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A Day With Harry S. Dent.

madhedgefundtrader's picture





 

A Day With Harry S. Dent. I listen to Harry S. Dent, not because he is an iconoclast, one of the few original thinkers out there, and a complete wild man, although these are all admirable qualities to be found in a global strategist. I listen to him because he has been right.

Go no further than the titles of his books. They include The Great Boom Ahead (1993) (click here for the link at http://www.amazon.com/Great-Boom-Ahead-COMPREHENSIVE-PROSPERITY/dp/1562827588/ref=sr_1_7?ie=UTF8&qid=1304359690&sr=8-7 ),  The Roaring 2000’s (1999) (click here for the link at  http://www.amazon.com/Roaring-2000s-Building-Lifestyle-Greatest/dp/0684853108/ref=sr_1_17?ie=UTF8&qid=1304360090&sr=8-17 ),  and The Great Depression Ahead (2008) (click here for the link at http://www.amazon.com/Great-Depression-Ahead-Following-Greatest/dp/1416588981/ref=sr_1_3?ie=UTF8&qid=1304359690&sr=8-3) .

His unique blend of demographic research, identification of global consumer spending patterns, and long term cycle analysis, really makes Harry one of a kind.
Foreign governments, major hedge funds, financial advisors, and individuals are all just wild about Harry. They have found his advice indispensible when navigating the sticky shoals of international finance.

So when an opportunity arose to spend a day with him sorting through the tea leaves, working through alternative scenarios for the future of disparate asset classes, and testing each other’s’ theories, I was on the next plane. It was nothing less than a Vulcan mind meld. And the late night Jack Daniels and 15 year old Macallan made sure we were both on a different planet.

Harry argues passionately that we are witnessing the end of the third great bubble in debt, hot on the heels of earlier forays into madness in technology stocks and real estate. Add public and private debt from all sources, and it totals $130 trillion, the greatest accumulation of IOU’s in history. The Federal Reserve is now manipulating all markets, and the exercise is certain to end in tears. The only way out from this will be to suffer an economic and financial crisis worse than we have seen to date.

The triggering factor will be the continued collapse of the residential real estate market. Continued shrinking home equity means that there will be ever fewer buyers in this market. That makes a laughing stock of current bank valuations, which have yet to be marked to market, and still obscure massive losses from the last crash. Have you enjoyed Uncle Ben’s wealth effect through rising stock prices? The movie run in reverse makes Freddie Kruger look like a cream puff, and the outcome will be ugly.

A key part of Harry’s work revolves around generational spending patterns. Americans see spending peak when they reach the ages of 46-50, and bleed off from there. He blends this perspective in with historical data on demographics and some traditional Eliot Wave Analysis to produce one of the most refined long term views in the marketplace.

The big problem is that we have 90 million baby boomers followed by only 70 million “echo boomers”. Falling family sizes from the1940’s onward are going to come back to haunt us. Adjust for the falling earnings of the next generation, and their net consumer spending could drop by half. As I am fond of telling those who attend my strategy lunches, don’t plan on selling your house to your kids, especially if they are still living in the basement.

Stocks.  (SPX), (QQQ), (EEM). Stock markets on crack are about to join Lindsey Lohan and Charlie Sheen in rehab. Harry didn’t bat an eyelash when he looked me straight in the eye and told me that the Dow was going to 3,300 by 2014. The only unknown is weather the crash starts now, or whether liquidity manufactured by the Federal Reserve can keep the party going for another six months. Put a gun to Harry’s head, and he’ll tell you that the peak isn’t coming until August. But the smart money is getting out, with the put/call ratio, great leading indicator, rocketing to 1.9 in February.

There will be no place to hide, as this will be a global event, and that reallocation towards more defensive sectors will be a waste of time. The Australian stock market will vaporize from 6,000 to 1,000, while Hong Kong will get pared back from 24,000 to 8,000. China is the greatest bubble and could take the biggest hit. The rising middle class will not take their first ever big recession lightly, and coming political turmoil is a given. Canada, with a great resource base behind it, a new government, and rising interest rates, will hold up better than most.

