

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Here are some comments below the video;

 

"it is fine as wisdom gleamed from empirical practice,................................................................ the philosophy here though, not the economics mind you, isn't a breakthrough. as he said, it is obvious but neglected, but only by economists."

 

"I'm quite appalled by the - how shall I call it? - degree of "freshmanishness" of Soros' thinking (admittedly, I am not much of a fan of Popper), though the notion of reflexivity vis-à-vis financial markets, volatility, and so on, though very much the stuff of common sense, is actually quite intriguing, and I can certainly appreciate how it would have played an important role in Soros' investment intuitions."

 

"This is entirely wonderful, reflexivity and fallibilism presented in a way that challenges and furthers philosophy and social science -> bravo ... well done"

 

"Thank You for posting this. This will be looked at 300 years later by posterity in awe....it is as if Voltaire himself is lecturing and was recorded on camera...."

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It might be interesting try and identify a situation where reflexivity is involved in real time, prior to the detachment from reality phase (or perhaps during). There needs to be a misconception present for it to develop into a reflexive positive feedback loop so;

 

Perhaps the one at the moment is the current run of quantitative easing, now that we have the third edition this may have reinforced a misconception among market participants that if future growth/economy/jobs doesn't meed expectations then Bernanke with always come along with another round of QE. It seems that Bernanke is trying to influence the economy using the markets whereas in reality the economy is driving Bernanke to influence the markets. Has this created a bond market that is detached from reality?;

 

30 year Tbond futures;

TBonds.png

If it continues it's upward trajectory the answer is probably yes. Perhaps this is the middle stage of a bond bubble? People were very bearish before the bond rally started. So gold, stocks and bonds to rally but the bond rally will be a continuing bubble?

 

I suppose what we need to see are increasingly more bullish stories on bonds and perhaps an increase in the pace of price rises.....

 

For reference

 

Q123.png

 

QE123.png

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Issue 1 of International Interdisciplinary Scientific and Practical Journal

 

REFLEXIVE PROCESSES AND CONTROL

 

A Russian journal that looks at reflexivity, includes a critique on Soros' theory of Reflexivity on page 73

 

http://www.reflexion...y/EJ_2002_1.pdf

 

 

This will become more prominent and widely discussed in the future.

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It might be interesting try and identify a situation where reflexivity is involved in real time, prior to the detachment from reality phase (or perhaps during). There needs to be a misconception present for it to develop into a reflexive positive feedback loop so;

 

Perhaps the one at the moment is the current run of quantitative easing, now that we have the third edition this may have reinforced a misconception among market participants that if future growth/economy/jobs doesn't meed expectations then Bernanke with always come along with another round of QE. It seems that Bernanke is trying to influence the economy using the markets whereas in reality the economy is driving Bernanke to influence the markets. Has this created a bond market that is detached from reality?;

 

30 year Tbond futures;

TBonds.png

If it continues it's upward trajectory the answer is probably yes. Perhaps this is the middle stage of a bond bubble? People were very bearish before the bond rally started. So gold, stocks and bonds to rally but the bond rally will be a continuing bubble?

 

I suppose what we need to see are increasingly more bullish stories on bonds and perhaps an increase in the pace of price rises.....

 

Charting the continuing bubble in the treasury market;

 

30 year (10 year weekly chart)

ZB.png

 

30 year (2 year daily chart)

ZB2.png

 

30 year (Stockcharts)

USB1.png

 

Ratio of 30 year to Dollar Index;

USBUSD.png

 

 

Relative to the dollar 30 years are about where they were at the start of September last year. On the one hand a continuation higher, beyond the 1.875 on this ratio chart would be further confirmation of a bubble, on the other hand, bubbles are typically picked up towards the end of the cycle.

 

 

Dollar Index chart for reference;

 

USD.png

 

 

 

WSJ article excerpt;

 

 

"Bonds—Heading From Bull Market to Bubble?

 

 

 

Ben Bernanke's latest announcement may provide a short-term boost to America's love affair with bonds—but at the risk of longer term pain.

 

The Fed chairman last week unveiled a new program of easy money to help kick start the economy. He will, in layman's terms, print money and use it to buy bonds, hoping to drive down interest rates and boost economic activity. It's the third time he's done this since 2009. He says he is willing to continue the latest program until it works.

Americans are already buying up all the bonds they can get. So far this year, we've pumped $220 billion into bond funds, even while yanking $80 billion out of equity funds, according to the Investment Company Institute. In the four years since Lehman Brothers imploded, we've poured $900 billion into bond funds, while withdrawing $410 billion from equities.

No wonder Bill Gross, the money manager at Pacific Investment Management (Pimco), recently announced the death of the cult of equity. Mr. Gross, one of Wall Street's most-watched figures, said that investors were finally giving up on the siren song of the 1990s, when "stocks for the long run" was deemed a guaranteed ticket to wealth.
"

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I emailed John Thomas (AKA the Mad Hedge Fund Trader) to see what his thoughts were RE bonds. He replied that there's no doubt about them being in a bubble but "when does it pop?".

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It might take a long time for a proper "popping" to start,

then it might develop very fast

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Marketwatch excerpt;

 

 

"Signs that bond market finally has topped

 

By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C. (MarketWatch) — How will we know when the great bond market finally tops out—for good?

 

It’s an urgent question, since the chorus of those predicting that a top is at hand—a chorus that has continued for years now, even as the unprecedented bond bull market has kept chugging along—has recently reached a crescendo. Needless to say, someday these stubborn bears will be right—might it be now?

 

And how will we know? As always in Hulbert On Markets, I turn to the top performing timers for insight.

 

Top bond timers still betting on the bull

 

Best vs. worst bond timers

Average bond market exposure among the top quartiles of timers, versus among the bottom quartiles. For updated info: http://on.mktw.net/UWbmlX

PERFORMANCE MEASURED OVER... TOP QUARTILE BOTTOM QUARTILE

Last year 77% -50%

3 Years 68% -50%

5 Years 98% -50%

10 Years 98% -50%

15 Years 97% 0%

20 Years 97% -50%

AVERAGE 89% -42%

Source: Hulbert Interactive

While it’s always possible that the great bond bull market is, or already has, come to an end, the top performing bond market timers are betting strongly that the bull is still alive and kicking. Not only are they very bullish in their own right, they are far more bullish than the bond timers with the worst track records.

 

The accompanying table reports the consensus recommended bond market exposure levels among the top and bottom quartiles of bond market timers tracked by the Hulbert Financial Digest. When constructing those quartiles, I focused on six different time periods—ranging from the trailing 12 months to the last 20 years.

 

Notice the huge difference between the recommended exposure levels of the top and bottom quartiles. In fact, on average, that difference is 131 percentage points. That’s the highest it’s been since I have been publishing Hulbert On Markets.

 

The more typical pattern at market tops is for the spread between the consensus of the best and worst timers to begin shrinking—either because the top performers have reduced their recommended exposure levels, or because the bottom performers increased theirs, or both. This is not what we’re seeing right now, needless to say. Since the beginning of this year, for example, the consensus of the top bond timers has stayed both high and constant, while the worst timers have become even more bearish."

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