This is trend following radio where great thinking comes alive.

Nobel Prize winners, legendary traders, bestselling authors, and the pros that know what drive us irrational human beings.

I am your host, Michael Covel, not filtered, raw, honest.

That's my passion.

As a quick setup today, before I jump into my monologue, I want some foundation.

What follows is about 10 minutes from Benoit Mandelbrot about efficient markets.

Keep this in mind before I dive into my rant.

Professor Mandelbrot, thank you very much for being with us here today.

Thank you very much for inviting me.

Let's start, if you could, if you could explain where the efficient market's hypothesis comes from,

where it intellectually started and what it presupposes.

Well, it started precisely in the year 1900, when a man named Bachelier, a French mathematician,

presented his PhD dissertation called Their Speculation. It's a remarkable piece of work,

which has had an enormous influence on theory of probability, enormous influence on what's called Brownian Motion. But it was meant to be a theory of probability, enormous influence on what's called Brownian Motion.

But it was meant to be a theory of the way in which prices vary on markets, of securities,

of commodities, etc. As such, it had the most bizarre history. For six years, hardly anybody pay attention.

Six years later, when the computer became available, when people could really compare that theory with data,

the Bacheli theory suddenly became known, people became aware of it, and it began to rule the roost of those who were

trying to model the variation of prices on various exchanges.

And what exactly does the Bachelier theory suppose or posit about the way that markets

work?

Well, it posits markets work in an extremely simple fashion.

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