Action Reaction Course 5

Case Study Course on Price Fluctuations

Sir Isaac Newton and George Marechal

Of the two kinds of change in the Universe, flowing change and random change, we are indebted to Newton’s invention of the Calculus that enables us to find out in advance the conditions that flowing change will produce in the future. His discovery of the natural law that Action and Reaction are equal and opposite in the field of physics also has been applied in the Course to the random changes of price movements in free markets. This application of the Action-Reaction law enables you to learn in advance where the probable reversals of price trends will come in the future. We owe this application to the late Roger Babson, who credited this law as the basis for his fortune of over $50,000,000.

When we speak of any scientific law, we mean a statement that a relationship has been observed among certain given conditions. We mean “if these conditions now, then those conditions will follow, and can be expressed mathematically”. We have “order” through which we can know the outcome from these conditions. We can therefore take advantage of this knowledge, and thereby progress and profit.

So Newton was one of the great discoverers of this “orderliness” that underlies all of the Creator’s work, even if we are often slow in discovering it. Newton’s Laws therefore as stated above, have benefited the users in both flowing and random changes.

The definition of randomness implies that future conditions are unascertainable, because there seems to be a lack of order underlying such change. Such has been the almost universal belief, still prevalent with most people as far as price prediction is concerned.

Marechal, also by mathematical methods of his own was the first to demonstrate that there is also order underlying the so-called random changes in price fluctuations. No professor in any University, no government economist, has ever been able to produce a similar chart showing as Marechal’s famous chart, copyrighted in advance, what the Dow Jones Industrial Stock averages would do 18 years ahead. As one of many other examples of this mathematical orderliness regulating the flow of stock prices, the writer received from this remarkable man now approaching 90, several months before President Nixon’s election, an accurate prognostication of what the DJ Industrial Averages would be the day after Nixon’s election.

Many others such as classmate Dewey’s Foundation for the Study of Cycles have shown the “order” underlying stock and future prices. For example the recent rise in price of Copper futures was predicted by the cyclical studies of that Foundation several years before the advance took place.

So now and during each of the past ten years your Foundation for Economic Stabilization has presented this Case Study Course on the predictability of prices, summing up the results of thirty years of research and inquiry among successful investors. By the use of these Course Rules never before published except by your Foundation, you as a Course member will have an advantage over others without knowledge of these Rules.

Alan H. Andrews, Director