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Harry S. Dent, Jr. is recognized as one of the most reliable economic and
business trend forecasters of our time. He has been profiled and quoted
in Fortune, Business Week, The Wall Street Journal, Investors Business
Daily, and Entrepreneur, and regularly appears on CNN, Fox and CNBC.
He is a Fortune 100 consultant, small business manager, new venture
investor and noted speaker as well as having a Harvard MBA. Mr. Dent
stood virtually alone in forecasting the unanticipated boom of the 1990s
in his book, The Great Boom Ahead written in 1992. Mr. Dent also
explained in his book his prediction for a downturn in the US that would
start around 2008. In 1989, when Japan looked invincible, he forecast
that the Land of the Rising Sun was on the verge of a 12 - 14-year
downturn, which followed in short order. He offers a refreshingly
understandable view of how the economy works, and suggests practical
applications at all levels, and uniquely uses the science of demographics
to identify changing trends and opportunities ahead. Dent has proven
that by using his approach to understanding the economy you can see the
key economic trends that will impact your life, your business and your
investments over the rest of your lifetime and years before they occur!
Now Mr. Dent has put together this CD Set, The Debt Crisis of 2011-
2012: How You Can Prepare and Prosper
You will learn how massive debt levels, slowing demographic trends in
spending, and deflation in prices (not inflation) will create a crisis much
like the early 1930s. Dent calls these the three D's: DEBT,
DEMOGRAPHICS and DEFLATION. To survive and prosper in these
increasingly volatile times you must understand how the three D's will
impact you, your family and your business. The massive stimulus
program of the U.S. government and worldwide will fail and create a
banking crisis greater than the one we saw in late 2008. Individuals and
businesses that can see this coming can prepare and prosper as we will
see the greatest sale on financial assets since the early 1930s. This crisis
which will create unprecedented opportunities "out of the ashes" will
paradoxically be very good for our economic health and will reduce our
debt levels and cost of living. This will generate another mass prosperity
boom like the one following the Great Depression from the 1940s through
the 1960s. Harry Dent gives you short and long term strategies for preparing and prospering in the crisis just
ahead and for the longer winter season lasting into 2020 to 2023. Cash, cash flow and credit will be king for
investors, as well as betting against stocks and real estate. Many businesses will evaporate and fail. Those that
cost cut and focus on their strongest products and services will survive and become dominant in their market for
decades to come.
This CD set includes:
CD 1: Why a Deeper Crisis Is Unavoidable: The Truth About Our DEBT
CD 2: Why the Boom Turns to Bust: How DEMOGRAPHICS Drive Our Economy
CD 3: The Four Seasons of Our Economy: Winter, Slowing and DEFLATION Ahead
CD 4: How to Prepare and Prosper: Short and Long Term Predictions
And a bonus CDROM which includes a downloadable workbook with charts so you can follow along with the first
4 discs.
Begin Learning How You Can Prepare and Prosper, NOW!
Harry S. Dent, Jr.
Author of:
The Great Depression Ahead
The Next Great Bubble Boom
The Roaring 2000s
The Great Boom Ahead
CD 1: Why a DeeperCrisis Is Unavoidable: The
Truth About Our DEBT
CD 2: Why the BoomTurns to Bust: How
DEMOGRAPHICS Drive OurEconomy
CD 3: The Four Seasonsof Our Economy: Winter,
Slowing and DEFLATIONAhead
CD 4: How to Prepareand Prosper: Short and
Long Term Predictions
1-1
2-1
3-1
4-1
l Debt as a % of GDP was approaching 200% of GDP in1929 prior to the Great Depressionl In 2008 such debt was approaching 400%l We have just seen the greatest credit bubble inmodern history
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-1
l Forget the $13 trillion in Federal Debt -- total privateand government debt was $56 trillion in 2008l $14 trillion in total government, $17 trillion infinancial institutions, $11 trillion in corporate and $14trillion in consumerl The financial sector and consumer sector are themost extreme and where the crisis has concentrated
U.S. Debt Since 1929as a percentage of GDP by category
Chart 1.1Source: SG Global Strategy, Bloomberg, US Federal Reserve
Government$14Trn
Financial$17Trn
Corporate$11Trn
Consumer$14Trn0
10,000,000,000,000
20,000,000,000,000
30,000,000,000,000
40,000,000,000,000
50,000,000,000,000
60,000,000,000,000
1977 1982 1987 1992 1997 2002 2007
Federal Govt Trust FundsFederal GovtState and Local GovtFinancial SectorForeignCorporateHousehold OtherConsumer CreditHome Mortgage
Total:$56 Trn !
