Bob Prechter Warns Market Correction “Larger Than The Malaise Of The ’30s” Looms
by Avi Gilburt via MarketWatch.com,
ZeroHedge.com
Apr 23, 2017
I recently interviewed Prechter, who released a ground-breaking book, “The Socionomic Theory of Finance,” at the end of December. In the 813-page book, which took 13 years to write, he proposes a cohesive model that takes into account trends in sociology, psychology, politics, economics and finance. I highly recommend the book.
As I’ve explained here, Elliott Wave theory says public sentiment and mass psychology move in five waves within a primary trend, and three waves in a counter-trend. Once a five, or V, wave move (the waves are sometimes described in Roman numerals) in public sentiment is completed, it is time for the subconscious sentiment of the public to shift in the opposite direction, which is simply a natural cause of events in the human psyche, and not the operative effect from some form of “news.”
As one reviewer on Amazon wrote about Prechter’s new book: “This [cohesive] approach allows a measure of prediction on the basis that social mood fluctuates in fractal waves, and knowledge of them allows one ‘to achieve some measure of success in forecasting the direction, extremity and character of financial, social, political, cultural and economic trends.’ ”
Here’s an edited version of the interview, in which Prechter gives his outlook for the U.S. stock market, the general theory of Elliott Wave analysis and his new projects.
Avi Gilburt: You’ve said that, once the stock market tops, you expect a major bear market and economic contraction to take hold. What is your general timing for this to occur?
Robert Prechter: The true top for stocks in terms of real money (gold) occurred way back in 1999. Overall prosperity has waned subtly since then. Primary wave five in nominal terms started in March 2009, and wave B up in the Dow/gold ratio started in 2011. Their tops should be nearly coincident.
Gilburt: What do you foresee will set off this event?
Prechter: Triggers are a popular notion, borrowed from the physical sciences. But I don’t think there are any such things in financial markets. Waves of social mood create trends in the stock market, and economic and political events lag behind them. Because people do not perceive their moods, tops and bottoms in markets sneak right past them. At the top, people will love the market, and events and conditions will provide them with ample bases for rationalizing being heavily invested.
Gilburt: You’ve said we will be mired in a “depression-type” event. How long could that last?
Prechter: I don’t know. All I can say for sure is that the degree of the corrective wave will be larger than that which created the malaise of the 1930s and 1940s.
The Rest…HERE
