Technically Speaking, September 2008

The Elliott Wave Principle, the legacy of Ralph Nelson Elliott, is practiced globally – now 62 years after his last work was published. Within its sophistication, as Paul Tudor Jones pointed out, “Elliott Wave theory allows one to create incredibly favorable risk/reward opportunities.”1 We focus on a pioneer’s work and when  impressed by a theory, we wish we knew more about the person. Essayist Ralph Waldo Emerson put it best: “There is properly no history, only biography.”

Ralph N. Elliott’s Wall Street career is well known. During the last 13 years of his life, he advanced a unique theory of stock market action. The Elliott Wave Principle was first revealed privately, in December, 1934, to Charles J. Collins, an investment counselor. In August, 1938, a monograph written with Collins’ assistance – The Wave Principle – was published.

A year later, Elliott wrote the now-famous twelve articles for the magazine Financial World, where Elliott’s theories were presented to a larger audience. Between November 1938 and August 1945, Elliott issued interpretive letters and educational bulletins. In June 1946, his last work – Nature’s Law: The Secret of the Universe – was published.

But what was Elliott’s background, and what do we know of his first 64 years?

Ralph Nelson Elliott was a child of the American Western frontier and an international man.

He was born on July 28, 1871, in the small community of Marysville, Marshall County, located by the Big Blue River, in northeastern Kansas. Elliott’s family had arrived in Kansas around 1868, to what was then the edge of the bustling American frontier. They purchased farmland.

The settlers on the Oregon Trail and the Pony Express riders all had passed by Marysville. The 1996 Olympic Games torch passed through Marysville.

His father, Franklin, was born in 1835, in Ohio, when that area marked the Nation’s Western frontier. His mother, Virginia Nelson, was a native of Philadelphia. Elliott’s grandparents were born in the United States, except for Virginia’s father, who had migrated from County Donegal, Ireland. Elliott had one sibling, sister May, who lived most of her life in the Los Angeles, California area.

Elliott’s maternal great-grandfather fought as a private militiaman at Bunker Hill during the American Revolution, was wounded and was made one of General Washington’s bodyguards. Elliott’s paternal grandfather Hugh was a veteran of the War of 1812.

Most of Elliott’s early childhood was lived on Elm Street in Fairbury, Illinois, a small and prosperous farming community about 100 miles  southwest of Chicago. Elliott’s father was a merchant, while his mother’s family farmed, Virginia Nelson’s brothers and sisters each farming 80 acres.

In early 1880, the Elliotts moved to San Antonio, Texas, where Elliott formed a lifetime love for Mexico and Latin America. He spoke Spanish, and wrote it well as some of his letters written in Guatemala in 1926 attest. His family typified the American family that migrated West living at the frontier’s dynamic economic edge. From origins in Ohio and Philadelphia, to Kansas, Illinois, Texas, and to their final destination in Los Angeles, California, in the early 1890’s, the Elliotts lived by movement and progression. Elliott’s father, mother and sister are buried side by side in Inglewood, California. Growing up with a spirit of independence and exploration, foreseeably, Elliott became an international man. In 1891, at age 20, he moved to Mexico to work on the railroads at the height of North America’s railroad boom. He lived in Mexico for the next 25 years. In youth, he worked as a lineman, train dispatcher, stenographer, telegraph operator and station agent. Later, he was employed in a variety of railroad executive positions, primarily in accounting and business reorganization.

On September 3, 1903, Elliott wedded Mary Elizabeth Fitzpatrick (1869-1941), a New Yorker. Mary was with Elliott in Mexico, Nicaragua and Guatemala. They were married for 38 years. During these same twenty-five years, Mexico held massive investments by the British in mining, the French in textiles, and the United States in railroads. The Elliotts might have remained in Mexico the rest of their lives. But by 1911, social tremors heralded the tragic and violent Mexican Revolution, during which nearly 2 million people died. In June 1916, (in his words) when President  Woodrow Wilson “ordered all Americans out of Mexico,” Elliott complied. He moved to Los Angeles where he cared for his elderly father whodied within a year. His mother Virginia had died in 1909.

Elliott spent his last two years in Mexico (1914-1916) in Frontera, a town at the mouth of  the Grijalva River, on the Gulf of Mexico, near theYucatán Peninsula. This was a safe place to avoid the furor of the Revolution wracking Mexico.

Consider two events that occurred in 1914:  The U.S. Marines seized the Mexican seaport ofVeracruz, making Americans very unpopular, and later that year, the Mexican Government seized the National Railways of Mexico, most probably resulting in Elliott losing his job. Frontera, with its American community (an American consul was posted in Frontera), was a safe haven. In Frontera, Elliott may have worked for one of the American-owned mahogany plantations in the area (when mahogany furniture was very popular).

Even after his forced departure, Elliott’s passion for Latin America remained unabated. Between 1917 and 1920, Elliott tried to establish an American paper company’s export business in Mexico (1918); was an auditor for the Pierce Oil Corporation in ampico, Mexico (1919); and, passed up an offer of employment from the Cuba Railroad Company (1920).

