Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression [Hardcover]

Robert R. Prechter Jr. (Author)

Book Description

Publication Date: June 21, 2002 | Series: Wiley Trading

This New York Times and Wall Street Journal business best-seller first presents the economic facts that show why a massive deflation is not just inevitable, it's already under way. The second part of Conquer the Crash is practical - virtually each of the 21 chapter titles explains How To, What To and you Should.

Amazon.com Review
In Conquer the Crash, Robert Prechter explains why he thinks the boom times are behind us. Based on his interpretation of the Elliott Wave principle (an idea premised on the notion that mass investor psychology is what really drives markets), Prechter believes that the U.S. economy is about to enter into a deflationary depression that few investors are prepared to deal with. In making his case, Prechter assembles an impressive array of data that in essence suggests that the bill for the last 10 years of market excess is about to come due. The second half of the book shows how to avoid becoming "a zombie-eyed victim of the depression" and offers advice on protecting one's assets in a deflationary environment (cash is king). If there's any good news in the future that Prechter sees coming (other than how to avoid it), it's that all-out depressions don't last very long. Conquer the Crash should appeal to gloom-and-doom investors and to those desperately looking for a safe haven from the uncertainties of today's markets. --Harry C. Edwards

Review

"So why bother paying Prechter any mind at all?...he's more right than Wall Street's Establishment usually admits." -- BusinessWeek, July 22, 2002

Editorial Reviews

Review

"…A must read especially for the discerning investor…" (Malaysian Business, 16 November 2003) --This text refers to an out of print or unavailable edition of this title.

From the Inside Flap

If you did not read Robert Prechter's At the Crest of the Tidal Wave (1995), you might have become the victim of any one of a dozen financial debacles. You might have held junk bonds, which have been collapsing ever since. You might have invested in commodities, which have fallen to new lows. You might have slaved over a demanding job that paid you in stock options that are now worthless. You might have speculated in Internet stocks, which went bust. If you are a vendor, you might have sold equipment to dot-com companies for I.O.U.s that were never paid. If you live in Argentina, you might have kept your money in a local bank and one day awakened broke. If you worked for Enron, you might have watched every nickel of your retirement savings evaporate. If you own a business, you might have let economists convince you that no recession was possible just before the economy contracted and slammed you up against the wall. Maybe for you, it's too late.

But for most people, this book is timely. It is being published at another peak in social optimism, with the stock market rallying, the Dow back above 10,000, economists unanimously bullish and commentators assuring us that the recession is over. If you think that all is well and your finances are safe, read this book before it's too late for you.

See all Editorial Reviews

Product Details

• Hardcover: 278 pages
• Publisher: John Wiley & Sons; 1 edition (June 21, 2002)
• Language: English
• ISBN-10: 0470849827
• ISBN-13: 978-0470849828
• Product Dimensions: 9.7 x 6.2 x 1 inches
• Shipping Weight: 1.4 pounds
• Average Customer Review: 3.8 out of 5 stars  See all reviews (143 customer reviews)
• Amazon Best Sellers Rank: #750,000 in Books (See Top 100 in Books)

More About the Author

For Robert Prechter's full biography, please visit www.robertprechter.com.

Robert R. Prechter, Jr., is a financial and social theorist and a market analyst. He has written 14 books. Elliott Wave Principle with A.J. Frost (1978) forecasted the great bull market of the 1980s and 1990s. Conquer the Crash (2002, 2009), a New York Times bestseller, predicted the current global financial crisis in detail. Prechter's two-book set Socionomics (2003) shows how his social and financial theories weave together with his market forecasting approach: Waves of group mood determine the tenor of society's actions, from more inward, dark, bearish expressions to more outward, sunnier and bullish endeavors. Prechter's newest website, www.socionomics.net, explains his socionomics hypothesis and how it applies to various human arenas.
Prechter has dedicated much of his career to employing and enhancing R. N. Elliott's financial pricing model called the Wave Principle. He began his career as a Technical Market Specialist with the Merrill Lynch Market Analysis Department. Prechter is President of Elliott Wave International, the world's largest market forecasting firm. EWI serves institutional and private investors around the world.

Financial Theory
Prechter's theory of financial causality proposes a separation between finance and economics. In the economic realm, goods and services have utility value and mostly are priced rationally via the Law of Supply and Demand. This leads to rough equilibrium. In the financial realm, investments are priced non-rationally, with changes fueled by uncertain future demand and according to the Law of Patterned Herding. This approach generates speculation and unceasing dynamism. Only once the analyst recognizes this divergence can he properly view financial pricing, Prechter asserts.

