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10 Popular Investment Myths Shattered

by Vadim Pokhlebkin
Updated: July 01, 2015

You may remember that in 2008-2009, as the worst financial crisis since the Great Depression was ravaging stocks, real estate, commodities and other "can't-lose" asset classes, many called into question traditional economic models, as well as the Fed's "omnipotence."

Why? Because mainstream economic models did little to warn us of the approaching doomsday. In fact, as late as 2007 many of them were suggesting nothing but blue skies ahead.

A couple of years ago, Robert Prechter, EWI's president, devoted several issues of his monthly Elliott Wave Theorist to a detailed explanation as to why the traditional financial models failed -- and why they are doomed to fail again (and again).

It's a very important 10-part series. Read it carefully -- it will explain, with simple charts and graphs, many "paradoxes" you see in financial markets daily and open your eyes to the shortcomings of modern economics.

Do Interest Rates REALLY Drive the Stock Market?
Part 1: See 4 simple charts that shatter this myth

Most investors believe that higher interest rates are bearish. These four charts show you the truth.

"Rising Oil Prices Are Bearish for Stocks": True or False?
Part 2: False, as you may have suspected -- see the evidence in one chart

"Rising oil prices reduce corporate and consumer spending, impacting stocks and the economy." Right? Wrong.

Learn Why Rising Trade Deficit Is NOT a Bearish Factor for Stocks
Part 3: In fact, the correlation is precisely opposite

"U.S. trade deficit seems to be a reasonable thing to worry about." This chart shows you why it's really not.

Do Earnings Really Drive Stock Prices?
Part 4: Believe it or not, it is possible for earnings to soar while stocks collapse

"If you knew earnings would rise for next 6 quarters, would you buy stocks?" Yes, it's a trick question.

Learn Why GDP Is a Poor Predictor of Stock Trends
Part 5: Investors do NOT rationally value stocks according to changes in GDP

"GDP reflects corporate success. So do stock prices. So how could GDP not impact stocks?" -- Solid logic, and yet...

Are Wars Bullish or Bearish for Stocks?
Part 6: The answer is, neither

"Some economists say wars stimulate the economy; others say war hurts it."  These 4 charts negate both cases.

Peace Is Always Bullish for Stocks: Yes or No?
Part 7: Another common generalization proven wrong

"Peace lets companies innovate and compete, helping the economy." True -- and yet, stocks will go where they go.

Would a Terrorist Attack Crash the Stock Market?
Part 8: Terrorist violence seems like a solidly bearish factor -- and yet...

As bad news goes, terrorism is at the top of the list. Why then do stocks ignore these terrible events so often?

Does Inflation Really Make Gold and Silver Go Up?
Part 9: Why precious metals are not a reliable inflation hedge

This idea of gold as inflation hedge is practically gospel. This chart shows a major flaw in this theory.

"Don't Fight the Fed?" Don't Make Me Laugh!
Part 10: Central banks no more control the markets than they control the weather

The Fed runs the market. Right? Well, "see if you can tell on this chart where authorities intervened."

Conclusion of the "10 Popular Investment Myths" Study
There are no consistent correlations between stocks and outside influences

Interest rates, oil prices, earnings, GDP, wars, peace, terrorism, inflation, monetary policy -- NONE have a reliable effect on the stock market.

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