I've heard that Soros, among others, cautioned you against the Thai investment.Why didn't you listen to the naysayers?
Well, Soros would be the first to tell you that his predictions are completely random. Henever says anything that doesn't jibe with his current position or his hoped-for outcome.And he's chronically bearish. He's chronically thinking that the world needs a centralplanner to put it to rights and that the market itself is too prone to disaster.
I think a much better view is that the stock market never rises unless there's awall of fear it has to climb. When the public is most frightened, only the strongare left, and that's when the market is in the best possible hands
. I call it taking outthe canes. Whenever disaster strikes, the very sagacious wealthy people take theircanes, and they hobble down from their stately mansions on Fifth Avenue, and they buystocks to the extent of their bank balances, and then a week or two later, the marketrises, they deposit the overplus in their accounts, invest it in blue-chip real estate, andretire back to their stately mansions. That's probably the best way of making money, tobe a
specialist in panics
. Whenever there's panic hanging in the air, that's a great timeto invest.
But I assume that's what you were thinking when you ignored the risk in Thailand,and that didn't work out so well.
There's no magic bullet that will make you money all the time, but what I said can bequantified and has been quantified and certainly works for the U.S. market. My basicmethodology, which I developed 30 or 40 years ago and which has been widely copiedand stolen and which about the half the industry uses
i.e., that the interrelationsbetween markets are predictive and can be quantified
I happen to believe that thismethodology is quite valid and I still use it today. And every now and then I can keep myhead above water.
How did it feel to be so wrong in such a high-stakes situation?
It was my first real taste of total disaster. I had pretty much lived a charmed life until thattime. I had won some awards as the best-performing fund the previous year, and I hadnever had a customer lose money with me. I had an unprecedented, too-good-to-be-true kind of record.When it happened, I went through all the stages of grief: anger, denial, sadness,everything. My sister happens to be a practicing psychiatrist, and she said that of the 11symptoms of suicide, I had 10 of them. I was destroyed. I had lost money for mycustomers and that was very terrible. And I had lost my feeling of competence in mychosen field. And I had I lost all my own money, a lot of people were depending on mewho would now have to fend for themselves, so it caused a great spillover of grief, too.