On WD Gann: ‘He Can Compound Money Faster Than Any Man I Have Met…’

In today’s Markets and Money I’m going to do something different. I want to introduce you to a legendary figure in the world of stock trading.

I had vaguely heard of him, but never knew the details. It was only after I became friends with Cycles, Trends and Forecasts editor Phil Anderson that I came to understand the true genius of Gann’s work.

What I especially love about Gann is that he makes you work. He doesn’t give much away for free. Yet if you’re prepared to put in the work, you begin to see the world in a completely different way. Things become clearer. The mysterious ways of the stock market start to make sense. But not only that. You actually start to see cycles repeating.

Gann was a prolific student of the Bible. He often said it was the greatest book ever written and contains the key to the future. But Gann interpreted the Bible in a completely unique way.

Consider this:

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

W.D. Gann applied this to the marketplace. 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 ON-RECORD that 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. We don’t have records of this period, but 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 financial markets.

Based on this cycle, he made some remarkable predictions.

Gann 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 23 November 1928. In it he predicted with precision the biggest boom of all time in 2929…then the collapse into the 1932 lows.

So how did Gann ‘see’ this cycle when others didn’t?

In short, he put in the work. It was more than that, though. He saw the world differently to most other people. He used information and made connections that most other people simply do not see.

In this respect, Gann is exactly like my mate Phil Anderson. Phil sees the world through the same lens that Gann viewed it.

Phil has made it his life’s work to continue where W.D. Gann left off. That is, studying cycles and observing how the world repeats.

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.

He’s developed a set of indicators that track the various ups and downs within this cycle, which got underway with the low in 2009/10, and should eventually peak around 2026.

Phil is helping Australian investors apply this knowledge to their own portfolios in his newsletter, Cycles, Trends and Forecasts.

You can learn more about it here.

I mentioned earlier this week that I don’t blindly follow Phil’s work. I’m sceptical of most things. But I wouldn’t recommend that you check his stuff out if I didn’t think it worthwhile.

At the very least, you’ll gain a different perspective on how to view the world. That can only make you a better investor.

Greg Canavan,
For Markets and Money


Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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