Harry Dent is the creator of the Dent Method, a method of forecasting long-term economic trends based on the demographic changes and patterns of a society. I had the pleasure of learning about Dent’s economic predictions and practical advice in a recent interview.
“Demographic spending and saving patterns are the most predictable element of economics. At or around age 20, youth enter the workforce. They earn and spend dramatically into their mid 40’s in modern economies like the United States. They begin to start saving for retirement shortly thereafter, and earning and spending declines the rest of their life. These patterns create cycles of boom and bust roughly every forty years. But economists rarely consider the role of demographics, and much less value it. They focus on fiscal and monetary policy, supply and demand, least of which drive long-term trends,” explained Dent.
Dent does not believe the stimulus package is going to work. In fact, he believes we’re on the cusp of a depression, a fact most analysts have failed to seriously consider.
“The government has been doing this since the 1970’s. Every time we have a downturn, they believe they can make up for it and spend what the private sector isn’t. This policy reinforces the boom and bust trend. This time, they’re out of cards to use. We’re experiencing the largest credit bubble in history. Consumer households and business are saturated with debt. The baby boomer generation has peaked. If history wasn’t so clear about this, we wouldn’t be so sure. But it is.”
So what can we do? Dent’s first recommendation is to accept that the government will not be able to stop it. As he put it, their efforts are akin to “pissing into a tidal wave.”
“Sell your stocks and all assets that you can. Hold onto your cash and let things get lower and lower. You’ll be able to re-buy all that you want at much lower prices. If you want to be more aggressive, I’d recommend betting against the stock market. The best perspective to take is simply that you’re going to step aside and let it happen. Those with cash flow are going to be winners.”
If you’re interested in learning more about Dent’s predictions, check out this monthly newsletter! HS Dent also produces a quarterly report about its long-term research.
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