During the 1980s, Bob Prechter won numerous awards for market timing as well as the United States Trading Championship, culminating in Financial News Network (now CNBC) granting him the title, "Guru of the Decade." In 1990-1991, he was elected and served as president of the nation-al Market Technicians Association in its 21st year.

He has also published a seminal book on Elliott wave analysis titled, “Elliott Wave Principle – Key To Market Behavior,” three books on the major practitioners of wave analysis, and books on his own views in Prechter's Perspective and At the Crest of the Tidal Wave. 

Part 1

In your professional career, you’ve made a number of long-term market forecasts that lie far outside of conventional opinion. Is there a reason why you have so often stood outside the crowd?

I make my forecasts using the Wave Principle. I don’t rely on any data external to the market. I study the charts and interpret the waves as best I can. News is not helpful – in fact, it’s counter-productive. I could do this on a desert island as long as I had access to the charts. This method often places my forecasts outside of public opinion because the majority relies on news, which is always bullish at tops and bearish at bottoms.

Majority opinion cannot be any other way, because the herding nature of human beings forms a popular consensus, which creates the market’s trends and turns.

Your first big public forecast was made in 1978 in your book, “Elliott Wave Principle – Key To Market Behavior,” which you wrote with A.J. Frost. Can you tell us more about this forecast and the financial climate that it was made in?

It’s easy to forget, but the late ‘70s were a period of widespread financial worry. People were fairly resigned to a gloomy view of the stock market and the economy. Inflation and gas prices were skyrocketing, and interest rates were on their way to new all-time highs. Portfolio strategists were calling for the final smash of the secular bear market that began in 1966. A public opinion poll showed that the U.S. public was more negative about “the future” than at any time since the poll’s origination in the 1940s.

In 1978, the Dow moved as low as 740 but it never came near the 1974 low at 577. In the book, I described, along with A.J. Frost, “the current bull market in stocks…which should accompany a breakout to new all-time highs.”

Which of course it did.

Yes. We knew that wave 5 had begun and would overcome the gloom.

When you called for the Dow to reach as high as 4000, people thought you were crazy – just as some think of you today.

Who, me?

You also successfully forecast the crash in 1987, didn’t you?

Nobody specifically predicted a “crash” before it started, including me. But I did tell people to sell, right when the sentiment indicators showed the majority bullish. In fact, that was one of the reasons I turned cautious. Then the Dow fell 900 points, which back then meant something!

Haven’t you also nailed gold and silver?

Yes, for over 20 years. They have been my most consistent markets.

But allow me to caveat my own track record. In the ‘90s I made the biggest mistake of my career. Even though I predicted that “Investor mass psychology should reach manic proportions” in the stock market, I never imagined that the mania would carry on as long as it did. Wave 5 continued higher throughout the ‘90s, and I got off too early.

Did that turn you bullish?

Quite the opposite. I think my basic interpretation of the long-term financial picture is correct. I’m not timing a five or ten-year trend here; I’m attempting to pinpoint the termination of a 200+ year move and a killer bear market. The higher it went, the more bearish I got.

Let’s talk about your current long-term forecast. You’ve just written a book titled “Conquer The Crash.”

All signals point to the fact that wave 5, which is the final leg up of our great bull market, topped in early 2000. Mass psychological trends are now fueling a corrective move that will decimate stock prices.

I believe it’s time for people to prepare for a vast economic disaster, which will include a deflationary crash and an economic depression as bad or worse than the one suffered in the early 1930s.

When will it begin?

It is already in progress!

I’m not sure the world is ready for this.

Has it ever been? Disasters of this magnitude always catch the general populace off guard. Today is no exception – too few are even remotely prepared for this crash.

What should we do?

My book is subtitled “How To Survive and Prosper in a Deflationary Depression,” and it will tell you exactly how to do just that. There’s still time to prepare for this impending financial disaster, but not much. Once things really get going, the panic will make it more difficult to protect yourself.

You’ve got to start preparing now

 Part 1     Part 2      Part 3