The economy: Where we’re at

I did an extended interview with Robert Prechter of Elliott Wave a while back.

Here’s his latest.

If you’re still plugged into Wall Street and its dubious “products” there’s still time to get away before you’re left holding a sack of thin air.

The financial system is in a state of terminal insanity right now and you should walk away from anything that depends of an endless supply of cheap money to maintain itself (and that would include real estate.)

I gave this advice to my System Club members in a letter in 2005.

It seemed crazy at the time.

Then 2008 came.

Well, we got a little bounce after that and like Wile E, Coyote hanging in mid air in a Road Runner cartoon, this craziness can’t go on for ever.

Here’s how Prechter put it in his latest newsletter.

“The ebullience of 2000 was amazing, and the indulgence of 2006-8 was flabbergasting. Now words are insufficient to convey the breadth and depth of the financial insanity that exists. The stock market is overvalued, but no one thinks it matters. The economy is dying, yet economists think it’s fine. Real estate is weighed down by debt, yet institutional investors are buying tens of thousands of homes, to flip. The amount of risky debt is so huge that it can never be repaid, but the public is gorging on it at a record pace. Corporations can’t find any traditional areas worth investing in, yet they are buying their own stock. Most people and institutions, including governments, are broke, but they don’t know it.’

The reason people can’t see disaster coming is that their behavior is the norm around the world. The illusion of financial safety is systemic, and the financial excesses are systemic. When people look around, nothing looks out of place. Only history can put today’s lunacy into perspective.

You can’t blame such optimism on clinical insanity. These are everyday people. They are not so much out of their minds as living entirely inside the public mind, where mood holds sway. They are sharing a global dream state.” – The Elliott Wave Theorist—July 17, 2014

I agree with every word.

– Ken McCarthy

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