The Great Bust Ahead: The Greatest Depression in American and UK History is Just Several Short Years Away. This is your Concise Reference Guide to Understanding Why and How Best to Survive It
by Daniel A. Arnold
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Binding: Paperback
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January 2010 Update
1. First, read the prior year update below.
2. The January 2009 update predicting a 2009 rally of perhaps 30% from a new low of around 7000 did happen . . . and more!
3. With NASDAQ now added from 1985 onwards to reflect its then significant percentage of the total market s capitalization (see chart on books ws at . . thegreatbustahead . . ), the correlation with the demographic becomes even more stunning than just the DJIA alone.
4. The 2007-09 deviation from the demographic is a manmade short-term (at this point) deviation. As described in the book, short-term is 1-3 years. We may yet recover in 2010 and start to follow the demographic line again.
5. However, as per the book, we have now entered the period of great danger from 2010 onwards. The demographics based depression could begin as early as 2010. This is based on the fact that if a single age of 49 is used for the book s charts, rather than the five year groupings, the demographic peaks in 2010 (Chart 8 in the book) rather than 2012. So, we may now continue to climb the curve to 2012 (which is an actual DJIA peak of about 20K), OR see the crash begin at any time from now onwards.
6. Riding this last period is highly dangerous and must be done with great care as you will be embarking upon brinkmanship. If the projected DJIA returns to following the demographic a very enticing potential DJIA gain of about 90% by 2012 is in the offing. After 2009 s 60%+ rally from the low, 90% over the next 3 years does seem very possible but, as we know, that rally was NOT at all reflective of a recovery in the economy. The sub-prime legacy and further residential and growing commercial foreclosures may drag us down yet again in 2010/11.
7. Per the book s 2002 warning, I still recommend being out of all stock based investments no later than 2010. Then wait for long bonds to peak around 6% (probably in 2010/11). Then invest in medium to long term treasuries. These bonds should then offer a substantial gain when interest rates crash again in the first year or two of the depression.
January 2009 Update:
1. 2008 was the victim of a self inflicted sub-prime financial crisis. This has nothing to do with the demographics based massive depression that is yet to come, as described in the book. The sub-prime consequences are however very similar though mild so far compared to what is coming our way. The book clearly spelled out that along the way unpredictable short-term (1 to 3 years) disruptive events could happen. The sub-prime crisis is just that. It should be regarded as the warmer upper or hors d'oeuvre for the big one that is now rapidly closing in on us all.
2. It is unknown at this point whether the sub-prime based crisis will drag on beyond 2009 and then blend into the demographics based massive decline which could begin as early as 2009-10.
3. There is the strong possibility that we will see an interim recovery manifested as a rally in 2009 of perhaps 30% on the Dow after a new low of around 7,000. The only certainty is that historically in the long-term the Dow always returns to the demographic. The immutable demographic remains in a very strong upswing as it moves toward its 2012 peak before crashing. Also waiting in the wings are trillions of dollars earning very little in money market funds.
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70 of 71 people found the following review helpful:
Apocalypse maybe!, January 15, 2007
by R. M. Armstrong
I just wonder how globalisation may affect the situation, both in terms of increased exposure of western companies to Asian markets and the vast numbers of increasingly wealthy Asian middle class who might invest some of their spare cash (and there may be an awful lot of it) in foreign markets. It must have been somewhat difficult for western individuals to invest directly in Asian markets, and vice versa, even in 1987 but in 1929 it must have been all but impossible.
I cannot agree either with some of the steps recommended to protect oneself either. If currencies weaken then treasury bonds may not quite be the saviour they are portrayed. The traditional safe havens in times of turmoil - precious metals such as gold and silver - are not even mentioned. This may be because they are traditionally associated with inflation. However, they also come into their own in times of currency crises and "funny money" i.e. when the money supply threatens hyper-inflation. Investing in foreign stock markets such as India and China, nations which should continue to grow strongly for the foreseeable future surely should also be considered. With such strong growth in Asia, I find it difficult to believe another of the book's predictions which is that the oil price may possibly fall as low as $5 a barrel!
I consider this book - and others like it - to be a warning as to what might happen rather than what will. Nevertheless, if it prompts individuals to review their investments and to diversify accordingly it will be no bad thing. I just fear so many people may be so indebted for years to come that they won't be able to.
66 of 69 people found the following review helpful:
The Alpha Group that Leads the Herd, August 28, 2004
by David
The author's conclusions, formed using a relationship between U.S. population growth and the Dow Jones Industrial Average, support a coming financial crisis of tsunami proportions, but his optimism that things will not erupt until the beginning of the next decade and his investment recommendations for the immediate future are arguable.
