The mind of a Porfitable Trader

The Efficient Market Hypothesis is an example of the pseudo-scientific mumbo-jumbo that has come to dominate capital markets in the last half of the 20th century. It is in the same category as the Common Stock Legend and the Fallacies of the Nobel Gods. Changes in the sociology of the market come slowly; but when they occur, they are extremely important in Capital Flow Analysis. The Efficient Market Hypothesis and the Common Stock Legend were instrumental in supporting the expansion of the Great Bubble of the 1990s.

In flow of funds analysis, we do not need mathematics that go beyond the capacity of a ten dollar hand-calculator. It is more useful to read books on history, sociology, culture, and on the technical aspects of securities and market institutions, than to bother with learning stochastic calculus. When analyzing flow of funds accounts, we do not need advanced mathematics. In fact, Benjamin Graham's remarks in "The Intelligent Investor'"are relevant for practitioners of Capital Flow Analysis: