Newsgroup: it.economia.borsa
Titolo: KING OF DOOM

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NELL'AUGURARE BONA NOTTE A TUTTO IL GNU'S GRUP, COPIO E INCOLLO UNA BELLA
INTERVISTA A ROBERT "KING OF DOOM" PRECHTER, CON TANTO DI PREFAZIONE DI G.
ZIBORDI DI COBRAF. NON E' PROPRIO RECENTISSIMA, DATO CHE RISALE AL 11/9/2002
MA AH AH AH AH AH AH RITENGO MA NON SOLO E' ATTUALE MA E' ROBA DA FUTURAMA.
GIUSTO UNA NOTA PER I ROMPICOGLIONI DEL "BASTAVA IL LINK" E' CHE STA ROBA CE
LO' NELLARDDISK E NON AVEVO VOGLIA DI METTERMI A SPULCIARMI NEL MEGLIO DELLA
CONVERSAZIONE DEL SUDDETTO SITO.
Questa č una sintesi delle interviste che Bob Prechter ha tenuto di recente.
Per chi si collegasse ora Prechter č stato negli anni 80 probabilmente il
piů influente con i suoi commenti di borsa avendo indovinato l'inizio esatto
del mercato toro nel 1982 e il crash del 1987. Vendeva 30 mila del suo
report nel mondo. Ha avuto un eclissi essendo andato negativo sulle borse
nel 1994, ma ha insistito in modo coerente (o ostinato) che eravamo alla
fine del ciclo iniziato DUE SECOLI FA che il crash in arrivo era cosě
storico e epocale che non valeva la pena di fare altro che cominciare a
proteggersi a tutti i costi.
Come si vede leggendolo Prechter č ora al punto da offrire consigli su quali
banche non falliranno e consiglia di evitare tutte le banche americane e
usare solo alcune banche svizzere. Si tratta di un personaggio geniale che
ha indovinato in modo incredibilmente esatto a volte e altre ha sbagliato
completamente. Ma č ancora molto seguito e il suo libro sul crash č il best
seller finanziario da due mesi in america.
La cosa che mi impressiona sono questi seminari per spiegare in quali banche
svizzere rifugiarsi per non essere travolti dal crollo delle banche mondiali
che propone
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Prechter has been doing a lot of interviews lately about the current market
environment and his latest book, Conquer the Crash. The following excerpts
are taken from four of Bob's recent interviews with the following
individuals: Robert Barker, Business Week; Jim Puplava, host of Financial
Sense Newshour; Kathryn Welling of Weeden & Co. and John Dobosz, Forbes
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In your book you talk about depressions. When do depressions occur and what
causes them?
Well, a depression occurs when the economy contracts. That happens when
there is decline in the demand for goods and services at current prices. In
this case, we are facing exactly that sort of thing. Because when you have a
situation where people can't save, they're spending more than they're
making, we know that they're going to have to cut back on their spending
eventually. When people are trying to pay off debts at a very high rate of
interest and their income slips, which as we've been seeing unemployment has
been edging up to new highs with each passing quarter, that means they're
going to do less spending as well. So I expect to see a decline in the
demand for goods and services in this country. That is going to be the
beginning of a depression.
That's why when I see these economists talking about these 3% and 5% growth
rates for the economy in the 2nd half and then this miracle of corporate
earnings going up 30% and 40%. You kind of wonder what are they looking at?
I mean, do consumers go out and go into a -5% or -6% savings rate? I just
don't think that's going to happen.
I think most of that, although they would never admit it, is from hope.
Because they say the only way the stock market can hold up - and the only
way any of this debt can get paid off - is if corporate earnings start
soaring and people's incomes start soaring at some massive double-digit
rate. So then now they're saying, well I guess that's what's going to
happen. I think the burden of debt is piled up so high that it's not only
impossible, but that is the reason why we need to be looking in the other
direction.
Isn't there also a problem during the 90's where many industrial companies -
like IBM or General Electric - many of these companies morphed themselves
into finance companies? They were making more money on finance than they
were actually making things.
Oh yeah. General Electric just really transformed itself from perhaps the
premier manufacturing company in the world in the 1950's and 60's to what I
call a house of cards right now. It's all about manipulating credit,
manipulating debt. They're lending, they're borrowing, they're shifting
money around, they're shifting credit around. We put out a special chart on
General Electric in the first couple days of October 2000. We said this Bull
Market is over. It's up 100 times from its low in 1974 and it's over. It's
since been cut in half and I think it's, frankly, just the beginning. They'
re not Enron, but they have that type of financial company where,
ultimately, the trend in investments and finance is going to be the trend in
that company's fortunes. It will be a slower decline than Enron and there's
certainly less in the way of accounting gimmicks, but they use them anyway
and people have noticed it. I think it's going to take a long time for them
to return to a solid company that's producing things that people really
want.
