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9 of 9 people found the following review helpful
5.0 out of 5 stars This book will cause you no financial harm if followed
Let me get this off my chest first: I read every single review here at Amazon before I bought this book and I must say that the negative reviews; or more accurately the nasty ones, lead me to believe that the reviewers did not read the book. I say that because even if Prichter is wrong, and there is no upcoming "Deflationary Depression" and this decade is all blue skies...
Published on Aug. 27 2002 by T. Austin

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4 of 4 people found the following review helpful
2.0 out of 5 stars A poorly argued case, even for market bears.
Mr. Prechter is best known as a popular advocate for the Elliot Wave principle. He continues this school of thought in this book.
The book is divided into two parts. The first part attempts to persuade the reader that the US economy is headed for a deflationary depression. The second part recommends actions to prepare and prosper during a deflationary depression...
Published on May 11 2004 by Orson Wang


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9 of 9 people found the following review helpful
5.0 out of 5 stars This book will cause you no financial harm if followed, Aug. 27 2002
By 
T. Austin (Van Nuys, CA United States) - See all my reviews
(REAL NAME)   
Let me get this off my chest first: I read every single review here at Amazon before I bought this book and I must say that the negative reviews; or more accurately the nasty ones, lead me to believe that the reviewers did not read the book. I say that because even if Prichter is wrong, and there is no upcoming "Deflationary Depression" and this decade is all blue skies just like the late 1990's were, any subsequent readers who followed his advice to the exact letter of the verbage would NOT lose any of their assets whatsoever. Therefore, how could this book do harm? At worst it educates the reader as to how to handle uncertain times. There is no bad or harmful advice in this book.
His advice is basically to pay off your bills, put your money in rock solid banks. Don't rely on the government to protect you, buy some precious metals, and get ready to profit once we are at the rock bottom by way of investment strategies that take advantage of the subsequent inflation post a "Deflationary Depression." What's harmful about being in cash?
Now the review: Prichter is confident that there is going to be a deflationary depression. A period of great contraction in our economy that drives down any and all inflated value out of any goods or services such as the depression the United States suffered through in 1929.
He supports his premise with monetary statistics such as the 30 trillion dollar credit bubble that America now has, and numerous other statistics that aren't that pretty.
Prichter also bases his premise for a "Deflationary Depression" on a controversial charting method known as "The Elliot Wave Theory". It's controversial in that some stock market analysts think it is merely conjecture, while other analysts feel it is an absolute, social, "fractal". (A "Fractal" is defined as a geometric shape that self repeats over and over into a larger shape. This can especially be observed in nature.)
As a result, the Elliot Wave Theory is believed to be an accurate way of charting graphs whereas the viewer trained in this principle can predict where that statistic is going to go based on Elliot Wave analysis. Whether this is nonsense or not, every major brokerage firm has an Elliot Wave analyst.
Prichter teaches the basics of this technique and supports his findings with background statistics such as market volume and breath.
The book is divided into two sections: Why a "Deflationary Depression" is going to happen, and the second part of the book covering how to profit and protect yourself when it does. At the very least this book is an educational exercise as to what to do if a "Deflationary Depression" or bear market occurs.
To repeat, his advice would do no harm if followed even if he is wrong. Challenge any reviewer who says otherwise.
Tony
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4 of 4 people found the following review helpful
2.0 out of 5 stars A poorly argued case, even for market bears., May 11 2004
By 
Orson Wang (Novi, MI) - See all my reviews
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Mr. Prechter is best known as a popular advocate for the Elliot Wave principle. He continues this school of thought in this book.
The book is divided into two parts. The first part attempts to persuade the reader that the US economy is headed for a deflationary depression. The second part recommends actions to prepare and prosper during a deflationary depression. This specific edition of the book also includes an update written in 2004. (The original book was written in 2002.)
First of all, with any investment book review, it is important to understand the reviewer's biases. My belief is that the US will enter some type of unwinding, either through an extended securities bear market, or more severe overall imbalance. I maintain a minor belief in technical analysis but do not rely on it.
Elliot Wave analysis is, at its core, a technical analysis methodology. Elliot Wave claims to find a recurring pattern in short term, long term, and ultra-long term market price charts. What is gravely missing, however, is some sort of explanation or justification for its supposed utility. Many schools of technical analysis, for example, give plausible explanations for why "resistance levels" exist based on market or individual investor psychology. This is completely missing from Mr. Prechter's writings and thus he fails to distinguish himself from a long line of failed data miners.
