20 Questions with Robert Prechter: Signs Point to Deflation
by ilene - June 30th, 2010 2:04 pm
20 Questions with Robert Prechter: Signs Point to Deflation
Courtesy of Elliott Wave International
The following article is an excerpt from Elliott Wave International’s free report, 20 Questions With Deflationist Robert Prechter. It has been adapted from Prechter’s June 19 appearance on Jim Puplava’s Financial Sense Newshour. To read the entire conversation, access the 20-page report here.
Jim Puplava: Bob, I want to pick up from last September. Since then we’ve had several quarters of positive economic growth. Asset classes rose substantially, CPI turned positive, gold has hit a new record, oil is close to $80 a barrel. I guess a lot of our listeners would like to know, have these events altered your views on deflation?
Robert Prechter: No, because we forecasted these events, and we forecasted them at the bottom in March and April of 2009. On February 23 in the Elliott Wave Theorist, I said that we were almost at the bottom; that ideally the S&P should get down in the 600s before turning up; and that the Dow was going to rally from that low up to about 10,000. We put that target out a few days after the low. The main thing we said at the time was that it was going to be only a partial retracement, in other words a bear market rally. By the end of it, we said people would be bullish on the economy, there would be positive economic numbers, investors would think we have made the turn, the Fed would take credit for having saved the financial system, and there would be optimism across the board. All of this has happened. And going into April 2010, few people in the fundamentalist or technical camp were looking for a downturn.
The final thing I said was that Obama’s popularity would rise into that peak, and on that one I was wrong. His ratings couldn’t even bounce during that period, which I found very surprising. But both Obama and George Bush’s popularity trends followed the real value of stocks, not the inflated dollar price of the stock market, which I find interesting.
As far as inflation and deflation go, we had deflation during the down cycle in 2008. Commodities fell hard, the stock market fell hard and real estate fell hard. But the recovery that we were looking for in the first quarter of 2009 was expected
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Prechter on Yahoo! Finance: “Even $1 Trillion Can’t Save the Euro, But Gold is No Safe Haven”
by ilene - June 6th, 2010 9:30 pm
Here’s Robert Prechter’s (of Elliott Wave International) latest video.
Prechter on Yahoo! Finance: "Even $1 Trillion Can’t Save the Euro, But Gold is No Safe Haven"
The euro’s recent loss has been the dollar’s gain, which means that it’s not the best time to buy the U.S. dollar. Meanwhile, the most popular alternative to currencies, gold, isn’t such a good buy either. Watch the second excerpt from Robert Prechter’s May 20 interview with Yahoo! Finance Tech Ticker host Aaron Task to hear what Prechter thinks is in store for the U.S. currency and gold.
For more information from Robert Prechter, download a FREE 10-page issue of the Elliott Wave Theorist. It challenges current recovery hype with hard facts, independent analysis, and insightful charts. You’ll find out why the worst is NOT over and what you can do to safeguard your financial future. Hurry! This free offer expires June 7.
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And in case you missed Robert Prechter’s previous Yahoo video (I did), here it is:
"On Schedule for a Very, Very Long Bear Market"
Robert Prechter discussed the recent global sell-off that has sent all major U.S. averages 10% below their 2010 highs with Yahoo! Finance Tech Ticker host Aaron Task on May 20, 2010. Prechter says that the current climate shows that "we’re in a wave of recognition" where the fundamentals are catching up to the technicals and that it’s time to prepare for a "long way down."
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Bigger Than A ’10% Correction’?
by ilene - May 26th, 2010 9:20 pm
Every Big Bear Grew From a Cub
By Elliott Wave International
The famous "10% correction" that market pundits talk about sounds so nice and tidy, so predictable and tolerable. It’s as if this "cute little correction" came neatly wrapped, like an M&M candy character, and smiled at you and your family after you open the box.
If only it were so.
"If all the market ever did on the downside was dip 10% once every two years, then investing would be easier than shooting fish in a barrel. Obviously, this is not the case. The fact is that the stock market’s movements are a fractal. Declines come in widely varying sizes." - The Elliott Wave Theorist, December 2001
There is no way to know in advance whether a particular market downturn will fall 11%, 35% or 89%. Even the Wave Principle only forecasts probabilities-- not certainties. One thing that is certain — every bear market reached a 10% drop before prices fell even further.
