From The Stock Market Barometer by William P. Hamilton, published in 1922

Cycles and Laws of Stock Market Movements

Continued from...Roger W. Babson's Theory

Cycles Overestimated

There are other compilations, and that of Harvard University will be noticed in a more appropriate place.

I am inclined to think that all attach too much force to the cycle theory, very much as we have seen that Charles H. Dow did in splitting the favored ten-year cycle into an assumed but non-existent five-year bear market and a similar five-year bull market. But Mr. Babson would tell you that his areas of expansion and even of inflation, extending not five years but two years or less than three in point of time, do not necessarily blow their tops off in a final explosion and that the bottom does not drop out of his period of depression. A stock market crisis may occur in the middle of a bull market, like the Northern Pacific panic of 1901; or a near-panic, with a development more serious and radical, may occur in the course of a major bear swing in the stock market, as in 1907. Mr. Babson correctly shows that the latter was followed by a business depression that had already been foreshadowed in the downward stock market movement. If all panics and industrial crises arose from the same causes and could be predicted with the suggested rythmical certainty, they would never happen because they would always be foreseen. This sounds something like an Irish "bull," but it may well stand as a statement of the fact: Was it not an Irishman who said that an Irish bull differed from other bulls in the respect that it was always pregnant? I do not here go deeply into this question of cycles, because it is abundantly clear that the stock market is little moved by any such consideration.

Order Is Heaven's First Law

If Wall Street is the general reservoir for the collection of the country's tiny streams of liquid capital, it is the clearing house for all the tiny contributions to the sum of truth about the facts of business. It cannot be too often repeated that the stock market movement represents the deductions from the accumulation of that truth, including

the facts on building and real estate
bank clearings
business failures
money conditions
foreign trade
gold movements
commodity prices
investment markets
crop conditions
railroad earnings
political factors and social conditions

but all of these with an almost limitless number of other things, each having its tiny trickle of stock market effect.

It will be seen from this how true the postulate made in an earlier discussion was when it was said that nobody in Wall Street knows all the facts, to say nothing of the meaning of all the facts. But the impartial, passionless market barometer records them as certainly as the column of mercury records the atmospheric pressure. There is nothing fortuitous about the stock market movement, and I think I have shown that it cannot to any profitable extent be perverted to the ends of deception. There must be laws governing these things, and it is our present purpose to see if we cannot formulate them usefully. Many years ago George W. Cable said: "What we call chance may be the operation of a law so vast that we only touch its orbit once or twice in a lifetime." There is no need to lose ourselves in the mazes of predestination and foreordination, or reduce the Westminster Confession to absurdity by saying that life is just one damned thing after another. But we shall an recognize that order is Heaven's first law, and that organized society, in the Stock Exchange or elsewhere, will tend to obey that law even if the unaided individual intelligence is not great enough to grasp it.

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From The Stock Market Barometer by William P. Hamilton, published in 1922