Replies to post #36693 on Zeev's Turnips Patch-No Politics (ZEEV)

[Ace Hanlon]

I would not go by Prechter. His long-term record is very bad despite a few good calls.

His call for Dow 1000 strikes me as absurd barring something like a nuclear bomb going off in downtown Manhattan. The grizzly bears I respect -- people like Saville, Hussman, and Alan Newman -- talk about the bear troughing around Dow 5000-6000.

I am frankly agnostic on where the ultimate trough will be. What I am quite sure is that the recent lows will be tested again in the not too distant future -- possibly before the end of this year. And that this rally will be substantially corrected soon after the election.

[Public Heel]

CoalTrain/George - Prechter - I've read that book. It's basically a recitation of Elliott Wave Theory, which says that the 2000 top was the end of a typical "5th Wave" up from a major bottom (in 1933), and that we will now repeat the 1929-1933 experience.

Usually, I dimiss this kind of thing as mumbo-jumbo, but I like the psychological and economic justifications that the Wavers give for a "typical" 5-wave upmove (if there really is such a thing).

Is he grandstanding? Yes. After all, if the Dow goes anywhere near as low as he's predicting, he'll have been so much righter than anyone else that he'll be able to write his own ticket for the rest of his life: books, lectures, the easy life of a talking head...

One thing to keep in mind is that his prediction requires that the collapse begin to feed off itself. So far, that really hasn't happened. There has been a huge boom in real estate, a miniscule increase in unemployment, and the opposite of a credit crunch (I don't know what you'd call that... credit mania?)

There's no reason for the Dow to go below 4000 (or probably 5000) based on current fundamentals. However, if the collapse starts to feed off itself, if a credit crunch gets going, if unemployment starts to take off... then much lower levels will be seen. Of course, that's when we go over the line from recession to depression. My WAG as to the probability: 25%.