Why “exogenous cause” advocates are usually left scratching their heads
When I say “shock,” I mean something like a political assassination, the price of oil tripling, a major earthquake or, let’s say, a terrorist attack.
This is mentioned because some people on Wall Street who use models to forecast the stock market will say something like, “This is our forecast for stocks, unless some unforeseen shock happens.”
I was reminded of the topic of shocks and the stock market as I was reviewing a 2014 Robert Prechter speech which every investor should hear.
I remember this 53-minute speech being released almost ten years ago and thinking how much clarity it brings to investors.
For a limited time, Prechter’s full presentation is available for free by following the link below. But I wanted to share one takeaway right away and it has to do with a “shock” which occurred in the form of anthrax attacks.
Here’s a chart and what Prechter had to say:
The first attack was on the bottom day of 2001. They continued through the biggest rally of the entire period I’m showing on here — six months!
And right after the peak, anthrax fears fade. Now, if you’re an exogenous cause advocate… and you believe that terrorist attacks are important, you can only draw one conclusion: Terrorist attacks are bullish.
And look what happened when they stopped — the market crashed and went to a new low.
In the presentation, there are other examples of where so-called “exogenous causes” regarding the stock market are debunked.
If you’re like me, you’ll find these equally fascinating — and instructive.
Click on the link below to learn how you can get Robert Prechter’s presentation — free.
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Watch the 53-Minute Presentation That’s Helped Thousands
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Watch one of Robert Prechter’s most insightful presentations for investors.
Prechter challenges you to consider a radical new perspective on social and financial causality. The perspective will enable you to anticipate, understand and act on developing social trends that nearly all other investors and forecasters fail to see coming.
Learn how most investors’ conventional understanding is not only flawed, but also dangerous, as it influences them to make the worst possible decisions at the worst possible times–such as buying real estate in 2007, gold in 2011 and oil in 2014. These were major ‘turning-point’ years where it literally paid to go against the herd.
Yet a small minority of investors were able to anticipate these “surprise” trend changes in time to take advantage of them. Now you can too.