Hi Michael,

What you say is right about various businesses peaking at different times. Harry Dent already covers that in his books, and has different peaks for different businesses. (Of course, I can't summarize his whole book in a short post.)

Does that mean that those investments could represent good possibilities? Maybe. But keep in mind there are large lengths of time when Buffett has stopped buying stocks completey. If you read the recent articles, you'll see Buffett is at that stage again - he says he's not selling his stocks, but he's not buying any new stocks either.

As for the 46.5 years vs. 49 years, yes, he has changed it - but I don't see it as a problem. This is partly due to culture, since if people start having children later, then the point of "peak" spending will change. There's nothing wrong with making a small adjustment like this.

If you say that you can't adjust for this, then you're saying that the age of peak spending should never change. That's unrealistic. The POINT is that the age of peak spending roughly correlates with the stock market, which seems to be true most of the time.

Does the model hold recently? The model is not an exact fit, as you can see for yourself, and may be even less of one in recent times. Does that mean the model is no longer valid? I don't think so - but it is a theoretical model.

This is different from day-trading - this model is ridiculously simple. Take the birth rates - shift them by 46-49 years. None of the day trading models I'm aware of are this simple. Plus, there is rationality behind this model - whereas day-trading models often don't seem to have a "reason" as to why things should behave the way they say.

However, there's an inaccuracy in the model....

He looks at BIRTH RATES. What he really wants to look at is the POPULATION SIZE at the age of peak spending (around 46-49 years). While there will be a large correlation of the population size at those ages with the shifted birth rates, it won't be exact - because of immigration.

If you adjusted for this, I wonder if it would make a difference.

Anyhow Michael, like I said - I can't summarize everything in his books here. He's taken into account many of your points already. I've only talked about a very small part of what he's written about.

- Dien

P.S. There is another effect - the more people know about this model, the more it will affect their behavior. So, the more this model is well-known, the less accurate it will be - because the knowledge of the model itself will start to affect people's stock-buying and selling behavior. The effect should be that everything the model predicts should start happening sooner. So, for example, if everyone expects a depression starting around 2008 - they might start selling their stocks earlier than that to be safe. This could mean that the depression could occur even earlier than the model predicts.