Be Prepared

EWI ^ | May-June 2001 | Bob Prechter

[Tauzero]

Here's a short list of things you can do:

• Wrap up any real estate sales deals you are working and get out of all investment real estate.
   

• If you have a huge mortgage on a McMansion or condo that you cannot afford unless your current income maintains, sell it and move into something more reasonable.
   

• If you are just as happy renting your residence as owning, do it.
   

• If you have a choice of employment, try to think about which job will best weather the coming financial and economic storm.
   

• If you are entrepreneurial, start thinking about what people will need when times get hard.
   

• If you manage a bank, insurance company, money management firm or other financial institution, work out of all your complicated derivative positions. Cut back on speculative positions, particularly bullish ones. Get rid of all second-tier debt investments. Get on solid footing with investments that are liquid and easy for a potential buyer to understand.
   

• Review your debt holdings. If you have municipal bonds, consumer debt "investments," real estate debt, junk bonds or anything other than top-grade paper, pawn it off on some sucker who thinks that the Fed controls the economy.
   

• If you are an employee, try to get an employment contract with a time guarantee that will take you at least into 2005, with a lump-sum payoff in case of layoff.
   

• In you are an employer, don't sign any such thing. Decide now how you will handle a depression.
   

• If you own expensive property that depends upon massive public patronage, such as an amusement park, sports team, arts center or other such facility, sell it, or lease it insured.
   

• Review your bank's balance sheet and investment positions. If you don't like them, find a safe bank. (Due to a big response, the U.S. bank we recommended two years ago no longer takes out-of-state accounts. This is a lesson to act early! Weiss Research (PO Box 109665, Palm Beach Gardens FL33410, 561-627-3300) and SafeWealth (PO Box 1995, Windsor, Berkshire SL45LL United Kingdom, 441-753-554-461) can help you locate a U.S. or foreign bank respectively.
   

• Involve your significant others in your decisions. It will be crucial that your home or business partners be in tune with your thinking before it's too late to act.
   

• Talk to overly invested parents or in-laws who may be planning to pass on their investments to you. See if you can get them to become liquid near the end of the advance.
   

• Make sure that your passport is current, since demand may increase later and delay processing.
   

• Re-read At the Crest of the Tidal Wave.
   

• Smile! because you will not be jumping out of the window; you'll be buying your new mansion or office building from the bank a few years hence at ten cents on the dollar.

• If you run a business that normally carries a large business inventory (such as an auto or boat dealership), try to reduce it by the first quarter of 2002.
   

• If you require an inventory of items that may be hard to obtain in a depression, stock up.
   

• If you own rental property, try to get long-term leases with an early termination penalty clause.
   

• If you rent your living or office space, make sure that your lease either allows you to leave on short notice or has a clause providing you with lower rent if like units are reduced in price to new renters.
   

• If you have invested in art or "collectibles" that you do not want for personal aesthetic value, sell them this year.
   

• Recall EWT's arguments about why Y2K would be a non-event when most people said it would be a disaster. Then consider the fact that we will soon be expecting the onset of an economic and social disaster now that most people are complacent. Dig out that old "Y2K" list of preparation items and buy from it whatever you would like to have - such as an electric generator, some emergency foods, etc. - some at half the price they were selling for in December 1999.
   

• If you want to have kids, hurry up. You won't feel much like it three years from now. (See the September 1999 Special Report, "Stocks and Sex."
   

• If you are tempted by a bargain price on a product for which you have no foreseeable need, resist the temptation to buy. The likelihood is that it will fall further still. As it does, there is a good chance you will find you didn't want it anyway.
   

• Work for a business that provides services to rich people. A lot of people will not have their assets tied up in the stock market, and their real net worth will soar. As a second choice, work for a business that provides services that help strapped people save money.

 
Be ready to put up with the following:

Economists will claim that the recession is over or there was no recession and that the next wave of boom has already begun or is dead ahead.   The Fed will celebrate its engineering of a "soft landing," which in actuality was simply a contraction commensurate with a fourth wave correction of Intermediate degree.   The media will tell us how the public in its collective wisdom held onto its stocks for the long haul.   We will hear "I told you so's; and reiteration that the market always goes up long term.   We will be reminded that the baby-boomer boom is not due to peak for another six or seven years.   We will hear that people who participated in the Internet mania were dopes and that the smart ones are fully invested in blue chips and S&P index funds.   IPOs will become popular again.   The "Dow 30,000+" books will be back in vogue.   Several major magazine covers will feature the return of the bull market and/or the resumption of the rising economy and/or Alan Greenspan as a savior.   "Oldies Radio" will survive for another six to twelve months.   Politicians will look pretty smart. The President's ratings will be moderately to very favorable, no matter what he does.

[Tauzero]

ping

[freedomlover]

The main question I have is "how do we keep FR up and how can I keep getting it?" OK, two questions.

[jcmfreedom]

This is very interesting considering what we already know. I have to agree with the long term dates before the tide turns.

I heard yesterday that the bottom will fall out of Japan in April. That should really make things here in the U.S. interesting!

It's also interesting that both times that I tried to post a brief article to freepers for their input on the Japan economy, it was cut. I read and re-read directions for posting however, I must have missed something.

[jacquej]

Can some kind soul please help a clueless grandmother in on what this means? I thought we were over the "hump" so to speak, but this suggests that dire times are ahead.

Is it time to stock up on seeds and hunker down, and if so, why... I mean, doesn't the ever-so-wonderful gubmint bail us out when things get rocky?

They sure have more of my money than I do!

[John H K]

Well, there's a small community of people to which a looming massive economic depression is always around the corner; it's almost like a religion. A lot of them sell a lot of books and make a lot of money on seminars about it. Really started in the 70s, as best I can tell. They've been completely wrong for 30 years but the tune never changes.

I think there are a lot of different psychological reasons why it's popular; while this particular author claims that he didn't think Y2K was a big deal, many of the people backing "coming economic depression" claims were very big on Y2K being the end of society as we know it, advocating survivalist stuff, etc. But most of these types are goldbugs; that is, people obsessed with gold as an investment, in persuading other people to buy gold (which then would make the gold they already have more valuable) or advocating the US government go back on the Gold Standard as a panacea to all the ills of the world. No evidience this author is a goldbug but these types often turn out to be "crypto-goldbugs" after you dig under the surface.

Basically, people like predicting doom, having their predictions mocked, but then seeing doom come true; they fantasize about being able to say "I told you so" and being the only ones prepared while everyone else suffers. Very powerful fantasy.

The only way we CAN get a big economic depression is if these types can convince everyone that one is coming; if the author of the first post in this thread got everyone in the country to take the actions that he advocates to PREPARE for the depression, then we actually WOULD have a depression.

[Tauzero]

"Well, there's a small community of people to which a looming massive economic depression is always around the corner"

Fortunately, Bob Prechter, the author of the suggestions, isn't one of them. He was very bullish on the 80s, for example. Started getting bullish in 1979, as a matter of fact.

"The only way we CAN get a big economic depression is if these types can convince everyone that one is coming"

Oh no no. By definition the majority must be wrong at major economic turning points. If everyone was convinced one was coming, or if everyone was convinced things were just going to get worse, that'd be a reason to be bullish.

[rohry]

Looks like alot of opinion on your part with no evidence of knowing what you are talking about...paint a broad brush across anything you don't agree with and you can belittle it. Some people think that the largest debt ever created in the history of the world might mean something...

[rohry]

Did I write this last night when I imbibed too much?

If this was a test I would have scored 95%...