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A Day With Harry S. Dent.
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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+100 JP. I bet dent was drinking the Macallan 15 yro. Got to drink the expensive stuff before deflation makes it cheaper.
I dont understand why anyone thinks paper money will increase in value when the Fed can at will create more of them thereby making each dollar less valuable
The scenario described will lead to the explicit default of the US government, a load of banks, corporates, states and municipalities.
The Fed can prevent this by just printing. Explain to me why they will not as the Fed is NOT independent.
We may have deflation vs. gold and silver but not vs. linen.
By the way I am surpised why no one is mentioning the fact that US gasoline prices hit an all time low a few weeks ago. Not in USD but in silver, there is the deflation everyone has been expecting the past 3 years
Harry Dent's putative deflationary scenario also completely overlooks ALL of monetary history, in which such an event has NEVER, not once, occurred. Yet there are countless examples of overspending, overindebted governments, such as ours today, resorting to or being forced into debasement of the currency and/or eventual hyperinflation --- in fact, the correlation is 1:1 in this regard. So tell us again, Harry, why THIS time it's different?
1) Make outrageous prediction
2)Hope it comes true
3) If it comes true write books and run around telling everyone about it.
4) If it does not happen, slink into the darkness and wait a few years before starting again from step 1.
+1 Harvard should be proud. Dow 40,000k or 3,000k? Which way, up or down Dent?
Maybe a nominal value of 40,000, but it will spend like 3,000? When we are all looking for something to eat off of McDonald's "Hundred Dollar Value Menu"?
The question isn't whether or not an ounce of gold craters to $250, it's what will that ounce of gold (or $250 for that matter) then be able to buy? A TV? A car? 10 acres of farmland?
Bravo. Valuation in any government scrip is a fool's game now.
exactly
True but the answer will have to be: "an ounce of gold will not buy as much as $1,492 will" so convert your OZ into $'s. I'm not saying I agree with his view but, if it actually came to pass, you want Benjamins right now
Dent is a moron
hey MHFT, do you have any greek inlaws living in canada?
A lot to think about.
Why the Aussies get whacked, but the Canucks don't beats me. They are pretty much birds of a feather.
I think you are right about that, with one exception - Canadians are affected mostly by the US, and Aussies are affected mostly by China.
So despite similar cultures, populations (though not histories), debt cultures, and resources, I could see economic fallout being different between them.
I agree with you both the initial impact will hurt them all but those two will find their legs faster than all others because they can fly solo. Food and water are the biggest issues for Australia but Canada has plenty of both so maybe Aussies will have to build more water desalination plants and hydroponic grow huts.
The thesis ignores the prevailing trend. The path of least resistance is continued monetization.
Oh look another deflationist argument. How original.
Yep, keep hunting that unicorn of fiat currency deflation, Harry --- a unicorn which, it must be noted, has NEVER been seen once in monetary history. And I am not willing to bet that "this time is different" either, unlike Harry here. 2001/2002 Argentina redux is what I see in our future, not some putative and laughably impossible deflation.
Another "genius" with half the equation.
Here's a slightly different example. I believe Cramer is a genius trading within a 1 to 14 day horizon. Anything beyond that is beyond his scope of genius. Me? I'm a complete idiot trading a 1 to 14 day horizon---it's not within my scope of expertise.
Ah, the dilusions on Jack Daniels and single malt. MHFT, maybe next time you should try Red Bull, it gives you wings. You are ALWAYS late-to-the-party, Mr. Obvious. When you turn on your garbage disposal, do you think there is an angry critter down there?
Ah, the dilusions on Jack Daniels and single malt. MHFT, maybe next time you should try Red Bull, it gives you wings. You are ALWAYS late-to-the-party, Mr. Obvious. When you turn on your garbage disposal, do you think there is an angry critter down there?
Ah, the dilusions on Jack Daniels and single malt. MHFT, maybe next time you should try Red Bull, it gives you wings. You are ALWAYS late-to-the-party, Mr. Obvious. When you turn on your garbage disposal, do you think there is an angry critter down there?
This proves you can't be right all the time. Shortage of dollars means Ben finallly ran out of ink, cotton and linen.
Or that all of the exits are gone for converting money substitutes into currency. Thing is though, people will only want the dollars long enough to purchase something tangible that they need (including saving value over time).
Moving down through Exeter's Pyramid is deflationary only in the sense where one has previously confused a substitute (equity/bond/CDS/etc) as being money itself. Yes, money will gain in value as compared to them, but not when compared to prices of things we need to survive (food/energy).
To assume that the dollar is the stopping point in Exeter's wealth transfer is to fundamentally misunderstand what fiat money is, and where its value is derived. A dollar may be worth more than a financial instrument, but you can't eat either.
Harry Dent also predicted Dow 40,000 by 2009 back in 2004. FAIL.
http://www.freerepublic.com/focus/f-news/1269555/posts
I think Harry is making the mistake of seeing things thru US centric eyes. He is missing the way funds flow worldwide and assuming that the US dollar will be a safe haven. If it is not then he will be wrong.