A purchaser of this hour-long read would be advised to immerse himself in Robert Prechter's, Conquer the Crash and Fiancial Reckoning Day by Bonner and Wiggin. These books better illustrate the world as it is, bringing together the influence of world money supplies, gold, interest rates, world politics and, very importantly, social mood.
Where Daniel Arnold sees the correlation of the population and the Dow Jones, Prechter documents the predictive value of the Dow in measuring social mood. I would allow that Mr. Arnold has accurately pegged the 45-54 year olds as the alpha group that leads the population's mood, or herd mentality, as a result of its purchasing and investing power.
Read this book. Look at the charts. Just don't make any immediate investment decisions without considering that our world is on the verge of a massive "asset devaluation" that will transcend stocks, bonds, real estate, and for a time, precious metals. The looming possibility of a world-wide liquidity crisis triggering liquidation of assets to cover the costs of mounting debt, should be of greater concern.
Arnold issues several warnings, should his predictions come true, and offers a number of actions individuals may take. Most notably, he supports why personal property most likely will be at risk to theft or destruction in an environment of rising unemployment and rising crime, but on page 51 advocates, "even if you would not support gun-control during healthy times, consider supporting gun control legislation to help take the dangerous edge off the crime wave that will hit during the depression." Libertarians and 2nd Amendment supporters will have a real hard time with that one.
45 of 46 people found the following review helpful:
A CONCISE, EASY TO UNDERSTAND, BLUNT WARNING, November 8, 2006
by Reader
37 of 38 people found the following review helpful:
Neutral stance, July 5, 2006
by K. Doherty
The 'demographics' argument is a key factor in economic health, and surely cannot be omitted when writing a comprehensive analysis of futue economic health. One of the first books I ever read was written by Kenneth Dyschtwald (sp)- "Age Wave"- a comprehensive analysis of the political, social and economic ramifications of the largest demographic mass of people in the history of the world. While it was publised in 1990, many of the tenets of this book have come to fruition-- as well as the consequences of the aging of the boomers, and the 'birth dearth' that followed. It should come as no coincidence that our growing immigration problems have likely been orchestrated at the gov't level, to 'beef up' population statistics, and (it is hoped) will offer a 'cushion' to the monstrous shortfalls in Social Security, Medicare and other un-funded programs that will soon be needed as the boomers age.
While it is true that our aging population may be following a similiar trajectory with respect to Japan's well known economic crisis, it is worth pointing out that similiar circumstances (crash of Nikkei, mismanaged currency), may have precipitated-- or at least acted in symphony with (aging) demographics, these events as well. Whether demographics was a causal or casual relationship is anyone's guess. In my humble opinion, a crash is coming that will likely be the consequence of a number of intersecting underlying reasons (weakening dollar, monstrous deficits, promiscuous federal reserve- cheap credit and weak underwriting standards, peak oil, growth of Asian countries like China and India AND demographics) that will all lay the foundation for this correction/depression.
Finally, the idea that this book was not written by a PhD or an ecnomics professor makes it FAR more appealing to me. It's refreshing to see someone with a view of their own rather than parroting the mangled gov't statistics, or media housing/stock market bubble cheerleaders.
71 of 78 people found the following review helpful:
A Worthwhile, If Exaggerated, Warning, April 17, 2005
by B. Lovian
But like so many prognosticators, this one makes a big, tenuous assumption: that investors have NOT priced in the alleged precipitating event (demographics) and won't until it's too late. It could be that the market already knows that our coming demographic decline and huge debt load will eventually constrain stock market returns. That information might be discounted in current and future stock prices, and they therefore may never reach the heights the author forecasts they will before the Great Bust ensues.
While I do expect a major bust within the next decade, it may not be as severe as the author thinks, precisely because people will be anticipating the trends he lays out. In other words, while the Dow does seem likely to crash to 5,000, it may be from a top of around 15,000 rather than 30,000. And instead of crashing after the precise demographic top in 2012, it might begin crashing much earlier, as our huge debts prematurely "age" the population and hamper our spending power, and investors begin to see the writing on the wall. (I plan on turning bearish in 2008, when the first wave of Baby Boomers begin to retire.)
You'd be taking a huge gamble by piling in to stocks now and planning to time your exit point based on this book or your expectation of a "bubble boom" to occur within some other author's time-frame. If the stock market will ultimately be much lower than it is now, you'd be wise to build cash and accumulate gold coins now. If you're more aggressive-minded and long-term oriented, use major market rallies as opportunities to ease your way into bear funds.
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