Random Walk Down Main Street
September 27, 2012 at 10:55 PM CFRN Interview with Burton Malkiel-author, “Random Walk Down Wall Street
Today is Thursday, September 27 and during the Morning Trading Session, DeWayne mentioned having not received any comments from me regarding the August 16 public radio interview with Burton Malkiel who is the author of “Random Walk Down Wall Street” and who espouses his theory that market Price cannot be predicted.
Also engaged in the discussion was David Williams, the developer of Pagetrader, who has demonstrated hundreds of times that the Market does have predictability both in Price and Time components. I listened to the complete broadcast intently because my personal view is in contrast with Mr. Malkiel and I have been a friend and student of David Williams for well over a decade.
I note that I listened to the interview again today.
It is particularly hard for me to express my thoughts in writing with the same “gusto” as when speaking where inflection of tone denotes emphasis or importance and thereby conveys a certain sense of what one is trying to say. That said, I therefore use capitalization or other print medium to “inflect” my tone —please excuse me for doing so.
As stated above, the book purports the idea and the author reiterated the “unpredictability” of the markets. Mr. Malkiel did, however, acknowledge that He did not think it was Impossible and stated that there was not enough predictability for “the average investor”. He also affirmed that the markets “may not be” as “pure random” as once thought but He had not changed his mind—and, in fact if there were a system or methodology of prediction, “it would be short-lived”.
Maybe it is just me, but it seemed very DISMISSIVE towards Mr. Williams and all others that have or use any Technical Methodology to “predict” future actions and Price levels in the markets as they trade.
My belief that the Markets have some predictability has already been stated. My Question is WHO is an “Average Investor”? I certainly do not consider myself as AVERAGE in anything and I do not aspire to be AVERAGE—indeed, I strive to be the Best that I can in ALL I can.
Perhaps, because of the lack of investment education in our schools and the general public, the average investor is one with little or no knowledge. In that light, I can agree with the author that investors in low-cost indexes will probably fair better than the managed funds (depending upon WHO the manager is) and I will agree that Price Action SEEMS random. However, if anyone looks at charts enough, even the uneducated can “SEE” patterns and repetition of patterns thereby giving Some Indication of Predictability.
It is also my belief that Anyone who strives to “educate” himself about the Markets automatically challenges “average” and instead becomes an EXPLORER with a Desire to Better Himself. We all know what Explorers do and have done and where all of us are because of them. Those who posess the EXPLORER SPIRIT ARE FAR FROM AVERAGE ! I think that everyone who Calculates Anything that MAY give them an Advantage in trading the markets has that Explorer Spirit—whether using simple moving averages or trend lines or algorithums on a room-size computer.
I know there ARE methodologies that have the ability to PREDICT future Price levels, Times of Price redirection, and Periods of trends in either direction—these have been proven in the DOING by many as far back as W.D. Gann and currently by David Williams and others.
I have no Academia certification worth mentioning, and I cannot change the “Non-Predictability” mindset of the author---He must do that Himself, but I will say that it cannot be done without the re-kindling of His own Explorer Spirit and a true Willingness to change His opinion.
I sincerely HOPE that the EXPLORER SPIRIT within me NEVER DIMINISHES and that I ALWAYS have the COURAGE to SEEK the TRUTH and the STRENGTH to CHANGE for my own BETTERMENT and the BENEFIT of OTHERS.
Powderhorn
Reader Comments (1)
Intriguing insights, Powderhorn --- Thank you for taking the time to share your thoughts... I'll add a comment or two if that you don't mind. The old adage continues in use --- "Did anybody get the license plate number of that truck that just ran me over????" Seems to me that this is what occurred to many "Average" (ill informed, and very unaware of technical indicators, their use, and track record????) Investors circa 2008, etc.!!!! If markets are truly RANDOM --- then why do we hear so much about "RISK ON" and "RISK OFF????" And why does PRICE CORRELATE so strongly to FED and other CENTRAL BANK interventions --- and why did R SQUARED go to just about 1 (100%) when the markets were tanking in late '08, early '09, etc. IN VIOLATION of ALL OF ACADEME'S AND CONVENTIONAL WISDOM'S (Conventional Wisdom for the Average Investor???? Seems to me that "Common Sense is Only Common To Those That Have Obtained It..." Perhaps, "To Whom, And At What Point In Time????" --- One Might Intelligently Ask...) "VENERATED" RULES OF THUMB, and why did the markets rally so strongly when mark-to-market accounting rules were suspended for the MONEY CENTER BANKS regarding their mortgage porfolios in the SPRING of '09???? INQUIRING MINDS REALLY DO WANT TO KNOW !!!! --- THANK YOU POWDERHORN!!!! INTRIGUING INSIGHTS!!!! EXCELLENT POINTS RAISED! :-) Seems to me (just one Ghost Rider's opinion of course) that taking a "RANDOM WALK" approach to trading/investing "ON WALL STREET" perhaps might well be likened to a blind person taking a "RANDOM WALK" on a super-highway or an expressway --- or for that matter seals and sea lions taking a RANDOM swim in white shark invested waters --- (again, just one Ghost Rider's opinion) --- THANK YOU POWDERHORN --- INTRIGUING INSIGHTS --- LOVE THE "EXPLORER" METAPHOR --- "We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time." T. S. Eliot
Ghost Rider 3:16 :-)