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The Technocrat's Intellectual Review:

The Roaring 2000s

by Harry S. Dent

This is a disappointing book. It shows every sign of having started out as a magazine article or something similar and then being expanded to fill a 318 page book. This leads to a lot of fluff and repetition as unfortunately the author hadn't put in any more research to get any more information. And there are definite signs of him making stuff up when stuck for a point. The line "Digital literally means left Brain Thinking" shows that he made it up and never looked in a dictionary to see what it does mean. And that he assumed his audience would be too dumb to know the difference.

This is surprising common amoung the genre. Similar books that also predict a continuing economic boom for the USA into the next century have also started as magazine articles. I refer to The Long Boom and Dow 36 000. With such works I recomment the approach that I used for these two, namely read the magazine versions. They can be found from links in my reviews.

However, unlike the other two works, Harry Dent actually has a interesting new theory to back his claim. Long Boom merely says that the current trends will continue, and that the internet will reform the economy, and Dow 36 000 uses the simple Capital Assets Pricing equation and sticks in some VERY dubious numbers, along with claiming that shares have been underpriced for all of history until now. Harry Dent has a theory that should explain all long term share market movements under all circumstances.

His theory is that the economies, and hence company profits and hence share markets, are driven by the proportion of the population that is at the peak spending age of 46.5 years. To do this he has three important graphs: One showing spending versus age, in which there is a peak at about 46.5 years. Another showing the number of people who are about that age versus the year. And the third showing the Inflation Adjusted Dow Industrial average versus the year. Sure enough the 2nd and 3rd graphs match up nicely... for the years 1953 to 1995. In my edition of the book this is Figure 1.6 and it looks fine.

This is great, and would probably get full marks for a 3rd Year University assignment. But before you actually claim it as proven some more work is required. the first step would be to extend the data back a lot further. Dent does indeed refer back to the 1920s a lot, but he does this descriptively rather than plotting the graphs. And that is very suspicious. He has a graph of the population back to 1820, the Dow is available back to the beginning of the 20th Century and share market data goes back hundred of years. So why not plot them against eachother? One can only suspect that the curves no longer match as well as in his existing graph.

At this point Dent introduces a new idea. That births come in groups or generations separated by about 40 years. Why this is so is not explained and doesn't sound right to me. If it was just generations then don't most women have babies long before they are 40? And wouldn't the natural variation in child birthing age even out the generations over a couple of cycles? If it is some other reason then Dent doesn't explain it.

There is once again a graph to show the existence of these 40 year popultion surges, but it only goes back to 1910. In other words there are three peaks on it. Or to look at it another way, two troughs. One at the Great Depression, and the other after the Baby Boom. Both of these are explainable without resorting to a mysterious cycle. And it is not as though population data is that hard to come by, it should be trivial to get reasonable data for a whole range of countries over a period of centuries, but this is not done.

So with only two data points, the great 40 year generation cycle is accepted as proven for the rest of the book.

The next point is that generations alternate in temperment. One is conservative, the next radical, then conservative again as each one rebels agains the behaviour of it's parents. This is, once again, a reasonable but unproven statement. Once again a couple of data points are provided. The generation of Henry Ford, who were at their peak in the 1920s were innovative and radical, the generation who fought World War 2 were boring and conservative (Perhaps the fight to the death with 60 million casualties was enough excitement for them?) the baby boomers were rebels (as they are constantly reminding us) and now Generation X is meant to be far more stable (but as yet they haven't been proven either way).

Once again this can be reduced to about one data point. That compared to the generations before and after them, the surviviours of World War Two were inclined to keep their heads down and not rock the boat. My guess is that if an entire generation of people is put into the military, then they will tend to obey orders more than otherwise. Just go to any current country with universal conscription into a disciplined armed forces, South Korea for example. By comparison with a less militaristic country the people tend to be very orderly, neat and hierachal. No surprise there, they've been trained to be!

With these alternating generations, we are then supposed to have major innovations in society every 80 or so years. Exhibit A here is the 1920s when cars, electricity, aeroplanes, telephones, urbanisation, tractors and the assembly line revolutionised the modern world. And lead to a great stock market boom. True, but this is just one example.

Dent never even mentions the 1840s, which is the next obvious time to look at. At first this is strange, because the 1840s fits into his innovations plan well. This was the beginning of the gloabalised economy. Steam trains and steam boats meant that suddenly people could trade with places more than a hundred kilometres away. On the other side of the world actually. And the telegraph meant that messages could be sent around the world in a time reduced from months to seconds. the industrial revolution emerged from England and began transforming Germany, France, and the USA. So why doesn't Dent mention this?

Possibly because the US stockmarket did badly in the 1840s. Political and financial crisis overcame any profit to be made from the technical innovations. This is in exact contradiction to Dent's thesis that the population surges drive the stockmarket regardless of everything else.

Next we can look at the 1760-70s. Here again annecdotal evidence suggest that it was a time of tremendous innovation and revolution. To name just three, the French, American and Industrial revolutions all started. The English started settling Australia. Most of the greatest works in the 18th century (the Declaration of Independence, the Rights of Man, the Encyclopedia Brittanica, The Wealth of Nations, The Swiss Family Robinson) were all written. The stockmarket performance I don't know about, but surely Dent could have looked it up?

After this we hear about more cycles, the 500 year cycle, the 30 year cycle. None of which are given any justification or explanation, luckily they are unimportant to the theme of the book.

The rest of the book is filler. A broad analysis of some real estate trends is done, but nothing that hasn't been written about a dozen times before. A lot of vague advice is given about places in America to buy land, most of which can be summarised as "Buy places that are going to go up in price".

Finally, in the last chapter, we get to the stock advice. Based on the population at peak spending time idea (which despite not being proved may well be correct) the share market should boom until about 2009 and then collapse until 2023 when the next wave of big spenders comes through. Here we also get the only bit of supporting data that is not from the US post war period. According to the population model, Japans population in the 45-50 bracket, and hence economy, should have peaked in 1990, be on a decline ever since, and will pick up in 2010. This at least is out of sample, is in agreement with the results (so far) and tell you where to invest in 2008.

In short, just read the first and last chapters, but if you must: The Roaring 2000s


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