Prechter Calls Dow 1000

Robert Prechter is known for his ultra bearish calls and yes… Dow 1000 would fall into that category (90% drop from our current levels).  In this New York Times article they give a little background on Prechter and there is a bit of a  sense that they are belittling his theories.

But before you write off Prechter I recommend that you read his book “Conquer the Crash”.  The book was published in 2002 originally but the new edition has an extra chunk of chapters that bring the book more up to date with whats going on.

Although his headline comments are pretty wild he makes a lot of sense in the book.  His  argument that instead of an hyper inflationary period we are entering into a deflationary period has been pretty spot on.  He was able to call the real estate collapse in the original book and all the fallout that has resulted.  His theory behind the debt unraveling and the downward spiral involved in the overall rotation from optimism to pessimism is playing out today.  The book also goes into what to do with your investments and even lists the safest banks in every state.

One eye opening chapter is “What to do with your Pension Plan,” where he lays out how the government could “seize” your 401k.  Here’s a few paragraphs,

What is the worst that could happen?  In Argentina, the government continued to spend more than it took in until it went broke trying to pay the interest on its debt.  In December 2001, it seized $2.3 billion dollars worth of deposits in private pension funds to pay its bills.

In the 1930s, the world heard a lot of populist rhetoric about why “rich” people should be plundered for the public good.  It is easy to imagine such talk in the next crisis, directed at requiring wealthy people to forfeit their retirement savings for the good of the nation.

With the retirement setup in the U.S., the government need not be as direct as Argentina’s.  It need merely assert, after a stock market fall decimates many people’s savings, that stocks are too risky to hold for retirement purposes.  Under the guise of protecting you, it could ban stocks and perhaps other investments in tax exempt pension plans and restrict assets to one category “safe” long-term U.S. Treasury bonds.  Then it could raise the penalty of early withdrawal to 100%.  Bingo.  The government will have seized the entire $2 trillion – or whats left of it given a crash – that today is held in government sponsored tax deferred 401k private pension plans.   I’m not saying it will happen, but it could, and wouldn’t you rather have your money safely under your own discretion?

Yeah I know a little crazy right?  But at the same time I get an eerie feeling.  You?

If nothing else from this book you can learn what the “Worst Case Scenario” is.  Whether it happens or not, its always good to know what to look for.  And if you are intrigued to buy the book we put up an Amazon link on the site.

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One Response to “Prechter Calls Dow 1000”

  1. Like his book as well. Its a good book if you ever wondered ” How bad can it get? ” he lays it all out.

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