Wally Mackey, RFC, CSA President, Sycamore Group, Inc. Master Certification, Harry S. Dent Advisers Network FINANCIAL PLANNING FOR THE REST OF YOUR LIFE®
Harry S. Dent Forecast
FINANCIAL PLANNING FOR THE REST OF YOUR LIFE® Harry Dent forecasts the Dow Jones Industrial Average will decline as low as 3,800 by late 2012, and real estate values will decline even further as the country falls into a deep economic depression from 2009 to 2023. The greatest damage will occur in the first four years (2009-2012). As in the 1930s depression, a short recovery (2013-2017) will be followed by another recessionary period (2018-2022). Then, around 2023 the Echo Boomers spending will initiate a relatively long-term recovery. The financial media has never called a trend, either up or down, until long after it had begun. As our economy starts to slide, we will likely hear and read, “The government spending program will turn the economy around next year.” “The President sees encouraging signs.” “This is leading to a new economy.” However, as you will learn it is impossible for the government to replace the declining spending pattern, and the current government spending will only cause problems for future generations. The President’s economists failed to predict Japan’s demise in 1990, and they will be wrong again. Fortunes will be lost. To survive The Great Depression Ahead, you will need a different approach. BASIS OF THE HARRY S. DENT FORECAST Simple principles drive complex change. Economists think long-term trends are not predictable. At least, not until Harry Dent proved long-term economic predictions can be made by tracking the Baby Boomer Generation’s spending pattern. Dent accurately forecasted the recession of 1990-91, the economic expansion during the mid-nineties, and the greatest stock market boom in history. Now, he predicts our economy is on course towards the Next Great Depression, like the Japanese depression he forecasted over a decade ago. Dent says, “The economy is as volatile and worrisome as it has ever been in history.” Harry Dent is one voice no serious investor can afford to ignore. Wouldn’t it be nice to be able to predict the key economic trends that will impact your life? Of course! But, most financial planners say no one can predict any economy trend past the next election or Federal Reserve Board policy change. Dent proved it’s not that complex! He simply looks at the Baby Boomers’ spending habits. Dent discovered Boomer purchases are predictable. Let’s take potato chips for example. Teenagers eat the most potato chips of any age bracket. If you are a 42-year old parent, you will quickly agree. A national consumer report shows families with a head of household age 42, consumes the greatest amount of potato chips. Now, if you own a potato chip company, you can forecast sales by simply comparing the number of families whose head of household is age 42 today with the number next year or five years ahead.
Women seem to quickly relate to the next example. Most motorcycle sales are made to men age 48-52. Only a very few men buy a motorcycle after age 57. So, if you wanted to forecast motorcycle sales, simply look at birth statistics for the number of men between ages 45-52 today with the number in the future.
See the pattern? On January 23, 2009, Harley-Davison announced they were cutting 1,100 jobs, closing facilities and consolidating others; as it grapples with a slowdown in Baby Boomer sales. The company reported its fourth-quarter profit fell nearly 60 percent. There are fewer 45-52 year olds and the trend will continue for years. Harley-Davison’s stock sold at $72 a share in 2006 when the Dow Jones Industrial Average was at its highest level in history. It closed at $11.50 on January 26, 2009. What if, you could create a chart representing the country’s total sales of all products? Fewer sales mean a weakening economy. The employment rate depends on the total sales of goods and services. When total sales decline, the economy declines. Dent created such a chart in 1993, and his books for fifteen years have warned Americans of the 2010-2022 depression. WHY THE BABY BOOMERS CAUSED THE STOCK MARKET BUBBLE BOOM AND ARE NOW CAUSING THE NEXT GREAT DEPRESSION! The Consumer Expenditure Survey says the Boomers began to spend less after age 48 to pay down debts and start saving more for retirement. Thus, the peak spending age (consumption) occurs around age 48. The peak rate of investment occurs around age 54, as does leisure travel. Investment continues into retirement to around age 63 and net worth peaks just after age 64. Many aspects of health care spending, like pharmaceuticals, continue to grow until average age of death, currently 78.
The Personal Consumption Expenditures Chart shows the government accounts for only 20.2% of the country’s consumption; whereas, 70.5% of the goods and services are purchased by general population.
Our personal consumption has consistently risen since 1990, right up until December 2008. Look at the chart above. See the beginning of the decline? Consider the following events we have witnessed in the last 20 years: (1987) Black Monday – the stock market plunges over 20% in one day, (1990) First Gulf War, (1990-91) Recession, (1997) Asian Currency meltdown, (1998) Long term capital management hedge funds blew up with the ensuing credit crunch, (1999-2000) tech bubble bust, (2001) 9/11, (2002) Iraq War, (2005) Hurricane Katrina, (2007). But, even these events never changed the rising Baby Boomer spending rate. So, the key indicator of the national consumption is the number of families at their peak spending: meaning the greater number of families at their peak spending age, the greater the consumption. Thus, personal consumption is the largest influence on our economic health; as well as the growth of individual industries, such as the automobiles, real estate purchases, travel, retail clothing stores, etc. When number of these families decline, the economy slows down. So, forecasting starts by determining the number of peak spending families now and in the future. Dent looked at demographical data- the historical birth rate.
Harry Dent developed his now famous “Spending Wave” and published it in “The Great Boom Ahead” (1993). He simply moved the Immigration Adjusted Birth Index forward 48 years to illustrate the number of families at their peak spending age (48) each year. 
The red portion of the chart shows number of families at maximum consumption. The yellow line is the Dow Jones Industrial Average. Year after year, the yellow line closely tracks the number of families whose head of household were their peak spending age. There’s no doubt the Spending Wave accurately forecasted the Dow Jones Industrial Average, right up until September 9, 2001. After 911, investments in the stock market shifted to begin the real estate boom. When the real estate boom ended, the money returned to the stock market. In 2008, the stock market peaked and started a decline caused by the sub-prime mortgage investment crisis. This decline has nothing to do with the Spending Wave. Today, retirees and Baby Boomers are very fearful and uneasy. As a retirement planner, my role is to offer strategies specifically designed for the Great Depression Ahead. Even the most sophisticated investor mistakenly thinks the stock market will recover in time to reach their retirement dreams. They recall the 2000 recovery started seven years later. However, this time it will be completely different! Recovery won’t start fourteen years. Now, it’s time to read the report titled, YOUR RETIREMENT PLAN FOR THE GREAT DEPRESSION AHEAD!
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