Monday, October 20, 2008

Book review

I was on Amazon to purchase a couple books and one of the Amazon recommendations was "The Great Bust Ahead," by Daniel Arnold. Arnold wrote the book in 2002 and predicted a massive US/UK depression from around 2013 to 2025.

It's a short book, 65 pages, with a simple premise: GDP is/has been driven by the 45-54 year old demographic since the early 20th century. This demographic is theorized to be the largest consumer segment. Arnold finds a high degree of correlation between the size (sheer number) of people in this group and the economy as indicated by the DJIA. When the segment (baby boomers) start to exit the 54 year old age group (but 10-15 years before they actually retire), GDP will decline precipitously.

His predictions:
A DJIA high of around 26,000 sometime around 2013, +/- for wars, pestilence, acts of God
A drop in the DJIA back to around 10,000 before trending upwards in 2025
a 12 year depression that will make the Great Depression look like a beach party; resulting in a peak of 25% unemployment starting around 2013, with the resulting sociological problems
A deflationary period similar to Japans in the 90s to today

His recommendations (not mine):

Get into cash or long and intermediate government bonds before 2012
Sell your house, bank the profit with bonds, and rent, then rebuy after prices collapse

He's not a professional economist but the book brings up some interesting points and frightening predictions. You can check it out here.


MM said...

starting to think you need to get out more, homie.

a 60% market contraction?

Cody's Tri Blog said...

Sounds like an interesting read, H. S Dent has some similar theories and books based on demographics. Not sure how much of it I buy, but it is logical.

martygaal said...

Yeah I'm not sold on a total collapse either, but some rough roads are probably ahead for the US peso, tax rates, etc.

MM said...

all the more reason to flood your retirement with spare cash - dollar cost averaging is a great thing.