Earlier this year the book The Great Depression Ahead by Harry S. Dent was published. Dent is one economist who has been willing to stick his neck out (and his reputation) and has been very specific on what he sees in our current economic situation and what he thinks will happen. He offers free e-mail updates for purchasers of the book, and I just received that update Thursday. This review of his views is offered as just that; give them what credence you will. I do respect Dent's opinions and feel they they should be considered. It is unfortunate that some will dismiss his views as extreme because he does think we are headed for a depression, and that is an idea that many just cannot accept. Time will tell if it is true.
In his Update #2, Dent says we are in the bear market rally which he predicts in the book. He thinks there may be a setback to the rally in late May, and then the rally pushes on to perhaps late July or August, reaching a high of about Dow 10,100. Dent says he would be entirely out of stocks by late July or August at the latest.
Dent says some of the causes for the decline in stocks in the fall will be real estate problems, such as rising yields on Treasuries, which will push mortgage rates higher, hurting any rebound in real estate sales. Other problems waiting to blossom, Dent says, are the credit card crisis and rising unemployment. Because of these issues, Dent thinks the stimulus plan works only to a point, but it does not lead to a return to robust economic activity.
All of this is happening, Dent points out, in a time of declining spending by the Boomer generation who will save more in coming months and years as retirement nears, and because their wealth has been negatively impacted by the current economic downturn.
Dent says late 2009 to late 2010 is the most dangerous time to hold equities. He predicts a collapse in stocks during that time period and the onset of a protracted depression in which government spending cannot reverse.
Dent's voice is one among many, but I think his dire view is one that should be considered in the endless mix of opinions/advice that bombards investors. I would suggest the book is a worthy read. The reader can then make his/her own conclusions.
Disclosure: No positions