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Hasn't most of the world already experienced some degree of deflation in
this cycle?
The worldwide trend began on the last day of 1989 in Japan and slowly spread
across the globe. Southeast Asia had its deflationary collapse in 1997-98.
That's not over, either. South America is beginning to go through that now:
Argentina collapsed last year into deflation. Uruguay is in trouble now. And
the United States and Europe together are the blue-chips of the world in
terms of their economies. And they are peaking last.
Asset allocation might be a bit tricky when the value of everything is
falling. What do you do with your money during a deflation?
Step one is to get out of all of the investments that have traditionally
gone down during a deflation. The first one is the stock market. The second
one is the real estate market. The third is the market for risky bonds-bonds
that have been issued by debtors who are less than pristine in terms of
their long-term ability to pay the interest and the principal. Those are the
areas that most people are invested in and are dangerous today. Some people
are over-invested in fringe areas like collectibles and commodities, which
also go down in deflations.
Number two: get into safe cash in a safe depository. I think there are two
primary depositories for most Americans. They are Treasury bills in a
Treasury-only money market fund. Another option is one of the safer banks. I
also think that U.S. banks in general are not as safe as some jurisdictions
in the world, notably Switzerland and Singapore, so if you're really serious
about safety, you need to investigate those areas.
Number three is only for certain people-people who really feel that they are
seasoned investors or speculators and who understand risk and are willing to
take it. Those people have been cleaning up in this bear market by being
invested in instruments that make money on the downside. The amazing alchemy
of a bear market and a deflation is that if you're positioned properly, you'
re making money at the same time the money itself is going up in value. It's
a double whammy. You can make money if you're invested in, say, the Rydex
Ursa Fund, which goes up as stocks go down, or a market-neutral managed fund
that's split between a bullish and a bearish manager, both exercising his
stock-picking ability.
So you see a crash as imminent - is that the right word?
I think we're in one now, but we're in the very early stages. The same thing
is true of a depression. People say, well, we're not in a depression, and
there are no bread lines and all that. But those are symptoms of the end.
And the time to understand what's coming is closer to the beginning, and
that's where I think we are.
How should people invest then?
The main message I would like to get across is get safe. Be safe. If you
talk to virtually anyone else out there today, you will get [a message] that
is, in a nutshell: Rush out and take a huge risk.
[Stocks are] risky in normal times, but when you have a historical view of
valuation, it's close to financial suicide to be putting your money into a
bull market that has already run its course, that is one of the biggest in
history in terms of overvaluing shares.... [You] should be in something that
's very unpopular right now - cash.
Why is cash important in the midst of deflation or a depression:
Well, cash is the only thing that goes up in value during a deflation. The
reason is the credit which is considered by most people to be money,
although it's actually credit, begins to decrease and therefore the total
amount of purchasing power in the economy is going down. Anytime money
supply (and I'm using that term loosely to include the credit supply,
contracts) there's less of it, people can understand when the government
creates money and the Fed creates credit, and there's more and more of it,
we get what we call inflation. And the value of the dollar or the purchasing
unit goes down. Therefore, prices of goods go up and up and up. People are
used to that. They have to realize that it can work in the other direction.
When the total amount of money and credit contracts, the prices of goods
will actually start falling and that makes each unit of money, each unit of
money or credit that survived that is, worth more. The key is to be in
something that will not be destroyed. If you owned a bond of a corporation
or a municipal government that defaults, you're at zero. But, if you have
money that does not disappear, then suddenly you have more buying power than
you did before. And a lot of my book is to steer people into areas where
they will be able to put their cash and keep it safe. And believe me, there
aren't many places in the world. A lot of places that people think their
money is safe are anything but.
Let's talk about the positive side of all of this. If the crash takes place,
which I believe is coming and the depression that follows it, those who are
liquid are going to have some of the best buying opportunities of a
lifetime. I can think of, Bob, the story of Warren Buffett's 1968 meeting in
La Jolla, California with Ben Graham. Ben Graham lost half his clients'
money during the stock market crash. They were looking at the stock market
in the late 60's and basically Ben told him to get out. Buffett went back,
disbanded his partnership and stayed in cash. But when the '73/'74 Bear
Market came, he loaded up and bought, I think, what was it, 10% or 20% of
the Washington Post for $10 million. He had the buying opportunity of a
lifetime and much of the Buffett fortune was made as a result of that
buying.
