‘That which has been is what will be,
that which is done is what will be done,
and there is nothing new, under the sun.’
Ecclesiastes chapter 1, verse 9
Is it true that there is nothing new in the marketplace?
W.D. Gann thought so. Specifically, he believed that the law of action and reaction means that history must repeat. In all markets. Over and over again. Markets are driven by human beings. And human beings do not change. They repeat their behaviours, cycle-after-cycle.
That was the theory, anyway.
How did it stack up in practise?
When it comes to the teachings of Gann there are two sides. One that thinks he is far and away the greatest market oracle of all time. Nuclear physicist-turned Wall Street investment banker Asoka Selvarajah calls W.D. Gann:
‘The greatest genius that the financial markets have ever seen… His achievements in this arena in every way match those of the greatest scientists of our century or any other.’
Then there is the camp that believes has been overhyped over time. Or was even a fraud to begin with.
Whatever the case, Gann left a track record that’s pretty damn remarkable…
Here’s what we DO know about William Delbert Gann…
He was born on a cotton farm in East Lufkin Texas on June 6, 1878. He spent his teens working in the family business as a clerk in their cotton warehouse.
Somewhere around the turn of the century he started trading — both stocks and commodities. Although we don’t have records of this period, he obviously had success, because in 1908 he took his trading to Wall Street. Fairly soon after that he started his own brokerage on 18th and Broadway.
From then Gann was an active trader, on and off, for 56 years. So there’s a fair bit of solid track record data to go on.
Gann’s legend started growing almost instantly after moving to New York City.
In the month of October 1909 alone, he made 286 trades in one trading session. Only 22 of these were losing trades. A 91% success rate. The press started following him closely. A journalist from the respected Ticker and Investment Digest spent time on the trading floor observing every trade Gann made over several weeks. He later wrote ‘I once saw him take $130, and in less than one month run it up to over $12,000. He can compound money faster than any man I ever met.’
Gann was in it for more than just money though.
Rocket expert Wernher von Braun once observed: ‘The natural laws of the universe are so precise that we have no difficulty building a spaceship to fly to the moon and can time the flight with the precision of a fraction of a second.’
Gann, too, was convinced this precision had predictive powers when applied to the markets, the political cycle, even the whole course of human history….
So while he traded like a demon, he kept studying like one too…
Gann concluded that, having many more centuries of data to analyse, he would take his studies to England. After returning, he skipped past Wall Street and went straight to New York’s Astor Library. He spent just under a year there.
A friend of Gann’s, Clarence Kirven, wrote: ‘He is the only man I ever knew that I thought had worked as much as Mr. Thomas Edison.’
That hard work led Gann to the following conclusion:
‘To make a success you must continue to study past records, because the market in the future will be a repetition of the past. If I have the data, I can tell by the study of cycles when a certain event will occur in the future. The limit of future predictions based on exact mathematical law is only restricted by lack of knowledge of correct data on past history to work from.’
Put simply: Gann found that there is an 18-year cycle in the economy and markets.
Based on this cycle, he made some remarkable predictions. He accurately forecast the downturn of 1921.Then the recovery out of these lows…
He put out a forecast for 1929 in Gann’s Supply and Demand Letter on the 23rd of November 1928. In it he predicted with precision the biggest boom of all time in 1929…then the collapse into the 1932 lows.
So how did Gann ‘see’ this cycle when others didn’t?
Did you know that, according to Psychology Today, 4% of people see the colour red when they hear the number five? Or when they look at something blue, hear the note C-sharp?
Synaesthesia is a cross-sensory neural condition. Sounds are experienced as colours. Tastes can induce shapes. Numbers and letters, days of the week, months of the year…all of these can be represented in different sensory ways.
In short: your whole perception of the world is blown wide open. It’s like everyone else sees in 2D, but you see in 3D. Many masters of their fields have had synaesthesia; including Duke Ellington, Vincent Van Gogh and the physicist Richard Feynman.
You could say W.D. Gann possessed a form of ‘market synaesthesia’.
Areas usually disconnected within the Mainstream Economist Brain retain connections. It’s like putting on a pair of glasses…and seeing that the markets have dimensions, patterns and oscillations completely invisible to the normal naked eye.
Another Australian man see’s the world in the same way.
Phillip J. Anderson has been made it his life’s work to continuing his research where W.D. Gann left off.
He’s taking Gann’s cycle theories…as well as prior research carried out by Fred Harrison…to study if there is a Grand Cycle in the Australian economy.
He’s found that there is
What’s more he’s working on developing a set of indicators that can track the various ups and downs within this cycle in between the beginning low (which was around 2009/2010) and the eventual peak (which Anderson expects around 2026).
I’ve been involved in a new project Anderson is working on for Australian investors.
The feedback so far has been very promising…
‘All I can say is that I heard Phil speak at a small gathering in a Melbourne stockbroking firm back in 2005. I happened to take notes of what he predicted. …. his prediction of a low in the US market on March 5th 09 and a US real estate bottom in 2010 is a credit to his studies of cycles and Gann.’
‘His documented evidence of the connection between economic rent and credit being the causation of cycles is irrefutable – and no doubt very comforting to conservative investors/traders. Mate – this guy is a legend – his book should be on the year 12 reading list!’
‘They are simplified, in other words, a great deal of research has been broken down and we get the nuts and bolts of the matter. Also, it’s rare to find an economist who claims there is a ‘big picture’ – a grand cycle, and cycles within cycles.’
‘Phil is an independent thinker with no regard for conventional limitations.’
You can find out more here.
Contributing Editor, Money Morning
From the Port Phillip Publishing Library