Portrait of a supposed expert (from CBSMW):
Mark Hulbert and I have known Bob Prechter for more than 20 years. We believe he's sincere.
Of course, being on the wrong side of a market, like being under torture, is more than the strongest character can stand.
It's not a pretty sight.
A lot of our e-mail focuses on the question of why we continue to follow Prechter at all.
The short answer: by Hulbert Financial Digest count, the stock market timing of Elliot Wave Financial Forecast (which HFD treats as the successor to Elliott Wave Theorist after the latter stopped giving portfolio advice) has outperformed the Wilshire 5000on a risk-adjusted basis over the entire period since July 1980.
Over the past five years, it gained 3.5 percent on average annually, vs. 1.8 percent for theWilshire 5000.
This, however, was the Prechter people's investors portfolio, which switches between the stock market and cash. The traders portfolio actually goes short, with the result that it has an annualized loss of close to 20 percent since 1985, when buying and holding produced an annualized gain of more than 12 percent.
Hence, of course, the angry e-mail.
In addition, we remember Prechter's remarkable flashes of success, notably calling the stock market rally in the early 1980s, in the teeth of 15 years of gloom, and also the early 1980s gold bounce.
Statisticians might not regard these as technically significant. But they would say the same about the career of great speculators like the thrice-bankupt Jesse Livermore.
You have to be impressed, too, by the sheer versatility of Prechter's thinking. The current Elliot Wave Theorist is an explosion of contrary opinion, from skepticism about the economy and the stock market to (short-term) optimism on the dollar and inflation -- i.e. Prechter thinks price levels will fall.
This isn't enough to appease out angry e-mailers. But it's something to think about. |
