Saturday, July 31, 2010

How Bad Is It?

Marc Faber Questions if Dow Could Hit 1,000

"In the August edition of the ‘The Gloom, Boom & Doom Report’ Marc Faber questions whether the Dow could hit 1,000 as predicted by Robert Prechter, based on his interpretation of Elliot Waves, Fibonacci numbers and socioeconomic trends.
Prechter, who has written 13 books on finance, believes that the stock market is historically overvalued in terms of dividends and earnings, because of a "great rise in positive social mood."
But the mood changed in 2000 and the "trend toward negative social mood will lead to an economic contraction," according to Prechter.
"Small bear markets lead to recessions, big bear markets lead to depressions. The current bear market will be the biggest in nearly 300 years, so the depression will be correspondingly deep," Prechter said.
Prechter goes onto to suggest the bear market is of super-cycle degree, the biggest since 1720-1784 and will therefore see a decline for equities deeper than the decline during the great depression, which saw the Dow fall 89 percent."

"And how do you trade the Dow at 1,000?
One suggestion from Faber is buying a self-sustainable farm in the middle of nowhere surrounded by high voltage fences and barbed wire and equipped with booby traps and an arsenal of machine guns, hand grenades and armed vehicles guarded by vicious Dobermans."


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