Adios Phony Rally

A few days ago, a friend told me I should read Ron Paul’s Meltdown:A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts will Make Things Worse, which was published February 9, 2009, almost exactly at the bottom of a two year crash that wiped out 50% of the market. I said thanks, but I had been preparing for the event since  reading Robert Prechter’s Conquer the Crash, which was published in 2002, six years before the crash.

I don’t doubt that Meltdown was an interesting read. But what good does it do an investor to find out after the fact why he got severely whacked? Conquer the Crash was not a popular book because it went against the then universally bullish outlook. But anyone who understood the premise behind it and acted on the recommendation to get out of stocks, investment real estate, and most every other investment and hold cash was spared a mountain of grief.

The 2007-09 crash, according the Wave Principle, was Meltdown 1.0. The rally that peaked in April of this year ended the countertrend rally, and we are now in the early stages of Meltdown 2.0. The most recent little runup, which began in early October should be coming to its end within the next few sessions. Thereafter, the Wave Principle calls for a year long drop that should not pause much until the Dow Industrials has lost 70-80 percent of its value.


Look for good news to accompany the peak of this contra trend rally. Washington will have passed the extension to the tax cut, Europe will be mending its fences, Christmas shopping will be good. It’ll all be very nice, and the suits on Wall Street will be proclaiming a new bull market along with a wonderful economy.

Then, next Halloween, When every stockholder in the land is avoiding tall buildings, you can buy any number of bearish books that tell you why you should have stood in bed during 2012.

Forewarned is better.

Happy Holidays,


The author makes no representation as to the accuracy of the quoted material, but believes the sources to be reliable. No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.

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