Stock Market Crashes Are Predictable, Major Decline Is Coming In 2003 And 2004, Says UCLA Physicist

Science Daily ^ | 12-17-2002 | UCLA

[HumanaeVitae]

This is a fairly common occurence. Scientists view everything as logical mechanisms that need to be probed and then plotted on a graph. Markets involve humans. I think that this system will fail like all the others...

[Bloody Sam Roberts]

Shades of Asimov's Hari Seldon.

Funny. My first thought was of Psychohistory as well.

[Protagoras]

When you combine his predictive charts with Elliott Wave theory, you have a perfect fit.

The Elliott Wave theory is as good as the pigeon theory. Which rail of the fire escape across the street from the exchange had the most pigeons perched on it.

[RightWhale]

Another chartist. If he were worth listening to he should have a radio show. In one paragraph he says he can't tell if the bubble ends with a burst or a long bear. Then he says we are going to end this one with a long bear. Roll dem dice, Didier.

[Doctor Stochastic]

Not there.

[Tauzero]

"Actually, any successful prediction tool will modify the markets by its adoption because it changes peoples' behavior, thus making the prediction tool worthless."

The answer to that is the tool won't ever attract enough adherents, precisely because of mob psychology.

There will never be a shortage of investors like the author of post 9.

[dighton]

I would put more stock in this guy's thoery if he was writing his book from the deck of his 110' yacht moored off Monte Carlo.

Exactly. Having such red-hot algorithms, there's no reason he shouldn't be rich.

[Poohbah]

"My research takes all my time; I do not spend even one percent of my time investing in the market," he answered. "However, I have invested with associates, who implemented this system, in particular in hedge-funds. We have done well, and are continuing to do so. This system alone, however, is not sufficient to profit in the stock market with active trading, especially not in the short term and must be complemented with other analyses."

Translation: his ability to actually make predictions just plain sucks.

[Tauzero]

"Having such red-hot algorithms, there's no reason he shouldn't be rich."

Actually there is. The vast majority of people are not psychology suited to investing, and he's probably no exception.

A good investing algorithm does you no good if you don't have the emotional discipline to implement it.

And besides, he himself said his model, by itself, was insufficient.

[Tauzero]

"Translation: his ability to actually make predictions just plain sucks"

That's not at all an accurate translation.

[Tauzero]

"If he were worth listening to he should have a radio show."

Surely you're not serious.

[Poohbah]

Either he has an algorithm that can actually predict market downturns, or he does not.

He basically said that he doesn't, right after he said he does.

[Tauzero]

"Scientists view everything as logical mechanisms that need to be probed and then plotted on a graph. Markets involve humans."

I know you meant to imply some difference, but the behavior of mobs is at least partly understood -- and quantifiable.

[Tauzero]

No, he said it was not sufficient for short-term active trading. He has indeed made some good calls.

[Poohbah]

If you consistently make the same call as to market direction, you will eventually be correct.

But I'm not going to confuse that with the idea that he actually knows what he's talking about.

[Tauzero]

"If you consistently make the same call as to market direction, you will eventually be correct."

Umm, yes. That's germane because...

"But I'm not going to confuse that with the idea that he actually knows what he's talking about."

Ah, you then by implication say he has made some bad calls. What were they?

[I_be_tc]

has found patterns that occur in market crashes dating back for centuries.

Centuries? Wow, this guy is good. I wonder how many centuries he went back to study the market?

TC

[Tauzero]

"It's credit expansion and easy money."

Ah, but credit expansion and easy money are not uncaused first causes.

[Maelstrom]

A most reliable way to "predict" market crashes is to create them. Self-fulfilling prophecy is the term used.

Now the Astute Reader should ask: why would a professor from UCLA wish to create a self-fullfilling prophecy concerning a market crash around 2003-2004?

Conservatively Yours

[Poohbah]

Elliot Wave theorists always predict doomsday.