Positioning Systems Blog

Key Points – Great Depression Ahead [Harry S Dent Jr.]

1. We have just lived through one of the greatest Bubble Booms in the history of the planet, over the last 25 years. It will nosedive into the next Great Depression – which historically occurs about every 80 years – beginning with a small economic recovery in the mid-to-latter half of 2009, which will be quickly off-set by major rises in inflation pressures, interest rates, and a final major rise in oil, energy and commodities prices – which will signal the final Bubble Bust preceding the onset of the next Great Depression. This will likely happen despite the efforts of the U.S. Government and other world governing bodies to stave off the impending drop with their respective Bank Rescue Plans and Economic Stimulus/Recovery/Reinvestment Plans.
2. The coming Great Depression will mirror that which happened in Japan from 1989 through 2003 – which is referred to by economists and historians as The Lost Decade. Stock and Real Estate prices dropped by half or more during this period in Japan, and it was driven by many of the same demographic and economic events, trends and cycles which are now confronting the rest of the world. It will also mimic our own Last Great Depression from August of 1929 through 1933, and the less-severe secondary depression period in 1937-1938.
3. The Asian and emerging stock bubbles started to peak in 2007, are now sliding as well, and will see a similar crash by 2010.
4. The Final Bubble to peak and burst will be the oil, energy and commodity bubble, likely between late 2009 and mid-2010. Energy prices will likely spike again, with oil prices going back up to between $140-$215+ a barrel. This will trigger the next major crash in stock prices.
5. The next accelerated stock crash is likely going to occur between mid-to-late 2009 and late 2010. This is when the majority of damage will be done to stock prices, reminiscent of the crash that occurred in 1929. This downward correction is likely to continue off and on into mid-to-late 2012. The Dow average may go to 4,500 points, and could go as low as 3,800 points.
6. All asset bubbles – stocks, commodities and real estate – will then deflate or already be deflated; hence, the only safe place is cash and money markets; and then, on a lag, into the highest-quality government and corporate bonds, including international bonds, to best benefit from falling interest rates and deflation.
7. Opportunities to lock in high long-term yields (5-10% or more) on bonds before interest rates fall again are likely between mid-2010 and mid-2011 in different sectors from long-term Treasury to corporate to municipal bonds, in that order.
8. Intermediate-term buying opportunities in Asian stocks and health care should emerge between late 2010 and early 2015.
9. Buying opportunities in Apartments/Starter Homes and Vacation/Retirement Homes should emerge between mid-2011 and early 2015.
10. Businesses that are liquid and have strong cash flow will be able to buy assets and gain market share at low prices. If it looks like a Good Buy right now, be patient. It will be a Great Buy very soon.
11. The worst of this next Depression is likely to hit between mid-2010 and mid-2013, especially around early 2011, when unemployment could reach 12% TO 15%, or possibly higher. In the last Great Depression, unemployment peaked at around 25%.
12. There will be a substantial Bear Market Rally, likely around mid-2012 and early-to-mid-2017, in which Asia and health care have the best demographic trends behind them.
13. There will likely be a less severe downturn ensuing from around mid-2017 into early 2020, or as late as 2023.
14. We will see the next concerted and sustained global boom from around 2023 through around 2036, with the last long-term bargain buying opportunity in stocks likely in late 2022.
15. China and East Asia will be slowing down just as the United States and most of the rest of the world reemerges in the early-to-mid-2020’s. Yet first in the coming decade of 2010-2020, this region will likely strengthen its financial position by bailing out the U.S. and many European governments.

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