In this item at MarketWatch, Peter Brimelow brings us details of the latest investment performance of the folks at Elliott Wave, a group that comes about as close as you can get to being perma-bears and, of course, perma-deflationists.
One bear feeling good about deflation call
An investment letter that dodged the crash of 2008 is a current top-performer. It’s feeling good about its long-standing deflation prediction.
The Elliott Wave Financial Forecaster, edited by Steve Hochberg and Pete Kendall, is fifth of just nineteen of the 180-plus investment letters monitored by the Hulbert Financial Digest to have beaten the market in 2011 through September—up 5% by HFD count versus negative 9.86% for the dividend-reinvested Wilshire 5000 Total Stock Market Index.
This is, frankly, pretty unusual. EWFF has been relentlessly bearish for so long that many investors think it was always so, and any favorable mention gets vitriolic response.
Needless to say, 2008 was a great year for EWFF, especially because it also made one of its brief excursions into bullishness in time to catch the subsequent bounce. See April 2 column.
You can still see this in HFD’s monitoring: over the past five years, EWFF was up an annualized 0.7% versus negative 0.75% annualized for the total return Wilshire 5000.
But further out, the cost of prolonged bearishness has been horrific. Over the past fifteen years, for example, EWFF is down negative 3.43% annualized versus a gain of 5.4% annualized for the total return Wilshire 5000. It’s worth noting, however, that EWFF closes the gap significantly on a risk-adjusted basis.
Still, in the face of the 2008 crash, and the savage slump this summer, few investors can wholly repress the fear that, just maybe, the Elliott bears might ultimately be vindicated.
Well, not as long as there are people like Ben Bernanke with his hand on the printing press… As noted here on a number of occasions before, I’ve long thought that Elliot Wave Theory is nonsense and, basically, lost all respect for Bob Prechter when he predicted that the gold price would never surpass $400 an ounce about a decade ago.