A Market Forecast That Says ‘Take Cover’
July 6th, 2010WARNING: This isn’t a recommendation to buy, sell or hold any financial instrument.
I don’t see how anyone making predictions like this can, at the same time, be telling people to buy into confetti paper/promises to pay, but, for whatever it’s worth, here you go.
Via: New York Times:
WITH the stock market lurching again, plenty of investors are nervous, and some are downright bearish. Then there’s Robert Prechter, the market forecaster and social theorist, who is in another league entirely.
Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.
In a series of phone conversations and e-mail exchanges last week, he said that no other forecaster was likely to accept his reasoning, which is based on his version of the Elliott Wave theory — a technical approach to market analysis that he embraces with evangelical fervor.
Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.
“I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”
His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the best investment opportunities ever,” he said.
Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted.
For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”
The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.”
hold cash and cash equivalents
to me, it shows just how deep-seated the delusion has become. even someone who has spent their life studying the history and cycles of economic depressions cannot see the forest for the trees…
they just cannot let go of their axiomatic beliefs. because if they did, well, they would then have to start dealing with reality (i.e. how to get enough food to survive for years on end after the “US treasuries” have been used as kindling paper).
whoah! can’t go there (reality), now can we!
[EDIT: WARNING: Nothing that appears on Cryptogon should be considered as a recommendation to buy, sell or hold any financial instrument. Thanks, Kevin.]
so, are things going to deflate or hyperinflate? i don’t guess that i have enough money for it to really matter, but should i cash out my roth ira (i’m mid 30’s)?
in fact if i could get some advice from the folks here who clearly have more cognitive function than i do:
i’m mid 30’s, have essentially no debt, i have about $50000 saved spread out as follows:
20% checking account
20% gold/silver coins
20% money market acct
40% roth ira (in healthcare fund and emergingin mkts)
i live simply, work seasonally, i’m considering just moving back to my parents that have 80 acres, and just try to have a small farm similar to kevin that runs this site. anyway, any advice on what to do with savings? i want to keep it as simple as possible (ie- i don’t want to spend my time watching stocks or markets)
you know, i read this site and others like it almost daily, and i agree with the outlook of them (although i don’t have the technical understanding or brainpower that most of the people here do). you see the numbers and what is happening so it must be true. but at the same time i have a hard time reconciling it to what i am seeing around me. i work in a national park and daily i see hundreds of giant RV’s pass through, i don’t know anyone who has lost their job (here or back home), and i just don’t see anything different around me. is this all just going to hit like an earthquake and everything fall apart in one big bang? anyway thanks.
[EDIT: WARNING: Nothing that appears on Cryptogon should be considered as a recommendation to buy, sell or hold any financial instrument. Thanks, Kevin.]