Review: Fortune Tellers, Walter A Friedman
An idea suggested by STA members, and one I wholeheartedly support, is not a ‘Book Club’ as such (way too bourgeois) but a forum to showcase and discuss books that are either new, useful, or beautiful (to paraphrase William Morris); ones that have inspired, shed new light, or are plain amusing.
With this in mind I have picked ‘Fortune Tellers’, even though it’s not strictly about technical analysis. Rather it’s an introduction and exposé of some of the very first US men (and they are all blokes, though some of their wives helped) who tried by various means to forecast, and make a living, out of predicting stock market moves. The sort of thing which is now bread and butter for technical analysts, and for all too many economists also.
While perhaps not going into enough detail about their methods, it does conjure up the sort of thinking and background they were working in – all the more interesting because they cover the stock market crashes of 1907 and 1929. Kicking off with Roger Babson, who is considered the founder of today’s economic forecasting services and a pioneer in technical analysis, though others like J. K. Galbraith thought his work ‘hocus-pocus mysticism’; it just goes to show that there is nothing new under the sun.
Through Irving Fisher and his mathematical models, to a name you are all familiar with, John Moody, doyen of credit ratings and fundamental analysis supremo, the book skips elegantly though their thinking and the problems turning these into profitable businesses.
A word of warning though from Professor Pietra Rivoli of the McDonough School of Business at Georgetown University: ‘Each man [in the book] has nothing if not hubris; such overconfidence was not new then, nor is it obsolete now. Studies find that “high-hubris’ individuals are more likely to overpay for acquisitions or commit fraud’.
Do please write in with suggestions of books we might delve into and don’t forget that STA members have access to a dedicated space in The Barbican library to browse books on technical analysis.
ISBN 978-0-691-15911-9 (hardback)
Princeton University Press 2014
Tags: Babson, forecasting, Moody, Prediction
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