Prechter, who has written 13 books on finance, believes that the stock market is historically overvalued in terms of dividends and earnings, because of a "great rise in positive social mood."
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But the mood changed in 2000 and the "trend toward negative social mood will lead to an economic contraction," according to Prechter.
"Small bear markets lead to recessions, big bear markets lead to depressions. The current bear market will be the biggest in nearly 300 years, so the depression will be correspondingly deep," Prechter said.
Prechter goes onto to suggest the bear market is of super-cycle degree, the biggest since 1720-1784 and will therefore see a decline for equities deeper than the decline during the great depression, which saw the Dow fall 89 percent.
"The trend toward negative social mood that has been in progress since 2000 and which is about to accelerate will continue to curtail lending and lead to a tidal wave of defaults and a terrific deflation," he said.
"The amount of outstanding credit today is so large that system-wide defaults could lead to as much as an 80 percent –90 percent decline in the volume of dollar-denominated credits worldwide," according to Precther.
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And how do you trade the Dow at 1,000?
One suggestion from Faber is buying a self-sustainable farm in the middle of nowhere surrounded by high voltage fences and barbed wire and equipped with booby traps and an arsenal of machine guns, hand grenades and armed vehicles guarded by vicious Dobermans.
Yep
ReplyDeleteThat's my farm alright !
I'm so glad I haven't worked my A off 46 years for nuthin'
Bring it on
Do you really think the Dow will drop to 1000 points? Haven't you figured out that the fed is printing and injecting money into the stock market? Print, borrow, and spend: so far it seems to be working for them. I wonder when the excrement is going to hit the fan?!
ReplyDeletewhen?..giggle,snirk,snirk...
ReplyDeleteThis article is totally false. None of what was said will come true. Next week, the markets will roar up again as usual and things will continue on as normal.
ReplyDeleteI suspect they cannot keep the DOW up forever and manipulate things forever because eventually the high unemployment will cause money reserves for people, states, and federal government to run out. Many already have. Yes the printing press can run a while but that will simply make the crash worse. I suggest that the finacial world and Banksters get familiar with the number ZERO.
ReplyDeleteThe Creator has his finger on the RESET button and has used it in previous world ages when greed and corruption was too much. It appears we are headed down the same path in our world age. Somewhere around 2012 might be reset button time which could take months or years.
Prechter is a writer of considerable skill and I have been following him for quite a while. Many of his adherents boast of his accurate predictions. Others point out he has been howling 'wolf' for a good many years.
ReplyDeleteIn any event, his forecasts of dire social upheaval fail to take into effect the inherent tendancy of people to aggregate in a calamity. The craze of individuality that has risen to such heights will fade in the face of crisis. For him to declare that people will do otherwise is pure doomster porn. Disgusting.
Economic confusion and fear are the loathsome twins he lovingly nurtures. The Dow Jones Industrial Index is not now, never has been nor ever will be the United States. The same can be said for our balance of trade with China or any other kind of 'economic measure' you choose to name.
The sun will continue to rise, people will continue to be fed and shelter found for all. You may not ride in your gold-plated SUV to the spa every day but America will continue to function much as it always has.
If oppressive government worries you, vote and let your reps know you are watching. If financial affairs worry you, get your affairs in order the best you can and scorn fear and wild talk of the end of civilization. In the darkest hours people show their best and their worst. Which are you?
It will never drop to 1k. It'll always be kept propped up. As greedy as the rich elite are, they are not stupid. The rich elites use the stock market, so they'll focus their attentions on keeping it running.
ReplyDeleteWealth disparity is only a problem for the non-elites. The stock market will be fine. Half the country could be unemployed that doesn't mean the elites will face any problems, they might have to actually use some of their money in propping up the stock market and lying about how bad things are, but they'd be okay.
The Dow Jones average is not a real indicator of market health. These are the heavy hitters of the business world with high paid lobbyists and an open invitation to White house. Don't be fooled by the NY casino masters. The dow average can go up while the mainstream businesses get slaughtered.
ReplyDeleteYou all miss Pretchers point about 1K DOW. If we continue to have a deflationary environment the Fed money printing or QE will have no effect on the markets.
ReplyDeleteThe DOW was under 1K in the 70's what has truly changed since then till now? Nothing much to me. Maybe movies are more advanced, but thats fiction.
Until we start producing in this country I fully believe the DOW should be 1K.
8:59 said:
ReplyDelete"The sun will continue to rise, people will continue to be fed and shelter found for all. You may not ride in your gold-plated SUV to the spa every day but America will continue to function much as it always has."
American has stopped functioning like it "always has" about three years ago. This year it officially died. Do you not realize this country has been altered about three times before? If you knew what was in the bills Obama just shoved through you wouldn't be joking about how America will continue on.
This country is in a suicide dive off the Grand Canyon, you'd have to be pretty oblivious to think everything is normal. You'll feel the effects of this dive very soon.
DOW can say whatever it wants, the country can be filled with its trash materials and appear like we are wealthy, people can walk around hahaha-ing with some ignorant outlook ("optimistic")... but it isn't going to change reality.
End of civilization? It is possible we could see the end of all centralized orders, or maybe not. The end of America? YES it is.
The once mighty us, has fallen down and it can't get up. We used to be number 1 at almost everything, now we are number one in Homelessness, Welfare, Starting wars and Incarceration! What a great place, we are soon to experience what Mexico and Africa have always experienced!
ReplyDelete