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(More customer reviews)Robert Prechter Jr. is well-known in stock market circles for his Elliott Wave predictions over the years have had their success and failures. This is Prechter's third and latest book (At the Crest of the Tidal Wave (1995) and The Elliott Wave Principle (1978)). His current book is really two books in one printed on different colored paper! Even if you do not agree with Prechter's view of the world, you should certainly understand his arguments and make your own decisions.
Part I (135 pp.) focuses on why he believes a stock market crash will occur in the near term, as well why deflation and economic depression are high probability scenarios. Although deflation and depression are rare occurrences, Prechter believes that they are at the brink. His goal is writing the book is to provide insight into defining both events and make you believe that they can happen, and eventually make you believe that they are likely to happen.
Prechter compares the period 1942-1966 (called Wave III) with the economic expansion of 1974-2000 (Wave V). He points out that the most recent period had much weaker economic fundamentals and performance than the prior period, although by stock market standards Wave V had an increase of 1930% on the DJIA compared to 971% during Wave III. In his analysis he provides comprehensive statistics on GDP, Industrial Production, Capacity Utilization, Unemployment rate, household's liquid assets, federal and consumer debt, prime rate, federal budget deficit, personal savings among others. Prechter then defines depression and its relationship to the stock market. One of his key observations is that 'major stock market declines lead directly to depressions'.
Prechter depicts the five waves evident in the stock market using four charts. He points out that the five-wave pattern occurs even taking into account major news events such as Hitler's rise to power and the end of the Vietnam war. Prechter provides four signs of a market top and explains the Elliott Wave characteristics of each of the five waves.
Prechter presents his case for the existing stock market precarious situation (as of March 2002) by covering Wave V in great detail. He spends considerable time examining the fifth wave from 1974 to 2000 compared to previous waves. The case for the historically high stock evaluation is made by focusing on the low dividend yield, outrageously high book value, and high P/E ratio. Prechter then covers how psychology plays a major role in a stock market advance and decline. He reviews the psychology of he economists, brokerage strategists, money managers, public, and the media.
Prechter believes that the upcoming bear market will be the most devastating since the great depression and perhaps since 1720-1784. If this occurs, he indicates that the U.S. will experience another depression. He forecasts that the DJI will plummet to 777, the August 1982 low, if that average follows the pattern of the prior manias (e.g., Nikkei; DJI 1929-32; Gouda tulip bulbs (1634-1722); and the South Sea Company (1719-1722)). Lastly, he makes the case for deflation, and discusses the Fed and banking system.
Book Two provided Prechter's advice for protecting yourself and profiting from the upcoming depression. His recommendations include:
1. Have safety of principal by being in cash or high-quality short-term U.S. Government treasuries (T-bills) or money market mutual funds that invest in these types of instruments.
2. Sell your home (if you have a large mortgage) and rent instead.
3. Find a safe bank (using Weiss Ratings, Inc., for example) and keep your money there.
4. Do not own or invest in stocks, options or futures.
5. Consider buying inverse mutual funds (such as Rydex Tempest that double short the S&P 500) and Rydex Venture (double short NASDAQ 100). ProFunds also offers bear funds. To invest in any of these funds, Prechter cautions that you must be a short-term timer to be successful.
6. Buy physical gold and silver metals.
7. Cash out your whole life insurance policies and convert to term insurance from the safest firms (based on Weiss Ratings, Inc., for example)
Prechter provides a very sobering view of the future that few individuals will heed because of its negative and extreme consequences. But if this book makes you think about the safety of your financial nest eggs, retirement funds, insurance policies, etc; then at least you can decide to take some steps to protect yourself. If the stock market can manage to rally 20-40% from the lows of July 2002, then perhaps you should consider cashing in your remaining equity and mutual funds positions before the 'real' bear market takes hold as Prechter envisions. I know I will be doing that and then using my charts and technical indicators to tell me when to get back in. It's shame that Prechter did not publish this book in March 2000 when the market was at its peak. He would have saved most investors, who believed his work, a great deal of money if they had followed his recommendations.
Whether you agree with Prechter's view of the world, you will certainly agree with this quote:
'To be successful in life, or at least learn something along the way, you have to think for yourself.'
Click Here to see more reviews about: Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression
Today's financial and economic tribulations were a long time in the making. Many people ask, "Why didn't someone see it coming?" A New York Times bestselling book did see it coming. Over 100,000 people read it in time to protect their wealth. The book foresaw and explained the collapse in home prices, plunge in stocks, subprime debacle, liquidity crisis, the demise of Fannie and Freddie, the Federal Reserve's failure to turn the trend, and lots more. The book was Robert Prechter?s Conquer the Crash, published in early 2002, when the Dow was above 10,000 and the financial world was partying around-the-clock.
Fast forward to today: the average U.S. homeowner has suffered a decline of 30% to 40% in property value. Stocks and commodities had their biggest fall since 1929-1932. Fannie Mae is a zombie corporation under the government?s protection. The Fed has pushed every button at its disposal (and then some), to no avail. If Prechter thought a whole new book would help, he'd have written one. But Conquer the Crash is a book-length forecast that's still coming true -- only some of the future has caught up with the specific predictions he published back then. There is much more to come. That means more danger, but also great opportunity. Conquer the Crash, 2nd edition offers you 188 new pages of vital information (480 pages total) plus all the original forecasts and recommendations that make the book more compelling and relevant than the day it published.
In every disaster, only a very few people prepare themselves beforehand. Think about investor enthusiasm in 2005-2008, and you'll realize it's true. Even fewer people will be ready for the soon-approaching, next leg down of the unfolding depression. In this 2nd edition, Prechter gives a warning he's never had to include in 30 years of publishing -- namely, that the doors to financial safety are closing all over the world. In other words, prudent people need to act while they can. Conquer the Crash, 2nd Edition readers will receive exclusive online access to the Conquer the Crash Readers Page, where Prechter continually updates the book's recommended services and institutions.
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