Robert Prechter Challenges The Safety Profile Of Big Banks

In an article on Yahoo Finance, Robert Prechter of Elliott Wave International said that the US economy is on the verge of depression and deflation.

Prechter, the author of ‘Conquer the Crash,’ has been bearish on the US stock market for a long time. When asked what an investor should do, he said, “My whole case is what to get out of. Find a refuge. Probably the safest place for most people's money is in Treasury bills or a fund that specializes only in Treasury bills." He cited American Century's Capital Preservation Fund as an example. "That's as close to cash as you can get. Actual cash is not a bad idea either," he added.

Although Prechter is bullish on the US dollar, he considered a large number of US banks to be unsafe as mortgage delinquencies and foreclosures are on the rise. He said, "And guess what? That's the asset base for virtually the entire banking system in the US. So there's no question that banks are under severe stress right now."

According to Prechter, being big definitely did not imply being better. "We have felt all along that the riskiest banks were the largest," he says. He also doubts the capability of the Federal Deposit Insurance Corporation (FDIC) to rescue all the risky institutions.

When questioned whether or not the biggest banks were 'too big to fail' and won't the government bail them out, Prechter replied, "Whether that continues I don't know. There's already been the beginning of voter backlash on this very question."

Read more from Benzinga's Markets.