This missing and crucial "why" is the most glaring hole in this book. While other writers attempt to prove a thesis through a chain of reasoning and supporting data, Mr. Prechter skips steps in his thesis. The holes are not glaring to a casual reader, but a person with some breadth in economic knowledge will easily spot large omissions.
For example, even if you accept the disjointed framework of technical and fundamental analysis, the fundamental arguments for deflation are seriously flawed. Note, also, that Elliot Wave principles claim only to predict the performance of securities. Thus, Elliot Wave is agnostic with respect to the inflation vs. deflation debate. Therefore, Mr. Prechter's arguments for deflation are purely fundamental in basis. This is where his loose foundation really comes apart. His understanding of the Federal Reserve functions are contrary to those written by many other writers and scholars, including many who share similar contempt for the Federal Reserve. This is rather crucial, because the specific authorities and obligations of the Federal Reserve can determine whether a presumed economic failure results in deflation or hyper-inflation. Convincing cases for deflation have been made, but Mr. Prechter does not offer one.
Where many market bears thoroughly argue and carefully build their conclusions, Mr. Prechter glosses over far too many details to arrive at this deflation conclusion and blatantly ignores examples that contradict his thesis. He uses the US depression of 1929 as his sole argument that monetary policy is powerless to prevent deflation, forgetting that Federal Reserve authority was much lesser back then. Meanwhile, he ignores the numerous historical hyper-inflation examples caused by monetarism, such as 1970's US "stagflation", the recent collapses of Argentinean and Mexican currency, or even popular historical cases such as the South Sea Company bubble and post World War One Germany. Mr. Prechter is either grossly ignorant or deliberately avoiding such cases. Neither speaks well for him.
Most importantly, he sets up his own case of why he is wrong. He admits that there is a small probability that he could be wrong and that hyper-inflation will set in. Mr. Prechter says that this would be indicated by a declining US dollar and a price of gold reaching above $400 per ounce. Both are now clearly true, yet in his 50-page 2004 appendix, he conveniently ignores this fact and chooses to emphasize only his market index prognostication.
The rest of his fundamental case rests on material already beaten to death by other bearish scholars. He writes about historical price to earnings ratios, the contrarian indications given by popular finance magazines and long-to-short ratios, for example. His fundamental arguments are not thoroughly presented and escape ridicule only because others have argued the case before him. He adds nothing new here.
Since the first part of the book is so poorly supported, the second part regarding how to survive a depression is irrelevant. His recommendations generally apply only to deflation and would not work in a hyper-inflation or zero-inflation economy.
When one supports an already argued case, the burden of proof is small. However, if one dares to present a different case as Mr. Prechter has done, one needs to cover all well known and reasonably applicable cases at a minimum. Mr. Prechter has failed in this regard and by his own criteria.
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2 of 2 people found the following review helpful
5.0 out of 5 stars Something wicked this way comes, Feb. 18 2004
By 
Thomas Mongle (Houston) - See all my reviews
(REAL NAME)   
Robert Prechter is expecting a devastating dose of deflation leading to a depression, and no collective body (read "government") can do anything about it. He is one of the "old-timers" who has survived the market's up and downs for more than 20 years, and his outlook on our situation is not to be taken lightly. Being high profile, his pronouncements make headlines, and it's all too easy to point to a previous mistake and write him off. However, his scholarship is second to none. He's been right in the past; he just may be right again. And if he is, most of us are in real trouble. Thus, his argument is too important to dismiss without a thorough reading.
Prechter starts with a good overview of his pride and joy, and the basis of all his study - The Elliott Wave Theory. His conclusion is that we are at the end of the 5th wave of the Grand Supercycle which reaches all the way back to 1700. We're talking big-time financial implications here.
To quote Prechter on describing the milieu we've just lived through, "Third waves are built upon muscle and brain. Fifth waves are built upon cleverness and dreams. During third waves, people focus on production to get rich. During fifth waves, they focus on finance to get rich." Sounds remotely familiar.
At the bottom of all our troubles is debt. Gobs and gobs of debt, piled as high as the eye can see. Deflation/depression results in a contraction of credit as debt gradually gets wiped out...one way or the other. It produces a line of falling dominos where less credit means less borrowing means less spending means less production means less employment...which means more liquidations which means more defaults as everything feeds on the downward spiral.
