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Book Review: The Great Crash Ahead: Strategies for a World Turned Upside Down by Harry Dent

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The Great Crash Ahead: Strategies For A World Turned Upside Down, by Harry Dent, provides a clue into the meaning of our past financial history with projections into the future based on an analysis of market peaks, troughs and regression lines.

Japan stimulated its economy over 100% of the equivalent GDP since 1990 and stocks fell 80%. Real estate fell 60%. Dent believes that the government stimulus should be used to cover losses banks incur in order to write down loans to real values.

This write-down would save over one trillion dollars in interest and principal payments alone. Proponents of the free market, as well as many consumers and the working poor would argue the converse stating that bad decision-making shouldn’t be rewarded. Another alternative is to strengthen the Section 8
Program and make lending more difficult for borrowers who can’t afford mortgages.

Dent believes that the dollar will bottom out and ultimately appreciate. When crisis is imminent, gold and silver approach a high and rapidly fall when the crisis hits. For investors, tight stop loss orders may be needed to protect the basic precious metals investments.

Dent mentions the possibility of a 3300-5600 DJIA by 2013, a recovery in 2014 and a sharp upward movement in 2017 and thereafter. Dent doesn’t say so; however, the historical regression line derived from 1960 to 1990 projected into this decade brings the DJIA at 4000 or less. What makes up the difference? Perhaps, the difference lies in the area of productivity gains from microchip technological enhancements coupled with a population increase nearly twice the 1960 Census.

The largest generation in history now spends less and saves more due to an impending retirement. Generational waves are seen in 1929, 1968, and 2007. Household debt is up by 7 times since 1977. Demand has declined, prices have fallen in investments like real estate, production has slowed and lay-offs have increased. The long term trajectory for real estate must be up because world population is projected to grow to 9 billion people by 2050.

Historically, the ultimate cure is to increase exports, encourage innovation of new products/services and build new infrastructure. Growing populations in Asia top two and one half billion people in China and India alone. Even small penetrations into these markets mean millions of new customers.

The baby boom generation retires this decade and that event should depress unemployment even further. Unemployment was at a peak in the third quarter of 2009 with much steeper declines projected for 2014, 2017 and 2023.

There has been a 230 year bull market since 1780. Major market peaks are 1710-1720; 1830-1840; 1920-1930; 2000- 2008 and 2040. Tax collections of the states bottomed in the second quarter of 2009 and crossed into positive territory in the first quarter of 2010. Underfunded pension liabilities are projected at four and one half times the GDP.

Dent doesn’t say so; however, part of the cure is to fund pensions starting at birth in savings vehicles that cannot be accessed until many decades later. Dent believes that the optimal investment choices will be to build cash, invest in high quality fixed income vehicles and purchase high quality corporate bonds in the 2013 time frame.

The Great Crash Ahead by Harry Dent provides an important perspective on the past with a myriad of possibilities both good and bad for the present and future. Clearly, strategic planning is in order for both the public and private sectors. Households will not be immune to the upheavals ahead. Everyone should plan.

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About Dr Joseph S Maresca

I've taught approx. 34 sections of collegiate courses including computer applications, college algebra, collegiate statistics, law, accounting, finance and economics. The experience includes service as a Board Director on the CPA Journal and Editor of the CPA Candidates Inc. Newsletter. In college, I worked as a statistics lab assistant. Manhattan College awarded a BS in an allied area of operations research. The program included courses in calculus, ordinary differential equations, probability, statistical inference, linear algebra , the more advanced operations research, price analysis and econometrics. Membership in the Delta Mu Delta National Honor Society was granted together with the degree. My experience includes both private account and industry. In addition, I've worked extensively in the Examinations Division of the AICPA from time to time. Recently, I passed the Engineering in Training Exam which consisted of 9 hours of examination in chemistry, physics, calculus, differential equations, linear algebra, probability/ statistics, fluids, electronics, materials science/structure of matter, mechanics, statics, thermodynamics, computer science, dynamics and a host of minor subject areas like engineering economics. A very small percentage of engineers actually take and pass the EIT exam. The number has hovered at circa 5%. Several decades ago, I passed the CPA examination and obtained another license in Computer Information Systems Auditing. A CISA must have knowledge in the areas of data center review, systems applications, the operating system of the computer, disaster recovery, contingency planning, developmental systems, the standards which govern facility reviews and a host of other areas. An MBA in Accounting with an Advanced Professional Certificate in Computer Applications/ Information Systems , an Advanced Professional Certificate in Finance and an Advanced Professional Certificate in Organizational Design were earned at New York University-Graduate School of Business (Stern ). In December of 2005, an earned PhD in Accounting was granted by the Ross College. The program entrance requires a previous Masters Degree for admittance together with a host of other criteria. The REGISTRAR of Ross College contact is: Tel . US 202-318-4454 FAX [records for Dr. Joseph S. Maresca Box 646 Bronxville NY 10708-3602] The clinical experience included the teaching of approximately 34 sections of college accounting, economics, statistics, college algebra, law, thesis project coursework and the professional grading of approx. 50,000 CPA examination essays with the American Institute of Certified Public Accountants. Additionally, membership is held in the Sigma Beta Delta International Honor Society chartered in 1994. Significant writings include over 10 copyrights in the name of the author (Joseph S. Maresca) and a patent in the earthquake sciences.