Interest rates, oil prices, earnings, GDP, wars, terrorist attacks, inflation, monetary policy, etc. -- NONE have a reliable effect on the stock market
By Elliott Wave International
You may remember that during the 2008-2009 financial crisis, many called into question traditional economic models.
Why did the traditional financial models fail? And more importantly, will they warn us of a new approaching doomsday, should there be one?
This series gives you a well-researched answer.
Here is Part IV; come back soon for Part V.
Myth #4: "Earnings drive stock prices."
By Robert Prechter (excerpted from the monthly Elliott Wave Theorist; published since 1979)
Interest rates, oil prices, earnings, GDP, wars, terrorist attacks, inflation, monetary policy, etc. -- NONE have a reliable effect on the stock market
By Elliott Wave International
You may remember that during the 2008-2009 financial crisis, many called into question traditional economic models. Why did the traditional financial models fail?
And more importantly, will they warn us of a new approaching doomsday, should there be one?
That's a crucial question to your financial well-being. This series gives you a well-researched answer.
Here is Part III; come back soon for Part IV.
Myth #3: "Expanding trade deficit is bad for economy -- and bearish for stocks."
By Robert Prechter (excerpted from the monthly Elliott Wave Theorist; published since 1979)
Over the past 30 years, hundreds of articles -- you can find them on the web -- have featured comments from economists about the worrisome nature of the U.S. trade deficit. It seems to be a reasonable thing to worry about.
But has it been correct to assume throughout this time that an expanding trade deficit impacts the economy negatively?
Interest rates, oil prices, earnings, GDP, wars, terrorist attacks, inflation, monetary policy, etc. -- NONE have a reliable effect on the stock market
By: Elliott Wave International
You may remember that during the 2008-2009 financial crisis, many called into question traditional economic models. Why did the traditional financial models fail?
And more importantly, will they warn us of a new approaching doomsday, should there be one?
That's a crucial question to your financial well-being. This series gives you a well-researched answer.
Editor's note: The following article originally appeared in a special September-October double issue of Robert Prechter's Elliott Wave Theorist, one of the longest-running financial letters in the business. From Sept. 25 to Oct. 1, Prechter's firm, Elliott Wave International, is throwing open the doors to all of its investor services 100% free. Click here to join EWI's free Investor Open House now.
It piques our interest when a person or company makes the front page of a magazine or newspaper. On August 15, USA Today ran an article with a chart on the share-price performance of Warren Buffett's company, Berkshire Hathaway. The Guardian and other papers covered the news, too, which was that the stock had cleared $200,000/share.
The stock (symbol BRK-A) has returned a 19.7% compounded annual return to shareholders since 1965, the year Buffett turned a failing textile company into an investment company. It has returned 22.8% annualized since 1977. Let's just say that the stock has produced about 20% per year compounded.
The above figure shows that the stock has just met a 16-year resistance line on arithmetic scale. The next figure shows that it is still a bit shy of that line on log scale. Continue reading "Top Approaching in Berkshire Hathaway?"→
You may remember that during the 2008-2009 financial crisis, many called into question traditional economic models. Why did the traditional financial models fail?
And more importantly, will they warn us of a new approaching doomsday, should there be one?
That's a crucial question to your financial well-being. This series gives you a well-researched answer. Here is Part I; come back soon for Part II.
The Fundamental Flaw in Conventional Financial and Macroeconomic Theory
By Robert Prechter (excerpted from the monthly Elliott Wave Theorist; published since 1979)
Every time there is a recession, observers grumble about economists' methods. The deeper the recession carries, the louder the grumbling. The reason that widespread complaints occur only in recessions is that economic forecasters as a group never, ever anticipate macroeconomic changes. Their tools don't work, but consumers of their commentary do not notice it until recessions occur, because that is the only time when everyone can see that the methods failed. The rest of the time, when expansion is the norm, no one notices or cares.
The recent/ongoing economic contraction is the deepest since the 1930s, so the complaints about economists' ideas are the most strident since that time. Figure 1 shows how one publication expressed this feeling following four quarters of negative GDP.
Figure 1
Ironically, once the economy begins expanding again, everyone forgets about their old complaints. The media resume quoting economists, despite their flawed methods, and they are once again satisfied that their ideas make perfect sense.
Conventional financial theory relies upon the seemingly sensible ideas of exogenous cause and rational reaction. Papers are packed with discussions of "exogenous shocks," "fundamentals," "input," "catalysts" and "triggers." Stunningly, as far as I can determine, no evidence supports these ideas, as the discussion below will show. Continue reading "Don't Get Ruined by These 10 Popular Investment Myths (Part I)"→
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