Supertrends

1.FEELER, THINKER, HEDGEHOG, FOX – ON PREDICTIONS

‘We're on the verge of the biggest bear market in 300 years.' This was the opinion of the famous financial analyst, Robert Prechter, in an interview in The New York Times in summer 2010. A ‘bear market’ is a stock market with falling prices. In other words, Prechter was expecting a colossal downturn with depreciation of ‘more than 90%’. This was not the first time he had predicted a disaster. Just one year previously, in June 2009, he had forecast a sharp fall; while in 2011, once again he predicted that ‘the bear market is not over’. The markets would fall, fall, and fall again! Each time, his predictions spread like wildfire. The only problem for the people that listened was that the markets actually went up, up, and up again.

In fact, this is what stock markets generally do. For example, in 100 years US shares rose by an average of 7% per year – in addition to inflation, which, with compound interest, would have increased a passive stock investor's purchasing power by approximately 80 000%. Up, up, up!

On account of his endless doomsday forecasts, Prechter has often been described as the biggest ‘bear’ on Wall Street. That is Wall Street slang for a person who thinks that the markets are heading down. How exactly did he arrive at his predictions? Well, he used the so-called ‘Elliot Wave Theory’. He also claimed that he has never seen a market evolve in anything other than an Elliot Wave pattern.

I will not bore you here with ...