Houston Investors Association meeting November 14, 2009

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Updated 11/6/2009 with SIG topics

Updated 11/6/2009 with room numbers

The monthly meeting of the Houston Investors Association will take place Saturday, November 14, 2009 at Melcher Hall, on University of Houston Campus 4800 Calhoun Rd, Houston, TX. (See Location).

Featured Speaker: Eric L. Prentis, of “The Astute Investor

Since 1988, Dr. Prentis has dedicated full time to stock trading, investing, and stock market research to complement his trading knowledge. He is a stock market investing expert who has experience in good stock markets and bad. The Astute Investor and The Astute Speculator are a culmination of Dr. Prentis’ practical stock market experience and understanding of investor’s needs through work as a Registered Investment Adviser and academic training.

He received a B.S.I.E. degree from Northeastern University, an M.B.A. degree from Boston University, and a Ph.D. degree from the University of Houston; previously on the faculty of the University of Southern California in Los Angeles, CA, taught in the MBA program. … more

Dr. Prentis offers discounts on his books to HIA members and will donate 5% of to proceeds to HIA. See

Topic: The Credit Crisis and Its Effect on the Stock Market

Economic theory plays an important role in first causing and then perpetuating the worst credit crisis since the Great Depression. The Efficient Market Theory (EMT) defines markets as being in equilibrium and if unexpected events cause disequilibrium, it is only temporary, i.e., markets are self-adjusting. Asset prices “fully reflect” all available information, properly represent each asset’s intrinsic value, and as a result, prices are always accurate signals for correct resource allocation. Additionally, stock prices move randomly, therefore, markets cannot be beaten.

US economic leaders (i.e., Federal Reserve Chairman Bernanke, Lawrence Summers, Director of President Obama’s National Economic Council, Treasury Secretary Geithner and Christina Romer, Chair of the Council of Economic Advisers) believe the EMT best describes how markets function, accordingly, they think the stock market is a large casino where asset bubbles cannot arise, but if minor bubbles do occur they can be easily contained. Economists’, and the politicians they advise, faith in all-knowing markets leads Congress to repeal the Glass-Steagall Act in 1999 which protected us from the banking excesses of the Great Depression. Likewise, The Commodity Futures Modernization Act of 2000 is enacted, forbidding the US government from regulating swap derivatives, and in addition, state and local laws regulating gambling bucket-shops, instituted to correct the excesses of the credit crisis panic of 1907, are revoked.

The Technology Bubble in 2000, as well as many bubbles throughout history (i.e., John Law’s Mississippi Scheme, the South Sea Bubble and Holland’s Tulip Mania), and now the Real Estate Bubble, where home prices nationally have declined approximately 30% since June of 2006, with an additional 15% drop in prices expected, along with the US government’s use of anywhere from $3-to-$24 trillion taxpayer dollars and Federal debt guarantees to stabilize the financial markets are valid examples that major asset bubbles do occur, that markets are not self-equilibrating and that market prices cannot always be trusted for accurate resource allocation. Furthermore, I scientifically prove that the stock market can be beaten by 146% over 81 years at two-thirds the risk, please click below to read my paper “An empirical test of efficient markets: A heuristic predictive model.”

The EMT is irrefutably erroneous, making the US government’s use of multiple stimulus packages, keeping too-big-to-fail zombie banks alive, setting a zero-to-0.25 percent rock-bottom federal funds interest rate, not re-regulating the financial markets and using more-and-more government debt to mask the credit crisis improper and even dangerous. Tragically, the US is mimicking the policies the Japanese used when attempting to solve their real estate bubble, resulting in Japan’s 20-year secular bear market, i.e., as of 10/2/09, the Nikkei Index is at 9,732, down 75% from its high of 38,916 on 12/29/89, consequently, I expect a US secular bear market extending until 2027.

Dr. Prentis invites you read his paper, An Empirical Test of Efficient Markets: A Heuristic Predictive Model in preparation for the presentation.

Sig Agenda (room assignments TBA at the meeting)

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