THE NEXT GREAT DEPRESSION Forecast by Economist Harry S. Dent, Jr. FINANCIAL PLANNING FOR THE REST OF YOUR LIFE® Wally Mackey, RFC, CSA, Master Certification President, Sycamore Group, Inc. 10419 Cory Lake Drive, Tampa, Florida 33647 (888) 777-8685 sycamoregr@aol.com Member: Better Business Bureau of West Florida, Harry S. Dent Advisers Network, Financial Planning Association, National Association of Fixed Annuities, International Association of Registered Financial Consultants, Licensed Life Insurance Agent This document is only intended for educational purposes. The information is deemed accurate and authoritative in regards to the subject matter covered. Any reference to specific kinds of products does not mean the information is all-inclusive. Nothing in this report should be deemed advice on legal issues or investments. This is an advertisement to invite an inquiry for details. Unauthorized reproduction of this report or use of any of the Sycamore Group, Inc. trademarks are prohibited.
THE NEXT GREAT DEPRESSION (2009-2023) MONEY STRATEGIES USING SOMETHING GUARANTEED SAFE® will teach you the steps necessary for a safe retirement. I can assure you there’s a way to protect, survive, and profit in the Next Great Depression. I have implemented over 1,800 different strategies in the last fifteen years, and every client proved my strategies were more profitable than securities. First, I need to teach you the basis of the forecast, and why it is so important to take action immediately! Economist Harry S. Dent, Jr. has been among the most successful forecasters of his time. His books The Great Boom Ahead (1993) predicted the 1990s boom ahead of anyone else. His books The Roaring 2000s (1998) and The Roaring 2000s Investor (1999) are well-known investment guide books. Harry Dent says the current financial meltdown is not the next great depression. This mess, caused by Congress’ inaction to Wall Street’s greed, will lead into the depression starting next year as the commodity bubble bursts. By mid-2009 every investment will collapse, and the country will fall into a 15-year decline! Most financial planners haven’t a clue and won’t know what to do! However, thousands of Americans have already taken steps to protect their retirement. As the economic contraction accelerates, there will be no stopping it. We can expect a Dow as low as 3,800 by late 2012; that’s a 55% below the October 2008 Dow and a 75% drop from its 2007 high. New bonds will be issued at interest rates around 2%, CD rates near zero, and real estate values will decline even further. The greatest damage will occur in the first four years (2009-2012). Then, as during the 1930s depression, the stock market recovers slightly (2013-2017) giving false hope. The second recessionary period (2018-2022) will lead into a longer recovery after 2023 as Echo Boomers’ spending pattern pull us out of the depression. This pattern will kill investment-based retirement plans. During this period we expect the U.S. Government will be forced into Chapter 11 bankruptcy. The Dent forecast means most financial strategies will not survive the next great depression; including strategies advertised as fixed indexed annuities with lifetime guaranteed income riders, stocks, mutual funds, and variable annuities. If the plan relies on a rising economy to profit, it will fail. The only strategies proven safe are strategy based on high-grade corporate bonds. Mr. Dent’s new book soon to be released is titled, “The Great Crash of 2009-2010; Surviving and Thriving in the Coming Depression.” Since 2004 I have been a Member of the Harry S. Dent Advisers Network; earned a Master Certification and a license to represent him. My skills will lead you through these difficult days. The story starts in 1988 when Dent was a consultant for Bain & Co.; where he made the bold forecast that by year 2000 the Dow Jones Industrial Average would top 10,000. At the time no one believed him. After all, the Dow had just dropped 31% in late 1987, as Dent was forecasting the next stock market bubble boom. As it turns out, Dent was right; Dow broke 10,000 in April 1999 and was 11,497.12 by January 2000. His web site has guided millions to financial success for years. But, what’s more important to you is his forecast of a declining economy has not changed since first published in his book titled, The Great Boom Ahead (1993) and every book thereafter. He has consistently warned his readers of the Next Great Depression (2009-2023). With the current wild gyrations in the equity markets both at home and around the world, it is easy to lose sight of the larger economic picture. The next great depression is caused by ever increasing drops in consumption. Now, we see fewer cars being purchased, lower retail sales, electronic retailers refusing to provide forecasts, and major retailers are going out of business. Yes, the transition to the next great depression has begun, but it will have a greater impact in the years ahead. The ripple effect will be far and wide in investments, businesses, consumers, and government. And, it will get even worse! Once you become aware of the changing economy, you start recognizing the signs. For example, The Wall Street Journal October 6, 2008, headlines: “Big Discounts Fail to Lure Shoppers.” The article lists stores like Macy’s, Wal-Mart, Costco, Gap, Ann Taylor, Target, and Restoration Hardware to depict the changing Baby Boomer spending pattern. Baby Boomers are spending less and differently. This lower spending pattern changes our economy. That’s different from a slow-down! Another articles on the same day: “India Cranks Out Small Cars for Export,” “Volvo Strives to Refashion Itself,” Starbucks is Extending Shift for Baristas,” GM Shifts into Overdrive on Small Cars,” and “Allaying Worker’s Fears during Uncertain Times” to name a few. The swift will change your retirement! 