Robert Prechter

From Wikipedia, the free encyclopedia
Jump to: navigation, search

Robert R. Prechter, Jr. (born 1949) is an American author and stock market analyst, known for his financial forecasts using the Elliott Wave Principle. Prechter is an author and co-author of 14 books, and editor of 2 books,[1], and his book Conquer the Crash was a New York Times bestseller in 2002.[2] He also has published monthly financial commentary in the newsletter The Elliott Wave Theorist since 1979, and is the founder of Elliott Wave International and New Classics Library.[3][4] Prechter served on the board of the Market Technicians Association for nine years, and as the Association's President in 1990-1991. In recent years Prechter has supported the study of socionomics, a theory about human social behavior.[5][6]

Biography[edit]

Prechter attended Yale University and graduated with a B.A. degree in psychology in 1971. His career as an analyst began when he joined Merrill Lynch as a market technician in 1975, where he learned much about the trade from Merrill's Chief Market Strategist, Robert Farrell (June 1982).[4][7] There Prechter also learned of Ralph Nelson Elliott and the Elliott wave principle and was deeply intrigued:

So I tracked down R.N. Elliott's original books. They weren't even in the Library of Congress. But I finally dug around in the New York Public Library and found a catalog card listing a copy of them on microfilm and had photocopies made. I was amazed to find that there was a wealth of information that had been lost to Wall Street.[8]

Prechter has also said, "after I decided to make markets a career, I realized that mass psychology is what they're all about." [8]

Prominence[edit]

In 1979 Prechter left Merrill Lynch and published the first subscription issue of the Elliott Wave Theorist. The 1970s had been very bullish years in the gold market but mostly bearish for stocks, yet his Elliott wave analysis called for a long-term reversal lower in gold (February 1980)[4][9] and a long-term "super bull market underway" in stocks (October 1982).[4][10] Because these forecasts proved mostly correct—especially for the stock indexes—Prechter's following grew.

His visibility increased further after he won the U.S. Trading Championship in 1984, with a then-record 444% return in a monitored options trading account.[11] He was profiled in many financial and business publications and named "Guru of the Decade" by the Financial News Network (now CNBC) for the 1980s.[12]

Prechter has been forecasting a large-scale bear market, as explained in his book Conquer the Crash.[13]

Re-introduces Elliott[edit]

Much of Prechter's career as a publisher includes his efforts to re-introduce R.N. Elliott's wave principle to investors.[7] He compiled and republished all of Elliott's available writings, including the 1938 "Wave Principle," and the "Interpretive" and "Forecast" letters (1938–1946). Prechter also published a brief biography of Elliott and the collected Elliott wave writings of the few technicians who practiced wave analysis in the 1950s and 1960s (Charles Collins, Hamilton Bolton, A.J. Frost, Richard Russell).

Still, not all the popular exposure to Elliott wave analysis was the result of Prechter's deliberate efforts. In the few years before and after 1987, media coverage inflated Prechter's "guru" status to extremes, including the assertion that his forecasts could single-handedly "cause" the stock market to rise or fall[14] (a proponent of technical analysis, Prechter considered this absurd). In the months after Black Monday in October 1987, subscriptions to Prechter's Elliott Wave Theorist surged to some 20,000. That number declined in the early 1990s (as did the subscription levels of most other financial publishers), though "Prechter has done more to popularize and spread Elliott's philosophy than anyone else."[15]

Socionomics[edit]

In 1979, Prechter postulated that social mood drives financial, macroeconomic and political behavior, in contrast to the conventional notion that such events drive social mood.[16] His description of social mood as the driver of cultural trends reached a national audience in a 1985 cover article in Barron's.[17] Prechter coined the term "socionomics" and in 1999 published an exposition of socionomic theory, The Wave Principle of Human Social Behavior.[5] In 2003, he published an anthology of empirical work in the field, Pioneering Studies in Socionomics.