Bonds. While hard times for equities are ahead, bonds are about to enjoy the second coming. The traditional flight to safety bid is about to come back with a vengeance. The wholesale destruction of vast quantities of debt through default is having the unintended consequence that it is creating a bond shortage. Here we are, over two years into this recovery and the ten year Treasury bond is yielding 3.26%? Conditions for bonds are about to dramatically improve, and a 2% yield for this paper is potentially on the menu.

The Dollar (FEX), (UUP) Just as we are going to see a return of the Treasury bond, the dollar will enjoy a renaissance as well. Harry argues that the collapse of the plethora of asset bubbles we now see will bring a multiyear bull market for the greenback that could take us up 40% from here. That could take the Euro (FXE) down to its foundation level around $0.90. Debt defaults not only create bond shortages, they foster dollar shortages as well.

Oil. (USO), (DIG). If there is one commodity not expecting another Great Recession, it is crude oil. Slow the economy more than traders expect, and Texas tea drops in value by half. Strip out the monetary demand from those seeking a dollar alternative, and it halves again. Settle down the Middle East, and it halves a third time. Yes, Harry Dent is predicting that crude will fall from $115 a barrel today (and $128 for Brent), down to $15 by 2015. Yikes!

Precious Metals. (GLD), (SLV) If oil is wearing a toe tag, will gold be far behind? Coming deflation will cut the inflationistas off at the knees. A strong dollar sends those looking for alternatives into the Looney Bin. Take these frills away, and the barbarous relic becomes just a heavy rock that will take it from $1,550 an ounce, down to $250-$400. Gold bugs are about to get doused with insecticide. As for silver? How about a move from $50 to $4-$8?

To prove that Harry is willing to put his money where his mouth is, he is advising the Dent Tactical ETF (DENT) which mirrors and executes on his views. The fund is up 20% in the past 12 months.

 


Harry was originally a “good ole boy” from South Carolina, who like Federal Reserve governor Ben Bernanke, improbably went off to Harvard where he got his MBA. His career then took him to the top notch management consulting firm, Bain & Co. After years of consulting with Fortune 100 companies, he found gaping holes in their understanding of the global economy. That spurred him to take off and create his own research boutique to address these grievous shortfalls in understanding.
To learn more about Harry S. Dent, please go to his website at http://www.meetharrydent.com/

Quote of the Day

“We are starting to see signs that the smart money, the 1%who make most of the money, are starting to get out of the market,” said Harry S. Dent of the HS Dent network.

To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.

 


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Thu, 05/19/2011 - 01:47 | Link to Comment bruinjoe93
bruinjoe93's picture

I will take Jim Sinclair over Harry Dent any day.

Wed, 05/18/2011 - 06:48 | Link to Comment oulous
oulous's picture

Real estate dropping another 50% would be the best case scenario for America. Once you get it all sorted out and the banks have finally been properly vanquished you will be left with a huge mass of debt shy people that can suddenly take their previous indentured servant debt that was funneling to the wealthy few and spend it on an economy. They will have an excess of monthly capital that will let them buy things, save, fund things, pay for school. On and on.

The sooner homes become a place to live and not an investment the better off our economy will be.

Tue, 05/17/2011 - 15:04 | Link to Comment mt paul
mt paul's picture

realestate ..price distruction ..deflation 

every thing else . inflation ..

this is all about dirt ..land ownership of physical amerika

force real estate down ..stress owners to sell into declining value

via a housing market crash and inflationary preasure..

then yank liquidty at the top of inflationary cycle 

cause deflationary debt spiral ,margins ...

bottom everything out ..then buy it all at bottom price ..

it's all been done before...

 

 

Tue, 05/17/2011 - 15:31 | Link to Comment css1971
css1971's picture

Words! WORDS! I knew you coud do it!

 

So... no QE -> infinity?

Tue, 05/17/2011 - 14:42 | Link to Comment MiningJunkie
MiningJunkie's picture

I liked yesterday's post better....