Prechter blames some of this on The Depository Institutions Deregulation and Money Control Act of 1980 which gave the Fed authority to monetize any government agency's (any government anywhere) debt. That power was recently noted in a speech on 21 Nov 02 at the National Economist's Club in DC by Fed governor Bernanke who said, "But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost." Clearly, Greenspan & Co. don't plan to sit around while deflation envelopes us. Yet, Prechter contends that the Fed's action to drive rates downward, in addition to continually reliquefying the economy via debt, also participated in the initial phase of the deflationary process.
One of Prechter's most fascinating contributions on which he's written several books ("The Wave Principle of Human Social Behavior and the New Science of Socionomics," "Pioneering Studies in Socionomics," and "Socionomics: The Science of History and Social Prediction"), is that stock market crashes produce depressions and stock market booms produce eras of optimism and economic expansion. Not the other way around. The stock market is a discounting mechanism, leading the economy, not following it. He, correctly, I believe, perceives that stock market values are a function of investor (and public) psychology. When we feel good about ourselves, we bid prices up as is evidenced by expanding PEs. When we are down on ourselves, we sell stocks down to rock bottom prices, again evidenced by low PEs. Therefore, he measures the health of the whole system based on the health of the stock market. And that, he shows us, is in very bad condition - internally weak and grossly overpriced. He even puts a potential number at where the Dow Jones Industrial Average could eventually bottom out...all the way down to 777!
From the stock market, Prechter continues on to the economy, where debt, liquidity, GDP, production, unemployment, trade and budget deficits, etc. are all laid out for investigation, and the picture is one of weakness compared with the economic cycles that have preceded our current era. It is the portrayal of a gradually slowing economy.
All of this foreboding coincides with the Kondratieff Wave (Kondratieff Winter), producing this perfect storm of financial upheaval that's just around the corner.
After laying out why things are going to hell in a hand basket, Prechter proceeds to recommend a way out for the individual investor. He summarizes a list of investment precautions to take to protect yourself from potential calamity by surveying the various asset classes available to us today.
Bonds - Risky. AAA are safest but ultimately depend on ability to service debt.
Real Estate: Lack of liquidity. Prices will collapse with everything else.
Collectibles: Coins, maybe.
Stay away from commodities except gold and silver after they bottom out.
Money market funds are suspect.
Stocks: Only inverse index funds or going short.
Cash: All assets go down in deflation except cash. Short-term Treasuries. Outside US - hold bonds and notes of strong foreign entities. Protect against hyperinflation.
If you listen to Precheter, you will, as he cautions, not be any worse off if it doesn't happen as he predicts. But if he is right, then, at the bottom, you will be in perfect shape to buy stocks, real estate, etc. at bargain basement once-in-a-lifetime prices.
The book tells you why and how disaster could happen, with a lot of evidence on its side. Will it happen? No one knows how it will play out, but Prechter has done his best to ready you for the worst. Perhaps all we're waiting for is the last straw to break the camel's back, Precheter's "The Tipping Point."
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7 of 8 people found the following review helpful
2.0 out of 5 stars Apparently disgraced market gurus don�t just fade away�., Aug. 7 2002
By 
David J. Gannon (San Antonio, TX USA) - See all my reviews
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Robert Prechter, Jr. was to the 1980's what Abby Joseph Cohen was to the 1990's-the market guru with the golden touch and the fanatical following.
I was in investment banking from 1977 through 1987 and Prechter was everywhere. His newsletter was the equivalent of "required reading". He was quoted extensively. He could-and did-move markets.
He achieved his status through dogged, unabashed bullishness in the very early 80's and burnished his reputation further by correctly calling the top of the market cycle in mid 1986. That's when the Midas touch deserted him-he hasn't been close to a correct call on the market since, having converted to a "doom and gloom" analyst and being a dogged bear throughout the 1990's. His last book predicted this bear market-a bit early.
Well, way early. At the Crest of the Tidal Wave: A Forecast for the Great Bear Market was written in 1995. He missed the mark by 7 years and a few trillion in market value but hey, whose counting?
Apparently not the people buying Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, Prechter's attempt to exploit his bearish credentials of the past decade and a half to reestablish his status as market guru extraordinaire (Ms. Cohen, having blown several major calls lately, has left the title open for the moment for the taking).
So, is Prechter back? Is this the book that will keep you in the lead financially and save your fiscal bacon?
Probably not.
First of all, the likelihood we are entering a "depression" is highly doubtful. The unemployment rate-normally the preeminent statistic for judging downturns and depressions-has averaged about 5.5% during the recession we now "enjoy" By way of perspective, in the 1980's 5% unemployment was considered "full" employment. The 1990's changed that perception drastically, but that doesn't change history, which shows the "normal" level of unemployment in the recessions of the last century averaged around 8.5% and the average unemployment levels of the Great Depression hovered around 30%.
