From this morning on Bloomberg. Prechter now has a perfect record since calling for a major crash at the 2007 top and then calling the interim bottom earlier this year. He was made for this environment. His 2002 book, Conquer the Crash, is a practically a blueprint for what is happening.
Takeaways:
Betty Liu actually extended some respect to a bear. Maybe she’s been hanging out with Matt Miller.
Prechter expects a corrective sell-off within this corrective rally, prior to new highs, followed by 2008 redux starting later this year or in 2010.
Final bottom: 2011
Deflation to “definitely” continue beyond another year and a half or so.
The crash is a good thing if you hold cash and buy at the bottom.
Credit was shoved down American’s throats for decades by government-created programs: FHA, Fannie, Freddie, etc.
PS – Bloomberg now has a youtube channel, and is pretty speedy about posting interviews. Now I have no need for a TV at all, which is good, since I’ll be without one all summer.
Here is an interview from February 25th, where Prechter called for covering shorts in anticipation of the biggest rally since the start of the bear market. He has time to go a bit more in-depth here:
And here he is at the very top of the market in 2007, 20 years to the day after the ’87 crash:
Hummm … so this guy is predicting a pull back now … and further strength into the end of the year, I charted Growth x Earnings Yield of the most Widely Held Stocks: http://online.wsj.com/mdc/public/page/2_3023-mostwidelyheld.html
and it is the lowest since 2/2002 … what followed was a massive selloff … not sure If I agree with Prechter completely … we are having a small correction but that will continue only for a short while … maybe 2 or 3 weeks … then it’s back to the highs … and then slam down to into the end of the year .. Prechter says we have the correction and then go way up till the end of the year …
I don’t see Prechter saying necessarily that we go “way up” until the end of the year … there’s a difference between expecting optimism to recover to very high levels and expecting the stock market to do the same. Prechter has had 1000-1100 on the S&P and end of summer/early fall as ideal targets for this rally since the March lows.
Robert Prechter is a moron (So what if he predicted a crash? Anyone with half a brain could see that the stocks were overvalued. Many sensible analysts were screaming the same thing) – he thinks it’s still 1930 and we are living on a Gold standard, when in fact the only similarity between the 1930′s dollar and today’s dollar is the name, i.e., we are dealing with a totally different currency today which is purely fiat. BTW, how’s that treasury bet workin out for ya? Quick! Buy some more before they run out – only a limited supply available for all dollar deflationists.
Every one of Prechter’s assumptions in this article has been blown to smithereens:
http://www.financialsense.com/fsu/editorials/nystrom/2007/0831.html
But, yeah we’ll still have deflation. Right.
You are a coward Mike. Why hide behind your ability to strip off comments? Don’t you have the balls or intelligence to respond to a contrary point of view? I guess it figures since you follow idiots like Prechter. Fuck off now.
The poster SG is no longer welcome here. I don’t like to delete comments or ban people, but I didn’t start this blog to give a venue to keyboard jockeys looking for a fight. I’ve said it before and I’ll say it again: I’ll gladly debate hyperinflationists or socialists, but not jerks.
I’ve re-approved his comments so others can see what I’m talking about. What’s particularly ridiculous here is he taunts me about my bond trade, but bonds are up since I went long!
It’s a shame SG was so badly socialized as a child, because the link he posted makes a valid point about one of Prechter’s predictions about the Fed that has not come to pass, namely, that they wouldn’t load up their balance sheet with junk.
I actually like to see guys like SG posting here all hot and bothered and indignant that *anyone* could be valuing the U.S. dollar more dearly than your typical piece of 2-ply toilet paper. It gives me a lot more confidence that the deflation trade is the right one, and all these “reflation trade” mouth breathers (which, by the way, includes Bob Pisani and just about every mutual fund manager under the sun) are going to get their asses handed to them later this year.
Prechter has already admitted he was wrong that the Fed wouldn’t load itself up with junk. Of course, if they do find a way to get the U.S. Treasury to overpay for all those bad assets, you could argue that those assets weren’t really “junk” so much as a trojan horse for transferring losses to the taxpayer.
