Posted on 11/03/2004 4:12:45 PM PST by SierraWasp
Dow 40,000, Nasdaq 20,000 by 2009; Harry Dent predicts a 'New Millionaire Economy'
By Paul B. Farrell, CBS.MarketWatch.com Last Update: 9:25 PM ET Nov. 2, 2004
ARROYO GRANDE, Calif. (CBS.MW) -- You want some optimism? Well folks, after a flatlining market and the brutal, negative election campaign we've been dragged through, America desperately needs some optimism. And here it is. Harry Dent's latest predictions: Dow 40,000, Nasdaq 20,000 by 2009.
In many ways, the wars in Iraq and Afghanistan and the war on terror were no match for the divisive domestic "war" for the American presidency. It's been absolute torture. So thank goodness for Dent's optimism. The guy's a breath of fresh air.
In fact, Dent wins our annual Super-Optimist Award. He's the No. 1 cheerleader for America's stock market. You will love reading the predictions in his new book, "The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2005-2009."
Actually Dent's more than a super-optimist, he's America's ultimate contrarian. So what if his archrival Robert Prechter is predicting a 100-year bear? So what if SmartMoney just reconfirmed the conventional wisdom of Buffett, Bogle and Gross, who are forecasting single-digit returns through 2009? So what if InvestmentNews is telling professional advisers that insider activity is so negative it's now the "canary in the coal mine" signaling that "it's time to sell stocks?"
And so what if Dent's late-nineties books, like "The Great Boom Ahead" and "The Roaring 2000s," were way off the mark and probably resulted in investors hanging on too long as the bear market wiped out $8 trillion of stock market value between 2000 and 2002.
Even bigger than late 1990's boom!
You gotta love his chutzpa: Now he says that correction was right on schedule and we are still on track for Dow 40,000 by 2009. Nothing gets in the way of his optimism: "We are seeing another very strong bull market unfolding from the bottom" of the correction, and "2005 is going to be very strong." Indeed, things are even "better than the 1990's!"
In a 1997 Mutual Funds magazine feature Dent was pitted against super-bear Prechter. Dent predicted 21,000 by 2008. A couple years later he predicted Dow 41,000 by 2008.
Okay, maybe that seems a tad improbable, given 2004's flat market. But at least he isn't as over the top as Dan Kadlec's 1999 book, "Dow 100,000," which Kadlec said was reachable by 2020 with a mere 11.1 percent annual growth.
Irrational exuberance or rational optimism?
But fact or fantasy? You decide. As always, Dent's conclusions are based on some simple assumptions about demographic trends, his area of expertise.
Fortunately, the guy's both entertaining as a futurist and analytically overloaded with tons of demographic, economic, monetary and market numbers. This time his forecasts boil down to five major trends propelling America from 2005 to 2009:
The third and final bubble of a bull that started in the early 1980s. We're about to see the "greatest bull market and technology bubble of the last two centuries." The technology revolution regenerated: "We are on the brink of the tech revolution's second phase, as new technologies move fully into the mainstream and a new generation hits the peak of its spending and productivity cycle."
The "decade hangover cycle:" Corporations are just now wrapping up the consolidation phase following the late '90s bubble that lead to the 2000-2002 correction. America is now ripe for a "rapid emergence of new technologies" that will drive a new phase of economic boom.
The 80-year technology cycle. Dent is also predicting a rapid assimilation of new technologies similar to the 1920s. A new phase of the 1990s technology revolution will continue spreading low-cost versions to the masses.
Baby boomers move into high gear. Dent expects the "incredible earning, spending and productivity cycle of the massive baby boom generation" to continue driving the whole world as the "unprecedented economic boom of the past 25 years" races to a frenzied peak in 2009 ... before another bust.
These five trends will drive the boom to Dow 40,000 by 2009, creating what Dent calls "The New Millionaire Economy," a time of such great prosperity you can expect a 50 percent increase in the number of American millionaires. How's that for optimism and opportunity, my fellow Americans!
