-- Posted Sunday, 14 February 2010 | Digg This Article | | Source: GoldSeek.com
The celebrated demographics forecaster Harry S. Dent Jr forecasts a stock market crash by the end of February in his New York Times Bestseller ‘The Great Depression Ahead: How to prosper in the debt crisis of 2010-12′.
From around 10,000 today he has two scenarios for the Dow Jones in 2010: one, a fall to 3,300-4,600 in a broad crash also taking down real estate and commodities, including gold and oil; second, for the Dow to go even lower to 2,200-3,500.
Both are apocalyptic for stock market investors. Harry Dent made his name in the early 90s with a counter-consensus and very accurate, super bullish prediction about the outlook for stocks. His specialty is the study of demographics, or population trends, as a means of forecasting the future.
In his current book he apologizes some past errors, with a real howler being a stock market bubble in the late 2000s that just never happened or came close. Indeed, he is almost humble about noting the complexity of intermingled cycles that make forecasting tough.
Yet he has made some good calls in the past and his use of demographics is original and based in solid statistical information about population trends. There is also truth in his contention that the broad trends he mapped in his first forecasting coup in the early 90s did include an big downturn in 2009-2012.
Aside from his demographic analysis, Mr. Dent stands as a deflationist. He cooly says that all the government spending in the world will not offset the deflationary impact of a private sector collapse in business activity and trade, driven by falling consumption and a house price implosion.
Sometimes the simplest observations prove to be the best guides to future stock movements. For if this statement on deflation stands up then financial markets are currently way overvalued and heading for an imminent fall.
What is surely interesting for stock market investors is that Harry Dent is standing back from the day-to-day noise of the market. He is not talking about Greek or Dubai debt. He is not worrying about the latest unemployment or housing figures. His analytical model saw this coming twenty years ago.
For the full analysis you should read his very cogent book. But the obvious immediate implication is that stock market investors should sell now and not dally around. It is probably too late to sell real estate but certainly do not buy anymore.
Mr. Dent is negative on the immediate outlook for gold as he thinks the yellow metal will suffer along with all commodities in a rush to cash and short-term bonds. Thereafter Dent thinks there will be some great opportunities to buy long-term US bonds at high yields but curiously he does not foresee a rush to gold as bonds crash.
Harry S. Dent has been very wrong in his forecasts in the late 2000s but he seems on much more solid ground now with the Dow dipping under 10,000 last week. It is just very hard to come up with a positive alternative scenario that would save the long rally.
-- Posted Sunday, 14 February 2010 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link