Endnotes

[i] George Soros is an American currency speculator, stock investor, businessman, philanthropist and political activist. Soros is the chairman of a hedge fund group known as Soros Fund Management and the Open Society Institute and is also a former member of the Board of Directors of the Council on Foreign Relations. In 1970 he co-founded the Quantum Fund with Jim Rogers, which created the bulk of the Soros fortune. Rogers retired from the fund in 1980. Other partners have included Victor Niederhoffer and Stanley Druckenmiller.

The Alchemy of Finance (Simon & Schuster, 1988) ISBN 0-671-66338-4 (paperback: Wiley, 2003; ISBN 0-471-44549-5)

[ii] A George Soros quote dated April 26, 1994: "I must state at the outset that I am in fundamental disagreement with the prevailing wisdom. The generally accepted theory is that financial markets tend towards equilibrium, and on the whole, discount the future correctly. I operate using a different theory, according to which financial markets cannot possibly discount the future correctly because they do not merely discount the future; they help to shape it. In certain circumstances, financial markets can affect the so-called fundamentals, which they are supposed to reflect. When that happens, markets enter into a state of dynamic disequilibrium and behave quite differently from what would be considered normal by the theory of efficient markets. Such boom/bust sequences do not arise very often, but when they do, they can be very disruptive, exactly because they affect the fundamentals of the economy."

Reflexivity is based on three main ideas: (a) investor bias can grow, spread and disrupt market pricing mechanisms (b) it appears intermittently and is revealed as part of the trend-following habits of investors and (c) investor observations and participation can influence valuations and economic conditions.

[iii] John Serrapere, Defend to Advance, The Minsky Moment, InPerspective, Issue 1, February 2009.

[iv] John Serrapere, Panic P/Es, Active Indexer, October 2008, www.indexuniverse.com.

[v] The Yale model was developed by David Swensen and Dean Takahashi. David F. Swensen has been the Chief Investment Officer at Yale University since 1985. Mr. Swensen's book, "Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment" outlines his investment thesis.

[1] Laura Mandaro, MarketWatch, March 16, 2009

[ii] Marc Faber was born in Zurich and schooled in Geneva, Switzerland, where he raced for the Swiss National Ski Team. He studied economics at the University of Zurich and, at the age of 24, obtained a Ph.D. in Economics magna cum laude. Faber resides in Thailand and is best known for the Gloom Boom Doom investment newsletter.

[iii] Louis-Vincent Gave is CEO of the global financial services firm GaveKal. Educated at Duke University and Nanjing University, Mr. Gave is a former member of the French army. Since the 1990s, he has worked in global finance in Hong Kong, London and Paris. He left Paribas Capital Markets in 1999 to launch GaveKal Research. He is the main author of two books, Our Brave New World and The End is Not Nigh. GaveKal is well-known for its economic research on how platform companies have changed the world by enabling economic cycles in the developed world to undergo a permanent moderation that supports higher security prices and financial firm valuations.

[i] Recently a subscriber to John Mauldin's Weekly E-Letter directed my attention to Mr. Mauldin's coverage of the crash in equity earnings titled: Thoughts From The Frontline, Is That Recovery We See?, April 10, 2009.

John Serrapere works on research and consulting projects through Arrow Insights. He welcomes comments and suggestions at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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