Look up and see the dozens of American flags flying in the breeze as the parade passes by. Kids on tricycles and bicycles; bands marching and playing John Philip Sousa; red, white and blue bunting everywhere. That's what the Independence Day parade is like in every small town in the United States. But somewhere amidst the Stars and Stripes lurks another flag, carrying the image of a stock-market bear.
This week on July 2, the Dow dropped to 11,215, a level 20% lower than its most recent high of 14,164 in October 2007. Mainstream market watchers and the media were quick to point out that that kind of drop traditionally signifies a bear market. At long last, the investing world may be seeing the market as it really is. And, yes, even as most investment gurus keep looking for the bottom, we here at Elliott Wave International have been true to form in saying that the upcoming bear will be larger than most people can imagine and certainly larger than most living folks have experienced, except for those nonagenarians who remember the Great Depression.
Want To Survive and Prosper During a Crash? You can read all about how to do it in Bob Prechter's prescient and useful book, titled
Conquer the Crash, You Can Survive and Prosper in a Deflationary Depression.
One sign beyond the stock market itself that times are getting tough comes from a New York Times style article, headlined, "
It's Not So Easy Being Less Rich." The story, which ran on June 1, 2008, describes how even the very rich are cinching in their luxe leather belts to make up for less income – say down to $10 million from $20 million.
"Interviews with the people who actually see the bank statements, like divorce lawyers and lenders, say their clients are definitely living on less than they did a year ago, regardless of how expansive the definition of 'less' may be. Hairstylists and private jet rental companies say the wealthy are cutting back on luxuries like $350 highlights and $10,000-an-hour jet rentals. Even nutritionists and personal trainers notice a problem. The wealthy are eating more and gaining weight because of the stress."
So, wait, maybe they are actually letting their luxe belts out rather than in. The interesting point is that the very wealthy don't want others to know that they aren't quite as wealthy anymore, so they cover by selling small items rather than large items, according to the CEO of a firm that buys fine jewelry for resale.
"One recent client explained to Mr. Del Gatto [CEO of Circa] that she was selling $2 million in diamonds she rarely wore, because her friends wouldn’t notice that they were gone. 'She said, "If I sold my Bentley or my important art, they would notice...."
And one final note about weight gain, according to a dietitian who charges Wall Street executives $600-$800 a month for her services: "The number one concern that they have is the state of the financial market,” she said. “There definitely is a correlation between the stock market and weight gain.”
We're sorry to hear about the stress and weight gain, but we believe that there's a better way to prepare for the coming crash while staying thin and being less stressed-out. Read the book that Bob Prechter wrote in 2003 about how to protect yourself in difficult financial times. It's called Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression. For a taste of Bob's reasoning, here's an excerpt from Chapter 14.
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Making Preparations and Taking Action
The ultimate effect of deflation is to reduce the supply of money and credit. Your goal is to make sure that it doesn’t reduce the supply of your money and credit. The ultimate effect of depression is financial ruin. Your goal is to make sure that it doesn’t ruin you.
Many investment advisors speak as if making money by investing is easy. It’s not. What’s easy is losing money, which is exactly what most investors do. They might make money for a while, but they lose eventually. Just keeping what you have over a lifetime of investing can be an achievement. That’s what this book is designed to help you do, in perhaps the single most difficult financial environment that exists.
Protecting your liquid wealth against a deflationary crash and depression is pretty easy once you know what to do. Protecting your other assets and ensuring your livelihood can be serious challenges. Knowing how to proceed used to be the most difficult part of your task because almost no one writes about the issue. This book remedies that situation.
In a crash and depression, we will see stocks going down 90 percent and more, mutual funds collapsing, massive layoffs, high unemployment, corporate and municipal bankruptcies, bank and insurance company failures and ultimately financial and political crises. The average person, who has no inkling of the risks in the financial system, will be shocked that such things could happen, despite the fact that they have happened repeatedly throughout history.
Being unprepared will leave you vulnerable to a major disruption in your life. Being prepared will allow you to make exceptional profits both in the crash and in the ensuing recovery. For now, you should focus on making sure that you do not become a zombie-eyed victim of the depression.
The best news of all is that this depression should be relatively brief, though it will seem like an eternity while it is in force. The longest depression on record in the U.S. lasted three years and five months, from September 1929 to February 1933. The longest sustained stock market decline in U.S. history lasted seven years, from 1835 to 1842, and featured two depressions in close proximity. As the expected trend change is of one larger degree than those, it should be a commensurately large setback, but it should still be brief relative to the duration of the preceding advance.