Feedback
European Shorting
My Portfolios
Browse Gurus
Print
Email
Mr. Dent, author of the 2011 best-seller titled The Great Crash Ahead, was one of the featured speakers at the World Money Show which was held in Toronto last week. His presentation was lively, entertaining, and at times humourous. But when he finished, most of the attendees probably went off to lunch wanting a stiff drink to sooth their shattered nerves.
Who could blame them? Mr. Dent threw one chart after another onto the screen designed to prove beyond any doubt that the financial world has already ground to a halt and that what we have experienced so far is just the beginning of a long decline into economic night.
Stock markets will plunge, he predicted. The Dow will fall to 6,000, a loss of 55% from current levels. The TSX will drop to 7,500 in the short term and ultimately to around 6,000 as well. That's about 52% off current levels. To put that in perspective, the TSX low in the 2008-09 crash was 7,479.
"Retirees investing in stocks today will be dead before we hit the next cyclical peak," Mr. Dent said, almost gleefully. The audience laughed nervously.
And it won't be just stocks that will be hammered. The Canadian real estate market is due for a similar plunge, with Vancouver taking the biggest hit. "Vancouver thinks they're special," he sneered. "They're not. Vancouver is the last place I'd want to buy in North America right now."
As for Toronto, he predicted a decline of 33% to 50% in home prices. "Your bubble will burst," he warned. "Don't think your real estate market won't go down."
What will trigger these cataclysmic events? Demographics for one thing. Older people spend less - "they're deflationary, they downsize everything". Less spending means a slowdown in consumer demand, one of the most important economic engines.
(Not all experts agree with this theory; a Statistics Canada study done in 2009 found that people in their seventies spend only 5% less than they did in their forties. However, they spend their money on different things.)
Then there's the huge debt bubble. Counting unfunded federal liabilities (e.g. social security, Medicare) the U.S. owes $122 trillion - eight times the national GDP. Canada is in much better shape with a 295% combined debt to GDP ratio, which he described as "a very sound position in world terms". But it won't be enough for us to escape the fall-out.
Then there is China which drew Mr. Dent's scorn as "a BS economy". He could not say enough bad things about the country that everyone is counting on to pull the world out of the current funk.
"China is going down. They are not going to have a soft landing. It's the greatest bubble in history. They're building bridges and highways to nowhere - to Tibet, for heaven's sake. They're going to have the hardest landing in the world, not the softest."
Finally, during question period a shaken investor asked Mr. Dent where people should put their money. He had four suggestions.
1. Cash. In a time of deflation, which he sees coming, cash will be king.
2. The U.S. dollar. Despite quantitative easing, foreign money will flow into the U.S. seeking a safe haven, driving the dollar higher.
3. Foreclosed U.S. real estate, because it's cheap and prices will eventually recover. (Retirees might wonder in the light of his predictions if that will happen within their lifetimes).
4. Shorting stocks - but not for the next few months. Ironically, he thinks we'll see an upward move of 8% to 10% in the markets in the near term before the hammer falls.
Afterwards, a couple of clearly nervous people asked me what I thought. My reply was that the doomsayers are always with us but the world keeps turning. Anything is possible but the direst predictions rarely materialize. I continue to believe that we are in for a difficult few years, and there will certainly be some stock market corrections along the way. And we're already seeing signs of a slowdown in the housing sector.
But financial Armageddon? I'm not onside with that. And if it should happen the way Mr. Dent suggests, it seems to me he is missing one obvious investment alternative: U.S. Treasury bonds. In a deflationary environment, today's low interest rates will go even lower, perhaps into negative territory. So investors would gain both from an increase in bond prices and a surge in the value of the U.S. dollar.
That said, before anyone pushes the panic button check out some alternative views. Mr. Dent's ideas sell a lot of books, but there are many qualified experts who strongly disagree with him.
Subscribe RSS
RSS
If you do the opposite he says you would be better off.
Just read criticism under Wikipedia.
[en.wikipedia.org]
Dent makes heavy use of charts, cycles, and trends, apart from his demographic theories in predicting short and intermediate term economic and stock cycles. His work is based primarily on the assumption that most long term stock market performance can be explained by long-term trends and charts from the past. His critics question the assumption that clues to all major stock market events can be found in the relatively short history of well functioning stock markets in the world. His work has been criticized also for heavy use of data dredging - where it is easy to find patterns in past data and assign predictive powers to them when many such patterns occur in every data collection purely by chance.
