Customer Reviews

Conquer the Crash - You Can Survive and Prosper in a Deflationary Depression

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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.

As a stock analyst by trade with a degree in Finance, I can honestly say that Prechter's book is not worth the paper it's printed on. This book is typical of the gloom and doom books that get written during every economic downturn and then utterly forgotten about whenever the cycle changes. There were dozens of these written in the early 1990's slowdown.

The Elliot Wave Principle, like every other market-predicting tool, is generally useless. You might as well use astrology, it's about as accurate. Bottom line: If there's a way to predict the market, neither I (or anyone else) is going to reveal the secret.

Yes, to the shock and horror of those Americans who were taken in by the greed of the 1990's, markets do indeed go down. To quote a popular wall street phrase, 'Bulls and Bears make money, but the Pigs will always get slaughtered'. Each successive downturn in our history has become less and less severe as government and industry work on minimizing the effects of the problem. However, for those of you who belive the glass is always half empty, you may as well head for the hills, hide under your bed, get out your radiation suit and buy lots of gold. The rest of us will be quietly continuing to work on getting rich slowly through prudent risk-taking and careful investing.

Robert is a very glib person who the press understands and consequently they adore him.
How can one descibe The Federal Reserve System in a a few simple chapters when the world's leading econmists can't even predict interest rates ?
The Fed is more powerful than he thinks.
He is using scare tactics more than common sense.
The only truth or solid fact is that an investor can purchase 90 day US Treasury bills and keep rolling them over.
In 1960 TREASURY BILLS YIELDED .50% and in 1932 at one point they had a negavtive yield because the buyer was sure he could redeem the bills at par value.($1000) at maturity.
Save your money and find an honest banker or broker who charges a fair rate. ( $50 -$75). Cheerio!!!

In straightforward language, free of typical Wall Street econo-babble, Bob Prechter builds a bullet-proof case that a deflationary depression of historic proportion is underway. It will devastate the wealth of those who do not read this book and heed its advice. Bob Prechter calmly and rationally lays out the many options a prudent investor should follow at this juncture.

"Conquer the Crash" could save your financial future. The modest price of this must-read book is a true investment in your financial future. For less than the commission you paid to your broker on your last stock trade, you will learn how to secure your family's financial future.

If you need to protect your portfolio or even if you just need to sleep well at night, you owe it to yourself to buy and read this essential book.

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

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.

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.

I read this book back in 2003. Prechter talks about the extreme debt build up in the United States. The housing bubble and the problems with Fannie Mae are also discussed. In fact almost all the events taking place in the October 2008 Credit Crisis, are mentioned in the book. Prechter also does a good job explaining how crowd behavior and emotions, influence financial markets.
If you are a libertarian type, you will tend to agree with most of Prechter`s free market ideas. This book is a lot more timely in 2008.

Prophets of doom have always made entertaining reading. In his latest fire-and-brimstone warning, Robert R. Prechter, Jr., an experienced forecaster of long-term economic and social trends, says financial Armageddon is just around the corner. While his technical analysis ("Wave Theory") may appear to be stock-market astrology, readers may appreciate his examination of the basic functions of money and credit, his argument that worldwide central banking has fundamentally altered these functions, and his perceptive comparisons of the late 1990s with the Roaring Twenties. Prechter might have appealed to a broader audience by toning down his graphs and technical talk, and focusing instead on his investment suggestions: If the market turns down, you'll save your skin, but even in a bull market, keeping your money safe can't hurt. We recommend this book to anyone looking for bear-market investment advice, as well as those interested in technical analysis or an opinionated view of business and market cycles.

People don't like being told there isn't such thing as a free lunch - especially when that's how they eat every day.

Fundamentally, behind the volumes of graphs and several weak attempts to link the sun, moon and stars to Elliot Wave Theory, that is the very important and practical lesson of Conquer the Crash. Free lunches eventually catch up to all of us - especially in an economic system that Precther argues is addicted to them. No book I've read touches on the variety of levels of this premise in a timely, relevant economic context as well as Precther. He's not perfect, but his certainly is a compelling argument if you decide to be open minded enough to consider the potential that all too often ends up being 20/20 hindsight: The Emperor may not wearing any clothes.

As for those who criticize Prechter as a crank or a broken clock that is right twice a day, keep in mind that the prevailing wisdom among academic economists, Wall Street, much of politics and government - e.g. the power structure - believes it is prudent to have leveraged our economic system exponentially based on the economic wisdom and theories of this guy:

"We will not have any more crashes in our time"

---- John Maynard Keynes, 1927

Maybe Precther is right, maybe he is wrong. Time will tell. Read the book. Make an educated decision for yourself instead of relying on ... T.V. or in a magazine. By all means, ignore most economics professors -- they are usually thinly veiled socialists.