{"id":4289,"date":"2009-10-15T08:10:25","date_gmt":"2009-10-15T13:10:25","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=4289"},"modified":"2009-10-15T08:10:25","modified_gmt":"2009-10-15T13:10:25","slug":"how-to-prepare-for-the-coming-crash-and-preserve-your-wealth","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2009\/10\/15\/how-to-prepare-for-the-coming-crash-and-preserve-your-wealth\/","title":{"rendered":"How to Prepare for the Coming Crash and Preserve Your Wealth"},"content":{"rendered":"

By Susan C. Walker<\/strong><\/p>\n

Bob Prechter first released Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression<\/em> during \t\t\t\t\t a stock-market high in 2002, and it quickly became a New York Times<\/em>\u2013bestseller. Now he has updated the book with 188 new pages for a second edition, and it looks like it, too, will be published near a stock-market high. John Wiley & Sons plans to publish the new edition in late October. Visit Elliott \t\t\t\t\t Wave International<\/a><\/span><\/strong> for information on how to pre-order the new edition from major online retailers.<\/p>\n

As was widely reported in the dark days of late February and early March 2009, Prechter called for the start of the biggest stock market rally since the 2007 high. Since then, the S&P has soared more than 60 percent in just six months to reach his target zone of 1000-1100. This is one reason why he decided to release his second edition now.<\/p>\n

The first edition, which was published in early 2002, was “on the mark”\u00a0with regard to our current economic \t\t\t\t\t environment — so much so that it’s uncanny. Prechter\u2019s message has been good for investors who kept their money \t\t\t\t\t safe and for speculators who profited from declines. And he still expects a great buying opportunity ahead for those who \t\t\t\t\t can keep their money safe until it arrives. Here is a short list of some of the accurate predictions he made in 2002 that \t\t\t\t\t have come to fruition:<\/p>\n

Credit Deflation<\/h2>\n

“Usually the culprit behind [simultaneous stock and real estate] declines is a credit deflation. If there were ever \t\t\t\t\t a time we were poised for such a decline, it is now.” Chapter 16<\/p>\n

Bailout Schemes<\/h3>\n

\u201cIf [governments] leap unwisely into bailout schemes, they will risk damaging the integrity of their own debt, triggering \t\t\t\t\t a fall in its price. Either way \u2026 deflation will put the brakes on their actions.\u201d Chapter 32<\/p>\n

Banking and Insurance Stocks<\/h3>\n

\u201cWe will see stocks going down 90 percent and more \u2026 [and] bank and insurance company failures\u2026.\u201d Chapter \t\t\t\t\t 14<\/p>\n

Collateralized Securities<\/h3>\n

“Banks and mortgage companies \u2026 have issued $6 trillion worth of [securitized loans]\u2026.\u00a0 In a major \t\t\t\t\t economic downturn, this credit structure will implode.” Chapter 19<\/p>\n

Derivatives<\/h3>\n

\u201cLeveraged derivatives pose one of the greatest risks to banks\u2026.\u201d Chapter 19<\/p>\n

Mortgage-Backed Securities<\/h3>\n

“Major financial institutions actually invest in huge packages of \u2026 mortgages, an investment that they and \t\t\t\t\t their clients (which may include you) will surely regret\u2026. Chapter 16<\/p>\n

Fannie Mae and Freddie Mac<\/h3>\n

\u201cInvestors in these companies\u2019 stocks and bonds will be just as surprised when [Fannie and Freddie’s] stock \t\t\t\t\t prices and bond ratings collapse.\u201d Chapter 25<\/p>\n

Banks<\/h3>\n

\u201cBanks are not just lent to the hilt, they\u2019re past it. In a fearful market, liquidity even on these so called \u2018securities\u2019 [corporate, municipal, and mortgage-backed bonds] will dry up.\u201d\u2026 One expert advises, \u2018The larger, more diversified banks at this point are the safer place to be.’ That assertion will surely be severely tested\u2026.\u201d Chapter 19<\/p>\n

Insurance Companies<\/strong>
\n\u201cThe values of insurance company holdings, from stocks to bonds to real estate (and probably including junk bonds as well), will be falling precipitously\u2026. As the values of most investments fall, the value of insurance companies\u2019 portfolios will fall\u2026. When insurance companies implode, they file for bankruptcy\u2026.” Chapters 15, 24<\/p>\n

Real Estate<\/h3>\n

“What screams ‘bubble’ \u2013 giant, historic bubble \u2013 in real estate today is the system-wide extension of \t\t\t\t\t massive amounts of credit to finance property purchases\u2026. [People] have been taking out home equity loans so they \t\t\t\t\t can buy stocks and TVs and cars\u2026. This widespread practice is brewing a terrible disaster.\u201d Chapter 16<\/p>\n

Rating Services<\/h3>\n

\u201cMost rating services will not see it coming.\u201d Chapter 25<\/p>\n

Political Leaders<\/strong>
\n\u201cA leader does not control his country\u2019s economy, but the economy mightily controls his image.\u201d Chapter 27<\/p>\n

Short-Selling Ban<\/h3>\n

\u201cIn a bear market, bullish investors always come to believe that short sellers are ‘driving the market down’\u2026. \t\t\t\t\t Sometimes authorities outlaw short selling. In doing so, they remove the one class of investors that must<\/em> buy.\u201d Chapter \t\t\t\t\t 20<\/p>\n

Psychological Change
\n<\/em><\/strong>\u201cWhen the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation….\u201d Chapter 9<\/p>\n

Confidence<\/h3>\n

\u201cConfidence has probably reached its limit. A multi-decade deceleration in the U.S. economy \u2026 will soon \t\t\t\t\t stress debtors\u2019 ability to pay\u2026. Total credit will contract, so bank deposits will contract, so the supply \t\t\t\t\t of money will contract\u2026.\u201d Chapter 11<\/p>\n

Falling Tax Receipts<\/strong>
\n“Governments \u2026 spend and borrow throughout the good times and find themselves strapped in bad times, when tax receipts fall.” Chapter 32<\/p>\n

“Retirement programs such as Social Security in the U.S. are wealth-transfer schemes, not funded insurance, so they \t\t\t\t\t rely upon the government\u2019s tax receipts. Likewise, Medicaid is a federally subsidized state-funded health insurance \t\t\t\t\t program, and as such, it relies upon transfers of states\u2019 tax receipts. When people\u2019s earnings collapse in \t\t\t\t\t a depression, so does the amount of taxes paid, which forces the value of wealth transfers downward.” Chapter 32<\/p>\n

“The tax receipts that pay for roads, police and jails, fire departments, trash pickup, emergency (911) monitoring, \t\t\t\t\t water systems and so on will fall to such low levels that services will be restricted.” Chapter 32<\/p>\n

For more information on the new second edition of Conquer the Crash<\/em>, visit Elliott \t\t\t\t Wave International<\/a><\/span><\/strong>. Bob Prechter has added 188 new pages of critical information to his New York Times<\/em> bestseller.<\/p>\n

Susan C. Walker writes for <\/em>Elliott Wave International<\/em><\/a>, \t\t\t\t a market forecasting and technical analysis company.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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