The Macro Master

This past week, I had the opportunity to take my first real trip in many years.

Over my lifetime, I have visited fifty-three countries. I'm not sure my goal is to visit all of them before I die, but I certainly want to visit a lot of them.

For most of the last thirty years, I have been able to hit a new one or a few new ones every year. In the previous six years, though, I have not visited ANY new ones. Between work, COVID, and life – my travel has been curtailed.

After successfully launching HX Research earlier this year, I decided to visit Eastern Europe.

The first place I visited—and the one I was most excited to see—was Budapest, Hungary. I honestly know little about the place but have always been very intrigued by it.

As we walked around this ancient city, I thought about one of its natives, George Soros, who became one of the greatest investors of all time.

Most of you are familiar with Soros. His story is an incredible one.

He was born in Budapest in 1930 to a non-religious Jewish family. They stayed in the country and survived the horrific events of the Nazi occupation and the holocaust. There were over 550,000 Hungarian Jews who did not survive.

He left in 1947 and eventually attended the London School of Economics. After working at several merchant banks after graduation, he founded his first hedge fund—Double Eagle—in 1969. In 1970, he used it to start Soros Fund Management and changed the name of the fund to Quantum Fund.

Over the next four decades, Soros built one of the most legendary track records in investment history.

He has generated some controversy in recent years with his strong political advocacy.

While this has led to some detractors, no one can doubt his ability to use powerful intellect to master the global markets.

Soros is one of the investors who has most influenced my own strategies, but he is also one of the most difficult to understand.

Soros is not known for simple quotes. Here are a few of our favorites, along with our thoughts…

“It's not whether you're right or wrong, but how much money you make when you're right and how much you lose when you're wrong.”

Soros is known for his complex thoughts, but this is a simple and powerful trading insight.

We discuss this often when discussing our strategies. Everyone would prefer an approach that wins most of the time. Our TRADING strategies make money in over 70% of all our positions.

To make BIG money, though, you should aim for big returns. You also should manage your losses. This combination is how you compound wealth over time.

This is what we do in our INVESTING strategies. However, we will point out that most of our stocks make money there, too!

"Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected."

It isn't always what happens that is most important; rather, it is what happens relative to what investors THINK will happen.

Once an investor understands this concept, they are in a much better position to make money and manage risk.

The concept of expectations driving the market is an important jump to make to be successful.

“My peculiarity is that I don't have a particular style of investing or, more exactly, I try to change my style to fit the conditions.”

This is one of our favorites.

My partner Whitney Tilson once asked me what strategy we use in our investing and trading. I think he was expecting an answer like "value" or "growth.”

My answer was that I was a “make money” investor.

The environment changes, and your strategies need to adapt to be successful.

"The fact that a thesis is flawed does not mean that we should not invest in it as long as other people believe in it and there is a large group of people left to be convinced." The point was made by John Maynard Keynes when he compared the stock market to a beauty contest where the winner is not the most beautiful contestant but the one whom the greatest number of people consider beautiful. I have something significant to add: it pays to look for the flaws; if we find them, we are ahead of the game because we can limit our losses when the market also discovers what we already know. It is when we are unaware of what could go wrong that we have to worry.

This is a more typical Soros quote. It also raises one of the most powerful concepts in investing: Soros's theory of "reflexivity.”

This is the idea that investor perceptions of the future can influence the outcome.

This insight can occur at key market points and with particular stocks. IF you can identify these points, you can make an absolute fortune!

In tomorrow’s HX Daily, we will discuss how it works and how to take advantage of it.