Freakwenter high risk fund: quarterly report

Six months ago I started a project to evaluate the worth of emotional-technical analysis on the stock market. Emotional-technical analysis is a phrase coined (ka-ching!) by me as far as I know, but what it refers to is nothing new. It refers to consciously allowing emotions to get in the way of "smart" investment choices. While some number crunching is allowed, it is mostly based on developing an intuition about where markets will go based on a broad array of clues, drawing from the news, simple economic theories, savvy friends, and (most importantly) gut feelings.

I think there could be something to be said for allowing emotion/intuition to guide investment choices. The big market swings of the last few years left open opportunities for arbitrage so large as to make a mockery of the efficient markets hypothesis. My brief-but-growing experience as a statistician tells me that mathematical market models are useful, but they can not account for much of the variability in prices, because variability stems from such a wide array of sources: the overall direction of the economy, the environment, political stability, technological innovation across different sectors of the economy, changing demographics and values, mob behavior, and on and on. Of course, agreeing that the mathematical models are incomplete is not the same as saying that emotional-technical analysis can fill the gaps, but it at least opens up the possibility.

Many practitioners of emotional-technical analysis are also into voodoo, superstition, or are otherwise mentally unstable. I am not. I am not out to prove that this analysis works, and in fact I believe the number of people who could make a lot of stock-market profit this way must be very small. Early indications suggest that I won't get rich off of it.