Steven Thorpe

• Mr. Prechter is convinced that we have entered a market decline of staggering proportions — perhaps the biggest of the last 300 years.
• “I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”
• His advice: individual investors should move completely out of the market and hold cash and cash equivalents, like Treasury bills, for years to come. (For traders with a fair amount of skill and willingness to embrace risk, he suggests other alternatives, like shorting the market or making bets on volatility.) But ultimately, “the decline will lead to one of the best investment opportunities ever,” he said.
• For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”
• He has far less day-to-day influence now, after years spent developing a theory he calls “socionomics,” which holds “social moods” as the cause not only of market cycles but also of economic and political events. A grand cycle is ending, he says, and the time for reckoning is near.
• In 2002, he published “Conquer the Crash,” which predicted misery ahead. Even so, he said in 2008 that the market would soon rally sharply — then said late last year that stocks were about to fall and that the great decline would resume.

Read the whole article – http://www.nytimes.com/2010/07/04/your-money/04stra.html?ref=general&src=me&pagewanted=all

Finally, there is the “garage band hedge fund” started by Jamie Mai and Charlie Ledley in 2003 with a Schwab account containing $110,000 and housed in a shed in the back of a friend’s house in Berkeley, Calif. Mr. Ledley believed, Mr. Lewis writes, “that the best way to make money on Wall Street was to seek out whatever it was that Wall Street believed was least likely to happen, and bet on its happening.” In this case, his contrarian instincts told him, in Mr. Lewis’s words, that “the markets were predisposed to underestimating the likelihood of dramatic change.”

Four and a half years later the American economy was in trouble, and, Mr. Lewis says, the fund run by Mr. Ledley, Mr. Mai and their partner, Ben Hockett, would net more than $80 million.

Continue reading – http://www.nytimes.com/2010/03/15/books/15book.html?src=me