6 Acknowledgments

ics, also played a major role in developing and documenting the research, as did Dr. Michael Berry, with whom 1 collaborated on a number of articles. Peter Seligman, Rock Albers, and Mike Hemberger provided hundreds of hours of indispensable research assistance.

The exchange of views with Professors Robert Shiller, Meir Statman, Richard Thaler, Russell Fuller, and Richard Zeckhauser-all behavioral economists-has also been important to the work presented here.

My relationship with Simon and Schuster has been both pleasant and constructive. In particular, I would like to thank my editor, Fred Hills, for his many important contributions in shaping this work both on the conceptual and editorial levels. I also very much appreciate the efforts of Hilary Black, an associate editor there.

Needless to say, the statement that any errors in the work are my sole responsibility certainly applies here.

For Holly, Ditto, and Meredith,

without whose love, support-and pleasant diversions- this book might have been completed many months earlier.

contents

Introduction 15

Part I

WHY CURRENT METHODS DONT WORK 25

1. The Sure Thing Almost Nobody Plays 27

On Markets and Odds 28 Great Expectations 30 The New Conquistadors 34 A Titanic Clash 37 The Journey Ahead 39

2. From Technical Analysis to Astrology 40

The Walls Come Tumbling Down 40

The First Victory 41

Hail the All-Powerful Chart 42

The Star Wars Technicians 43

And Theres the Fringe 44

The Technicians Moment of Truth 45

Destroying the Faith 47

3. Bigger Game Ahead 48

Value Investing 49

Assessing Earning Power 50

Cash Flow Analysis 50

Accounting 51

Price-to-Book Value 52

Contemporary Value Techniques 53

Visions of Sugar Plums 53

Why Dont They Work? 55

Market Timing and Tactical Asset Allocation 56

Momentum 57

A 08 1 Random Walk 59

The Three Faces of EMH 59

The Power of an Idea 62