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Q: Can you summarize your long-term outlook for stocks and bonds, the dollar, gold, inflation and economic growth?

A: I think the rise in U.S. stocks is in a terminal phase and faces a historic trend change. Most stock markets worldwide are likely to follow suit. Major stock declines have always led to recessions or depressions, and this time should be no different. Social unrest will follow in many areas of the world. The bond market is not a haven, as it topped out in 1998. The quality of investment debt overall is the lowest in human history, and bond investors will have to pay for an error in judgment. I am bullish from time to time on gold and silver in the near term, but their bear market is not quite over yet. Over the next ten years, the biggest risk we face is deflation. Economists are cheering the low inflation rate, but the long-term trend in the rate of inflation is akin to where it was in 1929, so it is not good news. Later in the defla tionary process, precious metals will be the single best investment. We are watching carefully to be able to identify that time.

Q: Where will the Dow be when the decline is over, and when do you think that will happen?

A: Every financial mania in history has been followed by a collapse that takes prices to below where they were when the uptrend began, which in the current case is Dow is 777 in 1982. I do not know when it will bottom because we will be dealing with a major corrective process that could last a century. It will be a great fourth wave, balancing the second wave, a bear market that lasted from 1720 to 1784. The first major low should occur in 2003-2004. I outlined the entire scenario in At the Crest, but it is too speculative to detail here.

Q: Aren’t there some stock markets, in Asia, for instance, that you believe are closer to a bottom than a top?

A: They are staging partial recoveries within a bear market. The full retracement of the Nikkei’s mania has yet to be completed.

Q: You have anticipated these events for quite some time, at a huge opportunity cost. Where did your calculations go wrong?

A: It has been frustrating. In 1982 and 1983, I described the coming mania, which would be “like 1929, 1968 and 1973 combined...indicators will give sell signal after sell signal, and the market will just keep on going.” It was an insight only “Elliott” could provide. Unfortunately, I thought we would reach that point in no more than 8 years, which is actually on the long side for most of history’s manias. But so far, it has lasted 18 years! If I weren’t such an optimist, I would think that this means the top is even bigger than Grand Supercycle. By the way, I would add that the idea of “opportunity cost” is valid only if someone gets out at a higher level. Most people won’t. The gunslingers who have ignored historic overvaluation to “make money” in the past decade will not get out for the down move. Their financial dreams will dissolve. Would you rather be that person, or the one who cashed out early and avoided getting caught up in the mania?