The Next Great Bubble Boom
The Next Great Bubble Boom is principally a book about cycles. This is not Harry Dent’s first book. He has published others, with reasonable accuracy. One, in the late 1980s – when everyone else was buying – forecast the decline of the Japanese economy, and hence its share and real estate markets. Time has proven him correct. He uses the same type of demographic technique to support his view that North America is about to experience conditions similar to the roaring twenties. Harry is no shrinking violet with his forecasts, predicting the Dow Jones Industrial Index will reach 40,000 by 2009!
Regardless of whether or not you agree with Harry’s bullish forecast, his book is still worth a read for its revelations about observable cycles in the share market, and how demographics plays its part. A central theme is that share markets follow predictable economic cycles every 80 years. Long-term economic booms and busts follow generational spending waves about every 40 years and these can be projected.
In a nutshell, demographics suggests that people experience a peak in their spending between the ages of 46 and 50. The trick is to see how each year’s ‘46ers’ are doing, whether they are increasing in number or declining. In Japan’s case, the late 1980s did not see a baby boom as the United States did following World War II.
Harry also delves into the various cycles contained within the share market. Beginning with the annual cycle, where the majority of gains are made between November and April each year, Harry discusses the four-year presidential and ten-year decennial cycles. He demonstrates how a few simple models that take advantage of these cycles can greatly improve portfolio returns.
Harry includes a discussion of real estate, and explores the implications of what will happen in North America when the baby boomers begin to downsize.
I enjoyed Harry’s simple use of demographics as an explanation for share market movements and, although I found his Dow prediction a little wild, I liked the case he built to support it.
This article was originally published in the Sep/Oct 07 issue of YourTradingEdge magazine (www.YTEmagazine.com). All rights reserved. © Copyright 2009, MarketSource International Pty Ltd.
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