Since then, the counter-intuitive premise of the socionomic hypothesis—that social mood drives the character of social events—has gained attention in academic journals,[18][19][20] books,[21][22] the popular press,[23][24][25] universities,[26] academic conferences[27][28] and in research funded by the National Science Foundation.[29][30] The Socionomics Institute hosts an annual conference each April in Atlanta GA regarding social mood.[31] The conferences have included presentations from academics, authors and financial professionals such as Richard L. Peterson, Tobias Preis, Johan Bollen, John Casti, Michelle Baddeley, Todd Harrison, Eric Gilbert and Robert Prechter.

Criticism[edit]

While Prechter has his admirers, he has been criticized by media and pundits for his long term record. For example, The Wall Street Journal ran a page one article in August 1993 with the headline, "Robert Prechter sees his 3600 on the Dow – But 6 years late," in reference to Prechter's 1987 forecast for the Dow Jones Industrial Average.[32] Technical analyst David Aronson wrote:

The Elliott Wave Principle, as popularly practiced, is not a legitimate theory, but a story, and a compelling one that is eloquently told by Robert Prechter. The account is especially persuasive because EWP has the seemingly remarkable ability to fit any segment of market history down to its most minute fluctuations. I contend this is made possible by the method's loosely defined rules and the ability to postulate a large number of nested waves of varying magnitude. This gives the Elliott analyst the same freedom and flexibility that allowed pre-Copernican astronomers to explain all observed planet movements even though their underlying theory of an Earth-centered universe was wrong.[33]

Notes[edit]

