Batra & Prechter on Stocks

...continued from yesterday...

Stocks

Batra, page 152: “stay away from investing in common stocks, and sell any that you may now own by the presidential election in November .... Note that…stocks will not drop in a straight line..but the trend would be downward, with the Dow plummeting by as much as 80 percent over two to three years.” Batra wrote that after setting aside enough liquid cash to survive the imminent depression, consider investing in put options.

Prechter’s advice: short selling could become outlawed but by the time political authorities do that, the market will have bottomed. Selling stocks short is a great idea at the onset of a deflationary depression, especially shorting banks and other financial companies. Avoid shorting defense and natural resource stocks as they could move up instead of down with the overall market. Unfortunately, there are structural risks in being in stocks during panic sell-offs.

The exchanges involved might refuse to or become incapable of processing of your orders. Some examples that occur to me are: your order might be filled but confirmation of the fill will not be given to you on a timely basis, or your broker could go bankrupt thereby delaying your right to access funds in your account, or the exchange could suspend trading for weeks or months thereby locking you into your position and exposing you to a gap-up that wipes out your account when the exchange resumes business.

...continued tomorrow...

Copyright 2008 Raymond T. Lee. All rights reserved.
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