Socionomics
Prechter's theory of socionomics says that trends and events across a broad spectrum of human interaction are impelled by a common immutable force: social mood. With its claim that mood impels action and events, socionomics is unique; most social theories posit the reverse.
The Wave Principle
As a market analyst, Prechter applies the Wave Principle, a financial pricing model identified and described by Ralph Nelson Elliott in the 1930s. According to this model, financial market prices develop in a series of five- and three-wave forms and produce a fractal. Prechter has written and/or edited a dozen books on the Wave Principle. Prechter began applying the Wave Principle to financial markets in 1972. Prechter's firm, Elliott Wave International, analyzes every major financial market in the world, 24 hours a day, according to the Wave Principle.

Awards
Using the Wave Principle, Prechter won the U.S. Trading Championship in 1984 with a then-record 444% return in four months in a monitored, real-money options trading account. Prechter has won numerous speaking, timing and publishing awards, and in 1989, he was named "Guru of the Decade" by the Financial News Network (now CNBC). In 1999, Prechter received the Canadian Society of Technical Analysts' first annual A.J. Frost Memorial Award for Outstanding Contribution to the Development of Technical Analysis. In 2003, Traders Library granted him its Hall of Fame award.

Miscellaneous
Prechter was born in 1949. He attended Yale University on a full scholarship. In 1979, Prechter founded Elliott Wave International and began publishing monthly market analysis under the masthead, The Elliott Wave Theorist. He was a nine-year member the Market Technicians Association's board and was the MTA's President in 1990-1991. Prechter employs a staff of analysts who apply the Wave Principle, real-time, to every major market in the world. He recently created the Socionomics Institute, which elucidates socionomics, and he underwrites the Socionomics Foundation, which is dedicated to supporting socionomics-related academic research. Elliott Wave Principle has been translated into a dozen languages, and Conquer the Crash was a New York Times bestseller. Prechter has made multiple speeches and media appearances around the globe. In 2008, the Georgia state legislature asked Prechter to testify before the legislature's Joint Economic Committee regarding the developing real estate crisis. Bob is a member of the Triple Nine Society, the Shakespeare Oxford Society and the Shakespeare Fellowship.

Customer Reviews

Most Helpful Customer Reviews

148 of 151 people found the following review helpful:

3.0 out of 5 stars Provocative Viewpoint on the Market and the Economy, August 18, 2002

By 

L. Masonson (Monroe, New York USA) - See all my reviews
(REAL NAME)   

This review is from: Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression (Hardcover)

Robert Prechter Jr. is well-known in stock market circles for his Elliott Wave predictions over the years have had their success and failures. This is Prechters third and latest book (At the Crest of the Tidal Wave (1995) and The Elliott Wave Principle (1978)). His current book is really two books in one printed on different colored paper! Even if you do not agree with Prechters view of the world, you should certainly understand his arguments and make your own decisions.

Part I (135 pp.) focuses on why he believes a stock market crash will occur in the near term, as well why deflation and economic depression are high probability scenarios. Although deflation and depression are rare occurrences, Prechter believes that they are at the brink. His goal is writing the book is to provide insight into defining both events and make you believe that they can happen, and eventually make you believe that they are likely to happen.

Prechter compares the period 1942-1966 (called Wave III) with the economic expansion of 1974-2000 (Wave V). He points out that the most recent period had much weaker economic fundamentals and performance than the prior period, although by stock market standards Wave V had an increase of 1930% on the DJIA compared to 971% during Wave III. In his analysis he provides comprehensive statistics on GDP, Industrial Production, Capacity Utilization, Unemployment rate, households liquid assets, federal and consumer debt, prime rate, federal budget deficit, personal savings among others. Prechter then defines depression and its relationship to the stock market. One of his key observations is that major stock market declines lead directly to depressions.

Prechter depicts the five waves evident in the stock market using four charts. He points out that the five-wave pattern occurs even taking into account major news events such as Hitlers rise to power and the end of the Vietnam war. Prechter provides four signs of a market top and explains the Elliott Wave characteristics of each of the five waves.

Prechter presents his case for the existing stock market precarious situation (as of March 2002) by covering Wave V in great detail. He spends considerable time examining the fifth wave from 1974 to 2000 compared to previous waves. The case for the historically high stock evaluation is made by focusing on the low dividend yield, outrageously high book value, and high P/E ratio. Prechter then covers how psychology plays a major role in a stock market advance and decline. He reviews the psychology of he economists, brokerage strategists, money managers, public, and the media.