Elliott’s passport applications show that he was 5’8” tall, had blue eyes, brown hair, a complexion described as “ruddy” and “fair,” and wore eyeglasses. Photos taken in 1918 and 1924 show an elegant man with a sturdy frame, hardy appearance and an air of self-assurance.

By early 1920, Elliott had moved to New York City, where he remained until late 1924. During these years, Elliott worked in corporate restructurings and established a consulting business. He traveled to Canada, England, France and Germany.

He developed a specialty as a consultant to restaurants, cafeterias and tea rooms. This specialty built on his accounting knowledge and business expertise. He authored a monthly column for the magazine Tea Room and Gift Shop. In his introduction to its readers, the magazine said of Elliott that “he is primarily a business man.” His two-page column answered readers’ questions and gave accounting and business guidance for operating a restaurant.

During these years, Elliott’s knowledge of Latin America and his corporate experience had brought him into contact with influential people in  the academic and political worlds, who noted his abilities. Elliott had met these individuals in Latin America or through his railroad positions. One of these, Dr. Jeremiah W. Jenks, a distinguished lawyer, academician and political advisor, was influential in leading Elliott to his highest political appointment.

In December 1924, President Calvin Coolidge’s Secretary of State, former New York Governor and Supreme Court Associate Justice CharlesEvans Hughes, appointed Elliott Chief Accountant of Nicaragua, which was then under American military governance. From February to June, 1925, he worked in Managua. As reported in The New York Times, Elliott worked “to revise the banking and financial laws of Nicaragua.” The Elliotts left Managua a few months before the United States Marines departed Nicaragua.

From August, 1925, to October, 1926, in his last corporate position, Elliott served as the General Auditor of the International Railways of Central America in Guatemala. The railroad’s headquarters were in Manhattan, and its stock was traded on the New York and London Stock Exchanges. Today, this is the national Guatemalan railroad. Letters written in this position show that Elliott spoke and wrote Spanish well.

In 1926, Elliott wrote a 100-page manuscript titled The Future of Latin America, which he wanted to expand into a book. The manuscript originated as an internal memo to the U.S. Department of State. Elliott presented comprehensive foreign policy proposals for creating economic stability and lasting prosperity in Latin America. He chastised the United States for being “a country of provincials” unable to visualize the many opportunities abroad. He wrote: “The citizens of the United States are under a moral obligation to mankind…it is an evident duty that they do all in their power to assist the less fortunate toward the enjoyment of that prosperity and peace of mind which they themselves have come to know.”

This memo shows Elliott to be an acutely knowledgeable observer of Latin American customs, economics and politics, with a strong desire “to outline a constructive foreign policy along practical lines” for U.S.-Latin American economic affairs.

Elliott wished to write a book advancing his Latin American ideas. It did not happen; it would have been his second book. In August, 1926, his Tea Room and Cafeteria Management was published. The book advises on establishing and operating a tea room and cafeteria and shows Elliott’s varied business expertise and acumen. Today’s Starbucks would be similar to a tea room of the 1920s. The book was favorably reviewed in The New York Times and the former New York R.N. Elliott – The Years Before the Discovery Herald Tribune.

Both The Future of Latin America and Tea Room and Cafeteria Management show a gifted writer who counsels in the most practical and beneficial ways to succeed as a Nation and profit in business.

In 1926, Elliott returned to New York City, suffering from a severe alimentary tract illness commonly found in tropical areas. By January, 1927, the Elliotts had left New York City and moved to downtown Los Angeles. In late 1938, the Elliotts returned to Brooklyn, where they remained the rest of their lives.

He continued his business consulting practice, which now included “private investments.” His health, however, was deteriorating. By 1929, he was physically debilitated and was forced into unwanted retirement.

His sharp and energetic mind would not rest. His stock market studies began. He read Robert Rhea’s book, Dow Theory, and was one of the first subscribers to Rhea’s stock market service.

Elliott’s observations led not only to the discovery of the Elliott Wave Principle but, at age 64, to a career in Wall Street, to what he later referred to as “Wave number five of my own life.” The Elliott Wave Principle is described in Robert R. Prechter’s R. N. Elliott’s Masterworks: The Definitive Collection, New Classics Library (1994).

Mary Elizabeth Elliott died on December 30, 1941, in Brooklyn, New York. There is no record that the Elliotts had children. Elliott’s sister May died in Los Angeles on December 18, 1953. May was Elliott’s sole surviving relative.

Elliott died on January 15, 1948, in King’s Park, New York, after 77 years of a very productive life.2 The New York Times published his obituary. 

Sources
Prechter, Jr., Robert R. (ed.), R.N. Elliott’s Masterworks: The Definitive Collection, New Classics Library (1994).

The author acknowledges Mr. Prechter’s invaluable assistance throughout this project. George A. Schade, Jr., CMT, has been researching Ralph N. Elliott’s biography since 1991. He contributed new research to Elliott’s biography published in Robert R. Prechter’s Masterworks.

Footnotes

1.  Schwager, Jack. D., Market Wizards: Interviews with Top Traders, Simon & Schuster (NYIF) (1989), p. 130.
2. For his significant contributions to the field of technical analysis, the Market Technicians Association awarded its 1996 Annual Award to Ralph Nelson Elliott.