And another near-certainty is that too many money managers will use the phrase "buying weakness" when the market falls 10%. On May 7, after the Dow Jones had fallen several hundred points in a few days, two money managers being interviewed side by side said in effect, "Buy." Not a word was said about caution. Not a word was offered about even the possibility of a major trend change in the market.
On the other hand, it was refreshing to hear a representative of a fund family say, "I don’t know why anyone needs to be a hero, and try to catch the bottom."
You may be tempted to jump back in because the market has recently "corrected." Yet consider what EWI’s Short Term Update subscribers read on May 7 — ". . .we would caution that some of history’s largest stock declines have occurred only after stocks were deeply oversold."
Two key features of the Elliott Wave Principle is its ability to establish a price target for the current trend, and a time range.
In his latest Elliott Wave Theorist (a two-part April-May issue), Robert Prechter tells why market participants should look far beyond a mere 10%-15% move in the now-unfolding trend.
Read Part One of Robert Prechter’s Latest Two-Part, April-May Theorists FREE…
The April-May Theorist series entitled "Deadly Bearish Big Picture" reveals a lucid picture for 2010-2016. It’s the flipside of Robert Prechter’s February 2009 Forecast for a ‘Sharp and Scary’ Rally. Click here to download the 10-page part one for FREE now.
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What Does NOT Move Markets? Examining 8 Claims of Market Efficiency
by ilene - March 3rd, 2010 11:58 am
What Does NOT Move Markets? Examining 8 Claims of Market Efficiency
By Susan Walker, courtesy of Elliott Wave International
If everyone says that shocks from outside the financial system — so-called exogenous shocks — can affect it for better or worse, they must be right.
It just sounds so darned logical, right? Economists believe this trope to be true, mainly because they believe that investors are rational thinkers who re-evaluate their positions after every new bit of relevant information turns up.
Beginning to sound slightly impossible? Well, yes.
It turns out that logic is exactly what’s missing from this it-feels-so-right idea of rational reaction to exogenous shocks. Find out what really moves markets — download the free 118-page Independent Investor eBook. You might be surprised to discover that it’s not the Fed or "surprise" news events. Learn more, and download your free ebook here.
Excerpted from Robert Prechter’s February 2010 Elliott Wave Theorist, published Feb. 19, 2010
The Efficient Market Hypothesis (EMH) argues that as new information enters the marketplace, investors revalue stocks accordingly. … In such a world, the market would fluctuate narrowly around equilibrium as minor bits of news about individual companies mostly canceled each other out. Then important events, which would affect the valuation of the market as a whole, would serve as “shocks” causing investors to adjust prices to a new level, reflecting that new information. One would see these reactions in real time, and investigators of market history would face no difficulties in identifying precisely what new information caused the change in prices. …
This is a simple idea and simple to test. But almost no one ever bothers to test it. According to the mindset of conventional economists, no one needs to test it; it just feels right; it must be right. It’s the only model anyone can think of. But socionomists [those who use the Wave Principle to make social predictions] have tested this idea multiple ways. And the result is not pretty for the theories that rely upon it.
The tests that we will examine are not rigorous or statistical. Our time and resources are limited. But in refuting a theory, extreme rigor is unnecessary. If someone says, “All leaves are green,” all one need do is show him a red one to refute the claim. I hope when we are done with our brief survey, you will
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Efficient Market Hypothesis: True “Villain” of the Financial Crisis?
by ilene - August 26th, 2009 1:43 pm
This article discusses Robert Prechter’s view of the Efficient Market Hypothesis. For more from Elliott Wave International, download this free 10-page issue of Robert Prechter’s Elliott Wave Theorist.
Efficient Market Hypothesis: True "Villain" of the Financial Crisis?
By Robert Folsom, courtesy of Elliott Wave International
When a maverick idea becomes vindicated, there’s a good story to tell. It usually involves a person (or small group of people) who courageously challenge the orthodoxy of the day — and, over time, the unorthodox yet better idea prevails.