What he labels as a reaction, I see merely as the short-term, knee-jerk reaction, as dictated by our old friend conventional wisdom. (kinda like 2008, only bigger)
Once that happens, only a very few know what the next step the banksters will take (well, other than bailing out themselves at others' expense in some form of QE).
Bill Gross will then go on CNBS to explain it all in the aftermath (once he invests all of his cash in the next front-running scam).
This proves you can't be right all the time. Shortage of dollars means Ben finallly ran out of ink, cotton and linen.
If Dent went to Harvard how can he be wrong?
How did his last fund perform?
This proves you can't be right all the time. Shortage of dollars means Ben finallly ran out of ink, cotton and linen.
That's so last century fiat. All they need now is a computer, a secure Internet connection and a titanium zero key.
In this scenario fiscal deficit will be gigantic. And most of the financial system bankrupted because of the fall in asset values. And presumably the Fed will not be buying Treasuries anymore? And banks will be allowed to go under taking people's deposits with them? And this will enhance their belief in holding paper money? Deflationist analysis is 180 degrees wrong.
I suggest reading the following:
http://fofoa.blogspot.com/2011/04/deflation-or-hyperinflation.html
The policy will be inflationist, but the consequences could be mega deflationist if the current currency war drives all three main financial super powers into the ropes. Then the wind down will be inevitable, all the more so that the inflationist spiral will make the gap between reality and pumped 'hopium' higher. It has to come, the eventual down turn. And it'll be big. As the more we deny it the more it'll grow in future impact. I don't see the EM carrying all this dead weight of US/EU debt for their benefit...when they can control the market they will...It may take time...and the DC world stays in stagflation...
So with all the money printing and inflationary policies the US has adopted, you think that we will go into DEflation? I don't see it. I see our currency being worth much less, therefore causing anything we import (which is everything) to cost more.
IMHO, FOFOA's argument made more sense to me .. They will inflate..
http://fofoa.blogspot.com/2011_04_01_archive.html
The bottom line is we are in a balance sheet depression. The asset side of the balance sheet has been killed in the last few years yet the liabilities (bank 'assets' which are marked-to-myth) are still the same as in 2007 - 2008. Asset bubbles are ALWAYS followed by deflation as a good deal of the capital that chased the bubble is destroyed. Eventually, the liabilities WILL be written down as there will be no meaningful growth until that happens. This series of events will be deflationary pure and simple.
Overlay that environment with the prospect of a hyperinflationary collapse caused by the money printing you identified and you have the filling in a really stinky sandwich.
The bottom line is that The Bernank and the rest of his CB counterparts will ultimately lose their war against deflation. In the process, they will destroy all paper currencies. This is the only place I disagree with Mr. Dent. I believe gold, silver, and oil will be the place to be as they are indispensible to modern life. Gold and silver because they are money and have been for more than 5,000 years. Oil because nothing ever discovered has the energy density of crude.
Only problem is no one knows which liabilities will be mostly written off and which ones will retain most of their value.
CBs are turning the where-will-the-writedown-hit question into one big lottery. On purpose.
PMs look good in that light.
Benron has said, "no deflationary depression on my watch". Can he and his brethren out print the giant sucking sound of debt collapse? That, along with the dollar's grasp on reserve currency status and the beneficial effect of inflation on debtor nations, makes it hard to agree with his vision of the future. I am not ruling anything out though. We are in uncharted waters, and strange things will happen along the way.
Has the Fed been able to inflate all assets? Think real estate and reread the article.
There, fixed it.
Compared to where Real Estate would be without the FED, the answer is still yes.
I understand that real estate is the giant boat anchor that could still sink the whole ship. The FED and federal govt. have been unable to keep that bubble blown up, and since real estate is the largest asset class for Americans, it's continuing death spiral will impact everything else. The federal government will have to pump the real estate market up with everything they have, in order to keep it from crashing further. Tax credits, easier credit terms for govt. mortgages, easier programs to keep people in their upside down homes, etc... Charles Hugh Smith wrote an excellent essay on how this could be just the first phase of a three phase decline in real estate, here is the link:
http://www.oftwominds.com/blogmar11/phase-shift-housing3-11.html
Like I said, Harry Dent could be right, but Benron & Co. are doing everything they can to prevent deflation at the risk of hyperinflation and a dollar crash.
CC - Understand your point...but the answer is "Yes" they have inflated Real estate. RE would be 20 to 30% lower minus Fed intervention.
Since you said "has," the answer is yes. Going forward? Maybe not short term, but I bet houses never reach their prices pre-Fed. So, the answer for the future is yes as well, if you view it over a long-enough time frame.
In other words, nothing is cheaper now than it was in 1913 as measured by a fed note.
.
Well, I think all you need to do is purchase his fund "DENT".
Dent must have been long the Thai baht in 1997
Clueless deflationist.