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Prechter's Latest 27/08/09 On King World News

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http://kingworldnews.com/kingworldnews/Bro...t_Prechter.html

Plenty in there even though it's pitched as a section from his book.

Only for those who see everything turning slowly BLACK. A little waffly but he reinforces the bleak picture.

Gold bugs probably shouldn't listen either...

yep but he continues to be wrong on gold

link

Truth would destroy U.S. economic system, Fed warns…

The U.S. Federal Reserve asked a federal judge not to enforce her order that it reveal the names of the banks that have participated in its emergency lending programs and the sums they received, saying such disclosure would threaten the companies and the economy…

"Immediate release of these documents will cause irreparable harm to these institutions and to the board's ability to effectively manage the current, and any future, financial crisis," the central bank argued.â€

Fed Urges Secrecy for Banks in Bailout Programs Jonathan Stempel, Reuters, August 27, 2009 Via The GATA DISPATCH 8/27/09 www.gata.org

“The Social Security and Medicare Trustees Report for 2009…(shows) Social Security and Medicare have a combined unfunded liability of almost $107 trillion…

The nation can’t pay for Social Security and the health entitlement programs it has now…

Are Members of Congress Out of Touch with Reality?â€

www.dailymail.com, opinion/editorial, 8/21/09

“What is a crying shame is, if they were going to print 10 trillion dollars, they would have done a lot more good rebating it to households, rather than sending it down the black hole of too big to fail institutions. In the hands of consumers, that cash would have trickled up to the larger institutions. As taxpayers, wouldn’t you rather have the money and decide how it is spent, rather than let the Central Planners have it and decide how it is spent? If you decide, we have capitalism. If they decide, we have socialism. What a blown opportunity. If the Central Planners change policy and decide to defend the Dollar rather than let it devalue, interest rates will rise sharply and destroy what is left of this fragile economy.â€

Robert McHugh, August 21, 2009

A key implication, not explicitly stated above, of McHugh’s characterization of the $10 trillion in bailouts and stimulus money going down the “black hole†of “too big to fail†financial institutions is that those bailouts and stimulis did not provide a sustainable “fix†to the economic and financial systemic problems.

Deepcaster mainly agrees with McHugh on this point. Consider for example, the likely state of the Economy when the bailout programs are ending and the stimulus funds have all been depleted and sent down the “black holeâ€. (By the way this “ending†and fund depletion are all coming in the next few months.) What then?

“Then†there is no sign that the U.S. Consumer/Taxpayer/and, often, Mortgage holder – 70% of the U.S. Economy – will be any better off. The bailouts and stimulus have not helped them (i.e. most of us) significantly. Indeed, the unemployment rate is still rising and no pundit or analyst has provided a credible scenario regarding when Unemployment may begin to significantly fall. This means increasing defaults on all sorts of credit obligations from mortgages to credit card debt.

And lest one think the worst is over for the housing market, consider that another huge wave of option resets begins in May, 2010 and will not end until October, 2011. This time the loans held by the already-financially-stressed middle class – the Alt-A’s, and Option-Arms – will be the ones resetting. The consequences for that “Sector†– the middle class Consumer/Taxpayer/and, often, Mortgage holder -- will be disastrous, and will virtually ensure another Major Equities Market Takedown.

Moreover, contrary to Official Statistics, Monetary expansion still continues at a brisk pace with M3 at 5% (shadowstats.com – see below). Downstream, hyperinflation is baked into the cake.

And U.S. and other government debt obligations continue to skyrocket, with the stimulus and bailouts totaling at least the $10 trillion, as McHugh noted, and with downstream unfunded. U.S. government liabilities from social security and Medicare alone totaling over $100 trillion and growing. The money to repay these liabilities will be provided mainly by U.S. Taxpayer borrowing at interest from the private for-profit U.S. Federal Reserve.

Realistically, given their magnitude and rate of increase, these debts can never be repaid without dramatically reducing the purchasing power of the U.S. Dollar over the next few years, a development which will significantly further reduce the wealth of those who hold U.S. dollar-denominated Assets.

As the markets come to acknowledge these Hard Realities, the ongoing Spring and Summer Bear Market Rally will end, and the catastrophic Takedown in the markets and Economy which we earlier forecast will begin. But the Takedown will not be linear, and Timing will be the key to profits and protection. See Deepcaster’s latest Letter and Forecast at www.deepcaster.com and click on ‘Latest Letter’.

It is encouraging, in an ironic sort of way, to know that other thoughtful and experienced writers agree with you, even if the shared vision of the future is a dark one.

Among the very best whom we have long appreciated is Harry Schultz. We take the liberty of quoting from his recent (23 August 09) letter as he articulated several of the conclusions to which we have also come.

Note especially his comments below – “It was a trap…a Ponzi Scheme†referring to The Fed and allied Mega-Bankers (The Cartel* -- see below) easy-credit and monetary policies which “set up†the Market Freeze-up and crash. Yes, Harry, it was indeed “a trap†and a “Ponzi Scheme†one which Deepcaster has long ago identified as one phase of what we started describing a few years back as The Cartel’s* ‘End Game’ (see “Massive Financial-Geopolitical Scheme Not Reported By Big Media†(08/11/06), “Protecting Profits from "Dark Liquidity" & Other Systemic Risks†(4/06/2007) and “Increasing Systemic Risk Portends Cartel 'End Game' Attempt†(03/07/2008) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com). In any event consider the delightful Harry Schultz’s characterization of our current pickle.

