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Old March 29, 2001, 03:57 PM
Dien Rice
 
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Default How to predict long range trends in the stock market....

Hi Simon, Gordon, Rick, and everyone,

Times of change are times of opportunities....

Often when people are "downsized", a proportion of them will turn towards starting their own business(es) to support themselves.... So services for the new businesspeople probably represents an opportunity....

Also, the plunging stock markets does represent a buying opportunity.... Based on demographic data, I predict the stock market will rebound within at most a year or so (though probably not the tech stocks to their previous height, since that was an irrational "bubble")....

Harry S. Dent has shown that the US stock market generally follows the US birth data shifted by about 49 years. In his 1993 book, he correctly predicted the stock market boom we've enjoyed in the late 1990s as a result of this demographic data.... (As far as I know, he's the only one to have correctly predicted this boom BEFORE it happened.) We had the boom in births from 1945 onwards, and that meant a boom in the stock market in the late 1990s.

Why shifted by 49 years? The reason why is because that's the age which the average person spends the most money on products.... More money spent means higher profits for various companies. Higher company profits means higher "valuations" for these companies and therefore, in general, higher stock market prices....

I don't have the book with me right now (a friend borrowed it), but in "The Great Boom Ahead" by Harry S. Dent, there's a dip in the birth rate data in the early 1950s some time, and that's the "dip" we're seeing now in the stock market.... Based on birth rate data, the stock market should boom again within a year or so, and keep growing until somewhere around 2010 (give or take a couple years)....

After 2010, again based on birth rate data, we could start to see a big depression (to rival the Great Depression of the 1930s) as the baby boomers reduce their spending.... Although that big depression is still around 9 years away, the time to prepare for it is now....

By the way, just because the stock market in general will go down, it doesn't mean that all industries will go down.... Some industries will boom, particularly those in which the retired baby boomers will tend to spend their money, and also those in which the "baby boom echo" generation (the baby boomer kids), who will be in their 20s, will spend their money....

Yeah, I know this is a long range view, but it actually makes a lot of sense when you think about it. The correlation that Harry S. Dent has shown between birth rate data and stock market indices in the USA has been borne out by history, and it was on this basis that he predicted the stock market boom of the late 1990s BEFORE it happened. (He also correctly predicted the current Japanese recession, again BEFORE it happened.)

So, I'm riding out the current storm, and buying these undervalued stocks now before the rebound in the stock market comes again, which will probably be later this year or some time next year....

I know some will think I'm off my rocker, going loco, around the bend, gone CRAZY for talking about such long term trends.... But if you want to be safe (and I want you all to be), then the time to think about it is NOW. As you know, I study - HARD - to find out what REALLY WORKS, and Harry S. Dent's approach not only makes sense but is borne out by history....

- Dien
 


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