"The answer, of course, is that the bubble hijacked people's reasoning faculties. As Chapter 8 of 'The Wave Principle of Human Social Behavior' explains, this is how social mood works. The desires and despairs of the non-rational limbic system are always in control, but it takes the extreme behavior of a bubble and collapse to reveal the driving force that is social mood. Still in control, social mood is now inducing people to believe that the crash has come and gone."
Steve Hochberg, Elliott Wave International
Showing posts with label limbic system. Show all posts
Showing posts with label limbic system. Show all posts
Monday, August 30, 2010
Sunday, July 25, 2010
Calculating Machines
"Clearly, markets are not rational calculating machines as some professors would have us believe, but a herd of emotional participants."
Paul J Lamont, Lamont Trading Advisors, Inc.
Paul J Lamont, Lamont Trading Advisors, Inc.
Tuesday, September 30, 2008
Waves and Mass Social Mood
Robert Prechter is the promoter of R.N. Elliott’s “Elliott Wave Theory”. It’s too technical to explain briefly, but essentially he believes that markets progress in waves and are directly tied to human psychology and the brain’s limbic system. His books, “At The Crest of The Tidal Wave” and “Conquer The Crash” are very insightful. His main thesis is NOT technical at all. He believes that “mass social mood” fluctuates in waves. Through history, herding human mammals go through cyclical optimistic and pessimistic mass mood shifts. When we’re happy and greedy, we drive financial markets upward and we’re predominantly peaceful. When we’re angry and fearful (now he says), we crash financial markets and start wars. He believes that financial markets are merely BAROMETERS of mass social mood. He believes that happy people buy stocks and the price rises versus believing that rising stocks make people happy. He’s coined the term “socionomics” for this psychological phenomenom.
His two websites are:
http://www.elliottwave.com/
http://www.socionomics.com/
Some excerpts from his books:
"Only a true understanding of the nature of people's behavior as it relates to markets will allow you to reason through emotionally charged situations and deal with them properly"
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 161
"Even at this early date, we might speculate on just a few developments that appear likely. For instance, I would be inclined to expect that the Middle East and Latin America will destabilize;....wars will erupt in Asia and the Middle East....foreigners will commit terrorist acts on U.S. soil"
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 435
"So what is the right course of action? The Elliott Wave Theorist cautioned in early 1986,'Once the craze really takes hold, just be aware of what is going on, and make sure you are not caught up in the amorphous feelings of confidence, complacency and love at the ultimate top.' The reader of this book faces a difficult task, one that will put him in such an extreme minority that he will feel isolated and unsupported. By selling all of your stocks, you will take the maverick road, and you will take it alone. I have no doubt that by the time this bull market is ending, our call for a huge crash and depression will be laughed off the street. Do not lose your perspective when the time comes. It will take great courage to make money during this bull market. However, it will take greater courage to get out near the top, because that's when the world will call you a damn fool for selling."
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 217
"Collective man will enjoy the same successes and repeat the same mistakes over and over, with minor differences in specifics, throughout eternity, although each time from a higher level of advancement. Mistakes are repeated not because people fail to learn from history, as many contend, but precisely because they do learn from history, from recent history, their own experience."
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 20
"It forces the analyst to look at the big picture. A proper long term perspective elevates the wave analyst above the cacophony of daily news. It provides the opportunity to make sense of the great trend changes in markets and dramatic social events that accompany them."
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 12
Prechter’s outlook for many many years has been massive deflation as in the Dow Jones Industrial Average equaling 700. Yikes! His theory is that everything crashes: stocks, commodities, and the economy. Associated with that is major strife across the world including major military conflict. Not the option we hope for. He was “dead on” with 9/11 and Fannie/Freddie.
His two websites are:
http://www.elliottwave.com/
http://www.socionomics.com/
Some excerpts from his books:
"Only a true understanding of the nature of people's behavior as it relates to markets will allow you to reason through emotionally charged situations and deal with them properly"
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 161
"Even at this early date, we might speculate on just a few developments that appear likely. For instance, I would be inclined to expect that the Middle East and Latin America will destabilize;....wars will erupt in Asia and the Middle East....foreigners will commit terrorist acts on U.S. soil"
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 435
"So what is the right course of action? The Elliott Wave Theorist cautioned in early 1986,'Once the craze really takes hold, just be aware of what is going on, and make sure you are not caught up in the amorphous feelings of confidence, complacency and love at the ultimate top.' The reader of this book faces a difficult task, one that will put him in such an extreme minority that he will feel isolated and unsupported. By selling all of your stocks, you will take the maverick road, and you will take it alone. I have no doubt that by the time this bull market is ending, our call for a huge crash and depression will be laughed off the street. Do not lose your perspective when the time comes. It will take great courage to make money during this bull market. However, it will take greater courage to get out near the top, because that's when the world will call you a damn fool for selling."
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 217
"Collective man will enjoy the same successes and repeat the same mistakes over and over, with minor differences in specifics, throughout eternity, although each time from a higher level of advancement. Mistakes are repeated not because people fail to learn from history, as many contend, but precisely because they do learn from history, from recent history, their own experience."
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 20
"It forces the analyst to look at the big picture. A proper long term perspective elevates the wave analyst above the cacophony of daily news. It provides the opportunity to make sense of the great trend changes in markets and dramatic social events that accompany them."
Robert Prechter, At The Crest of The Tidal Wave, 1995, p. 12
Prechter’s outlook for many many years has been massive deflation as in the Dow Jones Industrial Average equaling 700. Yikes! His theory is that everything crashes: stocks, commodities, and the economy. Associated with that is major strife across the world including major military conflict. Not the option we hope for. He was “dead on” with 9/11 and Fannie/Freddie.
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