The United States isn’t merely double-dipping back into recession, but worse — it's in the early stages of a depression that will strangle the economy possibly for years to come, says Robert Prechter, president of Elliott Wave International.
That means investors need to stock up on cash and other funds whose strategy is to succeed in a bear market, Prechter says.
Excessive debt burdens will take years to shake off, and the problem is that many economists underestimate how long a debt-saddled contraction can last, especially when negative social moods hamper economic activity even more.
"Some people are talking that maybe we'll have a double dip like 1980 to 1982, but I've been saying all along that this is the wrong perspective. You have to realize that we are in a depression," Prechter told CNBC.
"We're in the early stages, so we don't have the severe unemployment, the severe bread lines and that sort of thing. But since we are early in the trend, this is the kind of thing that the market is now beginning to look ahead and realize that the problem is deeper than just a minor recovery or a mild recession," he adds.
That doesn't mean investors need to run to the hills in panic and prepare for the end of days.
It means they should prepare for a bear market to last for about five years and look for opportunities in such a scenario.
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"For most people, I've been recommending to stay in cash. Because I think we're going to have one of the greatest buying opportunities of all time coming up," Prechter told CNBC.
"It's as if we are in 1973 or in 1930, one of those years where there's a lot of downside coming but if you have cash and you don't sit there fully invested all the way, you're going to have a great opportunity. The other opportunity is there are some nice bear funds out there."
Others agree that clouds continue to darken and build on the U.S. economic horizon.
Jim Rogers, famous for his bullish stance on commodities, says the U.S. will end up in defaulting in some shape or form and suffer a financial Armageddon.
"I don’t think we ever left the first recession, this is one long period of economic difficulty and America is going to pay the price for all of these mistakes," Rogers tells Newsmax.TV.
The economy can one day be repaired; Mexico, South Korea and Russia have gone through similar crises and came out alive, although it will be a painful recovery since the U.S. in particular has gone from being the world's largest creditor to the largest debtor.
"We’ve made some terrible mistakes in the past 40 or 50 years," Rogers says.
"You don’t just wake up one day and say okay that’s over, that’s fine, let’s move on to the next thing. We are going to have to take some pain, admit our mistakes, have some bankruptcies, cut spending with a chainsaw at the government level. It’s not going to be fun. The more we put it off, the worse it gets," Rogers adds.
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