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, “It’s just a correction,” “Buy on the dips,” and the old standby, “This time it’s different; this is the New Economy!” The same economists who failed to predict Japan’s demise will be wrong again, and fortunes will be lost. To prosper in the Long Winter Ahead, you need a sound financial plan. The Next Great Bubble Boom – How to Profit from the Greatest Boom in History: 2005-2009 was published in 2004. On page 237, Mr. Dent clearly outlines the strategies needed to protect your wealth after the bubble boom. He wrote, “In our next major book (December 2009) we will cover in more detail the best strategies for preserving and expanding wealth in the deflationary downturn from around 2010 to 2022, which could rival or exceed the Great Depression. The first principle that you need to understand is that there will be “no place to hide” in most stock and real estate sectors in the early years of the downturn. Hence, from late 2009 or early 2010 into mid-2012 we highly recommend that you switch your portfolio entirely or nearly entirely into high-quality long-term corporate bonds to preserve your wealth and grow it modestly at first.” My report titled, “Money Strategies Using Something Guaranteed Safe®” will show you how I use Harry Dent’s research to protect my clients’ retirement lifestyle. My strategies were specifically designed for the next great depression. Buyers beware! The process is far too complex for the average financial advisor. You’re going to need someone properly trained, or you’re going to get hurt! FUTURE GOVERNMENT BAILOUTS Harry Dent and others forecast the United States government may be forced into Chapter 11 Bankruptcy. The September and October 2008 government bailouts are only the beginning. The so-called subprime mortgage crisis will be followed by a 2009 stock market crash. As the economy declines even further, the government will be faced with the guarantees enacted on reverse mortgages, college loans, corporate pension funds, and the FDIC on bank accounts. Falling commodities prices (2009) will signal a collapse of the economy, and higher income taxes are unenviable. Retirement plans using stocks, mutual funds, and variable annuities will fail. Life insurance companies offering guaranteed lifetime income riders on variable and fixed indexed annuities may not have enough cash reserves. The riders are only as good as the company’s ability to pay claims. First, let’s examine the recent government bailout. American’s faith in financial products has been shaken to the core. Banks and stock brokerages are going out of business. We need to understand why it happened to understand my specific recommendations. Banks, stock brokerages, and life insurance companies do not fail until someone introduces investment strategies doomed to fail. Once the investments fail, the company cannot survive without a bailout. The underling assumption in the sub-prime mortgage strategy was the concept that real estate values would continue to rise forever. How many times have you heard? “The Lord only made so much land!” The sub-prime mortgage was designed with the assumption the mortgage would never be paid off. Rather, the homeowner was to sell the house at a later date, pay the mortgage balance, and keep the profit. It was an investment strategy. Some people were convinced it was a way to home ownership, but most people saw it as a temporary arrangement. Well, the real estate values did not increase. It declined, and the strategy failed. It was a financial scam repeated six times since the 1929 depression. Members of Congress know of it and did nothing! Harry Dent, President Bush, and other economists warned Congress as well! Harry Dent published a special report titled Demographic Trends in Real Estate in 2007. Mr. Dent appeared on “Good Morning America,” PBS, CNBC, CNN/FN, and was featured in Barron’s Investor’s Business Daily, Entrepreneur, Fortune, Success, US News and World Report, Business Week, The Wall Street journal, American Demographics and Omni. Even though he holds a MBA from Harvard Business School, where he was a Baker Scholar and elected to the Century Club for leadership excellent, only the profiteers paid much attention to his warnings.
In this 2007 report he wrote, “Our analysis shows that the broad housing market has peaked for what will likely be decades. A sudden crash is certainly not imminent, and there will be pockets of health growth for years to come. But nationally, the housing boom has run its course, and the Fed has little to do with it.
