Here is a little OT rant supporting your predictions.
July 6, 1998
Seer Speaks
Futurist says Dow could hit 35,000, and he's been right before
By Neil A. Martin
If you're worried that the bull market is about to peter out, you might want to
talk to Harry S. Dent. Ten years ago, Dent was predicting that the Dow
would go to 10,000 by the year 2000, and now he is predicting that it will
double to 21,500 and maybe even quadruple to 35,000 over the next decade
due in large part to a booming world economy. Dent's optimistic predictions
may seem hard to swallow right now, what with stocks in the U.S. looking
fully valued and the American economy increasingly threatened by Asia's
meltdown. But it helps to remember that Dent's seemingly outlandish forecasts
of a decade ago were also greeted with considerable skepticism. In the late
1980s, as Dent was preaching about "a great boom ahead" for the U.S.
economy and stock market, the more popular futurists were naysayers like
Ravi Batra, whose Great Depression of 1990 was scaring people silly with
its thesis about an impending economic Armageddon caused by greed and
overconcentration of wealth in America.
Dent strongly disagreed, supporting his case with analysis of demographic
trends, forecasts of Baby Boomer spending habits and a review of historical
economic cycles dating back 3,000 years. Dent predicted a soaring stock
market, falling mortgage rates and the resurgence of the United States as the
world's pre-eminent economic power. He also predicted the decline of
Japan's economic juggernaut. Perhaps most surprising, he forecast that the
U.S. government's annual budget deficit would disappear by 1998.
"It was kind of tough to get the message across at the time," Dent told
Barron's in a recent interview at his Oakland, California, townhouse, which he
shares with his wife and three children. "And while a few people thought some
kind of recovery in the economy and stock market might be possible, no one
expected a balanced budget. But here we are in 1998 with the government
worrying about what to do with budget surpluses."
Most of Dent's predictions, along with the formulas upon which they were
based, first appeared in a small, self-published book that Dent put out in
1989. It was called Our Power To Predict: Revolutionary New Tools for
Predicting Our Economy and the Future of Business. The pamphlet-sized
"training manual," as he called it, evolved from a series of lectures Dent gave
in the late 1980s to business executives around the country who wanted help
spotting emerging economic trends. While the book was never commercially
published, it was widely circulated and it quickly established Dent's reputation
in the business community as a savvy economic forecaster.
Three years later, in November 1992, Dent further refined his theories in a
book entitled The Great Boom Ahead: Your Comprehensive Guide to
Personal and Business Profit in the New Era of Prosperity. This tract
forecast a new age of prosperity that would emerge in the 1990s and extend
into the next century. The book quickly became a best-seller and has sold
more than 300,000 hardcover and paperback copies worldwide, prompting
one reviewer to christen Dent as "one of the world's most prescient economic
prognosticators."
Buoyed by the success of his past
predictions, the 45-year-old
forecaster is back now with another
book, The Roaring 2000s: How To
Achieve Personal and Financial
Success in the Greatest Boom in
History. It has been on the business
best-seller lists of the New York
Times, The Wall Street Journal and
BusinessWeek since its publication in
April.
Dent's new book picks up where his earlier tome left off and pushes his boom
scenario even further.
The world, according to Dent, is on the verge of the greatest economic and
stock boom in history. "The sudden emergence of information technologies
along with the peak spending years of the massive Baby Boom generation, the
largest in history, will usher in a new era of prosperity and sweeping changes,"
Dent says. The confluence of these two will ignite a period that Dent
characterizes as "the most exciting boom period since the Roaring Twenties."
The engine that is driving this great boom is an aging Baby Boom generation,
40 million strong, which will move into its peak spending years between 2008
and 2010. Boomers will turn in their sports cars for more luxurious vehicles.
They will buy different products than they did in the 1990s: Toys, baby-sitters
and aerobic classes are out; trade-up homes, health care and investing are in.
"The fundamental generators of change in any economy at any time in human
history have been the new generations," Dent says. "From the time of the
ancient Greeks, up through the Roman Empire, the Renaissance, the Industrial
Revolution and into the current century, new generations have brought with
them different values, tastes and spending habits, which in turn generate new
cycles of boom-and-bust."
Generally, these waves of development have stretched over 80-year periods,
from start to boom to bust. "The last time we saw such a boom period was
during the Roaring Twenties, when the Henry Ford generation of consumers,
augmented by a massive immigration wave, reached their peak years of
earnings, productivity and spending," Dent says. "At the same time, new
technologies, industries, products and services suddenly burst forth and,
seemingly overnight, automobiles, electricity, telephones and new products
such as Coca-Cola, became affordable consumer items. This confluence
caused high economic growth, unprecedented 5% average gains in business
productivity, a zero rate of inflation, along with rising savings rates and falling
debt ratios," he explains.
Dent argues that what happened in the Roaring Twenties will be repeated,
though on a much broader scale, in what he calls the Roaring 2000s. A
dramatic expansion of the economy will be triggered by the Information
Revolution, which will move fully into the mainstream, chaperoned by the
rapid adoption of personal computers, computer appliances of all kinds, and,
of course, the Internet.
