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Robert Prechter

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Robert Rougelot Prechter, Jr. (b. 1949) is an American investment newsletter writer and technical analyst, known for his financial forecasts using the Elliott wave principle. He is well known for his correct prediction of a rising stock market leading up to the stock market crash of 1987, but was much criticized following the crash. Since 1987 his predictions of a severe depression and bear markets have also been much critisized.

He has published monthly financial commentary in the Elliott Wave Theorist since 1979, and is the founder of Elliott Wave International and New Classics Library. Prechter has authored or edited 14 books, including Conquer the Crash, a New York Times bestseller. In 1999, Prechter proposed the theory of socionomics, about the dynamics of human social behavior and its relation to stock market prices and the Elliott wave principle.

Career

Prechter attended Yale University and graduated with a degree in psychology in 1971. His career as an financial 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). There Prechter also heard about 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.

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

In 1979 Prechter left Merrill Lynch and published the first issue of the “Elliott Wave Theorist.” During the 1970s the price of gold had risen, but stock prices had generally fallen. According to Prechter’s analysis of “Elliott waves” he predicted a long-term reversal to falling gold prices (February 1980) and a long-term "super bull market underway" in stocks (October 1982).

Because his stock market predictions proved to be mostly correct, Prechter's following grew during the early 1980’s. 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. He was profiled in many financial and business publications, and, in 1990 named "Guru of the Decade" by the Financial News Network (now CNBC).

The 1980’s

Prechter correctly called the price run up in stocks preceding the 1987 crash, giving him celebrity status. He has made unclear claims to have advised his newsletter subscribers to exit the market before the crash. “Nobody specifically predicted a ‘crash’ before it started, including me. But I did tell people to sell right when the sentiment indicators showed the majority bullish.” . His first prediction of a falling market made to the general public was published on October 20, the day after the crash.

Prominent media found fault with his 1987 prognostications. The Wall Street Journal in a front page article headlined "Robert Prechter sees his 3600 on the Dow--But 6 years late," wrote

In early 1987, the "Elliott Wave" theorist from Georgia drew wide attention for his market forecasts. There he was on the cover of Barron's: "3600 on the Dow? That, Says Bob Prechter, Is Where We're Going." It was a bold prediction at a time when the Dow industrial average was barely at 2000.

Unfortunately, the Dow never got within 800 points of the target before the market crashed in October. To compound things, Mr. Prechter then turned into a superbear, causing his followers to miss rally after rally in subsequent years. The result: Mr. Prechter went from stock-market hero to punchline of in-crowd jokes.

By December 1988, after the stock market had rebounded from the crash, Prechter was predicting a great depression "since it is likely to stand as the high of the post-crash rally, mark the end of the economic expansion which began in 1982 and kick off the next Great Depression."

Prechter stopped making public appearances in 1989.

Recent career

Prechter began making public predictions again in the 1990's. In recent years he has continued forecasting a large-scale bear market. Fortune stated that Prechter's constant predictions of depression and deflation since 1987 have not been accurate:

Most people haven't heard about this brand of voodoo since Robert Prechter, high priest of the Elliott wave, was lionized for calling the stock run-up that began in 1982 and the crash of 1987. Since then his big-picture forecasts have been laughably terrible, with global economic depression continually just around the corner and the Dow headed below 1000. His famous newsletter, The Elliott Wave Theorist, recently gave up financial forecasting in favor of broader societal issues, for which the outlook is also very grave but at least not subject to embarrassing comparisons with index numbers. (He does still venture market calls in a smaller, niche publication.)

The Elliott theory falls at about the midpoint of wave looniness.

Trading record

Barron's cites the Hulbert Financial Digest (both publications are owned by Dow Jones & Company) on Prechter's stock picking record through August 31, 1998.

According to numbers compiled by the Hulbert Financial Digest, the Elliott Wave Theorist timing strategy would have yielded a 12% annual return from the end of 1982 through August 31 of this year, compared with 15.6% for the value-weighted Wilshire 5000 and the 16.6% annual return logged by the S&P. That's a huge underperformance, even taking into account the fact that Prechter's strategy was only half as risky as being fully invested at all times.

Peter Brimelow states

by the Hulbert Financial Digest's count, the EWFF's trader's portfolio has endured a staggering annualized loss of 18.1% over the 20 years through September . (EWFF split off in 1999 from Prechter's Elliott Wave Theorist, which no longer offers specific portfolio advice. But the two seem to work in tandem.)

