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Scott Reamer's Main Points



Scott Reamer
Slaying Wall Street's Sacred Cows
Toward a new model for understanding asset price fluctuations

  • No currently successful model for understanding what governs asset prices
    • Efficient market hypothesis, random walk, fundamental analysis, utilitarian economics, and other theories do not govern prices
      • 85% of active portfolio managers have failed to beat the major averages over the last 30 years (Ibbotson)
  • While objective reasoning may determine everyday, individual supply/demand decisions, it does not govern decisions about financial assets
    • As stock prices increase, demand increases, herding impulse, impulse decision making
  • Wall Street's favorite aphorisms are all wrong
    • Stocks reflect earnings growth
    • Gold is a hedge against inflation
    • Surprise news causes changes in stock trends
    • Commodities reflect economic growth
    • Increases in oil hurt stocks
    • Rising interest rates hurt stocks
    • The Fed sets interest rates
    • Stocks reflect macroeconomic trends like GDP
  • To answer the questions of what forces govern asset prices, how they operate, who controls them, and are they patterned, we introduce the self-organizing complex system model for asset markets
    • No centralized control, multiple autonomous agents
    • Instinct driven, governed by phi
    • Non-random: self-similarly patterned in price and time
    • "Swarm Intelligence," similar to bees, ants, or fish
    • Individual ignorance but collective intelligence
    • Communication and cooperation
    • Adaptation and feedback
  • Some technical analysis tools to recognize these patterns
    • Elliott Wave
      • "Applied Fibonacci" in 13 relatively simple patterns
      • Based on phi in price and time
      • Good in intermediate/short term
    • DeMark Indicators
      • Derived from historical price record
      • Phi based in price and time
      • Good in longer term
  • A combination of Elliott Wave, Demark Indicators, and Classic TA tools allows the strengths of one to address the weaknesses of the other

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No positions in stocks mentioned.

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