“Housing is still the Achilles’ heel of the US…& has yet to have its last word. It will. In the run-up to the Oct 2007 stk mkts peak, the privately-owned US Federal Reserve (under spinner Greenspan) openly encouraged bankers to lend & the public to buy (without creditworth), & provided cheap interest rates. It was a trap, about which more later. Banks resorted to gimmicks, like adjustable rate mortgages (ARMs)-whose i/rates would later reset (like guillotines). Enter subprime. But don’t worry, Greeny snarled, “betting on higher house prices is the safest wager. If U get cash flow probs, when ARMs reset, your casa will be worth a lot more, so U can sell it & walk away with a nice profit.†Uh-huh…

Then bankers got concerned, so they took out insurance via credit default swaps (CDSs), a new invention, letting mortgages be sold and resold til they leveraged 20x over! They became the shakiest part of a huge global derivatives mkt with a nominal value in tens of trillions of $’s. This was a Ponzi scheme, which stalled out as ARMs began resetting, & defaults followed. Then the US economy slid & people were trapped; owed more on homes than could sell for, sent keys to the bank & left town. Wall St mortgage buyers were stuck, stopped buying, & couldn’t sell. Trust & liquidity dried up…

…â€deadly waterâ€, held back by the US Treasury dam, with leaks now visible, & the middle class about to be destroyed…

…Who wins US elections doesn’t matter; same people pull the strings…No banker should be allowed to go into govt jobs…Bills in US Congress to regulate Wall St are quietly neutered, off camera…is the US middle class being targeted? Via buying mega & multiple houses on tricky mortgages & now bearing new healthcare costs, paying both private & govt…Govt bail outs and debt plus sharply deflating the US$, will cause massive inflation. That will push middle class income brackets higher, meaning higher taxes as the $ buying power shrinks…

I predict the world will moderately trend toward deflation for the next 5-6 months, fed by more job cuts, half timers, wage reductions, foreclosures, bankruptcies, & consumers in hiding…

Following that, govt pumping will reverse the tide—or if they can’t, there will be a monetary failure-where fiat money is suddenly shirked in favour of “things†& we’ll begin (in either case) the start of stage one of a major inflation period (food soars, taxes rocket, crime leaps, interest rates leap, strikes dominate) for about 8 months, after which it escalates into a Weimar or Argentinean hyper-inflation lasting for about 10-14 months—that will wipe out the poor, savage the middle class & badly dent the rich. The US$ may be “revised†& gold will rise to multiple of 3-5x. After that a new depression, bigger than others of record. The start of that period will be the most dangerous, in getting out of the over-inflated things before they turn sharply down to the mean…†(emphasis added)

Harry Schultz Life Strategies, 23 Aug 09

The first phase of this Climacteric which both Deepcaster and Schultz forecast will likely begin after the ongoing Bear Market Rally Top approaches. Deepcaster expects to be able to give you a more well defined timeline in our Alerts, as we enter into Fall.

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As far as I can see, it's a time difference, not outcome difference. Prechter is saying deflation for 1-2 years with a strengthening dollar, deepcaster is saying 5-6 months.

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He's been wrong on gold since it was $200 an ounce. Anyone listening to him would have missed out on the entire gold story of the last 10 years.

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Excellent. Thanks for posting AF.

Also from above Deepcaster article:

Following that, govt pumping will reverse the tide—or if they can’t, there will be a monetary failure-where fiat money is suddenly shirked in favour of “things†& we’ll begin (in either case) the start of stage one of a major inflation period (food soars, taxes rocket, crime leaps, interest rates leap, strikes dominate) for about 8 months, after which it escalates into a Weimar or Argentinean hyper-inflation lasting for about 10-14 months—that will wipe out the poor, savage the middle class & badly dent the rich. The US$ may be “revised†& gold will rise to multiple of 3-5x. After that a new depression, bigger than others of record. The start of that period will be the most dangerous, in getting out of the over-inflated things before they turn sharply down to the mean…†(emphasis added)

So, gold may rise to $3000-5000 USD (I guess the goldbugs would claim that most currencies will as a consequence inflate at the same time, but that being the case I'm not entirely sure where the new buyers will come from since currencies are relative, but let's leave that aside) - following which the Deepcaster article says these over-inflated things will turn sharply down to the mean.

So there will be a violent spike, measured in months, where it will be up and down pretty damn fast - If it happens. Preceded by deflation and followed by the biggest depression of all time.

That's some tight window to time to perfection.

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Yeah, I think he's just advised traders to go short again too. If you look for his bloomberg videos on youtube he's been calling the markets perfectly for the last couple of years. In EW terms were just about to get a large degree wave 3 down, which should be like the collapse of the south sea bubble.

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Yeah, I think he's just advised traders to go short again too. If you look for his bloomberg videos on youtube he's been calling the markets perfectly for the last couple of years. In EW terms were just about to get a large degree wave 3 down, which should be like the collapse of the south sea bubble.

yep but its a moving target this time unlike the south sea bubble when they couldn't print more money

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Whether spot on or nearly right, it was fascinating to listen to. Especially the theories on herd mentality.

Recommended!

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In Prechter's 2002 book he advised to buy gold 'because it's cheap now', so it seems he called it right then. As pointed out above he is expecting an imminent second severe downturn in the stock market ala 1929/30 in which case gold would clearly plunge and the dollar soar. We'll soon see if he was right I guess. In fact he's expecting everything to drop for years after and the dollar as pretty much the only thing to rise so having your money there in that event would seem to be the thing to do, as long as it's a very safe bank or US Treasury Bills etc IMHO

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