Why Are Technicians Still Hired?

Why Are Technicians Still Hired?

It seems very clear that under scientific scrutiny chart-reading must share a pedestal with alchemy. There has been a remarkable uniformity in the conclusions of all studies done on all forms of technical analysis. Not one has consistently outperformed the placebo of a buy-and hold strategy. Technical methods cannot be used to make useful investment strategies. This is the fundamental conclusion of the random-walk theory.

A former colleague of mine who believed that the capitalist system would be sure to weed out all useless growths such as the flourishing technicians, was convinced that the technical cult was just a passing fad. “The days of these modern-day soothsayers on Wall Street are numbered,” he would say. “Brokers will soon learn they can easily do without the technicians’ services.”

The chartist’s durability, and the fact that over the years he has been hired in increasing numbers, suggests that the capitalist system may garden like most of the rest of us. We like to see our best plants grow, but as summer wears on somehow the weeds often manage to get the best of us. And as I often tell my wife when she remarks about the abundance of weeds in our lawn, “At least they’re green.”

The point is, the technicians often play an important role in the greening of the brokers. Chartists recommend trades – almost every technical system involves some degree of in-and-out trading. Trading generates commissions, and commissions are the lifeblood of the brokerage business. The technicians do not help produce yachts for the customers, but they do help generate the trading that provides yachts for the brokers. Until the public catches on to this bit of trickery, technicians will continue to flourish.

Burton G. Malkiel. A Random Walk Down Wall Street, including a life-cycle guide to personal investing. First edition, 1973, by W.W. Norton and company, Inc.

High Park’s well drained acid sand supports prairie and savanah vegetation, characteristic of 4,000 years ago, when the area was warmer and drier. Photo by Elena.