Posted on September 16, 2006
Filed Under Uncategorized |
by the stranger
The interviews I’ve read lately with Prechter seemed ambiguous, evasive, or both. Is he on the spot or under the gun? It’s hard to figure. But Prechter and Elliott Wave International charts are excellent none the less.
Opening one of his books again, Conquer the Crash, I’m reminded how great it is; this is a must-have book. That book is near the trail head for me. It introduced me to the Grand Super Cycle and led me to Kondratieff, Long Wave Cycles. Prechter’s opus is refining Elliott’s work and Wave Theory’s most important contribution, I think, is the big picture going forward.
The more I read, of various authors, the more convinced I am that deflation is inevitable. I’m also convinced hyperinflation is probable too; much debate concerns either, or. History provides us with America’s Great Depression, Germany’s Weimar Republic, John Law, Tulip Mania plus every other delusion and madness of crowds. But they’re just fractured rear-view insights with no clear view ahead. Throw in wave theory and at least we can plot a course.
Often quoted by Prechter and others is, cash is king in a depression. Numerous precedents support the adage, but situations vary so caution is critical. In the 1930s the Federal Reserve Note was in its infancy, it may now be near its death. Less notes - greater value; perhaps, but not when repudiated. Quantity of money is just one of the puzzle pieces this time around. No matter what though, a FRN should be useful paying down FRN debt.
Now maybe its just semantics, but a question I often have is the context or definition of cash. Historically in America, albeit off-and-on, cash has been hard-cash or backed by same.
In Conquer the Crash Chapter-33, gold and silver are listed separate from cash. But, in chapter-18 “Should you Invest in Cash” - under “The Safest Cash Equivalents Inside the US” Prechter states, “…Treasury bills or money market funds that hold only short-term US Treasury debt appear to be the best financial haven available next to bullion-type gold and silver coins.” And a few paragraphs later, “A federal government default is not impossible.”
The only significant problem I have with Prechter is his refusal to acknowledge that government intervention affects markets. He disregards the manipulation of gold and this is important. The manipulation of gold is not only well documented; it directly affects the final crash Prechter himself forecasts. Controlling the price of gold, combined with the globalization of Federal Reserve currency, may have postponed the crash by decades; and Prechter’s been early by decades.
In Prechter’s defense though, regarding gold, Conquer the Crash Chapter-22 begins with
“Precious metals are likely one day to become the most important asset class to own.” He further states… “You might be surprised to find that I advocate holding a healthy amount of gold and silver anyway. There are several reasons for this stance:
, it could be different this time, for some reason I can’t foresee. In a world of fiat currencies, prudence demands hedging against a rush to tangible money.
, these metals should perform well on a relative basis compared to most other investments…
, …it may not be prudent to try and finesse the final months.
, the metals should soar once the period of deflation is over…
and foremost, if you buy gold and silver now you’ll have it. If investors worldwide begin to panic into hard assets…”
Conquer the Crash is loaded with practical information on how to protect your money; and it gets smarter every time I read it. Note that, “What Makes Deflation Likely Today” is Chapter-11. And the chapter “Should You Invest in Precious Metals?” - that’s twenty-two, if you catch my drift. Overall, Prechter’s forecast is an ominous message and worth deciphering; just a matter of cracking the Prechter Code.