Soros: "superbubble" that has been swelling for a quarter of a century is finally bursting

History has proven him correct. The econometric discoveries once heralded as potential "laws" of macroeconomics have all faired poorly against the data over time. His own insights derived from praxeology have held up well.

This failure of econometrics is at the root of the current crisis. All the model based derivative valuations and risk management tools worked ... until they didn't. Same thing with the LTCM crisis. You just can't substitute regression analysis for thinking.

"Essentially, it says that financial markets have built-in biases which have an impact not only on prices but also, in extreme times, the fundamentals themselves. In such moments, market events affect as well as reflect supply and demand."

"But this crisis is profoundly different from its predecessors, he argues—at least, all those since the Depression—because two bubbles are coinciding: a “straightforward” one in housing, pumped up by low interest rates in the wake of the dotcom collapse; and a longer-term, more complicated “super-bubble” fed by globalisation, deregulation and decades of credit expansion, which is taking in commodities, currencies and more besides."

“[S]hort US and European stocks, US ten-year government bonds, and the US dollar; long Chinese, Indian and Gulf States stocks and non-US currencies.”

There's quite a lot of evidence that people's attitude affects the economy in the short run. The whole investing discipline of technical analysis rests on this, as do the schools of Keynesianism and Austrian macroeconomics.

But in the long run, people's basics needs always win out. You may believe that prices are going to fall and so it's better to spend your money later rather than sooner, but eventually you still have to eat. Or you might figure that stock prices are falling, yet companies are now spinning off so much in dividends that it's worth investing just for the dividend stream. These effects tend to put a floor (or ceiling, for bubbles) on any short-term psychological movements.

The tricky part is figuring out where the short term meets the long term. If people could do that reliably, they'd be millionaires in short order. But it's very difficult to time the point where "Everybody else expects prices to go down, so they will" meets "But they're really low, so the fundamentals look too good to pass up."

As for selling books, the guy's one of the richest people in the world...

Perhaps true now, but not true three years ago. Three years ago all the people who saw a crisis brewing were completely ignored. If you wanted popular attention you had to crow about making fast money in finance or by flipping houses.