Prechter and His Dow 1000 Prediction
That’s all that it is, a prediction. Nothing to get all ruffled up about. Robert Prechter is highly intelligent, has written countless books, and is one of the foremost economists in the country. An economist I can truly say I respect after reading several of his books. But this is one of those Nuriel Rubini types of attention grabbing headlines as a hedge in case the Dow hits 1000, he can take credit for it, just like Roubini took a swing for the fences when he said there will be a Credit Crisis that will cripple housing, as if that wasn’t already obvious by the time he mentioned it, but he became the face of the grim reaper. And recently, Mr. Roubini turned bullish. So might Prechter be taking over the grim reaper gown from Mr. Rubini? Stay tuned, while you work on your tan, not while you stare at your screen. There is one and only one thing you should be doing right now, and that’s NOT TRADING. Work on your tan, go to the beach, the pool, the sundeck, the Hamptons, whatever. Get the heck out of the office. Unless you really prefer a shortened life.
But this Dow 1000 idea of his seems like Vanity to me. An attempt to grab some headlines. Sure the stimulus is wearing off, and the economy has not started growing enough to offset the stimulus loss, but Dow 1000? Please.
Bear Market multiples have always bottomed in the single digits against the S&P 500. IF we were at a multiple of 8x, and that’s factoring in a Zero Interest Rate Policy (aka ZIRP), which makes it almost impossible to get to that level, then we would see Dow somewhere in the 4000 range.
Scratching that off the “reality” list of possibilities.
Let’s think outside the box. The $100+ billion per year we’re spending on the war is going to be re-directed towards stimulus packages conjured up by our tax & spend, or spend & tax Democrat’s, as is their duty and obligation, and we’re right back to Dow 6000. So I’m not saying prepare for a cascade sell-off, although the quantitative data is HORRIBLE right now, there’s no volume to cause that, and a lack of volume causes markets to slowly sink.
It’s more likely we’ll get that September rally followed by an October Surprise that will reward those sitting on piles of cash to deploy.
Get that? Some of you are hard of hearing, but can read. Sit on cash and prepare to buy stocks A LOT CHEAPER than they are today.
**Disclosures: Author is out of the stocks in entirety and is not even short the market, preferring the pool and Momosas.