"Internet usage by consumer households by 2002 will fundamentally change
how and where we live and work," he says. "It will create a new economic
surge that features a huge array of customized goods and services at
increasingly affordable prices, and usher in nothing less than the greatest boom
in history and an unprecedented opportunity for investors and entrepreneurs,
great buys in real estate, and a wealth of high-quality lifestyle choices for
people who anticipate these changes. We will see such rapid and exciting
changes as we have not seen since the dizzying pace of the productivity
revolution unleashed by the assembly line in the early 20th century."
As Dent sees it, a spending spree by American Baby Boomers will propel
stock prices strongly upward, with the Dow hitting at least 21,500 by the year
2008, and possibly much higher. "We are projecting a peak as high as
35,000," Dent says, admitting that "it may sound outrageous, yet it is the same
16% average annual gain the stock market has had since this bull run started
in 1982, and that's not counting dividends, which would add 18%, and that
means you would quadruple your money every 10 years."
The current bull market is just a prelude to an even bigger bull market, one
that will be fueled by rising personal earnings, technology-generated
productivity gains and, mostly, "Baby Boomers who are going to flood the
markets with investment dollars," Dent says.
What would a sudden correction or, perish the thought, prolonged
breakdown in investment do to Dent's timetable for prosperity?
"If the market were suddenly to drop below 7,000, that would break the
upbeat trend and indicate that something was breaking down in the world on
a global basis that we don't understand," he says, adding quickly, "But we
don't believe that will happen."
Even when the U.S. boom begins to wind down after the year 2020 and the
economy starts to contract, "demographic bulges" representing tens of millions
of "new consumers" eager to buy and invest will create "mild booms" in
Europe and Asia, including Japan, Dent says. He also predicts the U.S. will
experience its next great population migration and real-estate boom as people
move in droves out of the suburbs to the "exurbs" and to attractive small
towns. And lastly, Dent sees traditional "top-down" corporate hierarchies
being replaced by corporate networks that operate "from the customer back."
As for "re-engineering" and "restructuring," Dent considers them merely words
that largely preserve the status quo.
"We are on the threshold of a new economy, and the pessimists have been
proven wrong," Dent claims. "The stock market has been recognizing
something for many years that economists have not."
As might be expected, not everyone shares Dent's unbridled optimism. He
has been criticized for being too optimstic and reaching "unwarranted"
conclusions based on flawed research data. One recent reviewer of his latest
book, The Roaring 2000s, characterized Dent's analysis as "unoriginal,
overstated and simplistic."
To his credit, Dent is the first to admit that not everything he has forecast has
come to pass. "I underestimated the strength of the stock market boom,
which started even earlier than I predicted," he says, "and the economic
slowdown of the 1990s turned out to be much worse than I had originally
believed."
But he fiercely defends his methodology, which he says was developed over
the years by charting the history and characteristics of inflationary "waves" that
date back to ancient Greece. "We have been predicting trends for a long time
and enjoy high credibility, and I would match my research against anyone's,"
Dent snaps. "I'm not going to apologize for coming up with conclusions and a
view of economics that people can understand."
If demand for his thoughts is any indicator about his credibility, Dent is surely
a man worth hearing out. He is typically on the road five days a week
spreading his gospel at conferences sponsored by investment groups, brokers
and private companies. He makes as much as $16,500 for a keynote address
or a two-hour presentation of his theories.
"Harry and Jeremy Siegel, author of Stocks for the Long Run: The
Definitive Guide to Financial Market Returns and Long-Term
Investment Strategies, are two of our most popular speakers," says Jim
Salners, national sales manager with AIM Distributors, a subsidiary of
Amvescap, which hires Dent regularly for seminars and conferences it
co-sponsors with other members of the investment community.
"Harry's first book attracted our attention because we agreed with it," says
Salners. "Harry was one of the few people at the time who was predicting a
Dow of 10,000 by the end of the decade, and he has been basically right on."
As for taking an overly simplistic approach, Salners believes this is one of
Dent's strengths: "His is a basically a common-sense and demographic
approach to economics that really rings true to clients. They understand it."
"The typical economist blows away listeners very quickly with numbers and
statistics, facts and figures. Whereas Harry, whether he is right or wrong, has
a very understandable and clear approach to his material. On top of that, he
has been right for the better part of the past seven years."
So, what does Dent recommend to investors eager to capitalize on the coming
economic boom?
For all his knowledge, Dent is not a stockpicker. He believes it is more
productive, and ultimately more profitable, for the average person to select a
group of mutual funds rather than try to pick from thousands of different
stocks. Thus, he recommends purchasing mutual funds that invest in four
different types of stocks: big-company stocks, especially those with a strong
global presence, plus technology, financial services and health care.
Whatever else it has done, waxing serious about the future has paid off
handsomely for the native of Columbia, South Carolina. With two
best-sellers, more than 1,000 conference and seminar appearances over the
past five years, Dent estimates his net worth at around $3.5 million and
growing. He recently purchased 25 acres of hilltop property on the Caribbean
island of Culebra, a U.S. possession near Puerto Rico, where he plans to
eventually move his forecasting operation. He also operates the H.S. Dent
Foundation, a non-profit organization based in Burlington, Vermont, which is
active in educational and charitable activities.
Although Dent is hoping to expand his personal wealth into the $50
million-$100 million range, his easy-going manner suggests he has no burning
desire to become super-rich. Instead, whenever he retires, he says he would
prefer to concentrate on philanthropy, principally in education and
environmental causes.
"I would like to do something worthwhile for my family and the community,"
Dent says. "I don't believe in greed."
Yet another sign of his wisdom. |