Tue, 05/17/2011 - 14:40 | Link to Comment sgorem
sgorem's picture

Sounds like WE just heard the minutes from the "Universal Harry "Houdini" Dent/Middle Earth Troll Convention", with guest speakers the Mad Hatter with Harry Wanger and RoboTroll! Anyone who would put their money in the DENT FUND from this little "infomercial" is only going to get a DENT in their personal wealth. I believe anyone who tries to look into the future, "did I read 2014"?, has had a little too much Jack, and probably should've substituted the Macallan for some mesculine. Anyway, too many Black Buzzards flying in circles and anyone should find it extremely difficult to guess what's going to happen over night, much less months and years down the road. Sure things can be based on historical data, but that was then, this is now. Bottom line, Major upheaval in the ME with Israel now entering into some sort of retaliation mode for what is happening, and is soon to happen regarding Syria, aka Iran. MAJOR oil disruptions. More printing by the brilliant, and baffling bullshit brigade at the FED. Also time for Major Bondholder haircuts across the world. And finally, my tip of the Decade, BTFD ! Gold and Silver are hear to stay, and I don't believe we'll have to wait until the summer doldrums dissipate to get that Lunar shot we've all been waiting on. ps. no offense to Harry, Harry, and Robo, but you guys have earned it ya know. Have a Great day.

Tue, 05/17/2011 - 14:32 | Link to Comment kumquatsunite
kumquatsunite's picture

he big problem is that we have 90 million baby boomers followed by only 70 million “echo boomers”. Falling family sizes from the1940’s onward are going to come back to haunt us. 

from above article

_____

Here is the problem with this article. There are natural cycles to birth. For whatever reason, nature's cycle is a large birth group followed by quiescence followd by the next birth group as they come into the "breeding age." However, the United States has upended this natural cycle with unnatural immigration designed to create constant "growth" of revenue; this is unnatural and that is what we are seeing in the market: the perversion of the boom/bust repeat cycle is because a normal market would have built into it a desire to see the welfare of the "next generation" ensured through proper husbandry of resources. Instead what we see is immigrats and a few game theory cheaters rapaciously skewing the system as they eat the seed corn for tomorrow's "normal" generation. Third worlders care not for tomorrow; a fundamental principle of third worlders is steal it today because of the lack of political continuity ensuring their future. We have always been a nation that (until recently!) placed the welfare of future generations as the priority: the national pride by which we lived and for which we died. After all, the guys who didn't come back from WWII would have stayed home and played horse shoes and had a beer if they had known you were ceding your country to the third worlders, to the Chinese pounding Washington State and Massachusetts into oblivion; if they'd known that we'd be "push (ing) 1 for English and if they'd known that "compassion" was spelled "communism" where the country decided to steal from the productive and give to the fat, breeding welfarians and the foreignrats. Ah sure, the truth is never pretty, but you've not heard it for so long, do you even know the language of the truth? Will any messenger get through the lines of the embargoed right of America to be the country it is and has always been. Have you thought of where you will live when we fall to China? 

Tue, 05/17/2011 - 14:19 | Link to Comment Piranhanoia
Piranhanoia's picture

I particularly enjoyed the one line that sorta acknowledged "instability" when/if the people woke up. When you create a theorem about the future, why not factor in the consequences when everyone stops paying any bill that arose from plastic or paper transaction by choice, and shortly thereafter because they can not?  In being honest, he would have said;

It just neglects to mention a nuclear disaster that will destroy part of Japan and irradiate the world, the crop failures and starvation, the death of housing everywhere, the flooding and closure of the Big Muddy only because its spring in a new era of climate delta.

If it wears a suit and doesn't work in a courtroom, its barking.

 

Tue, 05/17/2011 - 14:19 | Link to Comment winks
winks's picture

I've followed this guy Dent for awhile. He is always making grand predictions, none of which ever seem to come true.

 "But wait, the Dow crash we predicted for October 2010 is now scheduled for October 2011 because the Fed is printing so much money. Our proprietary models have taken all of this into account and we know based on 500 years of history, it will happen."

You must first buy the book and then the monthly service to gain access to the advice from the "proprietary models".

Like the "elixir salesman" in the movie The Outlaw Josey Wales, Dent's models will cure "just about anything".

Tue, 05/17/2011 - 14:25 | Link to Comment Herknoid Weaver
Herknoid Weaver's picture

A key part of Harry's work is selling books and tapes.