That's right. Then you have stories of the Kennedy's and Bernard Barruch and
people who did the same thing in 1932. That is when you can make money. If
you're going to buy a stock at $112 a share and hope it goes to $200 that
may sound like big money to you, but it's not. The real money is made when
you can buy stocks at 25 cents, a quarter of a point, and watch them go up
to $19. That's real money and that's the kind of money that the super rich
people can make. But you can only do it if you're in cash and you get out at
the top and you protect that money all the way down. Then, when the last
stock owner despairs, you'll be his friend by buying those shares from him.
At that point, when the market finally turns around, the multiples are
unbelievable. That's the massive magic wealth of wealth in the stock track
record and I'd be happy to put it up against those. I follow my own advice.
I don't want to rope anybody into doing something they're not comfortable
with. I think they need to read the book, and as I say at the very end of
the Foreword, read all the evidence, then the responsibility is yours. You
make up your mind one way or another.
The real estate boom has clearly encouraged people to continue to leverage
up-
I don't understand it but, yes, people are taking out second mortgages to
buy things that they want.
For consumption, not investment.
Yes, they are consuming their homes and turning over the ownership to the
banks-
At least that means the banks have some hard assets.
Maybe. But now they are utterly dependent on the value of these real estate
parcels that they own so much of, and that is dangerous. I think that real
estate prices are going to go way down, very similar to the way they behaved
in 1929-'33. Or 1835 -1842. I just don't think banks should depend on those
values-but they are. We will have to see what kind of decisions are made by
banks in human terms. In other words, if the real estate market is falling,
do they kick people out of their houses and try to sell them, or at what
point do they decide that it is not worth it?
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Your book makes specific suggestions about ways for investors to find
shelter from the bear market/deflation/depression you see?
Exactly. I don't just say "go to cash," because the questions today are what
cash and where do you keep it? Two incredibly important questions. We know
from history that at the bottom of major market crashes, they tend to close
banks.
Let me guess, you don't suggest a safe deposit box in a New York City bank.
No. The fireplace would be safer in the winter. In fact, the book lists the
two safest banks in each state. Also, some of the safer banks in the entire
country. None of the major money center banks made those lists. The safer
banks tend to be small. They tend to be rather conservative. They tend to
have a lot of Treasury bills in their holdings because, believe it or not,
some bank managements actually are somewhat concerned and not willing to
speculate in derivatives and lend out all of their money to questionable
enterprises.
I want to talk about safe banks. Certainly, people remember the bank holiday
during the midst of the depression when the banks were closed. The first
thing that comes to mind, Bob, is I look at some of the large bank
portfolios, particularly the derivative books of our largest banks. They're
looking more like hedge funds than they are the safety of a prime bank.
Absolutely. Do you know, it was actually shocking to me to find out, that
for nearly two centuries, the courts in the United States have upheld an
interpretation of deposits to mean, not money that you've delivered for safe
keeping, but money that you have lent to your bank? That means that if they
go under, it's sorry Charlie. Well, you know you lent it. It was your risk.
Too bad. You have no recourse. You can't sue them. They didn't promise to
safe keep your money. They said thank you for the loan, now we'll go out and
lend it again and try to make more money than we're paying you for it.
Now, the key here is you need to have your money in a bank that isn't about
to go under because it's loans are so at risk. Unfortunately, today in the
United States, most banks by far have lent out a tremendous percentage of
their deposits. In some cases, even more than 100% of what they have on
deposit. The slightest run or demand by depositors could cause these banks
to shut their windows. Now, we all know about the FDIC and we can talk about
that too, but the point is these banks are lent out to the hilt. They lent
your money out. The only way to get safe is to put your money either in a
bank that has extremely high liquidity, and there are a few in the world, a
few that exist only to safeguard your money. Or, and I think this would be
the second best solution, is to take it out of the banking system and, at
least for the time being, lend it directly to the U. S. government by buying
treasury bills.
(Editor's Note: Average investors who've read Conquer the Crash and acted on
it should now be satisfactorily positioned for the coming depression. High
net worth individuals may wish to go a step further than the recommendations
in Conquer the Crash.
From September 30 to October 6, SafeWealth will provide first-class
accommodations, multiple seminar-style presentations, meetings with CEOs and
offices of ultra-safe depositories and other financial institutions in
Switzerland and private discussions to suit your needs.
The time to go is before the market crashes and the demand for such services
skyrockets. The fee is $15,000 per couple. The maximum attendance is 25, and
last I heard, there are several slots left.