A "good story" of this sort has surfaced during the current financial crisis. A chapter of the story appeared in a recent New York Times article, "Poking Holes in a Theory on Markets." The theory in question is the efficient market hypothesis (EMH), which the article suggested is so hazardous that it "is more or less responsible for the financial crisis." This quote tells you most of what you need to know:
"In the last decade, the efficient market hypothesis, which had been near dogma since the early 1970s, has taken some serious body blows. First came the rise of the behavioral economists, like Richard H. Thaler at the University of Chicago and Robert J. Shiller at Yale, who convincingly showed that mass psychology, herd behavior and the like can have an enormous effect on stock prices — meaning that perhaps the market isn’t quite so efficient after all. Then came a bit more tangible proof: the dot-com bubble, quickly followed by the housing bubble. Quod erat demonstrandum."
In case your Latin is rusty, Quod erat demonstrandum means "which was to be demonstrated." Its abbreviation (QED) appears at the conclusion of a mathematical proof. In this case, the massive financial bubbles of recent years are the proof that refutes the efficient market hypothesis, which argues that markets move in a "random walk" and are not patterned.
Similar articles in the financial press have reported the demise of the EMH. Just this week an Economist magazine blog included this bold declaration:
"No one has yet produced a version of the EMH which can be tested and fits the evidence. Thus, the EMH must logically be discarded, as a valid hypothesis must be testable."
QED, indeed — I agreed years ago that the random walk was implausible. But I didn’t come to this view because of behavioral economists, although their work…
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The Bounce Is Aging, But The Depression Is Young
by ilene - August 20th, 2009 7:13 pm
The Bounce Is Aging, But The Depression Is Young
Courtesy of Bob Prechter at Elliott Wave International
The following is an excerpt from Robert Prechter’s Elliott Wave Theorist. Elliott Wave International is currently offering Bob’s recent Elliott Wave Theorist, free.
On February 23, EWT called for the S&P to bottom in the 600s and then begin a sharp rally, the biggest since the 2007 high. The S&P bottomed at 667 on March 6. Then the stock market and commodities went almost straight up for three months as the dollar fell.
On March 18, Treasury bonds had their biggest up day ever, thanks to the Fed’s initiating its T-bond buying program. The next day, EWT reiterated our bearish stance on Treasury bonds. T-bond futures declined relentlessly from the previous day’s high at 130-15 to a low of 111-21 on June 11.
That’s when there were indications of impending trend changes. The June 11 issue called for interim tops in stocks, metals and oil and a temporary bottom in the dollar. The Dow topped that day and fell nearly 800 points; silver reversed and fell from $16 to $12.45; gold slid about $90; and oil, which had just doubled, reversed and fell from $73.38 to $58.32. The dollar simultaneously rallied and traced out a triangle for wave 4. Bonds bounced as well. As far as I can tell, our scenarios at all degrees are all on track.
Corrective patterns can be complex, so we should hesitate to be too specific about the shape this bear market rally will take. But from lows on July 8 (intraday) and 10 (close), the stock market may have begun the second phase of advance that will fulfill our ideal scenario for a three-wave (up-down-up) rally. In concert with rising stocks, bonds have started another declining wave, and the dollar appears to have turned down in wave 5 (see chart in the June issue), heading toward its final low. Although commodities should bounce, their wave patterns suggest that many key commodities will fail to make new highs this year in this second and final phase of partial recovery in the overall financial markets.
Meanwhile, our forecast for a change in people’s attitudes to a less pessimistic outlook is proceeding apace. Here are some of the reports evidencing this change:
More than 90 percent of economists predict the recession will end this year. [The]
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Elliott Wave International
by ilene - August 19th, 2009 3:30 pm
Our friends over at Elliott Wave International (EWI) are offering Bob Prechter’s recent 10-page market letter, FREE. It challenges current recovery hype with facts, independent analysis, and insightful charts. In Bob’s view, the worst is NOT over. Learn more.
From EWI: "In this issue, Bob 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. There are but a few opportunities left and little time to take them. Even as this happens, the terrible irony is that so many people believe the conventional wisdom, which claims ‘the worst is over.’"
Go here to download Bob Prechter’s Elliott Wave Theorist now.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.