The author failed to mention his 2004 book called the Great Bubble Boom  which predicted the dow 40000 by 2010

Tue, 05/17/2011 - 14:14 | Link to Comment Herknoid Weaver
Herknoid Weaver's picture

Dent is a goon. Nice Harry  way to build your rep on the self help tour.

http://kerwinrae.com/kr/whatotherssay.htm

 

 

Tue, 05/17/2011 - 14:10 | Link to Comment PistoleroPedro
PistoleroPedro's picture

"Settle down the Middle East"? Um, news flash....not exactly heading that direction.

Tue, 05/17/2011 - 14:09 | Link to Comment Herknoid Weaver
Herknoid Weaver's picture

Here is another follow up to the above link I provided

http://www.avaresearch.com/article_details-750.html

Tue, 05/17/2011 - 14:00 | Link to Comment Big Ben
Big Ben's picture

While the debt bubble and boomer retirement seem likely to create a lot of pain for the US, I really, really doubt that we will see $15 oil again. Inflation and currency debasement is the traditional response of governments to excess debt. Also, China and India are just beginning to industrialize, so I think energy demand will only increase while supplies of conventional oil seem to be peaking. The only way I could see $15 oil is if someone discovers a really cheap alternative, which is possible but doesn't seem very probable.

Tue, 05/17/2011 - 14:00 | Link to Comment QEsucks
QEsucks's picture

John Thomas. Macro Millionaire Coaching Program. website only. colorful prose. Lunch with Rudolf Havenstein etc.

Tue, 05/17/2011 - 13:57 | Link to Comment yipcarl
yipcarl's picture

I was the ass that subscribed to this guy.  He's just another mouth piece when it comes to forecasting.  Sure he's logical and probably right on a lot of stuff but wrong on more. He forecasts 3 or 4 different scenario's and when none happen he just puts out another 4.  Nothing to see here, move along. 

Tue, 05/17/2011 - 13:52 | Link to Comment Herknoid Weaver
Herknoid Weaver's picture

Here are some interesting recent articles on Dent.  Worth a look for sure.

http://www.avaresearch.com/article_details-744.html

Tue, 05/17/2011 - 13:38 | Link to Comment THECOMINGDEPRESSION
THECOMINGDEPRESSION's picture

Harry has been WRONG way more times then right. I would read and grasp Martin Armstrong, Alf Fields, Jim Sinclair before any of Harry's mumbo jumbo.

Tue, 05/17/2011 - 13:19 | Link to Comment apberusdisvet
apberusdisvet's picture

Given that the USGS postulates that silver may be the first element to go extinct and disappear from the planet within a generation, Dent's $4 number is missing a few zeros.

Tue, 05/17/2011 - 12:45 | Link to Comment Yossarian
Yossarian's picture

And this Madhedgefundtrader just declared it a great time to buy Gold, now saying sell (or is he just relaying Dent's views, one can never tell w/him).  The MHFT list an extensive resume on his website but no name- why is that?  Editor of Euromoney, started the first EVER international hedge fund, etc. The guy seems like a total fraud but I don't feel like doing the research on him- can somebody else please either figure out who he is or determine he is a fraud?  Thx.

Tue, 05/17/2011 - 15:16 | Link to Comment LudwigVon
LudwigVon's picture

started the first EVER international hedge fund

Tue, 05/17/2011 - 12:35 | Link to Comment punxsutawney phil
punxsutawney phil's picture

What a scam.  This DENT etf is just long equities, pull up the holdings on bloomberg. 

Tue, 05/17/2011 - 12:19 | Link to Comment speconomist
speconomist's picture

Finally something written.

Tue, 05/17/2011 - 12:15 | Link to Comment trav7777
trav7777's picture

$15 crude?  Not a chance in hell.

At that price, the entirety of nonconventionals is shut in by a minimum of $20+.

You would see a production COLLAPSE in the event of that oil price.

Remember this...major oil production goes OFFLINE when the price crosses below $40.

The finite headroom scarcity of oil is what is FORCING our global economy to deflate.

When I had arguments about what the oil peak meant, I always responded "sustained global recession."  This is what deflation is.

As far as the "price" of shit...wtf good is that going to be if the fuckin debt currency can't buy you anything? 

The bond is ONLY a safe haven so long as the government can make the coupon.  That prerequisite requires a condition precedent- that someone can PRINT the money to buy it, because there simply isn't enough real productive revenue to pay.