Total U.S. Debt, 2008
Chart 1.2Source: Federal Reserve Flow of Funds Report
l In addition, the government declares that it wouldtake $46 trillion today to fund the benefits it haspromised for health care and social securityl 80% of that $46 trillion in unfunded liabilities comesfrom Medicare/Medicaid which increased dramaticallyin 2003 with expanded drug benefitsl In 2009 we expanded health care again when weclearly can't even afford what we already have
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-2
l Our total debt when $46 trillion in unfunded liabilitiesis added to $56 trillion in debt = $102 trillion!l That is 700% of GDP as opposed to 200% in 1929l Our debt crisis is far greater than anyone is tellingyou, meaning a crisis is inevitable and the governmentcan't just stimulate their way out of this mess!
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-3
Note Your Insights & Actions Here :
l The $17 trillion in financial institution debt isunprecedented, banks used to lend against d e p o s i t s ,now they sell their loans to investors through debtsecuritiesl $8 trillion in debt was raised by government sponsoredagencies like Fannie Mae to buy loans from banks andallow them to lend morel $4 trillion was borrowed by Wall Street through "toxic"mortgage securities
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper
l We said from the beginning that the governmentstimulus plan would faill The best economic leading indicator is pointingtowards recession again by January of 2011 if not soonerl The stock crash we have been forecasting for thesummer of 2010 will cause this indicator to turn downmuch steeper ahead
Chart 1.5Source: Federal Reserve Flow of Funds Report
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The WLI forecasts economic growth approximately 7 months into the future.
Weekly Leading Index
Chart 1.6Source: ECRI
l Innovative new real-time measures of consumerspending are forecasting a consumer slowdown evenearlierl 2nd quarter GDP will be very disappointing whenreleased on 7/30/2010 and 3rd quarter could benegativel An accelerating stock crash from July onward willcause consumer confidence and spending to plungefurther
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-4
l Mortgage delinquencies continue to rise sharplydespite the economic recoveryl Foreclosures follow on a 1 - 1.5-year lag and thatdepresses home prices furtherl As the economic recovery fails further delinquencieswill only rise faster in late 2010 and 2011
Total Delinquency % (excluding Foreclosures) All Product Types
Mortgage Delinquencies
Chart 1.8Source: LPS Applied Analytics
l The real "ticking time bomb" is rising homes"underwater," meaning the home is worth less than themortgagel Even in a good economy 48% of mortgages areestimated to have negative equity by early 2011 with60% of those severely negativel The worst loans are option-ARMs with no principleand no interest for the first 5 years and they will be 89%underwater
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-5
l The "trigger" for the ticking time bomb is predictablerises in mortgage resets to higher, longer term ratesl The next surge occurs into October of 2010 and thenhigher into September of 2011l Subprime mortgages dominated the surges into 2008,this time it will be option-ARM loans - and they are themost likely to default
l Housing prices do not go up with the economy asstocks dol They correlate with inflation when adjusted for sizeand quality of featuresl An unprecedented housing bubble occurred from2000 - 2005 with prices more than doubling - that wassimply not sustainable
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-6
l A similar housing bubble occurred in Japan from 1986- 1991 with a 2.6 times increasel Bubbles always go back to at least where they startedas occurred in Japan with a 63% decline back to a bitlower than 1986 levelsl Japanese prices have not risen substantially even 18years after their peak in 1991 due to a much smallergeneration to follow as buyers
l The unprecedented housing bubble was fueled byextremely easy credit and low interest rates l In 2000 the average household could borrow 3.3 timestheir incomel By 2006 that expanded to 9.2 times, or nearly triple- that is nuts!
