Tuesday, October 23, 2012

Money Show - Harry Dent

Harry S. Dent, Jr. is the author of The Great Crash Ahead and founder and president of H. S. Dent foundation. His talk was called "The Great Crash Ahead: Strategies for a World Turned Upside Down".

He says that people reach a spending peak between ages 46 and 50. Older people spend less once the kids have left home. The young are expensive. They produced nothing but inflation. This is why we had inflation in the 1970's.

We will have deflation going forward because older people are deflationary. They spend less and then they retire. We have deflation because of demographics and debt. When you have high debt levels you get deflation.

Stocks peak every 39 years (that is 1929, 1968 and 2007). Recovery from this takes 25 to 27 years. Babies are the key to the future. China is not having babies. They will go in the same direction that Japan did. Japan was the first to have a baby boom peak.

In Vancouver, real estate costs 10 times average income. People cannot afford housing at 10 times income. It is speculators and foreigners who are buying. Real estate is in a bubble and bubbles always go back to their starting point. US housing is down 33%. To get back to the start of the bubble and that is 2000, housing will need to fall 55% to 65%. In 2000, housing in the US cost 3.3% of income. At the peak housing cost 9.2% of income. In Toronto, housing could drop 30% or more. Vancouver's drop will be worse.

Banks used to lend money from deposits, but now banks are borrowing to lend. Private debt needs to be deleveraged. The US has $66Tn of unfunded liabilities. The US debt is at $56Tn. This totals $122Tn and that is 8 times their GDP. We haven't seen the bottom of the US real estate market. Things are better in Canada as debt is 295% of GDP. Corporate debt in Canada is also better.

We are going to have deflation. We have debt deleveraging and this will cause deflation. We will also have another recession. In the US, the velocity of money is dropping like a rock. QE cannot overcome this. And it is not only debt deleveraging. We have a decline in wealth with more and more debt. The GDP is growing slower and slower.

Spain is going to trigger the next crises. Housing market in Spain was 30% higher than in the US. Spain had 13% of its work force in building. The US, in comparison, only had 6% of the workforce in building. Spain is moving into a depression.

China is a BS market. He does not believe that the growth in GDP is 8%. For China there is no soft landing. China is building roads and bridges to nowhere. China has built cities that are vacant. (There are a number of videos about this on YouTube. See oneof these videos.)

Japan has had lots of QE and the stock market is still down (from its peak).

In Canada, our markets peak before the US market does because of our commodities. Commodities peak every 29 to 30 years. In the next boom, Canada will do better than the US. We have real growth in the emerging markets.

Harry Dent has a site here. He said his site was at www.nextgreatcrash.com, but when you Google this site, you get the one above. For an interview with Harry Dent, see YouTube.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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