People don't really understand what this type of catastrophic deflation MEANS.  Do you really believe, deflationists, that if Sep 08 had gone unchecked, meaning a global run on the financial system, everyone trying to cash out at once, that "money" would have been worth anything?  A collapse of the banking system means that cash doesn't have much value either.

If the government declares force majeur because it cannot pay ITS bills due to the financial system going kaput due to deflative cascading insolvency, WTF does anyone think the FRN is worth?

The notes of a bankrupt state do NOT become more worthful (or even precious) during collapse.

Tue, 05/17/2011 - 14:28 | Link to Comment Fiat2Zero
Fiat2Zero's picture

Well said trav.

But might bonds act as a fake safe place temporarily?  Perhaps the reflexive move for the mass of hot money initially causes bonds to spike.

There was some talk about the dollar not acting as the safe haven currency (I forgot which mini crash this happened on), but now it seems to be enjoying a bump.

Lots of confusion in the market as everyone runs from one side of the Titanic to the next.

Isn't it harder to make a buck as a trader in this topsy turvy world?

 

Tue, 05/17/2011 - 14:28 | Link to Comment SilverBaron
SilverBaron's picture

"The bond is ONLY a safe haven so long as the government can make the coupon.  That prerequisite requires a condition precedent- that someone can PRINT the money to buy it, because there simply isn't enough real productive revenue to pay."

+14,000,000,000,000

Even at 2% U.S. debt cannot be serviced on current revenue.  How will it be serviced when exports/GDP plummet due to deflation?  Are they going to stop the wars/social security/medicare/welfare to pay interest on the debt?  The whole world is suddenly going to see a bankrupt/failing state as the last safe haven for their wealth? 

Tue, 05/17/2011 - 15:04 | Link to Comment kumquatsunite
kumquatsunite's picture

Ha,here's how to service the debt, a nice, neat, clean and honest, supply-demand method of servicing the debt: a tariff on chicken wings! $10,000 tariff on all chicken wings sent to China for one year. Voila! Debt erased. Or we just charge them a $13 trillion debt for all the technology they've stolen. Voila! Debt erased. 

I mean since when did we become such a bunch of pansies that we allow the rest of the world to pick our bones clean, even as we take in their overflow and destroy our own carrying capacity? Ever single American since the day we were founded knows that just because you aren't using it today, doesn't mean you won't eed it tomorrow.

And the Washington Post just had the dumbest article on selling some of the United States assets. Hey, what do they think we've been doing with the slew of immigrats they've let in over the last twenty years? For one-thousand a head (the cost of an immigrat), we've ceded 25% of our country. California. Oh you mean that state which once was our crown jewel, now a barrio of barbed wire and gang shootings? Washington State now known as "little Asia" in western Washington while eastern Washington is overrun with gangs and the fear of gangs. Then there are the Somali honor killings and involvement in prostitution; the endless fear of Muslims and planes going down down down; and there is the Hawaiians who rumor has have been promised a return to sovereignty by Oboma (after all, precedent was set with American Indians and their super-citizenship: all the rights, none of the responsibilities And you get to suck the pipe of the American taxpayers who "feel" your discrimination (boo hoo!). Ah yes, nothing like remedying every manifestation of historical wrong. Course funny thing about it, without all those Americans who have fought and died for this country, mostly buncha silly white men, wouldn't be nothing to fight over. After all, Oboma's native Kenya don't seem to have nobody fighting over her; and it would seem that if Oboma wanted anything, why not ask Kenya for it?

Tue, 05/17/2011 - 12:20 | Link to Comment Yossarian
Yossarian's picture

What do you mean "not a chance in hell?"  We had $28 crude just two years ago and absent the Bernanke Put the price would have probably hit that $15 target.  So, yes, it is possible IF you think The Fed will give up and financial leadership will accept a painful restructring process...but I don't think that is in the cards. 

Tue, 05/17/2011 - 13:18 | Link to Comment trav7777
trav7777's picture

we had that price for about a minute.

Remember what I just told you- the entirety of nonconventionals production, millions of barrels, is SHUT IN at that price.

Meaning that they cannot pay THEIR coupon with the revenue.  It's operating below cost.

That decline in production forced the price back up rather rapidly.

Do you really think all that deepwater production has a per bbl cost of $15 either?

