[LINK] baby boomer spending?

[stephen at melbpc.org.au]

Financial Bookshelf: 'The Great Depression Ahead'
By EILEEN AJ CONNELLY – 10 hours ago 

http://www.google.com/hostednews/ap/article/ALeqM5iJVsaPVQEy6-EvDsi89lL-
ZiDI3gD96K4D9O0


NEW YORK (AP) — If the economy looks like it's going downhill, just wait.

Government data released Friday showed the economy is slowing down much 
more dramatically than economists expected. But the current economic woes 
will pale in comparison to the big storm that's coming, predicts Harry S. 
Dent Jr. in his book "The Great Depression Ahead."

"If you thought 2008 was scary, 2010 to 2012 will bring on the greatest 
economic and banking crisis since the early 1930s," Dent writes, 
forecasting that real estate, stocks and commodities will all fall much 
further than they have already. 

The founder of HS Dent, an economic research and forecasting company in 
Tampa, Fla., Dent maintains the sharpest part of the decline will last at 
least two years. He sees the Dow Jones industrial average falling as low 
as 3,800, or just over half its current value.

The key to Dent's predictions are the various historical cycles his 
research has identified. 

The centerpiece is a 40-year demographic cycle that he says is winding 
down because baby boomers have started to drastically reduce their 
spending as they approach retirement. This change is the major factor 
that will drive a steep economic downturn. But it's not an isolated 
phenomenon, it's overlapped by other short-term, intermediate and long-
term cycles that show patterns in stock market corrections, technological 
advances and commodity price changes, among other economic factors..

The Associated Press talked with Dent about the predictions behind "The 
Great Depression Ahead" and the methods used to make those forecasts.

Q. Many critics have noted it's easy to pick out specifics for any given 
time and miscues in your predictions about how the stock markets are 
going to move or what will happen to the price of oil. Given that, how 
much confidence can readers have in your forecasts?

A. What our firm does that nobody, and I mean nobody, nowhere does, is 
predict trends decades in advance. When it comes to short term 
predictions, you know how much I'm right? Sixty, maybe 70 percent of the 
time. Our main message in this book is this is not just another 
recession, this is a long-term peak in stocks, like 1929, 1968, and 1989-
90 in Japan. 

This one's not going to be over in a year. We look at demographics, and 
90 million baby boomers are switching from being spenders to savers. 

Politicians think they're going to just fix the banking crisis, but what 
they really have is a long-term demographic slide. Government is not 
going to do the right thing, because you can't do anything about this.

Q. Even though they're aging, baby boomers are expected to live longer 
and be more active than prior generations. Why won't that help boost the 
economy?

A. Because of the spending cycle. People spend dramatically more money up 
to age 50, and then they spend less for the rest of their lives. The baby 
boomers are more active in retirement and they'll spend more in 
retirement. But they'll spend less than they have up to now, because 
their kids are gone and most of their durable goods are bought and paid 
for. Even if these people are more active, they may be spending money on 
vacations and rock climbing or whatever, but they're not spending money 
on houses and cars and the other things that stimulate the economy.

Q. You say there will be no major technological innovations to spark the 
economy in the next 15 years or so. Some people point to sustainable 
or "green" technologies being implemented now in energy and other areas 
to refute that. How do you back up your view?

A. We do think there are exciting new technologies that are being 
developed — nanotechnologies, biotech and robotics, for example. But we 
focus more on technology cycles, which come in waves. There is always 
innovation. But it's when these technologies hit critical mass, like the 
Internet in 1994 to 1996, that they impact the broader economy. There are 
a lot of things emerging now, but you've got to remember, PCs emerged in 
the 1970s, but they didn't affect consumers that much until the 1990s.

We had a big cluster of things in the '60s and '70s that didn't emerge 
until the 1990s. Technologies are extremely important and innovation is 
still occurring. The iPhone's going to get better, broadband is going to 
get better, but you don't get the same impact from those improvements 
that you do from the adoption of computers and cell phones. Just like 
generational things, they ebb and flow. The next generation will bring 
nanotech and alternative energies and so forth, but we won't see the 
impact of that for decades..
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