Prechter's Perspective

Prechter's Perspective, by Robert Prechter, Jr. and edited by Peter R. Kendall, gives you a unique view of Robert Prechter's thinking about the Elliott Wave Principle, investing, market behavior and social psychology. The book's question and answer format lets Prechter share his insights in an informal but thought-provoking style. You will enjoy reading the book's three sections:

Explanations - Prechter Meets Elliott
Applications - Money Making Rules for the Investor
Implications - Society and the Grand Supercycle

You may buy the book from the Elliott Wave International bookstore.

Review of Prechter's Perspective

This book, first published in 1996 and revised in 2004, is my favorite of the ones that I have read by Robert Prechter. The conversational style of the question and answer format let me really appreciate how Prechter thinks and feels about his three decades of investing and Elliott Wave Principle work. Reading the book gave me the sense of almost being in the room with Prechter as he answered a broad range of questions. Peter Kendall did a masterful job putting many years worth of material together to create a book that flows smoothly in its logic and presentation.

The book is full of details about the Elliott Wave Principle, stock market history and sound investing advice. But what makes it really fascinating reading is the story of Robert Prechter's journey throughout his professional career. He began as a trader focused on making money, and he is now contemplating the totality of mankind's activities. On the book's last page Prechter speaks of the power of the Elliott Wave Principle, "It provides a framework within which to observe, reflect upon and enjoy the beauty of nature in the activity of man." Rather than just concentrating on how to make money, Prechter is thinking on a grand scale as he pioneers a new branch of social science thinking and research.

Explanations - Prechter Meets Elliott

Prechter tells how he was first "captured" by the Elliott Wave Principle, which was discovered by R.N. Elliott, and how he applied what he learned to make money in gold stocks in 1974, silver mining stocks in 1993 and bonds in 1994. He speaks candidly about his great and not so great calls on the direction of the market. In 2000 he correctly called the surge in metals saying, "The next bull market in the metals will be a whopper." But he called for an end to the 1982 to 2000 bull market years before it finally crashed. Later in the book Prechter states, "I thought the bull market would last five years, eight at the outside. It lasted eighteen years from 1982. The time factor is the least predictable element in the Wave Principle. Form is unfailing - you have only 13 patterns."

Prechter shares his work habits with his readers telling us that he used to watch the stock market TV station in his office but, "I got rid of it ten years ago." Good decision!

Applications - Money Making Rules for the Investor

Prechter gives his six-point list of requirements for successful trading. He stresses the need for discipline and hard word because making money in any market is not easy. He tells us the get a foundation upon which to make sound investing decisions. He concludes, "And the only way to do that is to start reading."

Should you buy and hold or time your investments? Prechter argues that buy and hold works for multi-year upsides but buy and holders are in for a rude shock when the market turns bearish for a long period. My own work on buy and hold shows that the "long-run" for most investors is not hundreds of years but more like twenty to forty years. If much of your investing lifetime occurs in a sideways or bear market, you probably will not make lots of money, if any, with buy and hold.

Implications - Society and the Grand Supercycle

What makes the market move up and down? Many people believe that markets respond to daily events, big and small. Therefore, for some people, closely watching financial news networks like CNBC is a must. But Prechter argues that it is patterned social mood than guides social actions, and because the market is a large collection of people interacting together, its direction is governed by social mood. In short when people are positive and exuberant, the market goes up. But when people are worried and fearful the market goes down. This idea is the foundation of what Prechter calls Socionomics.

Next, the discussion turns to Prechter's view of the economy (the interview was in 2000). Prechter calls for a Grand Supercycle bear market and a world-wide economic calamity of a magnitude equal to or greater than the depression that began after the 1929 stock market crash. He describes a collapsing stock market in which many stocks will lose all or most of their value.

The book ends with Prechter giving examples of how the Elliott Wave Principle applies to politics, history, war, pop music and more.

Prechter's Perspective is a excellent book and I highly recommend it. To purchase it and other Elliott Wave based books please visit the Elliott Wave International bookstore.

Also, be sure to view History's Hidden Engine, a free entertaining and informative video all about the Elliott Wave Principle and much more.

Reviewed by Richard Howard.

Posted January 7, 2007.