Gold, Housing and Emerging Markets 2009 and Beyond
Stock-Markets / Investing 2009 Jan 10, 2009 - 08:55 AM GMTBy: Q1_Publishing
“This level of stimulus is at the point that it's like taking a bottle of Viagra and nothing happens...” - Harry S. Dent
We've entered an unprecedented period of uncertainty. The markets have collapsed and $30 trillion of stock market “wealth” has evaporated.
The future could be filled with even more. There are a lot of unanswered questions.
Real estate, gold, stocks...what's a safe haven? Is this a correction which will get sorted out soon or will it take much longer? Any life in China and India? Inflation or deflation? Is this the end of the financial world as we know it?
Those are just a few of the big picture questions.
Here's the thing, Q1 Publishing's Andrew Mickey is a firm believer in finding unique and thoughtful perspectives. He says, “Finding truly great people which can challenge you and the way you think is tough. When you find one, ask them as many questions as possible. Chances are, you'll learn something.”
That's why he recently sat down with Harry S. Dent of the HS Dent Foundation. Dent is the creator of the “Dent Method” and author of:
The Great Boom Ahead (published 1992)
The Roaring 2000s (published 1999)
The Next Great Bubble Boom: How to Profit from the Greatest Boom in History, 2005 – 2009 (published 2004)
Andrew Mickey says, “Harry is one of the best big picture guys in the world. He focuses heavily on age demographics, spending patterns, and has had dozens of spot on predictions over the long-term.”
Below is a discussion Andrew recently had with Harry about what's around the corner for gold, China, India, oil, commodities; where to have your money now; and where the big opportunities lie over the next 5 to 10 years and beyond?
Andrew Mickey: I've got to tell you Harry, the title of your latest book, The Great Depression Ahead , didn't get me too excited. You've hit the nail on the head many times before and if you're right this time…it's depressing to think about.
At the Prosperity Dispatch our 100% Free e-Letter, we've discussed the era of double-digit returns coming to an end, but I still don't think too many investors have fully realized what that will mean. But hey, that's reality and if we are honest with ourselves now we can be prepared for it and actually prosper.
With that, I'd like to ask, what is the main point investors need to realize now so they can navigate the tumultuous years ahead successfully?
Harry Dent: The biggest point here is that this is something that we have been forecasting for 20 years. Some people think, “we'll it's because of the banks meltdown, because of this and that. And now we're in this crisis.”
They're wrong.
We're due for this crisis because the biggest generation in history was going to come to an end.
We've had a long, and incredible, wave of productivity and spending. At the end of such booms you always have financial excesses and leverage. People just throw risk out the window. They think it's going to go up forever. You hit bubbles which have to break down.
But our point is that this is a long term reversal not a short term. This is not just another recession where the Fed stimulates the economy and we come back with more baby boomers buying houses and spending money. This is the end of a long boom and it's coming about a year earlier than we would have anticipated, because of this meltdown.
This is major.
Everybody knew we were in a housing bubble and we've been in bubbles before with stocks…and now commodities. Regardless, very few people saw how sinister the financial system got because, in a nut shell, investors, pension funds, and hedge funds increasingly became addicted to the returns in the 90's where you could make 20-30% returns in stocks easy. You could even make 6-7% plus in fixed income.
All of a sudden, when bubbles started bursting, you can only make half that much in stocks - at best. With Fed interest rates so low and disinflation you can only make 3-4% in fixed income.
All of this final kind of bank and securities melt down came out of the fact that wall street needed something different. A bunch of smart ass MBA's came up with this clever scheme of packaging all this debt in ways and diversifying it...tranching it up and insuring it.
Although, the insurance is not real as it's not regulated by insurance companies. They created what would appear to be a triple AAA security and the ratings agencies went along with it. Really they were more like triple B- or triple C+.
Then when the housing slowdown came (and we did forecast this cause that's a clear trend that shows where we are in this cycle). This thing melted down and created a near-term disaster.
What we're saying is the bigger downturns yet to come.
A: Bigger downturn to come? You mean, October and November meltdowns weren't the end?
H: It's all cyclical. We peaked in housing, we peaked in commodities, we peaked in stocks and at some point, around 2010 or so, we just turn around in our own spending and we go into a longer deeper downturn.
We've been saying for a long time that we're going to see a depression here. All these bubbles are deleveraging. With the economy, the biggest surprise I guess is it started [its downturn] late 2007 to 2008, not late 2008 to 2009 as the broader indicators would suggest. But it is happening and we call it the perfect storm.
The peak of the long term commodities cycle which happens every 29 – 30 years which happens to have coincided with the peak of a long term generational cycle which happens about every ..... This is like a storm. The first side of the storm hits. This is irresponsible at this point. The Government says we'll create money, we'll throw money at this and we'll buy treasuries, we'll buy agencies debt. This is getting ridiculous at this point and we're probably going to see an eye come over the next year.
We've got a new president, huge stimulus, low interest points, oil has fallen – ok the consumer gets a big break here and then just as the eye passes over and people think “god maybe we got out of this?” then... BAM ! You get the backside of the storm which is always worse and builds on the first side of the storm and that hits in 2010 and that's when from our point of view, we go into a depression not a depression.
Then we start to see bigger levels of deflation. From the storm point of view we get floods and damage and everything is disarray.
A: When do you see the true “bottom” coming in for the economy, housing, etc?
H: In 2012 and into 2013 housing is going to go a lot lower and stocks are going to go a lot lower.
We usually say that bubbles usually go back to where they began or a little lower. We use the example of the Japanese housing bubble which is a big reality. What we've been saying for years is that people don't understand that real estate could go down for years – Big Time.
Just look at the 1930's in the US and the 1990's in Japan. Real estate bubbles can decline for very long periods of time. Japan's bubble started in 1986 in real estate. It had been going up for decades just like ours but it went up exponentially from 1986-1991 just like ours from 2000-2005/2006. It dropped right back down to 1986 levels. This was a 60% drop in homes and a 70% drop in condo's in Tokyo.
It makes people almost want to puke looking at that graph. People haven't seen real estate go down like this all their life except for a few little things in the 90's and early ‘80's.
A: What does all this mean for GOLD…China and India…oil and commodities? Where are you telling investors to have their money now? What about over the next 5 to 10 years and beyond?
H: The number one thing… follow this link to read on.
Good investing,
Andrew Mickey
Chief Investment Strategist, Q1 Publishing
Q1 Publishing is committed to providing investors with well-researched, level-headed, no-nonsense, analysis and investment advice that will allow you to secure enduring wealth and independence.
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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