Bob Prechter has published a second edition of his New York Times–best-selling book, Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, and it's now available online for pre-order. The first edition became a New York Times bestseller in 2002 with more than 100,000 people reading it in time to protect their wealth before the sequential crashes in junk bonds, property, stocks and commodities.
The second edition includes 188 new pages of real-time commentary on markets and the mounting prospects for deflation -- rather than inflation -- as the true threat to the U.S. economy. In the first edition, Prechter described dozens of today’s financial and economic troubles. He not only explained why they would happen but also advised readers how to protect themselves from a deflationary depression. Many of the events forecast in the book still lie ahead.
The book's middle chapters include titles such as: 'Should You Invest in Bonds?'; ' Should You Invest in Collectibles?'; 'How to Find a Safe Bank'; and 'What You Should Do If You Run a Business.' Here are 15 brief excerpts that cover topics from bailouts to falling tax receipts to give you a sense of the useful information you will get in
Conquer the Crash, 2nd edition, published by Wiley, which is available online for
pre-order now.
1. Credit Deflation "Usually the culprit behind [simultaneous stock and real estate] declines is a credit deflation. If there were ever a time we were poised for such a decline, it is now." Chapter 16
2. Bailout Schemes “If [governments] leap unwisely into bailout schemes, they will risk damaging the integrity of their own debt, triggering a fall in its price. Either way … deflation will put the brakes on their actions.” Chapter 32
3. Banking and Insurance Stocks “We will see stocks going down 90 percent and more … [and] bank and insurance company failures….” Chapter 14
4. Collateralized Securities "Banks and mortgage companies … have issued $6 trillion worth of [securitized loans]…. In a major economic downturn, this credit structure will implode." Chapter 19
5. Derivatives “Leveraged derivatives pose one of the greatest risks to banks….” Chapter 19
6. Mortgage-Backed Securities "Major financial institutions actually invest in huge packages of … mortgages, an investment that they and their clients (which may include you) will surely regret…. Chapter 16
7. Fannie Mae and Freddie Mac “Investors in these companies’ stocks and bonds will be just as surprised when [Fannie and Freddie's] stock prices and bond ratings collapse.” Chapter 25
8. Banks “Banks are not just lent to the hilt, they’re past it. In a fearful market, liquidity even on these so called ‘securities’ [corporate, municipal, and mortgage-backed bonds] will dry up.”… One expert advises, ‘The larger, more diversified banks at this point are the safer place to be.' That assertion will surely be severely tested….” Chapter 19
9. Insurance Companies “The values of insurance company holdings, from stocks to bonds to real estate (and probably including junk bonds as well), will be falling precipitously…. As the values of most investments fall, the value of insurance companies’ portfolios will fall…. When insurance companies implode, they file for bankruptcy…." Chapters 15, 24
10. Real Estate "What screams 'bubble' – giant, historic bubble – in real estate today is the system-wide extension of massive amounts of credit to finance property purchases…. [People] have been taking out home equity loans so they can buy stocks and TVs and cars…. This widespread practice is brewing a terrible disaster.” Chapter 16
11. Rating Services “Most rating services will not see it coming.” Chapter 25
12. Political Leaders “A leader does not control his country’s economy, but the economy mightily controls his image.” Chapter 27
13. Psychological Change “When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation....” Chapter 9
14. Confidence “Confidence has probably reached its limit. A multi-decade deceleration in the U.S. economy … will soon stress debtors’ ability to pay…. Total credit will contract, so bank deposits will contract, so the supply of money will contract….” Chapter 11
15. Falling Tax Receipts "Governments … spend and borrow throughout the good times and find themselves strapped in bad times, when tax receipts fall." Chapter 32
"Retirement programs such as Social Security in the U.S. are wealth-transfer schemes, not funded insurance, so they rely upon the government’s tax receipts. Likewise, Medicaid is a federally subsidized state-funded health insurance program, and as such, it relies upon transfers of states’ tax receipts. When people’s earnings collapse in a depression, so does the amount of taxes paid, which forces the value of wealth transfers downward." Chapter 32
"The tax receipts that pay for roads, police and jails, fire departments, trash pickup, emergency (911) monitoring, water systems and so on will fall to such low levels that services will be restricted." Chapter 32