Books

Among the books Prechter has authored, coauthored, or edited are:

  • Elliott Wave Principle: Key to Market Behavior. John Wiley and Sons. 1978–2001. ISBN 0471988499.{{cite book}}: CS1 maint: date format (link)
  • R.N. Elliott's Market Letters. New Classics Library. 1993–1997. ISBN 0932750206.{{cite book}}: CS1 maint: date format (link)
  • Complete Elliott Wave Writings of A. Hamilton Bolton. New Classics Library. 1994. ISBN 0932750222.
  • The Elliott Wave Writings of A.J. Frost and Richard Russell. Bookworld Services. 1997. ISBN 0932750478.
  • At the Crest of the Tidal Wave. John Wiley and Sons. 1997. ISBN 0471979546.
  • The Wave Principle of Human Social Behavior and the New Science of Socionomics. New Classics Library. 1999. ISBN 0932750494.
  • Market Analysis for the New Millennium. New Classics Library. 2002. ISBN 0932750524.
  • Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression. John Wiley and Sons. 2002. ISBN 0470870907.
  • Beautiful Pictures. New Classics Library. 2003. ISBN 0932750605.
  • View from the Top of the Grand Supercycle. New Classics Library. 2003. ISBN 0932750559.
  • Pioneering Studies in Socionomics. New Classics Library. 2003. ISBN 0932750567.
  • Prechter's Perspective. New Classics Library. 1996–2004. ISBN 932750613.{{cite book}}: CS1 maint: date format (link)
  • R.N. Elliott's Master Works. New Classics Library. 2005. ISBN 0932750761.
  • How to Forecast Gold and Silver Using the Wave Principle. New Classics Library. 2006. ISBN 093275077X.

Notes

  1. William Power (19 August 1993). "Robert Prechter sees his 3600 on the Dow--But 6 years late". The Wall Street Journal: 1.
  2. Robert McGough (July 17, 1997). "Bears Will Be Right On Stocks Someday, Just You Watch --- So They Missed 5,000 Points, It's No Reason They Ought To Stop Prognosticating". The Wall Street Journal: 1.
  3. Levy, Adam (February 2003). "The Ultimate Bear". Bloomberg Markets: p. 69. {{cite journal}}: |pages= has extra text (help)
  4. ^ Robert R. Prechter, Jr. (various dates). "Elliott Wave Theorist". Elliott Wave International. Gainesville, Georgia. {{cite journal}}: Check date values in: |date= (help)
  5. Best Sellers List (11 August 2002). "Book Review". New York Times: p. 24. {{cite journal}}: |pages= has extra text (help)
  6. Robert R. Prechter, Jr. (1999). The Wave Principle of Human Social Behavior and the New Science of Socionomics. Gainesville, Georgia: New Classics Library.
  7. Penn, David (June 2003). "Social Mood and the Markets". Technical Analysis of Stocks & Commodities: p. 50. {{cite journal}}: |pages= has extra text (help); External link in |journal= (help)
  8. McCaffrey Brecht, Kira (July 2003). "Trader's Hall of Fame Award - Robert Prechter - An Interview with the Elliott Wave Guru". Stocks, Futures & Options Magazine: p. 42. {{cite journal}}: |pages= has extra text (help); External link in |journal= (help)
  9. ^ Robert R. Prechter, Jr. (1996/2004). Prechter's Perspective. Gainesville, Georgia: New Classics Library. pp. p. 6. {{cite book}}: |pages= has extra text (help); Check date values in: |year= (help)CS1 maint: year (link)
  10. Lazarovic, Karen (30 April 1985). "Elliott-wave technician sees 2d-half blastoff". New York Post: p. 36. {{cite journal}}: |pages= has extra text (help)
  11. Shaw, Russell (9 Oct. 1987). "Prechter flees Wall St. for Georgia hills". http://www.usatoday.com/ USA Today]: p. B1. {{cite journal}}: |pages= has extra text (help); Check date values in: |date= (help); External link in |journal= (help); Unknown parameter |coauthors= ignored (|author= suggested) (help)
  12. Myerson, Allen R. (October, 1985). "Robert Prechter: From Lake Lanier, He Can See Wall Street Clearly". Georgia Trend: p. 26. {{cite journal}}: |pages= has extra text (help); Check date values in: |date= (help); External link in |journal= (help)
  13. Hendrick, Bill (July 15, 1990). "Unbelievers Don't Worry Prechter". Atlanta Journal Constitution: p. H-4. {{cite journal}}: |pages= has extra text (help)
  14. Robert Prechter (October 20, 1987). "The Crash of '87: Bull Market Guru Predicts Further Dow Average Fall". The Wall Street Journal.
  15. "Corrections & Amplifications: Robert Prechter". The Wall Street Journal. October 22, 1987.
  16. William Power (19 August 1993). "Robert Prechter sees his 3600 on the Dow--But 6 years late". The Wall Street Journal: 1.
  17. Constance Mitchell (December 27, 1988). "Doomsayers Now Are Salient Among Market Bears". The Wall Street Journal.
  18. 'Elliott Wave' Forecaster Ends Public Appearances, The Wall Street Journal, March 10, 1989
  19. Geoffrey Colvin (16 October 2000). "The Wheelers, the Wavers, and the Star-Struck". Fortune: p. 84. {{cite journal}}: |pages= has extra text (help)
  20. Jonathan R. Laing (26 October 1998). "Ride that Wave! Is Bob Prechter's long-forecast economic and market collapse finally at hand?". Barron's.
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