Robert Prechter said on Tuesday he expects that as the U.S. economy sinks into a deflationary depression stocks will plunge.
The longtime technical analyst forecast the Dow Jones industrial average stock index could fall to between about 1,000 and 3,000 points over the next five to seven years in a telephone interview with Reuters.
The Dow was trading at 9,754 in early afternoon US time yesterday
"It is very clear there is substantial stock market risk," says Prechter, who urges investors to put their money in cash proxies such as safe-haven U.S. Treasury bills instead.
Prechter is known for his very bearish views on the economy and also for forecasting a big bull market in stocks in 1982 and for getting out before the 1987 market crash.
Over the near term, the dollar will remain under pressure against the euro and against the safe-haven Swiss franc, he says.
In early June, Prechter said the euro was set for a near-term rebound of about 10% over two or three months because technical indicators showed that amid the euro zone sovereign debt crisis, investors had become overly bearish on that currency.
Prechter reiterated that forecast yesterday, saying the euro will continue firming for about another two months, until it has gained about 10%.
US seeks advance notice of any BP sales
The US Department of Justice (DoJ) has asked BP for advance notice of asset sales or deals involving significant cash transfers as the British oil company seeks to raise funds to shore up its balance sheet, the Financial Times reports.
The request underlines how much the Obama administration considers the company its on going concern following the oil rig explosion which continues to spew gallons of oil into the Gulf of Mexico.
Last night, BP said it had not agreed or responded to a June 23 written request.
"We haven't agreed to those terms," a BP spokesperson said.
However, given the intense pressure from the Obama administration, industry watchers say it would not be surprising for BP to agree to the request.
China's property market braced for 30% drop
Standard Chartered has told clients to get ready for a fall in property prices of up to 30% across major cities in China, the Telegraph reports
Stephen Green, the bank's China economist, says a glut of new builds are hitting the market just as buyers are restrained by higher down-payments and curbs on speculation, the Telegraph reports.
"We believe developers will be forced to cut prices," he says.
Kenneth Rogoff, ex-chief economist for the IMF, told Bloomberg Television in Hong Kong: "You're starting to see that collapse in property and it's going to hit the banking system.".
The government is trying to deflate the housing market gently, mostly using tools known as "financial repression" rather than Western style rate rises.
At the same time, China is shifting its foreign reserve strategy, rotating out of Europe and into Japanese government bonds (JGBs). Japan's finance ministry said China bought $6bn (£3.9bn) of bonds from January to April, a record pace of accumulation.
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