At the risk of stating the obvious, real estate is built for people: houses and apartments to live in, offices to work in, vacation homes to play in, and often smaller houses to retire in. This makes demographic analysis particularly useful in forecasting booms and busts among various real estate sectors. The strongest demographic trends in home buying have clearly passed. In fact, the demographic impetus and sales momentum began to fade as far back as 2003, as demographic trends suggested, and much of the gains in housing in 2004 and 2005 were due to purchasing by speculators and by innovative financing (such as ARMs, interest only, and low or no down payment mortgages – the sub-prime mortgages) that brought many marginal homebuyers into the market.” Dent was warning us in 2007 in this extensive special report. Earlier in 2006, Dent published another special report titled, Death of Pensions. The report starts by asking, “What happens when someone can’t make good on a promise? Even worse, what if those promises involved your pension?” This is the next major bailout. Mr. Dent wrote, “Unfortunately, these questions are facing many Americans today as the companies they worked for and retired from are now going though difficult times. Our pension and health care systems are in crisis mode. It is a fact that U.S. companies absolutely cannot pay all of the pension and healthcare benefits that they have promised to their workers. The statistics barely skim the surface. While the number of underfunded plans is startling, the degree to which some are underfunded is staggering.”
Several major corporations have turned the health care responsibilities to the unions. Unions accepted this responsibility after receiving billions of dollars. The companies were eager to dump the responsibility for half the balance sheet cost. Now, the Democrats plan to assume the responsibly in a nationalized health care plan, and the unions will keep the billions in their bank account. The reverse mortgages, student loans, and the FDIC guarantees on bank savings plans are backed by government guarantees as well and at risk. In the next few years Congress will raise income taxes and authorize additional bailouts. It’s caused by converging events: the perfect storm. Even though it may appear in late 2008 our economy is recovering, Dent anticipates the current growth will end in 2009. The culprit! Ourselves! As consumers we will slow down our spending just as we become saturated with new technologies. The combination of these two forces will effectively stall our economy for years to come, as we wait for the next wave of spenders to emerge. How do we know this? By examining history and evaluating trends that are already in motion. Consumer spending accounts for about 70% of all spending in our economy. How much individual consumers are spending has a tremendous effect on our strength or weakness. 
Harry Dent analyzes data gathered through the Consumer Expenditure Surveys, which has tracked consumer spending every year since the early 1980s. We have found that the average family increases it’s spending every year until the head of household is between 46 and 50 years old, or roughly 48, just as the children are leaving home, as depicted in the following chart. After that, on average, our bills are lower because the children are gone and we begin saving more for retirement and paying off debt. This data becomes very powerful when combined the information: the number of people who are at their peak spending age, or peak spenders, and whether the number of peak spenders is growing or falling. To find this out, we use birth statistics from the National Center for Health Statistics and estimates of immigration, both legal and illegal, from the Census Bureau. From these sources we developed the Immigration Adjusted Birth Index, which tracks how many people were born each year.
We then move this line forward roughly 48 years (by changing the years at the bottom of the chart) to develop an estimate of the growth and contraction of the number of peak spenders in our economy. This powerful tool indentifies when our economy is most likely to be expanding and when it is expected to be contracting. Does it work? Historical data says absolutely yes. A long list of events listed in Mr. Dent best selling books illustrates the tool has accurately predicted the upward and downward movement of the economy for centuries. Harry Dent developed his now famous “Spending Wave” and published it in “The Great Boom Ahead” (1993). The red portion of the chart is the annual forecast. The numbers along the left represent the number of families whose head of household is age 48. The right side represents the forecasted Dow Jones Industrial Average. Along the bottom are years. That’s the basic chart.
The yellow line is the actual Dow Jones Industrial Average. Year after year the yellow line has proven an accurate correlation between the family spending pattern, the economy, and the Dow Jones Industrial Average. There’s no doubt the forecast works! The next chart shows the Spending Wave updated to recent times. For individuals who rely on an adviser to make strategic investment decisions, you need to recognize most financial planners are not trained by Harry Dent and will not recognize these demographic changes. They’re still preaching the “Hold and Hope” and long-term investment strategies already proven wrong! Most financial advisers disagree with Mr. Dent’s forecast and dismiss his Spending Wave. But, once you study the Spending Wave Chart, it’s obviously correct. How will you be able to deny the correlation between Baby Boomer spending pattern and the Dow Jones Industrial Average? The stock market bubble boom ended in October 2007. That means the Dow Jones Industrial Average will not return to its historic high in our lifetime. Boomers surveys indicate they plan to work part-time after quitting their full-time job. Boomers should take notice that Dent forecasts a 15% unemployment rate during much of the 15-year depression! Likewise, Boomers plan to down-size their residence. That’s already too late. Dent says real estate will fall even further after March 2009. Just a couple of thoughts! Continue your study by watching the DVD and reading the other reports contained in my information kit.