Tue, 05/17/2011 - 12:10 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Mr Dent and his deflationary argument is well thought out and intentioned...but linear projections tend to fall short.

Mr Dent misconstrues stagflation w/ deflation. There is enough $ and Eur out there now to prevent a long term deflationary scenario. Mr Dent must revisit his historical perspectives to understand the key issue of REAL interest rates and consequent Real GDP. Any basic analysis that gives a modicum of respect to these measures can only forecast stagflation as an outcome. 

Natural disasters (Fuku, Miss. flooding...coming Sun storms, etc..) gives the pols a chance to loosen the spigots more, not to mention outright War.

Of course, it starts out as deflation (I agree w/ Mr Dent there) however in this electronic world money can be created easier than a porn website. To save their own skins, the pols and powerbrokers will give paper money away like there is no tomorrow (Didn't Paulson and now Geithner say "We are gonna die unless we have TARP and QE^"?).

Inflation (printing) is presently, the path of least persistance and so it will continue, save for breaks like the debt ceiling issue. Printing ad nauseam has never worked, but it sure started a lot of Wars and human loss and suffering,

Tue, 05/17/2011 - 12:02 | Link to Comment treemagnet
treemagnet's picture

Say what you want, but I think I can learn somethng from the man - I'll be wiser for it.  PM's are great, I agree - but this cat knows stuff I don't. 

Tue, 05/17/2011 - 12:00 | Link to Comment Jack Sheet
Jack Sheet's picture

Cozy little corner here today.

Tue, 05/17/2011 - 11:57 | Link to Comment aerial view
aerial view's picture

Stagflation for overall growth; Inflation in dollar and commodities raising cost of living and Deflation in all real estate and most equities. That's what you get whether you drink a glass of Macallan or the whole bottle.

Tue, 05/17/2011 - 13:59 | Link to Comment silver140
silver140's picture

You summed it up, aerial view.

Tue, 05/17/2011 - 11:41 | Link to Comment nevadan
nevadan's picture

Slow the economy more than traders expect, and Texas tea drops in value by half.

OK.  maybe

Strip out the monetary demand from those seeking a dollar alternative, and it halves again.

I'm guessing there will be plenty of alternative seekers.

 

Settle down the Middle East, and it halves a third time.

lol

Tue, 05/17/2011 - 12:17 | Link to Comment trav7777
trav7777's picture

Do all of these things and the production growth since 2000 halves.

As real production declines, we cannot even maintain our current rate of consumption.

Tue, 05/17/2011 - 12:45 | Link to Comment nevadan
nevadan's picture

Maybe so, but getting all those things to happen is a mighty big if.

Tue, 05/17/2011 - 11:24 | Link to Comment topcallingtroll
topcallingtroll's picture

Considering how treasurys were completely reviled by everyone including retail, I would not be surprised to see a two percent ten year.

This deflation monster is huge. Bigger than most people realize.

Tue, 05/17/2011 - 11:23 | Link to Comment Diogenes
Diogenes's picture

"Canada, with a great resource base behind it, a new government, and rising interest rates, will hold up better than most."

Slight correction. Canada does not have a new government. Stephen Harper and his Conservatives have been in power since 2006. The recent election returned them to power with a majority government.

Tue, 05/17/2011 - 11:16 | Link to Comment MacGruber
MacGruber's picture

I read Dent's latest book which made a lot of sense, but if you followed his recommendations over the last year or so you would have lost your shirt. He might be good at estimating long term trends but he's not very good at the short game - especially when Biebernanke is goosing the markets.

Tue, 05/17/2011 - 11:24 | Link to Comment Temporalist
Temporalist's picture

Oh man Willie Banzai please make Ben Beibernake's Greatest Hits album and slideshow with Ben wearing that Beiber doo.  Please!

Tue, 05/17/2011 - 11:19 | Link to Comment Dr. Gonzo
Dr. Gonzo's picture

So all our millions of old folks will be rich as their social security checks will be able to buy up everything then? I call total B.S. on this article. It's based on an obsolete model.

Tue, 05/17/2011 - 11:10 | Link to Comment purplefrog
purplefrog's picture

I can guarantee you that the "smart money" is putting their worthless-and-less FRNs into SOMETHING.

