The Monday morning headline blared: "U.S. likely to lose AAA rating: Prechter."

Digging into the article widely distributed by behemoth news service Reuters, we learn that Robert Prechter also predicts:

• "...investors' confidence in an economic rebound fading, a trend that will drag the S&P 500 stock index well below the March 6 intraday low of 666.79 by the end of this year or early next."
• "...credit markets to clam up again as they did in the first phase of the global financial crisis and for the U.S. economy to sink into a depression."

Pretty dire predictions from Mr. Prechter. He made them at a recent "Reuters Investment Outlook Summit" held in New York. Now, you may be wondering what exactly a summit is that a news service like Reuters would be holding. Here's how they define their summits:

"Reuters Summits are your direct link to top business leaders, investors and regulators. Our journalists interview heavyweights in a particular industry, spin out hard-hitting breaking news and sharp analysis that can often move markets. If you want to understand what the insiders are thinking, look for Reuters Summits."

Now, within the Reuter's article about Prechter's recent talk, Prechter's credentials are cited as his being a "technical analyst" who is supposedly "known for predicting the 1987 stock market crash..."

Actually, Prechter has been making predictions for many years through his investment newsletter, Elliott Wave Financial Forecast. Newsletter tracker Mark Hulbert has been documenting Prechter's investment trading predictions and picks since 1985 so he now has a nearly 25 year long track record which can tell us whether you should trade on his predictions or not.

Here's how Prechter's trading advice has done from 1/1/85 through 5/31/09 versus the broad U.S. stock market average (Wilshire 5000 index) according to Hulbert's analysis:

Annualized Return:

• Wilshire 5000 Index + 9.7 percent
• Prechter's Trading Advice -15.4 percent

 
Total Return:

• Wilshire 5000 Index + 857.1 percent
• Prechter's Trading Advice - 98.3 percent

The underperformance of Prechter's newsletter is nothing short of astonishing and stunning! On an annualized basis, Prechter has underperformed the broad U.S. stock market Wilshire 5000 index by a whopping 25 percent per year! Here's what Hulbert's analysis shows would have happened to $100,000 invested according to Prechter's investing trading advice versus the Wilshire 5000 U.S. stock market index:

$100,000 Invested (1/1/85-5/31/09):

• Wilshire 5000 Index $957,100
• Prechter's Trading Advice $1,700

I had to chuckle when I saw who else was invested to speak at this recent Reuter's Investment Summit: Nouriel Roubini. I guess Jim Cramer wasn't available!

I am beginning to see a "bit" of a negative theme here with Reuters. In mid-November, 2008 I wrote about Reuters' articles quoting experts, including at another of their summits, predicting a depression. And, in mid-March, 2009, almost at the exact bottom of the U.S. stock market, I wrote about Reuters publishing a negatively hyped piece about one in eight U.S. homes supposedly being in or near foreclosure.


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Eric Tyson is the only best-selling personal finance author who has an extensive background as an hourly-based financial advisor and who does not accept speaking fees, endorsement deals or fees of any type from companies in the financial services industry or product or service providers recommended in his articles, books and his publications.