Moreover, the Fed is expanding the money supply at an ample rate and gives every indication of being positioned to do whatever is needed to avoid a deflationary spiral. Check out the inflation numbers for the past 24months. Inflation at the wholesale level is up about % overall and retail inflation is up about 1%. The absence of inflation is not the same as deflation folks. We are not in a deflationary economy, we are in a disinflationary economy (that is, the rate inflation has decreased markedly-but not disappeared altogether.)
Having said all that, there are a few basic points of useful information in the book. You don't have to be in a depression for a bear market to hurt a lot. Cash is King right now. Until the market hits bottom (look for the 60 day moving average of the S&P to have moved 5% above its trough), being in stocks is overly risky. Bonds are out. Rates are at historic lows, so returns are lousy and, moreover, bond yields long term have no where to go but up, so investments in bonds made now will depreciate over time (bond prices fall as rates rise).
Historically, a recession in post war America lasts about two years insofar as getting the statistics (such as the previously mentioned 60 day moving average on the S&P) back into a positive groove for equity investments. So the best advice is to hold your fire, hold cash or cash equivalents, and get back to investing sensibly early next year.
Byu which time, I predict, Mr. Prechter will have once again faded into the netherworld disgraced market guru's inhabit.
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1 of 1 people found the following review helpful
5.0 out of 5 stars Dead Accuracy, Oct. 10 2002
What Prechter has been predicting is rolling out before our very eyes. This book provides the reasons Prechter believes that the crash of the 30's was a walk in the park compared to what we will live through. In particular, he examines an area that not one in 10,000 of us understands according to Prechter. That's the role of the Fed in creating the most enormous credit bubble in world history. The changes our Congress made in the 90's gave the Fed the power to create virtually unlimited credit expansion and to monetize the debt of agencies and organizations on recommendation of the President. All this is why nobody talks about "printing" money anymore. The Fed just issues check books now.
Prechter believes that our social mood determines the fate of our markets. Knowing that, one can watch this whole economic disaster unroll and understand why.
You will miss a valuable education and new insights into the world of economics that may save your skin, if you miss this book.
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1 of 1 people found the following review helpful
5.0 out of 5 stars Great book, especially for banking system insights, Dec 4 2003
By 
H. E. Yang (New York, NY United States) - See all my reviews
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First, obviously Prechter has been very wrong this year, not just on his predictions about the stock market but also his bearish views on gold. This is true both for this book and his newsletter. Still, this book is terrific, and offers valuable insight into how our fiat currency and banking system actually works. Prechter also presents good historical background on what happened during past crashes, and his social commentary is always fun to read. I'm not that keen on Elliott Wave theory, so I mostly glossed over those parts. There are also very practical advice on where to buy gold, bonds, etc., which would be useful to novices.
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3.0 out of 5 stars SOME USEFUL INFO, BUT NOTHING EARTH SHATTERING, March 26 2004
By 
Rocco A. Savaiano (Chicago, USA) - See all my reviews
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If you take anything at all from this book, it should be that the only way to stay afloat in the financial world is to spend wisely, save at least 10-15% of your income each year, and diversify your investment portfolio with alternative asset classes like gold & commodities. When I say diversify, I mean that a 60/40 stock/bond portfolio won't do it anymore. I have read similar views from Harry Browne's "Fail-Safe Investing" and from fund managers such as David Tice of the Prudent Bear Funds. They all have been successful for years, and stress that with the falling dollar, one needs exposure to non-dollar-denominated securities and hard assets. I'm not convinced that the U.S., the engine of growth in the world is going into depression. That would have to be brought on by foreign sellers of U.S. bonds, and what would the alternative safe-haven be? EURO, Gold, a basket of currencies? Don't bet on it if you really think that our trading partners would stick a knife in us, the largest consumer market in the world. Besides, don't believe everything that the author says. We all know that trying to predict the future is an exercise in futlity and is akin to gambling....then again, so is playing the markets. Just be smart about it and do your research first before making investment decisions.