Play the market to win ... then get out
What's your best strategy? How do you play to win? For savvy, active investors he's got some aggressive market-timing strategies. But you really don't have to play market-timing games that'll increase your risks. Instead, Dent tells investors to make their bets based on a familiar 1990s kind of market assumption ... that a rising tide lifts all boats.
His core strategy is a basic asset-allocation strategy, nothing really extraordinary: Just stick with a well-diversified, buy-and-hold portfolio for the long-term, one that'll float you up as the market rises to Dow 40,000, perhaps even putting you among all the "New Millionaires" that he sees coming by 2009.
Fortunately his strategy also protects you if his optimistic predictions don't play out and the market continues flatlining, or worse yet, does a Prechter flip-flop and crashes.
Whatever you do, remember Dent's a macroeconomist, a mega-demographer and an optimistic futurist. Guy's like him get paid to see the world through rose-colored glasses. They thrive on broad sweeping long-term projections, forecasts and predictions.
You an optimist, pessimist, or flatliner?
And even with all his warts, Dent's vision of the market is most welcome after this insane, destructive election war. I applaud his optimism.
But, irrational exuberance aside, how serious should we take Dent's predictions of a Dow 40,000 by 2009? Or do you put more faith in Prechter's 100-year bear market prediction, with the Dow dropping below 1000? See previous Paul B. Farrell.
Which are you: A Harry Dent-optimist, or a Bob Prechter-pessimist? Or maybe something in between, a market flat-liner? What do you think? Send us an email!
Bob Brinker believes it's a cyclical bull also, and he's been dead-on calling the trends. I've noticed the market has been on a cautious upswing for the past few weeks, which makes me think traders had a good idea Dubya would win, but there was a possibility of the terror world pulling a Spain on us. Actually, I'm a bit surprised they didn't get something off to try to influence the election. Anyway, they ain't all that smart about Americans, or they wouldn't have given the impression they endorsed Kerry. If they had shut up, maybe the election would have been a lot closer than it was.
Harry Dent is a student of historical cycles, demographics and especially human nature! Like politics is the art of the possible, I like Harry because he looks for the upper limits possible in macro-economics.
The "establishment" always relies on "conventional wisdom" and it just thrills me when the "establishment's" sclerotic thinking gets blown away, just like what is happening with the Dan Rathers of the MSM, right now!!!
Yep, Dent has been uncannily accurate in the past. His book The Great Boom Ahead predicted the 1990's to a tee. I urge everyone to read his latest book. Most won't bother.
Unfortunately, if he's right, it means the Republicans will own the government until 2012, after which this country will most certainly go not-so-gradually socialist. The GOP will be blamed for an economic decline which was not of their making and no one could avoid.
White House: Debt Ceiling Must Be Raised
Foreigners own half US debt, tipping point unclear
EXACTLY! John Edwards based his whole candidacy on people starving in America. First of all, it ain't happenin'. Secondly, a case can be made that............NOTHING IS WRONG! Hey democRATS, hear that? Nothing is wrong. You don't have to go out and "fight" for people. Everybody is ok, OK? Leave us alone, keep your lawyers in lower Manhattan where they belong. We want to engage in commerce and make money with you. But leave us alone otherwise.
IMHO there just might not be anything wrong. And if there is, could the blame be placed on poor individual choices? What a radical concept.
If this is true, the 'Rats are history. The Republicans will be in control for a generation and the Libertarians will be the new "second" party.
I'm not buying Harry Dent's pipe dreams again. He was so wrong about the bubble, it's amazing he would ever show his face again.
That being said, yes, I believe the market will continue its decades-long upward trend, and I am fully participating for the loooong run. I'm just going to be well diversified, and I'm going to ignore pseudo-experts like Dent.
This scenario timeline go well with my theory of hyper inflation to pay/fund the national debt, and fund the empty social security 'lock box' commitments which will start coming due in about 2008.