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-7
l The U.S. housing bubble is likely to go back to whereit started or a bit lowerl The bubble started in 2000 and that would imply atleast a 55% decline vs. the 34% thus farl Look at your real estate and ask: what was it worthbetween 1996 and 2000? That is where it is likely to fall
l The great benefit to this debt crisis will be theelimination of $ trillions in private debtl We estimate that such write-offs could end up beingnear $20 trillion!l The ultimate "stimulus program" would be for thegovernment to support the banks in writing down debtwhich saves massive costs for households andbusinesses
CD 1: Why a Deeper Crisis Is Unavoidable - The Truth About Our DEBT
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 1-8
$2.5 - $3.0 Trn$4 Trn Wall Street Toxic Securities
$3.0 - $4.0 Trn $8 Trn FMae/FMac Bonds
Estimated Debt Write-Offs in the Private Sector
Chart 1.15Source: HS Dent
l The key driver of our economy is the predictablefamily spending cycle with agel Spending rises into a peak at age 46, plateaus into age50 and then declinesl Spending typically peaks as the kids graduate andleave the nest
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-1
l We do predictable things from cradle to grave whichmakes many things predictable about our economyl Hence, the birth index adjusted for immigration is thekey leading indicatorl We can predict inflation, spending, borrowing, homebuying and savings decades in advance
l Most important, we can predict the broader economyon a 46-year lag to the birth indexl Stocks follow the economy and correlate well longterm when adjusted for inflationl You can see the booms and busts in our economy 46years in advance and we warned of a downturn around2008 twenty years ago!
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-2
l We predicted a 12 - 14-year downturn in Japan back in1988 - 1989l Consumer spending followed a predictable demographicdecline and stocks followed downward in line with thatl Japanese stocks declined 80% and are still down 75%in the summer of 2010, 20 years later
Chart 2.4Source: Japanese Family Income and Expenditure Survey
l Demographic trends are pervasive - down to the mostmicro levelsl Potato chips peak at age 42 as calorie intake peaks at14 and the average kid is born at 28 to the parentl Such product trends can be predicted into local areaswith different age distributions
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-3
l You wouldn't have to be a psychologist to know whenthe average male has a mid-life crisisl Motorcycles spending peaks between age 45 and 49which means a bust aheadl It is aging professionals that dominate motorcyclespending, not younger people
l Most areas of spending peak between age 42 and 54 -from housing to furnishings to cars to travell The one large area that will continue to grow withBaby Boomers will be health carel For example, prescription drugs grow until theaverage woman dies at age 81
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-4
l Real estate is not one industry, but a series oflifestyle purchases as we agel Apartments peak at 26 as we get married, then starterhomes at age 29-33 and trade-up homes at age 37 - 42l There are two surges of second homes, the first intoage 46 - 50, and the second into 63 - 65
l We can use demographic trends to predict globally aswelll Developed countries generally follow the sameSpending Wave as in the U.S.l Europe's Spending Wave points down from 2010 fordecades to follow, as does Russia and East Europe
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-5
l In emerging countries, urbanization is the mostcritical trend for raising incomes and productivityl Brazil and Latin America are already 80% urbanizedwith slower potential aheadl Brazil only has $5,800 GDP per capita in 2000compared to near $30,000 in the U.S. at similarurbanization rates - they will not become as rich
l Workforce growth is the better measure ofdemographic growth as emerging countries don't havethe highly leveraged Spending Wave into age 46l Brazil will continue to grow from workforce trendsinto around 2030l Most of Latin America will see workforce growth moreinto around 2040
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-6
l China will be the surprise of this century as itsdemographic growth plateaus from 2015 to 2025 andthen declines more strongly from 2035 forwardl This results from the "one-child policy" back to theearly 1970sl China will see continued growth from urbanizationahead, but at much slower rates due to demographics
l India will be the large country that has both highdemographic and urbanization potentiall India's workforce growth points up sharply until atleast 2055 and likely longerl Southeast Asia grows into around 2040 and Pakistaninto the Middle East into 2065 or later
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-7
l Demographics also drive inflation rates as youngpeople are expensive and unproductivel Workforce growth on a 2.5-year lag correlates closelywith short term inflation ratesl This shorter term Inflation Indicator points towardsdeflation by early 2011
l We can extend inflation forecasts out two decades byprojecting when 20-year-olds will enter on average andwhen 63-year olds will retirel This longer term Inflation Forecast projects deflationin prices into around 2023, not inflationl Everything points towards deflation, includingmassive debt deleveraging and falling Baby Boomspending
