Roaring 2000s

[Michael]

I was curious if Harry S. Dent had changed his mind about the
demographic trends in his book, so I went to his web site and read a
couple of free articles that explained he was still very bullish,
especially about tech. He thinks the tech wreck parallels the auto
market's fall in the early 20's, and thinks tech will soar to Nasdaq
14,000 or so in the next few years. I found the demographic data
interesting in his book, but I am not as sure that I follow the
reasoning behind paralleling tech and the auto industry. Anyway, if you
want to read his free articles, see his web site at
http://www.hsdent.com

He used to have free articles explaining that the current bear market is
proof positive of the demographics driven bull market, because the
downtrend is caused by business spending retrenchment rather than a
consumer spending slowdown, but it is gone now. I have noticed that the
P/E multiples have stayed high despite the worst bear market since the
Great Depression, so he may have a point about boomer demographics being
at least part of the driving trend behind the unprecedented P/E
multiples. His free web articles are an interesting follow up to his
book anyway.

Mike

 

[Ted]

From a brief look at the Harry Dent's website, it appears to me that he is one of many people trying to sell their advice based on an alleged ability to predict the future performance of financial markets with a fairly high level of specificity.  In his case, he is making predictions all of the way to 2040!

Given enough such "experts" (or monkeys trained to draw lines on graphs) some are likely to "hit it right."  But really wise investors are the ones who recognize the impossibility of predicting the future with any degree of certainty, and "hedge" their "bets" by diversification into a variety of financial assets. (Alternatively -- if they are very risk-averse and willing to settle for a modest, assured real rate of return -- they now have the opportunity to invest in TIPs, which have only become available during the last 7 years or so.)

 

[Michael]

His book made an interesting case that the baby boom would keep the economy humming while they were in their prime spending years, and the economy would tank when they retired, as previous generations of retirees cut back on spending when they retired. When the economy tanks, the stock market will follow suite. To a degree, I can see this scenario playing out in Japan, whose baby boom is older and larger than ours. Still, there are differences between Japan and the US that may alter the outcome.

I agree that mere mortals such as ourselves cannot know the future with any degree of certainty. Diversification is good advice.

Mike