Riding the Waves of Irrational Behavior

Believers in financial-market cycles can seem a little nutty. That doesn't mean they're wrong

Illustration by Harry Campbell for TIME

When times are good in financial markets, we're willing to convince ourselves that they're good for a reason. The fundamentals are great, the experts tell us. Innovation is creating new opportunities and new wealth. We've gotten better at managing risk. After a few years of market trouble, though, the tone changes. "When the trend is sideways to down, they think the machine is broken," says Robert Prechter. "Jeez, it can't be us."

Wanna bet? Prechter does. He has made a career out of his belief that financial markets are ruled not by fundamentals but by waves of irrational behavior. Lately, after...

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