CD 2: Why the Boom Turns to Bust - How DEMOGRAPHICS Drive Our Economy
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 2-8
Chart 2.15Source: U.S. Census Bureau and U.S. Bureau of Labor and Statistics
Inflation
20 Year-Oldson a 3-Year Lag
Minus 63 Year-Olds
l Our most important cycle is an approximate 80-yearFour Season Cyclel Two generation boom and bust cycles creates fourseasons: spring, summer, fall and winterl But technology innovation creates price cycles liketemperatures with high inflation in summer, deflationin winter ahead and more balanced prices in spring andfall
CD 3: The Four Seasons of Our Economy - Winter, Slowing and DEFLATION Ahead
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 3-1
l Remember that private debt is $42 trillion vs.government at $14 trillion - it is the 800-pound gorilla!l Private debt grew faster in the boom and now isdeclining faster in the bustl Greater private deleveraging vs. government debtincreases means deflation wins, not inflation
Simple Four Season Economic CycleEighty Years in Modern Times
Chart 3.1Source: HS Dent
Perc
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f GD
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Government
19701960 19901980 20102000
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Chart 3.2Source: Steve Keen’s Debtwatch July 2009
l Household net worth fell $18 trillion in the firstrecession and stock crashl We project it will end up falling at least $26 trillion inthe deeper depression ahead, and likely morel This fall in assets greatly outweighs $ trillions ingovernment stimulus and private debt will ultimatelyhave to fall in line
CD 3: The Four Seasons of Our Economy - Winter, Slowing and DEFLATION Ahead
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 3-2
l Many forecasters focus on rising money supply fromthe unprecedented government stimulus plan as leadingto inflationl But they don't notice that "money velocity" isdropping like a rock!l If increases in the money supply are not spent or lent,then they do not lead to inflation
The Velocity of MoneyGDP to Adjusted Monetary Base
Chart 3.4Source: St. Louis Fed, US BEA
l The broadest measure of the money supply is calledM3l M3 has been falling sharply despite the un-precedented stimulus plan and has already turneddeflationary in 2010l The negative growth trends in M3 strongly suggest abanking and deflationary crisis just ahead
CD 3: The Four Seasons of Our Economy - Winter, Slowing and DEFLATION Ahead
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 3-3
l The last winter season from 1929 - 1942 saw adeclining and very volatile stock marketl The asset allocation plans you hear about simply won'twork when everything is falling - stocks, real estate andcommodities -- international and domesticl Long term bonds do best in the winter season, but youhave to wait until they first spike in yields forrepayment or default risks
Chart 3.6Source: Yahoo Finance, Bureau of Labor Statistics
l The last time demographic trends declined was 1969- 1982 in the summer seasonl Stocks were trending down and were very volatileagain, but not as bad as in the winter seasonl Inflation in summer favors real estate, commoditiesand emerging countries, but not bonds - the winterseason will be very different
CD 3: The Four Seasons of Our Economy - Winter, Slowing and DEFLATION Ahead
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 3-4
l Home prices lagged stocks and bottomed in 1933 atthe worst of the Great Depressionl Home prices rebounded after the bottom andeventually strongly - that will not be the case this timewith a smaller generation followingl Real estate needs to be bought and managed for cashflow, not appreciation as much
Chart 3.7Source: Yahoo Finance, Bureau of Labor Statistics
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Chart 3.8Source: Historical Statistics for the U.S. Colonial Times to1970
l The worst of most depressions comes in the first 3 -5 years when the banking system is deleveragingl Unemployment rates peaked at 25% in 1933 and thenhit 18% in the second recession in the late 1930sl This time we are likely to see 15% plusunemployment rates between 2011 and 2012, withunderemployment as high as 25%
CD 3: The Four Seasons of Our Economy - Winter, Slowing and DEFLATION Ahead
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 3-5
l Business failures also were much higher in the firstcrash from 1930 to 1932l A shake-out in businesses actually started back in1920 - 1922, much like the dot-com bust 80 years laterfrom 2000 - 2002l The businesses that survive the coming shake-out into2012 will see their competitors fail and gain massivemarket share
Chart 3.9Source: Historical Statistics for the U.S. Colonial Times to1970
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Chart 3.10Source: Historical Statistics for the U.S. Colonial Times to1970
l The Consumer Price Index also saw its worst deflationinto 1933 in the first crashl The second stock crash and downturn only saw veryminor deflation in pricesl The next spring inflation cycle started from 1942forward as will occur from 2020/2023 forward
CD 3: The Four Seasons of Our Economy - Winter, Slowing and DEFLATION Ahead
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 3-6