Yep, I agree, it’s good to see comments like SG above. I use
the F word all the time but in a public forum, it’s not acceptable. There seems to be two schools of thought: It’s either deflation or inflation. Inflation due to the extreme money printing and deflation as all the bad debts need to be written off. We are in a unique situation though: We are printing money out of thin air to pay off all the bad debts. Hummm, so instead of resetting to zero and getting rid of bad companies, we are transferring the bad debts to the the Govt’s balance sheet. Where is it going to go from there? Extra taxes. In addition, with the massive amount of
debt, at some point the US credit will get cut … and there goes interest rates up … there goes the housing market too!
Now, let’s say you are someone who started to work at age 19 years ago (1990) out of school and contributed 10% of your income into a 401K. Essentially, you have only 5 years of +ve returns and have lost 15 years of savings. Ok, so you have another 20 years of earnings … but you also have to pay for the kids school .. essentially you have passed the point of no return … if you invest you are once again risking loosing money for the next 20 most crtical years of your life if the stock market goes up and down or nowhere for the next
20 years … maybe up for 5 years net/net … how are you going to save for your retirement savings and kids college/marriage etc. What are you going to do? Save and save like heck … sock it all away. How many times are we going go through bubble after bubble and be taken
for a ride? No, people are not going to risk the stock market again … Now, here come’s the revenge of communism … China’s consumption will drive commodities higher …. a growing population’s demand for water, oil, energy resources are only going to go up exponentially … So there you go again with the final punch … In summary …
1. Increased Taxes
2. Debt degrading / Higher Interest rates
3. Increased Savings rate / Very little consumer spending
4. Higher commodity prices / Higher Cost of living ..
Too me this looks like stagflation ….
Here’s some interesting into: http://www.voxeu.org/index.php?q=node/3421
Well, that’s it for me …. the only option IMO is fast option based trades with your risk capital and then you save the rest … (20/80 mix)
Last point: In a public forum we want to exchange ideas and share information to enrich our subject matter and skills .. not humiliate and ridicule others …
“Of course, if they do find a way to get the U.S. Treasury to overpay for all those bad assets, you could argue that those assets weren’t really “junk” so much as a trojan horse for transferring losses to the taxpayer.”
It doesn’t matter whether or not they are removed from the Fed’s balance sheet; the taxpayer eats the loss either way. If the Fed keeps them, the losses will subtract from the Fed’s normal profit transfers to the treasury.
“If the Fed keeps them, the losses will subtract from the Fed’s normal profit transfers to the treasury.”
Good point. Not many people have this level of understanding of the fed.
i read prechters book and heres what i got so far in comparison to whats going on now:
prechter on gold – yes long term, short term no.
prechter on tbonds – yes , but due to us treasuries, may default so…no?
prechter on shorting – yes, until bottom hits/put it in a bearfund
prechter on cash – put it in a swiss bank account.
so thats it. preserve your cash and wait for the bottom.
Yeah, it’s so simple. He said that we were in a massive credit bubble and that it’s bursting would be deflationary despite the Fed’s best efforts. He’s recommended cash and short-term bonds in strong institutions, with a touch of gold and silver. He’s recommended shorting at times, but has always said that the best money is made by going long at secular lows.
What’s to disparage here?
But we may be in trading range between S&P 500 to 1000 for the next 10 years …. Again, the net net will be zero unless you invest in some of the best Divididend stocks … I am focussing on those people who are in the mid 40′s .. and they may not want to risk their remaining captial and future earnings in a market that is NOT going to go anywhere … I really think people should look at short term option plays if they have the time to scan every single day for a 2 to 8 day trade horizons … or pay some service to do it …
According to this Bloomberg screenshot published by ZeroHedge, the bear capitulation seems to be complete:
http://www.zerohedge.com/sites/default/files/images/SI%20Plunge.jpg
Actually guys, it dosn’t matter about who is right or wrong,
the end result is that families are the ones that suffer when games are played on wall street by these thieves.
We probably won’t even have a planet left as we know it in 3 and a half years.
Tsunami’s, extreme heat, volcanoe erruptions and earthquakes will see to that
Nah, Ang, life goes on. Credit busts, dishonest politicians and scheming bankers are just part of history.
And Ang, don’t be so sure about the whole heat thing — that’s just another scheme to transfer wealth to the bankers while the politicians tell us it’s for our own good. I have a masters in environmental science, and I have seen no compelling evidence that global warming is anything but hot air. The earth has warmed by 0.6 degrees in the last 100 years, and even that is a maybe.