Conquer the Crash -- What Crash?

Μια άλλη άποψη για την φάση των αγορών ολίγον επαναστατική αλλά υπολογίσημη.
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Conquer the Crash -- What Crash? 12/29/2006 1:39:40 PM
If the Dow Jones Industrial Average made a new high this year, what about the crash that Bob Prechter has predicted in the financial markets? Bob has an answer that might surprise you – there's been a crash all right, it's just been a silent one thanks to the large amount of liquidity sloshing around the domestic and global markets. Here's an excerpt from his most recent Theorist that explains why it's more important to look at the Dow in terms of gold than in terms of dollars.
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Excerpted from The Elliott Wave Theorist, December 14, 2006
Some people have asked me recently, “Hey, Bob, you wrote this book a few years ago, Conquer the Crash, and sure, the Dow dropped 30 percent and the NASDAQ was cut in half afterwards, but they’re back up. What happened to the crash?”
Well, for one thing, if any of you have been following my work, you know that I’m very big on psychology. You’ll notice a line at the top of my book. It says “New York Times bestseller.” The book came out when the Dow was at 10,600, but it didn’t become a bestseller until the Dow was breaking 8,000 on the way down. Of course, by the time any book becomes a bestseller, including mine, it’s probably going to be very close to a turn.
I think you might remember all the books that came out in the very late '70s, The Crash of ’79 and books about depression. Of course, it was one of the greatest buying opportunities of all time. So it doesn’t matter just that someone wrote a book called Dow 36,000, which I think came out in 2000; the book was a bestseller, which was a real hint as to what the overall psychology was.
However, I’ve got a better answer than that, at least in my opinion. I think there is a crash going on, but it’s silent. Here’s an example of what I’m talking about. It's the Dow Jones Industrial Average, with one big difference. Instead of pricing it in dollars, which have lost a tremendous amount of value due to the extreme increase in credit, we’re measuring it in real money: that is, ounces of gold.

It peaked in 1999 – in fact, in July of 1999. I’d like you to look at what happened on the left side of the chart, from the bottom in January 1980, all the way up to the peak in July 1999. As you can see, that was a very steady advance with very few interruptions.
This was the real bull market in Elliott wave terms. In fact, I published a book called Beautiful Pictures, which makes the powerful argument that the peak in January 2000 was the true end of the bull market. The Dow has made a new high, but the main thing to point out is that in real money terms, that was unquestionably the high in the real bull market, in other words, what we call the impulse wave. Everything that’s been going on since is part of a bear market.
If you recall some of the great quotes from the Dow Theorists of the past, one thing that they are fond of saying is that bear markets are tricky affairs. They can fool people in a lot of ways, and that’s what’s going on here.
Now, let’s look at the right side of this chart. We had the initial drop, somewhat of a recovery, then a double collapse. But look, the Dow priced in real money made a new low – not a new high, a new low - this year in 2006, in May. So it’s incredible that in the same year that the newspapers are reporting a new all-time high and celebrating, in real money terms the Dow has made a new low for the bear market.
Now, to put this in perspective, had we, the United States, changed from paper money to real money in 1999, this is the exact picture that would be shown in The Wall Street Journal of the Dow Industrial Average since that time. Of course, that’s not going to happen any time soon. We are in a credit society, and that’s the way it is. The question is, what’s the ultimate resolution?