l Interest rates or yields on long term governmentbonds fell generally from 1929 through 1941l But there was a spike in yields in late 1931 as theworst of the crisis started to set inl While most investments fell, there was a great bondbull market from late 1931 through 1941 -- and likelyfrom late 2010/mid-2011 into 2020-2022
Chart 3.12Source: Historical Statistics for the U.S. Colonial Times to1970
l In March of 2010 we outlined a "minefield of tickingtime bombs" to go off over 2010l We saw European default threats coming back in Apriland May and mildly disappointing 1st quarter GDPl From late July on we see very disappointing 2ndquarter GDP, geopolitical crises, accelerating mortgagedefaults and China's bubble bursting
CD 4: How to Prepare and Prosper - Short and Long Term Predictions
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 4-1
l We outline two scenarios for stocks in the decadeahead and the broader winter seasonl The next stock crash is likely to occur steeply into late2010 and see the Dow as low as 3,400-3,800l After another bounce into 2011, the last wave downshould occur into mid-2012 or so with lows around3,300
l The second scenario would see a more steady declineinto mid-2012 with a bottom likely between 3,200 and3,800l There would similarly be a mid-term rally mostlybetween late 2014 and mid-2017 followed by a moreminor crash into 2020/2022l In this scenario investors should wait to buy stockslong term until around mid-2012 and mid-2022
CD 4: How to Prepare and Prosper - Short and Long Term Predictions
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 4-2
l 10-Year Treasury bond yields have been declining in achannel since 1989l We could see even lower lows in yields at more like1.5% by early 2013 or so, after a spike to around 4.5%firstl Bond yields should generally decline from early 2011or so into 2020 or so creating a good environment forowning bonds long term
l Tax rates rose in the last winter season from 25%marginal rates to 94% in World War IIl That will happen again, likely to a somewhat lesserdegree from 2011 into 2020 or so l Talk to your financial advisor about how to reduceexposure to rising tax rates now before the rules change
CD 4: How to Prepare and Prosper - Short and Long Term Predictions
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 4-3
l Apartments are the best sector in the currentdownturn although there will be losses fromdepreciation of pricesl Apartments will benefit from rising rental demandfrom Echo Boomers into 2017l They will also benefit from households that can't orwon't buy a starter home in this environment
Top Federal Individual Income Tax Rates1913 - 2008
Chart 4.5Source: IRS
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The Apartment/Shopping Center Wave26-Year Lag
Chart 4.6Source: BLS and HS Dent
l Starter homes will see the greatest demographicpressures once home prices likely bottom around early2013l Demographic trends favor starter homes into 2021and then again from 2028 into 2038l This is the first and best broad sector for buying fromearly 2013 forward - have your kids wait to buy
CD 4: How to Prepare and Prosper - Short and Long Term Predictions
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 4-4
l Trade-up homes will fare the worst in this downturnand for years to comel The next rise in demand comes from 2018 into 2032l This is the last sector to buy into unless there areincredible bargains
l Vacation/retirement homes and areas will likely seethe most appreciation after crashing the most fromextreme speculationl The final demographic cycle points up from 2013 into2024l Early 2013 to early 2015 is likely the best period tobuy second homes again
CD 4: How to Prepare and Prosper - Short and Long Term Predictions
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 4-5
l Commercial real estate peaks the latest with the broadeconomy and then falls the hardestl Demographic trends here don't really pick up until2023l There will be select buying opportunities from early2013 or early 2015 for the mid-term boom into 2017
The Vacation/Retirement Home Wave Births on a 63-Year Lag
Chart 4.9Source: BLS and HS Dent
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The Commercial Real Estate WaveWorkforce Growth Projections
Chart 4.10Source: U.S. Census Bureau and U.S. Bureau of Labor and Statistics
l Global spending in general is flat into 2023 and thenup into 2035 before flattening againl The next concerted global boom will be shorter thanthe last one from 1983 - 2007l India should lead along with Southeast Asia and theMiddle East, with Europe lagging the most andChina/East Asia somewhat
CD 4: How to Prepare and Prosper - Short and Long Term Predictions
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 4-6
l Commodities boom on a different clock thandemographic cycles - every 29 - 30-yearsl Commodities are important for exports to mostemerging countriesl Latin America, the Middle East and Africa will get anextra boost out of a booming commodity cycle againfrom 2023 - 2038/2039
29-30 Year Commodity Price CycleCRB Index (PPI before 1947) 1913-2040
Chart 4.12Source: Bloomberg
l You can use our cycles to plan for your kids'education and career strategiesl The economy will be unattractive for jobs betweenlate 2010 and early 2013, and again from late 2017 into2020/2023l College enrollments will be declining demographicallybetween 2009 and 2015 making it easier for your kidsto get into a good college
CD 4: How to Prepare and Prosper - Short and Long Term Predictions
The Debt Crisis of 2011-2012: How You Can Prepare and Prosper 4-7