Isam Laroui's  Instablog

Sounds like a pretty good description of the global financial markets to me. Thanks to new experiments, it would appear that killer giant waves are between ten and 100 times more likely to occur than "conventional wave theory" would predict. I am not making this up. I would guess the Bell Curve is featured prominently in this particular wave theory. Nassim Taleb and his black swan non-theory would have a field day with this.

 

In an article in The Economist (and in an upcoming book, This Time Is Different: Eight Centuries of Financial Folly), the Harvard economist Kenneth Rogoff makes two crucial points. The first is that, by 2008, the banking system was so sick ("trillions of dollars of debt secured by an inexorably deflating asset bubble") that the failure of a major bank was inevitable. The second, more provocative, point is that Lehman's failure actually paved the way for the subsequent rescue of the whole banking system. It made it a little more politically palatable (but still not really palatable) to save the banks (if not the bankers) and the non-banks (think AIG).

 

Professor Lo of MIT is the first (and only so far) major academic who's been curious about, then supportive of technical analysis and this book is, in a way, his token of appreciation to the TA community. Most of the discussions address basic TA subjects and controversies. The target audience seems mainly to be people who might be curious about technical analysis but have heard negative things about it ("it's no different than astrology" would be one such negative preconception), so our TA heroes try to debunk the negatives and promote the positives ("if you believe psychology and history play a role in the markets, then you must believe in TA's contribution to the analysis of markets" is how I would paraphrase their response). They don't always succeed though and their contradictory answers to a number of questions may give pause to many an open-minded reader but overall they come across as a passionate, knowledgeable bunch.

 

I enjoyed Elliott Wave guru Bob Prechter's insightful remarks on the role of emotions in trading:

 

"No one assessing or trading markets is unemotional about it. This job is not like building cars. It's like trying to outwit a pack of murderous inmates in an insane asylum. You can't do it calmly because you don't know what they're capable of, and they don't have to use reason."

 

A trader friend of Bob's describes the trading life as: "hours and hours of boredom punctuated by moments of sheer terror".