Thursday, November 5, 2009
Prophet of the Eternal Crash
Bob Prechter's Bloomberg Interviews over the years were arranged to create a cool (McLuhan-cool, not iPhone-cool) multimedia presentation that respects the viewer's intelligence. The promotional materials of the Elliot Wave Institute are often a cut above the others. As a fellow marketer, I find they are the rare investment advisory service that succeeds in projecting some self-respect to me. That make them actually intriguing and a joy to read. Small wonder that the Elliot guys are an object of imitation.
Yes, Prechter intrigues me. Other investment gurus I may want to have a beer or party with (on the road to nowhere), but Prechter I would like to do the Vulkan mind meld with. Like me, he is a Mensan and like me, an obsessive bear. Unlike me, he has professional background in psychology and in economics and plenty of research to back his gut feeling - which has been predicting a bearish market since the 70's. All I had was a deep mistrust of The Man. It led me to the same bearish predictions since the 70's but I had no diplomas to back my ill gut feeling. So you see son, you need to study.
I love Prechter's thinking that external events are not a cause of behavior but its result. On the personal domain, psychology (and criminology) teaches us that "I had no choice", "I was just following orders", "the devil made me do it" and "look what you made me do" (thanks, RAW) are signs of consciousness in distress. But on the social domain, we do not apply the lessons of psychology and accept that external events are indeed a cause. Does this mean we accept that our society is made of individuals in distress? In the domain of economy, we chart and expect the herd behavior - it is what we call a trend.
The other night I mentioned this idea to a psychologist friend, and it reminded her of Roosevelt's "we have nothing to fear but fear itself". Yes, this understanding is the way of the leader, the therapist and the guru. We all have heard the cliche that our world is sick, but few realize it is true, in the clinical sense. Gurus, however, have always taught that. And now, after being inspired by some Prechter reading, I watch the talking heads on TV pointing to some graph and am acutely aware that these graphs are literally charting the steps of the lemming dance down the slippery slope.
But if, like Prechter, your predictions are constantly bearish about all and every thing, what's the difference between an enlightened guru, a direct action anti-globalization activist and my late grandmother? They all have a deep truth to share but provide vague timing and hazy details. In contrast, the shrewd "no future / Kali yuga" investor wants to know not that society is going down - we do, it will, and get over it already - but when to short it, so that we can be richer than the other lemmings and go down in style (or help the other lemmings if you are compassionately inclined).
And watching this series of TV interviews done along the last couple of turbulent years, it seems to me Prechter's is an unfortunately uniform dark perspective, always thinly veiled by the same thin Vulkan half-smile. How sad it must be, being the prophet of the eternal crash! It seems one has to become familiar with his fin-du-siecle mood, read it like tea leaves, and subtract his prevailing melancholy from his public appearances to divulge the news items from it. Like a guru's asistant who, upon seeing his guru sad one day, rushes out and sells all his stocks, perhaps those familiar with the pervading Prechterian darkness, Prechter's comments can be useful for timing.
Besides, I don't get how he can suggest viewing stocks in gold terms because it is "real money" - and almost in the same breath leave it out of the short list of "hard assets". At that moment, I could almost swear that behind the suit there lives a habitual nay-sayer yet more misanthropic than even myself. Those smart pessimists are such a nuisance. I stick to my bricks. For now. If worst comes to worst I will have them fashioned into a thick ghetto-style chain around my neck. We'll see who's darker when we hit bottom and hear the bell ring!
Posted by Mother of All Carry Trades at 10:24 PM