Robert Prechter says Dow can go as low as 1000. Dr. Marc Faber says as high as anything to whom should we listen to?

It is said “If you ask same question to 10 economist you get 10 different answers.”

I have been following Dr. Marc Faber for a while and I am one of the big time fans of him. Robert Prechter who is another “Gray hair Wall street guru”, believes in Elliott Wave Principal can not be ignored. Even Dr Marc Faber says that we cannot dismiss him.

Dr Faber’s prediction is based on philosophy that till the time Fed keeps “Money Tap” ON and does not soak any liquidity out of system (by keeping ~ 0% Interest rate), markets will go up and up!! What we saw from Mar 2009 till date is exactly the same. None of the economic parameters have improved unemployment is at it’s record high. Still market is UP. And hence Mark Faber is right.

At the same time if you were tracking the news and market carefully since Sep 2007 (when Sub Prime issue was open to public) you can see that Markets were going down though FED was “co-operating”. Since Sep 2008 Fed started lowering Interest rates and made it effectively 0 in early 2009. At the same time via various means Fed “bailed out” number of Financial Institutes like never before. Still Dow travelled from 14000  - 6600 From Oct 2007 to Mar 2009.

So saying that If Fed Print money market will go up may prove wrong in Short term.

In March I remember mood was extremely pessimistic despite all bailouts money and support from governments. Dow was going down daily by 4-5% and there was not a single “good news” in media. People were angry on Banks, governments. Suddenly news came from Citibank saying they are expecting profit in Q1 2009. According to me that was a turning point in this recession. So we can’t ignore that even “news” can change the trend of market. And of course once city says that they expect profit their competitors have to say that they are expecting profit sooner or later and that changed the direction. So if that news would not have came Robert Prechter's figure of 1000 was perhaps only few weeks away. 

Once the direction was changed, 0% Interest rate and bailout money started working and it gave a huge rally of almost 6600 – 10600 in same year.

Concluding: For Common man it’s best to remain diversified strictly as all these big names can be correct in some or other way and if you are not diversified it can be very risky at times. Before ending let me put one sentence that I heard in this week from David Morgan “If all are thinking same then perhaps no one is thinking really”.

Thanks

Amaresh Ashok Gangal