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You are correct in that.
A little background first:
I was one of the original advisors to the CFTC back in 1975 when it was formed. The
risk disclosure document was my baby and to this day, it has retained the same
language.
At the same time in 1975, my committee recognized that hypothetical results were being
presented in the same way as real-time and resulted in unfair representations. That is
why we made the distinction between hypothetical and realtime. In fact, the committee
wanted to completely ban any hypothetical results but cooler heads prevailed. The
substance of our stand was - complete disclosure-.
That said, I can understand the problem of RW. They failed to clearly identify
hypothetical with real.
But, and this is a big but- Judge Levine stated in his opinion that the claims of R&W
could not be true because "generally accepted principles of economics, as well as
common sense, instruct us that such a happy discovery is not to be. In
contradistinction to the hucksters of retail trading programs, respected scholars are
virtually unified in their recognition that even the most legitimate technical
systems...are incapable or providing the trader with any significant market
advantage."
This hearing was an administrative hearing, not a court trial.
Of the 20 plus billion dollars in managed futures programs, the vast majority is
managed by technical analysis systems. One must wonder why the judge chose only to
give credit to the ivory tower academics and not the real world.
Best to all,
Manning Stoller
Kevin wrote:
> I believe the point is, they were representing actual gains of xxx% when
> in fact there was no actual trading which took place. Or in other words,
> they did not represent that these were hypothetical results and
> apparently could not even show data which produced these results.
>
> > The comments made by Judge Levine, as I understand them, were part of the
> > record. I am trying to dig out the article. If you take it literally, every
> > technical analysts is committing fraud, including every technician who works for
> > a brokerage house, the fund groups, etc. It's the old random walk theory and
> > nothing will help anyone do better.
> >
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