Harry Dent

Harry Dent is the author of the book "The Great Depression Ahead" and he is renowned for forward forecasting market trends since the early 1980’s, and he is noted more recently for picking the start of the roaring great bull run market in early 2001, the peak in US property markets and the coming demise of the equity markets at the end of the decade coming into 2010.

He was recently in Australia on a national speaking tour and we were lucky enough to catch up with him for a one on one interview whilst he was in Melbourne, Australia.

Harry you are renowned for utilizing demographic trends as a key tool for your forward forecasts, can you tell us a little bit about this and how it works?
In the US we are fortunate in that the agencies collect over 600 categories of data, this data can then be utilized for forecasting the economy and market trends. We discovered that at different life stages, there are predictable spending patterns, which can be forecasted in terms of the size of consumption and also general trends in purchasing habits. The peaks and troughs of consumption can be forecasted by constructing a forward spending wave. This forward spending wave graph can then be overlaid onto the Dow Jones share market index and we also found that the index tracked this growth and decline in the market.

Part of your work is also looking at market cycles which have occurred over the past 200 years, can you tell us a little bit about these market cycles?
The 40 year cycle is the predominate one which is a generational cycle, of which the 80 year cycle is an extended version. The panic of 1907 over 100 years ago, if you move forward 80 years you reach the crash of 1987, both corrections were similar. In 1929 we had the market crash and the great depression followed, 80 years forward pretty much puts us in the same place of market chaos and a deflating cycle. In addition to this we also look at the commodity cycle, whereby we see a peak in commodities every 29 to 30 years. So for example, we saw this peak occur in 1920, 1951, 1980 and we expect to see a peak again around late 2009-2010.

Finally, what is your outlook for the global economies?
Broadly, we see in the US another round of home loans coming up for reset early next year, similar to the subprime. In addition to this the European market has a large number of corporate debt coming up for maturity at around the same time. So the credit markets will come under pressure again around 2010. This will have an impact on the equity markets and global economies. Australia will be far from immune from these events. I still feel there is a large amount of concern in the short to medium term and possible downside risk in the equity markets is still very high. This deflation cycle has not run its full course and will continue to do so for at least the next 12 months.