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In this three part
interview, Elliott Wave International president Robert Prechter discusses
his new book, “Conquer The Crash: How To Survive and Prosper in a
Deflationary Depression.”
During the 1980s,
Bob Prechter won numerous awards for market timing as well as the United
States Trading Championship, culminating in Financial News Network (now
CNBC) granting him the title, "Guru of the Decade." In 1990-1991, he was
elected and served as president of the nation-al Market Technicians
Association in its 21st year.
He has also
published a seminal book on Elliott wave analysis titled, “Elliott Wave
Principle – Key To Market Behavior,” three books on the major
practitioners of wave analysis, and books on his own views in
Prechter's Perspective and At the Crest of the Tidal Wave.
Part
1
In your
professional career, you’ve made a number of long-term market forecasts
that lie far outside of conventional opinion. Is there a reason why you
have so often stood outside the crowd?
I make my forecasts using the Wave
Principle. I don’t rely on any data external to the market. I study the
charts and interpret the waves as best I can. News is not helpful – in
fact, it’s counter-productive. I could do this on a desert island as
long as I had access to the charts. This method often places my
forecasts outside of public opinion because the majority relies on news,
which is always bullish at tops and bearish at bottoms.
Majority opinion cannot be any other way,
because the herding nature of human beings forms a popular consensus,
which creates the market’s trends and turns.
Your first big
public forecast was made in 1978 in your book, “Elliott Wave Principle –
Key To Market Behavior,” which you wrote with A.J. Frost. Can you tell us
more about this forecast and the financial climate that it was made in?
It’s easy to forget, but the late ‘70s
were a period of widespread financial worry. People were fairly resigned
to a gloomy view of the stock market and the economy. Inflation and gas
prices were skyrocketing, and interest rates were on their way to new
all-time highs. Portfolio strategists were calling for the final smash
of the secular bear market that began in 1966. A public opinion poll
showed that the U.S. public was more negative about “the future” than at
any time since the poll’s origination in the 1940s.
In 1978, the Dow moved as low as 740 but
it never came near the 1974 low at 577. In the book, I described, along
with A.J. Frost, “the current bull market in stocks…which should
accompany a breakout to new all-time highs.”
Which of course
it did.
Yes. We knew that wave 5 had begun and
would overcome the gloom.
When you called
for the Dow to reach as high as 4000, people thought you were crazy – just
as some think of you today.
Who, me?
You also
successfully forecast the crash in 1987, didn’t you?
Nobody specifically predicted a “crash”
before it started, including me. But I did tell people to sell, right
when the sentiment indicators showed the majority bullish. In fact, that
was one of the reasons I turned cautious. Then the Dow fell 900 points,
which back then meant something!
Haven’t you also
nailed gold and silver?
Yes, for over 20 years. They have been my
most consistent markets.
But allow me to caveat my own track
record. In the ‘90s I made the biggest mistake of my career. Even though
I predicted that “Investor mass psychology should reach manic
proportions” in the stock market, I never imagined that the mania would
carry on as long as it did. Wave 5 continued higher throughout the ‘90s,
and I got off too early.
Did that turn you
bullish?
Quite the opposite. I think my basic
interpretation of the long-term financial picture is correct. I’m not
timing a five or ten-year trend here; I’m attempting to pinpoint the
termination of a 200+ year move and a killer bear market. The higher it
went, the more bearish I got.
Let’s talk about
your current long-term forecast. You’ve just written a book titled “Conquer
The Crash.”
All signals point to the fact that wave
5, which is the final leg up of our great bull market, topped in early
2000. Mass psychological trends are now fueling a corrective move that
will decimate stock prices.
I believe it’s time for people to prepare
for a vast economic disaster, which will include a deflationary crash
and an economic depression as bad or worse than the one suffered in the
early 1930s.
When will it
begin?
It is already in progress!
I’m not sure the
world is ready for this.
Has it ever been? Disasters of this
magnitude always catch the general populace off guard. Today is no
exception – too few are even remotely prepared for this crash.
What should we
do?
My book is subtitled “How
To Survive and Prosper in a Deflationary Depression,” and it
will tell you exactly how to do just that. There’s still time to prepare
for this impending financial disaster, but not much. Once things really
get going, the panic will make it more difficult to protect yourself.
You’ve got to start preparing now.
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Part 2 |
Part 3
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