Image via Wikipedia
A Market Forecast That Says 'Take Cover' By JEFF SOMMER
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 (Elliot and the killer:DEFLATION), 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.' "
12 comments:
What kind of fucking sense does this make? Really.
For God's sake.
The market is a measure, like a temperature gauge, of the creativity, and the willingness to bet on the creativity of our society.
The only reason it is down is because government policy is hampering investors from putting money down on creative ideas. Additionally, those who are creative are disheartened and confused by the governments lack of belief in the profit motive which drives creativity.
This is all about Obama, and the 2005-2009 Bush expansion of government.
This is not about the market.
THE MARKET IS ONLY A GAUGE.
And, by the way, my attack is on the NYT's lack of understanding of what the market is.
There is no timeline on when things will change, or how long things will be bad, or any of that.
It's all about policy.
Check out the guy's site ...
Elliotwave.com?
He's using fractal theory to make a technical prediction of what the market does.
It's like using the 2nd law of thermodynamics to predict when the world will reach a state of complete chaos.
The physics are right but it never works out
I HOPE
Epa,
I think you would appreciate this:
All Large Calculations Are Wrong:
http://rwcg.wordpress.com/2010/07/04/all-large-calculations-are-wrong/
Pasto sez:"The market is a measure."
It is a measure.
BUT, what happens is everyone has the same/similar analysis software; all the investment guys 'believe' the same things; they all look at the same running averages and patterns (if I hear the phrase "classic head and shoulders" one more time, I'm gonna scream); no one wants to be the last man standing. What happens is a herd mentality where every money manager is trying to be profitable and draw in more cash from clients. So if the market 'looks' like it 'may' go in X direction, everyone rushes for that door, because they all know that someone has to buy stocks at an offered price or else it bids lower until there is no one left to buy from or sell to.
It is total mob psychology and becomes a self-fullfilling prophecy.
Bottom line: they all believe it, so they will make it happen by and because of that belief.
It is extremely rare for a money manager to be contrary to accepted tho't, cause if they lose a few billion, they'll never get another job. 'Course if he gets it right he is a hero.
Can you imagine what such a nosedive will do to parents who planned to fund their children's college education via proceeds from the stock market?
Every college family will be on the federal-loan program.
Also, there go the retirement plans.
All of which leads to:
THIS
Of course some retirement plans are already being raided bit by bit by folks who see no sense in leaving their money in a place where it is disappearing. If it's a matter of saving for 20 yrs down the road or saving their house now, guess which they're choosing?
And where the heck are the comments by SamenKami, Epa & AoW?
This story, unfortunately is not the only such story..yesterday the Telegraph's Ambrose Evan Pritchard made this case on other facts, and then:
CNBC
Now the things about trying to jump from a math analysis of stocks to MONEY is that what you are measuring is the behavior of millions of human decisions ... but human behavior en masse ...does it change?
I don't think so ..I just published a post about how Zakaria wondered why companies were not spending hiring and expanding when they were siting on 1.8 TRILLION IN CASH ... with Obama at the helm and warnings like this, as well as objective danger signs, WHO WOULD?
Thus it all becomes self fulfilling and the behavioral math controls.
Each of us should be thinking with part of our brains in this same pattern (IMHO). I'm not saying go out and 'cover your house in plastic bags and duck tape', but I am saying, at least if you don't BUY the materials, know where you can
The killer will be deflation. Watch every sign for real deflation. IMHO
M.R. - I'm one of those guys that cashed in 1 of my 2 401K's and paid off my house (got burned a new one in taxes and penalties.) I'm still thinking/hearing that the gov't wants to take the IRA's/401K's ($4-15 Trillion) and give you a piddly stipend in exchange.
Now if I can just make the annual tax bill, I'll have a hovel in which to live.
I had to raid my own a bit to pay some regular bills SamenoKami.
Like I said, if it's a choice between saving for 20 years from now and saving my house now. . .
Post a Comment