The Great Bu$t Ahead

[lu]

I’m impressed by the comments that people have contributed to this site.

I’m wondering if any posters here have read “The Great Bu$t Ahead” by Dan Arnold, and if so what your thoughts are. It’s a quick read if you’re interested in opinions about the future of the stock market and economy.

Here’s a link:
http://www.thegreatbustahead.com/

The graphics might be all you need to dismiss the entire argument. 🙂

I’m trying to think of reasons why his (fairly simple) argument could be wrong. Any thoughts from students of cycles and long term historical data?

It’s similar in nature to other doom and gloom arguments from such authors as Prechter and Dent, but with different timing and based on much simpler fundamentals. As far as timing goes, I thought the RE bust would happen in 2004. 🙂

Thanks!

[(former)FormerSanDiegan]

This is a Harry Dent copycat.
The book should be re-titled “The great Butt Head”

The first chart predicts a 7 year huge run-up in stocks starting in 2005 and ending in 2012. By the eyeball it looks like about a factor of 2. That’s 10% per year ?

Woo hoo ! good times ahead the next 7 years. Housing bust … who cares we’ll double our money in the Dow.

The hangover looks bad, though, but who cares, let’s party like it’s 2009.

[powayseller]

Does he have proof that the stock market follows the number of people aged 40-54? He’s right that 70% of GDP is consumer spending, but I have never read that most of that spending is done by middle-aged people. According to this guy, as the 40-54 yr old age group shrinks, the stock market will bust, leading to a great depression. This seems questionable without further proof.

[an]

I did read that book and it’s a quick read. There’s a possibility that it might happen. If you just look at what happened in 2001 in RE, I think a lot of people cashed out of the the NASDAQ and put the $ in RE. So now, it might happen the reverse, people will take the $ out of RE and put it back in the market. We’ll never know for sure until it happen, but that’s a possibility.

[(former)FormerSanDiegan]

PS –

Harry Dent’s Book uses the same demographic argument. The premise is that in the US the peak earning age is about 46. Spending = earnings – savings, and historically savings has been in the 0-7% range, so the bulk of $ earned is spent, stimulating the economy.

Dent showed a strong historical correlation of the US stock market with this demographic and also made the same comparison to the Japanese market. The only difference is that Dent’s book was titled “Great Boom Ahead” and published in 1994.

The reviews I read on this book and the web site itself indicate that this is a thinly veiled rip-off of one of the elements of Dent’s book. Even the title is a play on Dent.

I wouldn’t support this by purchasing. Get Dent’s book, ignore the title, and focus on the demographic trends beyond 2010.

[lu]

Dent also has a new book: “The Next Great Bubble Boom”.

Two shorter works of his: “Demographic Trends in Real Estate” and “Bubble After Bubble in The Ongoing Bubble Boom”.

I think his argument can be summarized by stating that money will keep flowing from one bursting bubble into another sector, creating a new bubble, one after another, until eventually it all ends really badly.

Roubini on the other hand predicts a deep recession (caused by the RE bust) starting much sooner, in early 07.

Thoughts? Anyone have a working crystal ball? 🙂

[Bugs]

I guess when the stock market takes off running we’ll have our answer.

How long do you think we’ll have to wait before that happens?

[powayseller]

Bugs, were you asking my opinion? I have 0% certainty regarding the recovery. Once the option-ARMs have finished adjusting in 2008, and unemployment hits 10%, the economy ought to be balanced enough to start its next upcycle, (unless we get a slump like Japan). Maybe we won’t hit a big slump since we are the superpower with the reserve currency. Once consumers emerge from their slump, the economy ought to pick up again.

[lu]

Here is another author, Steven Doty, who is predicting a massive bust because of the 80 million baby boomers that will be retiring soon.

http://thecomingcrashonline.googlepages.com/home

His analysis is based on monte carlo simulations, which is the same technique professionals use to optimize portfolios (such as when applying modern portfolio theory).

His book and profile: http://stores.lulu.com/stevendoty

Thoughts?

[Cow_tipping]

80 million baby boomers = 50 million houses in usually what I call the arctic tundra (though a bunch of them are in CA etc … but NY, NJ, CT, MA, MN, IL, OH, MI, OR, WA) have a large segment of that population … who I expect will attempt to unload their McMansions and head to FL. By 2011-2012 we will be in a 30 year depression in RE except in FL (ironic as that sounds now …) CA may stay the same from that regard, its not a retiree friendly state so I believe they will still try to get out. I think RE in the Northern 1/2 is toast starting 2011 on. Heck, might be time to fire up the steel mills again cos now you can live in those places on menial wages since the boomers have dumped their McMansions on the market. Detroit and MI has already started.
Cool.
Cow_tipping.

[Anonymous]

There is no way “real estate” money will start moving to the stock market. Bottom line, you can use literally 100% financing to purchase real estate. You can’t directly get a loan to purchase stocks. Most money in the stock market is from pension funds, 401Ks, etc.

Stock market cannot be artificially bid up in the long run by funny money the same way that real estate was.

[cr]

The best way to make a fortune is to write a book telling people how to make a fortune. If you really want to make it credible, pontificate the myriad ways society will change and present “your” ingenius ideas on how to profit from it.

[Anonymous]

And then convince your disiples to sell your book for you.. thus a pyramid scheme is born.

[poorgradstudent]

The chart is hilarious.

He projects the DIJA to hi an astonishing 26,000 by 2012! Yes, that’s more than double today’s level, in 5 years. Seriously… wow. The headline here is not the great bust… it’s he’s projecting the most incredible boom in the stock market ever.

Correlation does not equal causation. It’s a rule of logic a lot of people, even smart ones, sometimes forget.

[Anonymous]

I read the book by Doty, and have read a number of these type. This one is actually sane. I think I believe what he’s saying.

The modeling seems solid. It is actual economic modeling as opposed to “look at how these curves are shaped” in that “…Bu$t Ahead” link above. From what I know about the area, this is the type of hard-core simulation that the big guys use. He apparently directly simulates the demographics
and money flow in the economy using a monte-carlo model, and tests the model against historical data. The test are impressive. (But perhaps I shouldn’t be surprised. He’s a computational modeler.)

He also lays out some what-if / what can we do scenarios, based upon the modeling.

Anyone else read it and/or have an opinion?

[Author]

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