Bestselling author and financial guru Harry Dent shows why we’re facing a “great deflation” after five years of desperate stimulus—and what to do about it now Throughout his long career as an economic forecaster, Harry Dent has relied on a notsosecret weapon: demographics. Studying the predictable things people do as they age is the ultimate tool for understanding trends. For instance, Dent can tell a client exactly when people will spend the most on potato chips. And he can explain why our economy has risen and fallen with the peak spending of generations, and why we now face a growing demographic cliff with the accelerating retirement of the Baby Boomers around the world. Dent predicted the impact of the Boomers hitting their highest growth in spending in the 1990s, when most economists saw the United States declining. And he anticipated the decline of Japan in the 1990s, when economists were proclaiming it would overtake the U.S. economy. But now, Dent argues, the fundamental demographics have turned against the United States and will hit more countries ahead. Inflation rises when a larger than usual block of younger people enter the workforce, and it wanes when large numbers of older people retire, downsize their homes, and cut their spending. The mass retirement of the Boomers won’t just hold back inflation; it and massive debt deleveraging will actually cause deflation—weakening the economy the most from 2014 into 2019. Dent explores the implications of his controversial predictions. He offers advice on retirement planning, health care, real estate, education, investing, and business strategies. For instance... Businesses should get lean and mean now. Identify segments that you can clearly dominate and sell off or shut down others. If you don’t, the economy will do it for you, more painfully and less profitably. Investors should sell stocks by midJanuary 2014 and look to buy them back in 2015 or later at a Dow as low as 5,800. Families should wait to buy real estate in areas where home prices have gone back to where the bubble started in early 2000. Governments need to stop the endless stimulus that creates more bubbles and kills the middle class, and should assist in restructuring the unprecedented debt bubble of 1983–2008. Dent shows that if you take the time to understand demographic data, using it to your advantage isn’t all that difficult. By following his suggestions, listeners will be able to find the upside to the downturn and learn how to survive and prosper during the most challenging years ahead.
[...]... predictable things people do as they age Demographics tell us a typical household spends the most money when the head of the household is age forty-six—when, on average, the parents see their kids leaving the nest Reading these numbers is no different from life insurance actuaries predicting when the average person will die and, based on that, making projections decades ahead Essential to understanding broad... and investment strategies have to change for continued success But there are longer-term cycles in demographics and technology We have seen massive down cycles from the ice ages every 100,000 years or so, to the Dark Ages from A.D 450 to 950, and then an onand-off depression cycle from most of the early 180 0s into the Great Depression of the 193 0s There is much to see here from demographics, technology... economists assume consumers are more like a constant and that business and government swings drive our economy In fact, consumers are 70 percent of the GDP, and business investment only expands if consumer spending is growing and the government taxes businesses and consumers for its revenues; hence, it follows consumer spending indirectly as well The difference in spending patterns between a nineteen-year-old,... of books I respect most of these authors and read their books thoroughly, as they had a much greater perspective of history and cycles than most economists At the same time, however, I was studying demographics and the Baby Boom I understood that there was no way we could have a great depression when the largest generation by far was in its sweet spot for spending and borrowing in the 199 0s I came out... and sixty Vacation and retirement home purchases peak around age sixty-five People travel more from age forty-six to sixty, after their kids leave the nest, but then they begin to find it too stressful They finally choose to just go on cruise ships and be stuffed with food and booze with no jet lag or customs hassles That peaks around age seventy Then there are the peak years for prescription drugs (age... peaks Then spending drops like a rock all the way into death! This is a big deal that governments, businesses, and investors are not anticipating as the massive Baby Boom generation ages in one country after the next Visit bit.ly/1iBCHps for a larger version of this graph If you want to reduce middle-class economies down to one important factor, this is it: consumer spending by age Most economists assume... and most productive winter season for investors, businesses, and governments If you have the common sense to understand that you can’t fight a debt crisis with more debt, and that the massive Baby Boom generation around the world will only spend less as they age, not more, then you will listen to what I have to say and prepare your investments, your business, and your family and kids for this inevitable... and they don’t need a boring minivan anymore Some get fancy sports cars Some get big pickup trucks These are in fact the sectors doing the best in 2013 before they peak after 2014 But then their vehicles last much longer as they have nowhere to drive without the kids, so car spending plummets thereafter Visit bit.ly/1jt32nt for a larger version of this graph A sample of some key areas of consumer spending... thirtynine years apart, and also coincided with the peak spending of the last three generations Two boom-and-bust cycles make the four-season cycle, so two commodity cycles would come to fifty-eight to sixty years on average, in line with the Kondratieff cycles up to the early 190 0s After the Roaring Twenties we saw the first mass affluent middle-class society in history Their spending cycles started dominating... broad statements concerning demographics (too often the speaker hasn’t done in-depth research and reaches wrong conclusions) In this case, the statement is partly true, partly not The easy part—and the one that economists usually get right about demographics—is that the populations of most developed countries are aging and that rising entitlement burdens will fall on the younger generations How will the . four predictable stages where business and investment strategies have to change for continued success. But there are longer-term cycles in demographics and technology. We have seen massive down cycles from the. ages every 100,000 years or so, to the Dark Ages from A.D. 450 to 950, and then an on- and-off depression cycle from most of the early 180 0s into the Great Depression of the 193 0s. There is much. over the course of their life cycle. It s about the predictable things people do as they age. Demographics tell us a typical household spends the most money when the head of the household is age