Tue, 05/17/2011 - 11:09 | Link to Comment Commander Cody
Commander Cody's picture

DENT is only up 5.4% not 20% over the last 12 months.  It is a low-rated ETF.  Harry snookered you with booze.

Tue, 05/17/2011 - 11:11 | Link to Comment gaoptimize
gaoptimize's picture

He is pretending that the Fed doesn't have a printing press.  Is this article a tongue-in-cheek joke?

Tue, 05/17/2011 - 11:08 | Link to Comment assumptionblindness
assumptionblindness's picture

I think that Harry has done a very good job of presenting the 'deflationist' argument.  As a proud owner of silver I feel the urge to immediately try to poke holes in his thesis and explain why I am sure that the dollar is going to the equivalent value (or lower) of toilet paper.  All said, however, it doesn't hurt to recognize that the future may turn out very differently than what we envision today.  Rampant deflation across all asset classes would certainly qualify as unexpected/impossible.  Harry Dent presents a contrarian's case that is almost unbelievable enough to just come true.  I am going to take a look at DENT as a potential hedge...

Tue, 05/17/2011 - 12:25 | Link to Comment trav7777
trav7777's picture

the financial system is in a constant state of insolvency.

X+iX dollars are owed but only X dollars exist.

Therefore, it is possible for dollars to become scarce as the compounding iX begins to rival X in size.

However, in such a case, the Fed will print.  The alternative is that the system goes kaput.  In such a situation, yields will rise for all actors who cannot reliably conjure money, as demand for credit goes vertical.  However, all this does is place more stress on the system.

Anyone with a cash need has to come up with a higher repayment in a system of credit scarcity.  This is what that whole "LIBOR" thing was about in 08.  The treasury yield was 0, because everyone knew the Fed had the USG's back.  The LIBOR went apeshit and eventually was useless because nobody would lend at LIBOR anyhow.

Interbank credit ceased being available at any price...yields went to effectively infinity.  Institutions hoarded eDollars because they had to make their own coupons and could not afford to borrow at the prevailing yield from other institutions.  The central banks had to step in with discount windows and other programs to lend to them.

Those with some FRNs in the mattress thinking they will be gods are fools...nobody is going to borrow from you at 1,000,000%.  If they face insolvency or else insolvency, the choice is already made.

At this point now in '11, we face a sovereign now dependent upon the Fed to make the bond auctions work.  If the Fed doesn't, yields cannot do anything but rise.  Deflation means cash will become more scarce.  An idle Fed means that even the government needs to start competing for it.

At such time as a UST auction fails due to no QE3 or whatever, the dollar collapses rapidly.  PERIOD.  GovYields would go vertical just as they did for all the other institutions who in '08 were also up against needing to make a coupon with inadequate cash onhand to do it.

Tue, 05/17/2011 - 11:03 | Link to Comment richsob
richsob's picture

I think what he's saying could happen is it's irrelevant how much money is floating around if the assets are dropping in value.  Example: real estate could be dropping by 20%, 30%, even 75% and if no one wants to buy it then that is "deflationary".  Another example would be if bonds and other debt were defaulting in HUGE amounts then who would want to step in and buy them even if you had the money?  I've always said there will be a serious deflationary problem before the (hyper) inflation can kick in and destroy what little bit of wealth most individuals and nations will still have when that part of the cycle starts.  Be nimble: don't fall in love with anything you own because the market can move against you and you'll need to switch things around quickly from precious metals to cash to Treasuries back to precious metals, etc, etc.

Tue, 05/17/2011 - 12:15 | Link to Comment rhyzimmer02
rhyzimmer02's picture

You are confusing "value" with nominal value.  Yes houses can and probably will drop in value.  The question is what will drop faster, the $ price of a house or the value of the dollar.

The USD is not a store of value nor an accurate way to measure value.  In the 1930s a gallon of gas was 5c and you could have bought a gallon with a silver nickel.  Today a gallon is $4 or so and the silver nickel is worth $3 or $4. 

Explain to me why a gallon couldnt be $400 and a silver nickel also $400.  It all depends on how much "money" exists

Tue, 05/17/2011 - 11:00 | Link to Comment JP McManus
JP McManus's picture

I'd never drink Jack Daniels and a quality single malt like Macallan 15 in the same night. Blasphemy.

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