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My guest today on The Mind of Money is Harry Dent. Mr. Dent is The Founder and CEO of HS Dent, an economic research and forecasting firm that utilizes the Dent Method, a forecasting technique based on demographic trends. In his recent work, Harry Dent sees the FED stimulus ultimately failing to prop up the needs of the 92 million baby boomers that are faced with declining income and cutbacks on spending. In addition, Mr. Dent makes the point that these same people whose needs are increasing at the same time their income is declining, are taking more of the little money they have and saving it. He cites 122 trillion dollars in private debt, government debt and unfunded entitlements in social security and healthcare that the FED cannot counter.
Mr. Dent’s recent market calls have proven quite accurate, as he stated in August that there was one more wave down coming that would bottom in the late September through mid-October time-frame and that there was very strong support at the July 2010 lows of 1010 and 1040 on the S&P 500. He also projected a stronger rally at year-end. The S&P 500 actually bottomed at 1074.77 on October 4, 2011, within the time-frame Harry Dent mentioned. On January 11 Mr. Dent gave another update restating his overall thesis that the stock market is undergoing an artificial rally due to the FED’s stimulus that began in March 2009. He also argues that money has been reinvested, creating a third bubble, including commodities, stocks, junk bonds, gold and silver, all going up at the same time in the “risk-on” trade. Mr. Dent thinks this risk on trade is about to reverse in a major way and to get out of the stock market because the demographics going forward are very negative for stocks.
The reasoning behind this prediction is demographic, according to Harry Dent. He cites the peak in spending that comes at age 46, that baby boomers hit in late 2007. He also mentions the plateau that comes at age 50 as kids go from high school to college in different families, causing spending to drop off dramatically form age 50 until death, and his main point is that this year (2012) baby boomers will hit that drop-off point. Mr. Dent is predicting that the effects of QE2 will wear off in the second quarter of this year and he also sees Europe slowing down further. Let’s pick up with Mr. Dent to discuss what he sees ahead. Don’t miss this interview!