Dent has been criticized also by many economists for being downright wrong in several of his predictions.
In fact, www.maxfunds.com, a financial reporting site awarded him the The "Ultimate Charlatan"[3] Award. They write: "The worst investing advice usually arrives near the top and bottom of stock market cycles. Demographic trends guru Harry S. Dent is making the rounds again, and touting his latest book, The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History ...."
In his 2006 work, Dent predicted, “The Dow hitting 40,000 by the end of the decade, the NASDAQ['s] advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009 … The Great Boom['s] resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010.” Of course, those who read The Roaring 2000s, Dent's 1999 masterpiece, should soon be buying each of us a turkey with all the fixin's.
According to the book, only a year remains before the Dow breaks 40,000 and the Nasdaq hits 20,000, at which time we'll simply amplify our fortunes by shorting stocks in the coming depression. We can’t underestimate how big this final move up will be before the depression kicks in, since The Dow and Nasdaq are currently quite a bit lower than they were back in 1999 when The Roaring 2000s was published."
------------------------------------------------------------------------------------------------------------------------------------
[www.amazon.com]
95 of 97 people found the following review helpful
1.0 out of 5 stars A Master Spin Doctor December 2, 2004
By Vincent Yin
I can't dispute any predictions of the stock market, because nobody can know for sure until after the fact.
But I am really amazed at the shameless spinning by Harry Dent in his latest book about his past predictions. He makes it sound like he foresaw the crash of 2000-2002. But in fact, his previous book, The Roaring 2000s, published in late 1990's, made all sorts of bullish predictions that were totally 100% wrong in retrospect. When reading that book back in 1999, you'd get the urge of going all out to buy NASDAQ. In fact, his lucky streak of winning predictions for 1990s prompted the creation of the mutual fund AIM Dent Demographic Trends in late 1990s/2000 and of which Harry Dent is an adviser -- that fund underperformed S&P500 by a wide margin, not to mention that S&P500 was itself miserable for the past 5 years already. [...]
Now, I'd still respect Harry Dent if he had said in this latest book, "My predictions were wrong for the first half decade of 2000's, but I think the big trend will resume for the second half of the decade." But instead, he shamelessly spins his miserable track record of the past 5 years!
-----------------------------------------------------------------------------------------------------------------------------------
1.0 out of 5 stars So Harry is at it again. August 18, 2005
By Tom Reilly
Here is yet another book in which Harry Dent tries to cash in on his ridiculous demographic theories. Before investing any money on Harry Dent's advice, readers should do themselves a favor and investigate the history of the "Dent demographic trends fund". In June of 1999, Harry became a mutual fund advisor. It did okay for all of six months, then lost 70% of its value. It regained some ground in the last two years, but is still down substantially from its inception. Just a few weeks ago, the fund was quietly merged into another and the Dent name removed. It probably wouldn't be good for book sales if Harry's name was still attached to a losing mutual fund.
The charts and data may be of use, but people need to reach their own conclusions.
------------------------------------------------------------------------------------------------------------------------------------
[www.amazon.com]
1.0 out of 5 stars The Depression comes from buying this book, October 20, 2011
By
Christopher M. Adams (San Francisco, CA USA) - See all my reviews
This review is from: The Great Depression Ahead (Kindle Edition)
In his book "Great Boom Ahead", Dent correctly predicted that productivity and the US Economy would soar in the 1990's. Since then, virtually every prediction he has made (like his prediction that the Dow would hit 32K) has been spectacularly wrong. I enjoyed reading "Great Boom". It was well presented. This latest book, however, is in serious need of editing. It reads like it was written in less than 1 week, constantly repeats itself, and is filled with predictions without justification. But worse yet, the writing constantly refers to charts to explain his argument, but in the Kindle version most of the charts are missing. For instance, in chapter 3, charts 3.1-3.5 are nowhere to be found. Ditto for chapter 4. Maybe the print version is better, but this Kindle version is a waste of money.
------------------------------------------------------------------------------------------------------------------------------------
I could go one and one, but you get the picture...