Harry Dent: S&P 500 to Drop 30-50% This Year

By on January 5, 2012

Harry Dent - H. S. DentAuthor and newsletter writer Harry Dent was on Bloomberg with his latest views regarding the outlook for the economy and stock market for 2012.

Dent said the only good leading indicator is demographics which he has been using for 20 years. He said the baby boomers were expanding and spending into 2007. He added this spending has been plateauing from 2008 through 2011. He stated that 2012 will see a decline in boomer’s spending as their children leave the household and they begin saving for retirement.

Dent indicated that stock market investors are wrong to believe the stimulus is working and said it’s going to run out in the next few months on an 8-10 month lag on QE2. He added the economy is going to fall “flat on its face,” given what demographics say and given the biggest debt run-up in history.

When challenged by one of the interviewers regarding the slow and gradual nature of demographic changes, Dent said spending is actually precise and most people hit peak spending at age 46, which baby boomers hit in peak numbers in 2007.

Dent said people’s spending dives from age 50 until death. Dent admitted it’s not exact, but starting around 2012 there will be a long decline in spending. Dent said the last time this spending decline occurred was in 1968 through 1972.

Dent said Europe is clearly going into recession and it’s no accident that the countries with weak economies have the weakest demographics (Southern Europe).

Dent continued the interview with his view on emerging markets which have favorable demographics, whether boomers will dump stocks, which sectors will suffer from the drop in spending, whether the Fed can react in time, the outlook for his ETF (symbol DENT), and where investors should put their money (he mentions the U. S. dollar (UUP) and other options). The complete interview is available below.

Dent’s dubious forecasting history was previously profiled (here).

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