Harry Dent lays out the ultimate bear case in his new book.
Take one look at Harry Dent's body of work and you'll know he likes to make predictions.
He wrote The Great Boom Ahead in 1993, The Great Jobs Ahead in 1995, The Great Depression Ahead in 2009, and The Great Crash Ahead in 2011.
What's ahead now? A "demographic cliff," according to Dent's new book... Demographic Cliff: How to Survive and Prosper During the Great Deflation of 2014-2019.
"At Dent Research we have a not-so-secret weapon: demographics," Dent writes. "It is the ultimate indicator that allows you to see around corners, to predict the most fundamental economic trends not just years but decades in advance."
Dent spends the bulk of his book arguing that the demographic story has turned against the U.S.
As Boomers retire, it's not an unfamiliar argument. Dent writes that an aging U.S. will cause deflation that will weaken the economy from 2014-2019.
Here are some of his main points:
- Young people cause inflation because they "cost everything and produce nothing." But young people eventually "begin to pay off when they enter the workforce and become productive new workers (supply) and higher-spending consumers (demand)."
- Unfortunately, the U.S. reached its demographic "peak spending" from 2003-2007 and is headed for the "demographic cliff." Germany, England, Switzerland are all headed there too. Then China will be the first emerging market to fall off the cliff, albeit in a few decades. The world is getting older.
- The U.S. stock market will crash. "Our best long-term and intermediate cycles suggest another slowdown and stock crash accelerating between very early 2014 and early 2015, and possibly lasting well into 2015 or even 2016. The worst economic trends due to demographics will hit between 2014 and 2019. The U.S. economy is likely to suffer a minor or major crash by early 2015 and another between late 2017 and late 2019 or early 2020 at the latest."
- "The everyday consumer never came out of the last recession." The rich are the ones feeling great and spending money, as asset prices (not wages) are aided by monetary stimulus.
- The U.S. and Europe are headed in the same direction as Japan, a country still in a "coma economy precisely because it never let its debt bubble deleverage," Dent argues. "The only way we will not follow in Japan's footsteps is if the Federal Reserve stops printing new money."
- "The reality is stark, when dyers start to outweigh buyers, the market changes." It all comes down to an aging population, Dent writes. "Fewer spenders, borrowers, and investors will be around to participate in the next boom."
- The U.S. has a crazy amount of debt and "economists and politicians have acted like we can just wave a magic wand of endless monetary injections and bailouts and get over what they see as a short-term crisis." But the problem, Dent says, is long-term and structural — demographics.
- Businesses can "dominate the years to come" by focusing on cash and cash flow, being "lean and mean," deferring major capital expenditures, selling nonstrategic real estate, and firing weak employees now.
- The big four challenges in the years ahead will be 1) private and public debt 2) health care and retirement entitlements 3) authoritarian governance around the globe and 4) environmental pollution that threatens the global economy.
"You need to prepare for that crisis, which will occur between 2014 and 2023, with the worst likely starting in 2014 and continuing off and on into late 2019," Dent concludes. "You can contribute to the solution by conserving your financial assets and reinvesting them after the crisis." Cheery stuff.
You can get the book on Amazon.com.
More From Business Insider