The DOW going to 40,000 would be about right, for a total inflation rate of 400%, and all the free traitors who wish to foist our debt 'paper' and dollars on foreigners and others, to support our enormous trade and monetary deficits.
Yep, it's all lining up. $8/gallon gasoline, 40k DOW, $400k houses, $80k cars. Yup... it's all lining up.
That's just it! They never will! The preachy, teachy bastards are just obsessed with their "vision" of "social justice" and GovernMentalism that they pound in everyone's face with such perpetual evangelistic missionary zeal that they're worse than a newly converted Christian who was just baptized!!!
They've been losing elections because they are threatening. They somehow suceed in making Conservatives and Christians be perceived as threatening to hide their own threatening intensity in a shroud of pseudo populism or do-gooderism. They are fatiguing to the max!!!
Elliot Spitzer is a great current example of the lawyers of which you speak, that have a detrimental impact on commerce far beyond the realm of lower Manhattan. Rudy Juliannie was a good AG and he didn't shotgun aspersions and malicious, selective prosecutions at entire industries like Spitzer is doing at the insurance industry!
Democrats like Spitzer just HATE the insurance industry for the social good it does as private sector entities because they think this should be done only through the public sector as the only trustworthy element of society! That's pure unadulterated crappola and Socialism!!!
Without the parasitic burden of extreme GovernMental/EnvironMental Socialism we have been enduring since the FDR administration, the US would be light-years ahead of where it is today! IMO!!!
I think the only thing that can be done is convincing people to get out of and stay out of debt. A mortgage is not supposed to be comfortable or a source of income.
Elliot Spitzer is out of control. Notice how all those settlements collectively amounted to over a billion? Sounds huge. Actually it was about one or two months revenue per firm. But Spitzer got his headline.
Dent has indeed been uncannily accurate. Even so, he's a trend follower.
But this is roughly a 31% componded annual rate of return. While not impossible, extremely unlikely.
Simple reversion to the mean beginning at the end of the last bull run (a 10 percent return beginning January 1 2000 through December 31 2009) suggests a Dow 28,000. The problem here is that the 10 year number on the S&P 500, (neither a foolish price weighted index not a tech heavy abomination) is better than 12% as of 12/31/05. Reversion to the mean employing that information suggests dramatic underperformance for stocks.
If I had a five year time horizon, I would avoid aggressively investing in stocks, much less in aggressive stocks.
Make sure you have 10 years. 20 is much better. And count on our corporations to innovate, invent and lead the way through!
The good news is that economists don't manage money.
Yours in portfolio management,
Sentinel
Of course he's a "trend follower!" How else does anyone figure anything out about the future? If it' weren't for time, everything would happen all at once!!!
I like Harry and George! One predicts the "new Millionaire Economy," and the other predicts the "new Ownership Society!" God Speed, Harry & George!!!
Good grief, Sentinel of Plymouth, you snagged this thead from last november? Nice to know it's not really a "dead thread!" (grin)
I'll put this on my reading list, I'm still working on "The Crash of 1995".
Wow! With those numbers I could retire very early. (I was targeting 2017 or so.) Will earnings really increase enough to sustain that valuation? That suggests we keep economic growth above the 3 to 4 percent range for four years consecutive and that interest rates remain very low. And, since the exchanges usually value the future of a stock, it also suggests that such a situation exists for as far as the eye can see.
Someone was saying several years ago that the real estate market strips money from the stock market and vice-versa.
According to him, if the stock market gets pumped up, the dollars are coming from a real estate price collapse.
Make of it what you will...
Yep, that's about it. If the Dow is at 40,000, milk will be $15.00 a gallon and bread will be $12.00 a loaf.
Go DOW 40,000.
Invest heavily in Tech!
Have your stop-loss orders set.
Optimist that I am.
Oh... I still shy away from tech/NASDAQ stuff for a little longer. There sure is trillions of tons of cash still stashed on the sidelines that could make for a "secular bull" that I don't wanna miss, however. So be careful out there... will ya???
"So be careful out there... will ya???"
No doubt.
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