  1. ^ Robert R. Prechter Jr., Bibliography, Amazon.com.
  2. ^ Best Sellers List. (11 August 2002). "Book Review". New York Times: p. 24. 
  3. ^ Chen, James. (2010). Essentials of Technical Analysis for Financial Markets. New York: John Wiley and Sons. p. 4. ISBN 978-0-470-53729-9. 
  4. ^ a b c d Prechter, Robert R., Jr. (various dates). "Elliott Wave Theorist". Elliott Wave International. (Gainesville, Georgia). 
  5. ^ a b Prechter, Robert R. Jr., (2003). Socionomics: The Science of History and Social Prediction, Gainesville, GA: New Classics Library. ISBN 0-932750-57-5. Two volumes: The Wave Principle of Human Social Behavior (1999); Pioneering Studies in Socionomics (2003).
  6. ^ Penn, David. (June 2003). "Social Mood and the Markets". Technical Analysis of Stocks & Commodities: p. 50. 
  7. ^ a b McCaffrey Brecht, Kira. (July 2003). "Trader's Hall of Fame Award - Robert Prechter - An Interview with the Elliott Wave Guru". Stocks, Futures & Options Magazine: 42. 
  8. ^ a b Prechter, Robert R., Jr. (1996/2004). Prechter's Perspective. Gainesville, Georgia: New Classics Library. p. 6. ISBN 978-0-932750-61-7. 
  9. ^ Lazarovic, Karen. (30 April 1985). "Elliott-wave technician sees 2d-half blastoff". New York Post: 36. 
  10. ^ Shaw, Russell; Landis, David. (9 October 1987). "Prechter flees Wall St. for Georgia hills". USA Today: B1. 
  11. ^ Myerson, Allen R. (October 1985). "Robert Prechter: From Lake Lanier, He Can See Wall Street Clearly". Georgia Trend: 26. 
  12. ^ Hendrick, Bill. (15 July 1990). "Unbelievers Don't Worry Prechter". Atlanta Journal Constitution: H–4. 
  13. ^ Prechter, Robert R., Jr. (2002/2009). Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression (2 ed.). New York: John Wiley and Sons. ISBN 978-0-470-56797-5. 
  14. ^ Wiggins, Phillip H. (7 October 1987). "Dow Drops a Record 91.55 Points". New York Times: A1. 
  15. ^ Grimes, Millard. (August 1994). "Whatever happened to Robert Prechter?". Georgia Trend: 24. 
  16. ^ Prechter, Robert R., Jr. (August 1979). "What's Going On?" The Elliott Wave Theorist. Elliott Wave International. Gainesville, GA. Reprinted in Pioneering Studies (2003).
  17. ^ Prechter, Robert R., Jr. (9 September 1985). "Elvis, Frankenstein and Andy Warhol". Barron's.
  18. ^ Prechter, Robert R., Jr.; Parker, Wayne D. (2007). "The Financial/Economic Dichotomy in Social Behavioral Dynamics: The Socionomic Perspective". Journal of Behavioral Finance. Vol. 8 No. 2, pp. 84-108. Abstract here. Retrieved Nov. 19, 2007.
  19. ^ Bollen, Johan; Mao, Huina; Zeng, Xiaojun. (March 2011). "Twitter mood predicts the stock market". Journal of Computational Science. Vol. 2, No. 1, pp. 1-8. Abstract here. Retrieved April 24, 2012.
  20. ^ Taylor, Richard. (3 September 2010). "Mood Swings". Science. Preview here. Retrieved April 24, 2012.
  21. ^ Casti, John L. (2010). Mood Matters: From Rising Skirt Lengths to the Collapse of World Powers. New York: Springer.
  22. ^ Malik, Constantin. (2010). Ahead of Change: How Crowd Psychology and Cybernetics Transform the Way We Govern. Frankfurt: Campus Verlag. p.69. Abstract here. Retrieved May 29, 2012.
  23. ^ Moyer, Justin. (3 February 2012). "If Romney wants to beat Obama, he should hope the Dow crashes". Washington Post. Article here. Retrieved May 29, 2012.
  24. ^ Krantz, Matt. (17 November 2009). “Could the Pop-Culture Mood Mirror Stock Market Swings?” USA Today. Article here. Retrieved May 14, 2012.
  25. ^ Editorial. (7 August 2009). "Could recession end cannabis ban?". New Scientist. Preview here. Retrieved May 29, 2012.
  26. ^ Prechter, Robert R., Jr. (2004). "Socionomics - Social Mood as the Engine of Social Activity". Presented at the London School of Economics and Political Science, London, England, 18 March 2004. Document here. Retrieved April 25, 2012.
  27. ^ Parker, Wayne D. (2006). "The Socionomic Theory of Finance and the Institution of Social Mood: Pareto and the Sociology of Instinct and Rationalization". Presented at the Conference of the Association for Heterodox Economics, London, United Kingdom, July 14–16, 2006. Program here. Retrieved May 14, 2012.
  28. ^ Lampert, Matt. (2011). "The Central Bank in the Liberal Market Economy: Market Leader or Follower? Recent Comparative Evidence from the U.S. and Australia". Presented at the Academy of Behavioral Finance Conference, University of California-Los Angeles, Los Angeles, California, September 22, 2011. Document here. Retrieved May 29, 2012.
  29. ^ Announcement of this research in 2006 by the American National Election Studies. Retrieved Nov. 19, 2007.
  30. ^ Announcement of this research in 2011 by the National Academies of Science. Retrieved April 25, 2012.
  31. ^ http://www.socionomicssummit.com/program/ Retrieved April 9, 2013.
  32. ^ Power, William. (19 August 1993). "Robert Prechter sees his 3600 on the Dow – But 6 years late". The Wall Street Journal. 
  33. ^ Aronson, David R. (2006). Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals. New York: John Wiley and Sons. p. 41. ISBN 978-0-470-00874-4. 

References[edit]

  • Essentials of Technical Analysis for Financial Markets by James Chen. Published by John Wiley and Sons. ISBN 978-0-470-53729-9.
  • Socionomics: The Science of History and Social Prediction by Robert Prechter. Published by New Classics Library. ISBN 0-932750-57-5.
  • Prechter's Perspective by Robert Prechter. Published by New Classics Library. ISBN 978-0-932750-61-7.
  • Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals by David R. Aronson. Published by John Wiley and Sons. ISBN 978-0-470-00874-4
  • Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression (2 ed.) by Robert Prechter. Published by John Wiley and Sons. ISBN 978-0-470-56797-5.
  • Behavioral Trading: Methods for Measuring Investor Confidence and Expectations by Woody Dorsey. Published by Texere. ISBN 1-58799-164-0.

External links[edit]