The Evergreen Portfolio: Timeless Strategies to Survive and Prosper from Investing Pros

Chapter 6. Conquer the Crash, Condensed*

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Robert Prechter

My first book, Elliott Wave Principle, which I wrote with A. J. Frost, was very bullish. It came out in November 1978, with the Dow at 790. Today the outlook is much different. Now is not the time to take financial risks. It's time to batten the hatches so you can emerge safe from the storm.

A Myth Exposed

How many times over the past decade have you heard glowing reports about the "New Economy"? Economists proclaim that economic growth in the new Information Age has been "unprecedented" in its vibrancy, resilience, and scope. Rhetoric is cheap. Evidence is something else.

What would you say if you discovered that we have not had anything near a New Economy, that all that talk is a lie?

Figure 6.1 summarizes a shocking fact: The economic expansion during wave V, which lasted from 1974 to 2000, was demonstrably weaker than that during the preceding rising phase, wave III, lasted from 1942 to 1966. This tremendous bull market in stocks in wave V is the great "boom" that people feel in their bones. The economic vigor of wave V, the one that has received so much radiant press, failed to measure up to that of wave III by every meaningful comparison.

Figure 6.1. Economic Expansion Phases

Source: © 2002 Elliott Wave International; data courtesy of Federal Reserve Board.

So you see, it has not been a New Economy after all but rather a comparatively ...