November 6, 2009

A lot of what drives market activity-and what creates opportunities for profitable trades-is herd behavior. When prices start to go up, the bullish sentiment spreads, and as soon as a crowd gets involved, a rally is underway. When fear sets it, it gets contagious and the market crashes.

But the really big opportunities come from the ability to step outside of the herd's expectations and see things from a different perspective. If you have the wisdom and the courage to go against the popular belief, you can reap substantial rewards, especially if your timing is right. And someone who demonstrates that ability to defy the herd is someone worth paying attention to.

Robert R. Prechter Jr. is a good example. As the world-renowned popularizer of the Elliott Wave Principle, he has repeatedly revealed his capacity for original and insightful thinking. Along the way, he has time and again come up with startling forecasts for the markets and for the economy, sharing perceptions that boggle the minds of the more pedestrian pundits who are hopelessly locked into linear thinking.

In 2002 Prechter published a watershed book, Conquer the Crash, in which he made some astonishing predictions that defied the popular logic of the time, when the focus of the financial experts was on buy-and-hold strategies in the stock market, speculation in real estate that could presumably only go up in value, and on hedging investment positions with sophisticated derivatives as a kind of portfolio insurance.

And what did Bob Prechter predict? The implosion of collateralized securities. The collapse of Fannie Mae and the crumbling of major banks. The failure of bond-rating services to issue timely warnings. The advent of bailout schemes from the government. And an extremely rare, simultaneous plunge in real estate prices, commodities, and the stock market.

Oddly enough, as one after another of Prechter's forecasts were precisely reflected in the financial news of recent years, he didn't get much attention in the mainstream press. Maybe it was because his book also featured another prediction-that we are facing a deflationary depression.

While some would argue that deflation is impossible under the present circumstances, it might be prudent at least to consider that possibility, especially considering the stunning accuracy of Bob Prechter's other predictions. And if you're willing to take a peek at that scenario, Prechter has just the thing for you-a brand-new edition of Conquer the Crash!

All of the analysis and insight from the original edition is included in the new second edition. But Prechter has added 188 pages of entirely new material, and every one of the book's pages is worth reading and re-reading, even if your copy of the original edition is coffee-stained and dog-eared.

There are plenty of fresh gems between the covers. Here are just a few samples:

"It is not the case that Fed chairmen are either fools or geniuses, as their records appear to imply. They do, however, preside over eras that make them appear to be one or the other."

"I hate to challenge mainstream 20th century macroeconomic theory, but the idea that a growing economy needs easy credit is a false theory. Credit should be supplied by the free market, in which case it will almost always be offered intelligently, primarily to producers, not consumers."

"Those waiting to get rich in the stock market, however, have just been kidnapped, trussed up and thrown in the trunk of a car heading to Bankruptcy City. . . . Just look at this 25-year trendline, which just burst like an Army Corps levee."

"One of the biggest scams ever perpetrated is the idea that the stock market has made people rich over the past 80 years. Almost the entire gain in the Dow is due to debasement of the currency."

Even more important, though, the new edition of Conquer the Crash does more than just make dire forecasts and describe an ever-more-likely scenario of extended economic catastrophe. It also provides sound, specific strategies not just for surviving a wave of deflationary depression, but also for turning the troubled times ahead into an enormous opportunity for profit and personal prosperity.

Note the word "specific" here. Conquer the Crash not only offers clear theoretical insights and extraordinary strategic thinking; it also provides a treasure trove of references and useful resources, including websites, phone numbers, and the names of sound banks, insurers, gold dealers, advisors, and other individuals who can help you with your plans for prosperity during a deflationary depression. There's also an access code for a special online question-and-answer forum for readers of the book.

So here's the bottom line. Get a copy of Conquer the Crash immediately. Then read it, and put the strategies it suggests into action. If Bob Prechter's forecasts somehow turn out to be wrong, you won't really be any worse off-in fact, you'll wind up with a more solid grasp on your own financial future. But if he turns out to be right, you'll not only be able to make it through the coming depression-you'll also be able to reap some very big rewards as we hit bottom in a time of unprecedented opportunity.

Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression. Second Edition by Robert R. Prechter, Jr. Hoboken, New Jersey: John Wiley & Sons, Inc. ISBN-13: 978-0-470-56797-5 Hard cover, 480 pages, $29.95. Order your copy directly from http://www.financialcyclesweekly.com/snip/108.htm .

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