Not everyone cares to prepare for a financial environment that will be different from the current bullish one. Just as surely, most people don't want to think about an economic recession. But recent follies in the credit and debt markets have turned some people's minds to the strong possibility of a recession in the United States. For instance, here's the lead from a recent story in the Financial Times, "The R-word Surfaces on Wall Street": The R-word is usually avoided by Wall Street's economists. It tends to be a conversation-stopper when investment bank clients are told to prepare for the worst. "It is like looking a client in the eye and telling them that their child is ugly," says David Rosenberg, chief economist at Merrill Lynch. "It is not what people want to hear." [Financial Times, Sept. 10, 2007] If this is what people think about using the word, "recession," just think how unwilling they are to talk about a depression. Well, Bob Prechter isn't afraid to talk about a depression. In fact, he's written a whole book about how to prepare for a deflationary depression, and now – while the stock market's sun is shining, and people are making financial hay – now might be just the right time to read about how to prepare for a deflationary depression. * * * Excerpted from Conquer the Crash, You Can Survive and Prosper in a Deflationary Depression by Robert R. Prechter, Jr. The ultimate effect of deflation is to reduce the supply of money and credit. Your goal is to make sure that it doesn’t reduce the supply of your money and credit. The ultimate effect of depression is financial ruin. Your goal is to make sure that it doesn't ruin you. Many investment advisors speak as if making money by investing is easy. It's not. What's easy is losing money, which is exactly what most investors do. They might make money for a while, but they lose eventually. Just keeping what you have over a lifetime of investing can be an achievement. That's what this book is designed to help you do, in perhaps the single most difficult financial environment that exists. Protecting your liquid wealth against a deflationary crash and depression is pretty easy once you know what to do. Protecting your other assets and ensuring your livelihood can be serious challenges. Knowing how to proceed used to be the most difficult part of your task, because almost no one writes about the issue. This book remedies that situation. Preparing To Take the Right Actions In a crash and depression, we will see stocks going down 90 percent and more, mutual funds collapsing, massive layoffs, high unemployment, corporate and municipal bankruptcies, bank and insurance company failures and ultimately financial and political crises. The average person, who has no inkling of the risks in the financial system, will be shocked that such things could happen, despite the fact that they have happened repeatedly throughout history. Being unprepared will leave you vulnerable to a major disruption in your life. Being prepared will allow you to make exceptional profits both in the crash and in the ensuing recovery. For now, you should focus on making sure that you do not become a zombie-eyed victim of the depression. The best news of all is that this depression should be relatively brief, though it will seem like an eternity while it is in force. The longest depression on record in the United States lasted three years and five months, from September 1929 to February 1933. The longest sustained stock market decline in U.S. history lasted seven years, from 1835 to 1842, and featured two depressions in close proximity. As the expected trend change is of one larger degree than those, it should be a commensurately large setback, but it should still be brief relative to the duration of the preceding advance.
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