It’s a great time to be a prophet of economic doom, because everyone’s still smarting badly enough from the last suckerpunch to take the threat of a groin-kick very seriously. And if you want a really bleak prediction, Robert Prechter’s ananlysis of fractal patterns in the market movements of the 1930s and 40s implies that the groin-kick will be delivered by an elephant wearing concrete boots [via TechnOccult]:
Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or âfractals,â in the stock market of the 1930s and â40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.
âIâm saying: âWinter is coming. Buy a coat,â â he said. âOther people are advising people to stay naked. If Iâm wrong, youâre not hurt. If theyâre wrong, youâre dead. Itâs pretty benign advice to opt for safety for a while.â
[…]
For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people âfrom buying stocks for 100 years,â he said. This time, he said, âIf Iâm right, it will be such a shock that people will be telling their grandkids many years from now, âDonât touch stocks.â â
The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash âextremely grateful for their prudence.â
Prechter’s analysis isn’t very popular, naturally.
The âmathematics donât work,â Mr. Acampora said, because such a big decline would imply that individual stocks would need to trade at unrealistically low levels. Furthermore, he said, âI donât want to agree with him, because if heâs right, weâve basically got to go to the mountains with a gun and some soup cans, because itâs all over.â
Still, on a ânear-termâ basis, he said, âWeâre probably saying the same thing.â
There’s a deep emotional component to Acampora’s response, there – the same one that keeps most of us from considering the real worst case scenarios. Caesar hears only what is pleasing unto Caesar, perhaps… but note that Acampora has shifted his own personal holdings to cash in the short term, so grim times are likely to be on the cards one way or the other.
But Doug Rushkoff, typically enough, sees an opportunity to build a better system on the ruins of the old:
Yes, this is really it. The beginning of a true end-of-cycle economically.
If you own âstocks,â use these bounces to get out completely. If you have to park your money somewhere, consider yourself lucky you have money to park.
The object of the game for those who actually have capital is not how to grow it, but how to keep it. Capital has driven our economy since 1300, and the recent bull market was the end of a cycle that began in the mid-1700â˛s.
The fact that it is ending is not the end of the world at all. It just means that thereâs a whole lot of money out there with no place to go. People canât find a place to park their money because thereâs more money looking for investment than there is stuff to invest in.
And thatâs because weâre finally in a technological era where great innovations are more about reducing the need to spend time, resources, and energy than they are about increasing it. iPads aside, of course.
Given the choice, I’ll take Rushkoff’s vision of the future, please. Will we make that choice for ourselves, and carry it through? I guess that’s down to us.