Prechter believes that the upcoming bear market will be the most devastating since the great depression and perhaps since 1720-1784. If this occurs, he indicates that the U.S. will experience another depression. He forecasts that the DJI will plummet to 777, the August 1982 low, if that average follows the pattern of the prior manias (e.g., Nikkei; DJI 1929-32; Gouda tulip bulbs (1634-1722); and the South Sea Company (1719-1722)). Lastly, he makes the case for deflation, and discusses the Fed and banking system.

Book Two provided Prechters advice for protecting yourself and profiting from the upcoming depression. His recommendations include:
1. Have safety of principal by being in cash or high-quality short-term U.S. Government treasuries (T-bills) or money market mutual funds that invest in these types of instruments.
2. Sell your home (if you have a large mortgage) and rent instead.
3. Find a safe bank (using Weiss Ratings, Inc., for example) and keep your money there.
4. Do not own or invest in stocks, options or futures.
5. Consider buying inverse mutual funds (such as Rydex Tempest that double short the S&P 500) and Rydex Venture (double short NASDAQ 100). ProFunds also offers bear funds. To invest in any of these funds, Prechter cautions that you must be a short-term timer to be successful.
6. Buy physical gold and silver metals.
7. Cash out your whole life insurance policies and convert to term insurance from the safest firms (based on Weiss Ratings, Inc., for example)

Prechter provides a very sobering view of the future that few individuals will heed because of its negative and extreme consequences. But if this book makes you think about the safety of your financial nest eggs, retirement funds, insurance policies, etc; then at least you can decide to take some steps to protect yourself. If the stock market can manage to rally 20-40% from the lows of July 2002, then perhaps you should consider cashing in your remaining equity and mutual funds positions before the real bear market takes hold as Prechter envisions. I know I will be doing that and then using my charts and technical indicators to tell me when to get back in. Its shame that Prechter did not publish this book in March 2000 when the market was at its peak. He would have saved most investors, who believed his work, a great deal of money if they had followed his recommendations.

Whether you agree with Prechters view of the world, you will certainly agree with this quote:
To be successful in life, or at least learn something along the way, you have to think for yourself.

310 of 328 people found the following review helpful:

5.0 out of 5 stars This book will cause you no financial harm if followed, August 27, 2002

By 

T. Austin (Van Nuys, CA United States) - See all my reviews
(REAL NAME)   

Amazon Verified Purchase

This review is from: Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression (Hardcover)

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

77 of 83 people found the following review helpful:

4.0 out of 5 stars Good to read but be aware, September 21, 2005

By 

Alexey Panchekha (NJ USA) - See all my reviews
(REAL NAME)   

This review is from: Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, Expanded and Updated Edition (Paperback)

If you are an experienced reader of financial publications and would like to read a view that is very different but presented with arguments and reasoning - this is a good book to read. A different view will likely shine a new light to known facts and pull some new ones that you have not considered recently. Even if you don't agree with the author, such reading has high value if facts are presented well. These are. You should keep in mind though, that author stresses that he foresaw long bull market before many, knew its characteristics, etc. But his own advisory service (tracked by Hulbert Financial Magazine) has very poor results. He is way behind broad market on a "regular investors" portfolio and dramatically negative in his "trader" portfolio. His performance looks very consistent bad during a good 20 years period. So, in fact, you would look like a true hero if you took all his "trader" advises and did just opposite! Note, that it is not just stock picking that is bad. Timing-only returns are even worse. So, remember, your brain cannot retire yet. Given that - it is a good reading, good perspective to consider.

If you are just starting to read financial publications - you might not appreciate the fact that there are thousands of financial publishers at any given time. All, yes, all of them are smart. Really smart. Finance has so many dimensions that it is possible to argue any number of views at the same time - all well grounded and reasoned. When you are starting, anything you read impresses you, looks totally convincing and even evident. Moreover, you will have a feeling that you can make a confident use of newly acquired knowledge. This is why it is NOT good first reading for you. Before you have your brain active - you need some measured background reading. It is simply NOT POSSIBLE to judge from common sense - it takes decades to build common sense in finance. This is a radical view, expressed by rather radical author, practicing non-scientific ideas. His ideas cannot be proven or disproven because he talks about things that happens ones in a century or once in 3 centuries! So, keep in mind a simple fact - this particular man was right big time once but he himself was not able to make any use of his seeing into future. His theory was with him all along but help none either. In fact, you were better off not hearing his advices! I'd keep doing just that. This does not mean I dislike (or like) his prognosis. He may be right and he maybe wrong. He might be right in direction but wrong in the extent. Or any combinations. There is nothing in his book or in his performance so far to make it anything but a pure guess.