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4.0 out of 5 stars A tremendous education in finance most Phd,s dont have!, Feb. 17 2004
By 
Marc (Florida,USA) - See all my reviews
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If you read the 1st paragraph of the October 23rd review, I would agree 100% with what he said about this book. I am so impressed with Bob Prechters knowledge, that I put him as an affiliate on my site:momsonlinestocks.com That said, Bobs, forecasts have not quite come true of yet and many reviewers bash him for it. However, when you see how convincing his arguements are for a worldwide financial collapse and if you just take 2 of the many arguments he presents, you will start to shiver. #1-He says that stocks traded at only 6x earnings after the 29 crash. (THEY ARE AROUND 36X THAT NOW ON THE S&P AND OFTEN 50X THAT ON THE NAZ!) #2-He offers a trememndous argument for our US dollar which "used" to be backed by gold, as now worth practically nothing, and only derivitives, leverage and pyramid type schemes by the treasury and most banks keep this secret hidden. But for how long!? Because of this book alone, I have become an absolute Elliot Wave fanatic and as a pro trader hope to polish my skills enough to offer my services to private investors and possibly institutions and mutual funds. Thank you Bob for the new hobby! I can't stop talking about Elliot Wave analysis.It is addicting. Read his other book ELLIOT WAVE PRINCIPLE to find out about the other half of this books reasonings. I would be delighted to hear from anyone here to get feedback and also to possibly form a club on elliot Wave Theory or the info in this book. My only knock on the book is that it may scare people into thinking they will need to run away from civilization and go live in the woods if his predictions finally come true. Worth a read, true or not. This book will give you more slants on the economy than any CNN reporter you listen to.
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4.0 out of 5 stars The Coming Storm, Dec 2 2003
By 
C. F Higgins (Warrenville, Illinois United States) - See all my reviews
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Robert Prechter is basically a behavioral economist who believes in the inefficient market theory that irrational bubbles can, and will, form in the market place. Not merely in the stock market, but also in real estate and commodities markets. His method involves the use of Elliott Wave Theory, a forcasting tool which primarily looks at investor sentiment.
Prechter predicts a period of severe deflation. With interest rates at a historical low (not merely in the US, but also in places like Japan where the rate is zero), the Fed lacks power to inject additional liquidity into the economy in order to keep the GDP growing and the stock market propped up. Excess capacity and massive amounts of consumer and corporate debt have brought us to the brink of economic catastrophe.
But I'm not entirely convinced that deflation will be our end-game. With the orgy of government spending, the fall of the dollar, and excess liquidity, I think a sharp spike in inflation looks imminent. Nevertheless, if I look around, I see Prechter's fears manifesting themselves; people taking out home equity loans to invest in the stock market and pay off credit cards, 5 Blockbuster video stores within 3 square miles, zero percent financing on cars...
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4.0 out of 5 stars Prechter's conclusion probably right, but timing is wrong, Oct. 21 2003
By A Customer
First, I have been reading Robert Prechter since the early 90s, and he certainly makes a persuasive argument with his Elliot Wave analaysis. Problem is, he has been wrong on shorter time frame swings many times during the 90s, so it comes down to the reader to make up his own mind. To dismiss him as a "gloom-n-doomer" is ignorant and silly, yet to blindly follow him is also naive. The truth is probably somewhere in the middle. His 1995 book "At the Crest of the Tidal Wave" made a much more persuasive argument for an inevitable severe market downturn and subsequent depression. This follow-up 1992 book, "Conquer the Crash", was probably intended for the masses who ignored his earlier work. His 1995 book was SO persuasive that I missed the 1995-2000 bull market because I was convinced that Prechter could also time the market. He can't. And yet I still am convinced that most of his conclusions are correct. (The jury is still out on the severity of it.) Look around, after you take your blinders off: Good-paying jobs are leaving the U.S. for India, China etc. The US government has to adjust the unemployment figures by removing from it those who have given up looking for work. And many of those who do find work are taking 30-50% pay cuts. Consumer debt (mortgages, home equity, credit cards) are rising and rising. State, local and federal government debt is still rising. Corporate debt continues to rise. The dollar is dropping in value. Corporations' liabilities (health care and pensions) are rising and rising. Government liabilities (social security and Medicare) are still rising. How will this all play out? Who and how will debt be paid? Even Harry Dent, in his popular 1992 book "The Great Boom Ahead", and his follow-up "The Roaring 2000s" predicts the "Mother of all Depressions" to arrive around 2010, when the baby boomer's spending spree winds down, and they begin retiring. So think about it, the eternal pessimist Robert Prechter and the eternal optimist Harry Dent BOTH AGREE on the inevitable arrival of an economic depression. They only disagree on the timing. So somewhere between now (2003-2004) and 2010 the U.S. and the world will fall into the consequences of their multi-decade debt build-up and the demographics of an aging population and a blind government. The long-awaited depression will arrive. Argument settled.
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