I wrote this article back in 2005. It's interesting to look back at that particular timeframe and see the scam before the proverbial crap hit the
fan. Back then Alan Greenspan was still this financial god that everyone on Wall Street still worshipped, and the government and the pundits were
telling us that everything was great. "Go ahead, put all of your money back into the stock market, and realestate never looked better."
Though I saw the realestate bubble, I didn't comment on it within the article (you will see that it's not a short one.) It's one reason that I
didn't see things getting so bad so quickly. I think that I was off by about a year or so, because I didn't grasp at the time how bad the
realestate bubble actually was. You have to keep in mind that before now, a realestate bubble was practically unheard of. We were all pumped with
the propaganda that you could never lose with realestate and that it never went down.
Something else to make note of: I discuss a little bit about Elliot Wave analysis in this article, in particular, the Elliot Wave that had formed
from the 80's and ended this decade. You will note that an Elliot Wave consists of eight waves, five trend waves and three counter trend waves.
Five waves with the trend and a, b, and c waves against the trend. There formed, in the 80's and into the last decade, a five wave uptrend that
culminated in a huge fifth wave dot com bubble that started to reverse into the counter trend at the beginning of this decade (it all has to do with
fractal analysis of the stock market technical analysis charts.)
Well, it seems that by my analysis, we are nearing the end of the B wave up of the counter trend, which means that we will be starting the major, and
always larger, C wave down. The pundits and the Fed are trying to tell us that it's all over, but the worst is yet to come, because the C wave is
always the largest wave of the counter trend. I don't see any light for years to come.. The demographic trends just don't show any hope.
Those of you who trade the markets regularly may be familiar with something called the Elliot Wave Principle. Without getting too complicated here,
this principle was developed by R. N. Elliot, and is based on the nature and patterns associated with what is referred to as fractals. Fractals are
naturally repeating patterns that can be observed in decreasing scale throughout an object. For instance, if you were to observe the seacoast from an
airplane, you would notice certain repeating patterns throughout, and even as you got closer, you would notice smaller degrees of this same repeating
pattern throughout the entire shoreline, even when you are looking at a particular small section of it. R.N. Elliot identified fractal patterns within
the markets, and was able to predict with a high degree of accuracy the ebb and flow of the stock market by learning to read these fractal patterns.
According to Elliot, each wave of a stock market line graph subdivides into various other waves that make up an eight-wave fractal pattern. If the
wave is moving in the same direction as the wave of one larger degree, then it subdivides into five waves. If the wave is heading in the opposite
direction as the wave of one larger degree, then it subdivides into three waves (denoted by the letters A, B, and C in the figure below). Each of
these waves adheres to specific traits and construction, as described in Elliot Wave Principle (1978). Figure 1.2 below is an example of this pattern.
(Conquer the Crash, Prechter p. 23)
It's kinda like digging up an old time capsule. It's kinda fun going back and looking at all of the lunacy. As promised, here's the article:
Article
