Farewell to he who cried wolf
ADOFF of the hat and a moment’s silence for the passing of Jochen Raedel, boss of Hi-phive Investments in Johannesburg, who endured a fair bit of ribbing from this column for his unrelenting bearishness.
Whereas the rest of us watched with some anxiety but a great deal of relief as global markets hoisted themselves off the floor after the 2007-08 credit crash, Raedel remained convinced that his Elliott Wave counts indicated imminent meltdown. Every time another leg of the bull run etched into the charts, he would revise his analysis and point out yet another critical turning point looming into view.
Sadly, Raedel never lived to see the cataclysmic end of what seemed to be a never-ending fifth wave up. It would have been apt and richly deserved.
Elliott Wave theory is famously premised on the mood of the market. Asset prices do not move as a result of events; it is underlying sentiment that causes the line on a graph to move one way or the other in impulsive spurts and bouts of uncertain stasis. The theory, based on the mathematical equation that directs the proportions of everything from the whorls of a seashell to the pattern of sunflower seeds, can make a certain kind of technical analyst come across as slightly obsessive.
Viewed with hindsight, any chart drawn with Elliott Wave tools (which include Fibonacci numbers) will show a remarkable conformity to the tenets of the theory. The only catch is that it rarely predicts the future. Most technical traders
His reading of the charts was based on a rather quaint and outmoded view of how markets work
use Elliott Wave as a kind of road map that suggests certain probabilities based on prior history. As every asset manager knows, this is about the best you can hope for when faced with unlimited possibilities.
To me, Raedel’s reading of the charts was based on a rather quaint and outmoded view of how markets work. Fifty years ago, in a world of limited information and central banks that avoided interfering in the natural flow of buying and selling, the great cycles of investor mood may well have been vivid when translated to a chart — able even to forecast likely trends.
That ticker-tape model of the investment universe died long ago. Today, who would hazard being an old-school seer when prices are driven in microscopic fractions of a cent by computer algorithms and by vast “dark pools” of off-screen transactions conducted by the likes of Goldman Sachs, Bank of America and JPMorgan, which, of late, have reported close to zero losing days in any given trading period.
Exasperating for the Jochen Raedels among us, but fact. Ordinary investors, with all the tools, data and theories in the world, have never been so blind.