There may be some forecasters who think the Dow eventually will surpass the 13045 target I’ve been touting here for the last month, but certainly none who are more bearish on the economy than I.  Not even Bob Prechter, who recently lobbed a 13000 target of his own into the firmament of bullish mind-benders. There would appear to be two schools of thought on this: 1) that when permabears like Bob Prechter and I turn bullish, there are no more pessimists left to sell stocks, hence the market is vulnerable to a crash; or, 2) we naysayers are not the least bit bullish, not in our hearts, at least, but we sure as hell know when a chart is screaming "rally!!!"

Take your  pick. But for what it’s worth, the Elliott Wave guys are the only technicians I know of who regularly come up with targets precisely coincident with my own. In that sense they are kindred souls, even if I tend to shrug off all of that Grand Supercycle stuff that would have us ponder charts going back to the 1700s.  Concerning Prechter, more than a kindred soul he is a mentor who has blazed a trail on the topic of deflation. The fact that he can foresee no outcome for a terminally shaky world economy other than deflation tells me that he “gets it.” He is going to be right, for reasons argued at length, and brilliantly, in several of his books. In my opinion, anyone who thinks inflation is going to undo us has no fundamental understanding of the problem. Less charitably, I would say that they are all fools at worst, blind optimists at best -- even a been-around-the-block-kinda-guy-who-should-know-better like Gary North.  

(Click on chart to enlarge)

Where Bob Prechter and I have diverged in our thinking is about gold. His long-term forecast for the metal has been famously bearish, while mine, much less famously, has been quite bullish: “The no-brainer investment of our lifetime”. After all, I’ve always reasoned, how could the impending collapse of a global financial system drowning in bogus money not be bullish for gold over the long haul? In fact, there is an answer to that question that I find increasingly compelling, even if I continue to hold mining shares in my sons’ college funds. I still consider precious-metal stocks a good long-term investment, since I am convinced bullion will retain its purchasing power no matter what happens to the economy. But I’m no longer so sure that it’s an absolute no-brainer for investors to eschew all other classes of assets in favor of precious metals alone.

Where Prechter and I seem to agree is in our willingness to consider a question that understandably rankles gold bugs, to wit:  In a world cast into abject penury by deflation, will there be sufficient savings to bid gold to the astronomical heights some gurus are predicting? Prechter seems rather certain that deflation will prevent the gold price from soaring. I find this line of thinking persuasive but cannot dismiss the logic that the cosmic expansion of credit already in the pipeline must at some point produce serious inflation. Of course, one could argue that we've already had serious inflation -- in real estate and financial assets -- and that only deflation remains to chasten speculators and profligate borrowers. Regardless, one thing about which I am quite certain is that energy and other essentials will never be priced in gold or a gold-backed currency. For if the day comes when consumers around the world have to start paying for real goods, particularly energy, with “hard” money, we will have a deflation that’ll make the 1930s seem like a hayride in June.  

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I’ll be in Vancouver this weekend teaching the Hidden Pivot Method, but there are still some places left at the two that remain -- in San Francisco on November 11-12; and in Sydney, Australia on  December 2-3.  You can  request a registration form and further details by clicking here.  Please specify which session you are interested in.  If you act now, there is still a chance to claim a free Hidden-Pivot calculator and one of our snazzy Rick’s Picks combed-cotton polo shirts in your choice of colors.