Why Boomers Love Doomers like Harry Dent, Robert K...

Harry Dent, demographic economist, and book and newsletter writer.  Robert Kiyosaki, book writer, serial “entrepreneur, and seminar promoter. Robert Prechter, financial author and newsletter publisher.  All have 4 things in common. 1. Successful self-promotion of their financial acumen, 2. Horrible long term track records of their predictive abilities, 3. To the best of my knowledge, none currently manages or have managed substantial amounts of money for others successfully in their careers, and 4^th and foremost, they can be lumped into a category of financial sooth sayers I label as doomers. Doomerism actually now has a definition.  It is defined as an extreme form of pessimism, or a predisposition to catastrophizing as a threat response. Call it “the End is always Near” way of thinking.

Jeremy Grantham, co-founder of GMO Asset Management, Nassim Taleb, author of the Black Swan, the Impact of the Highly Improbable, and Ray Dalio, founder of Bridgewater Associate also have some things in common.  They have actually founded or been advisors to highly successful investment management firms during some time period over the last 30 years.   In Grantham’s case he now predicts a stock market crash almost annually. He was right twice earlier in his career, which is 2x more than most of these financial prophets, in a relatively timely fashion, so many investors in his age demographic still listen to him.

In Nassim’s case, he is advisor to Mark Spitznagel Universa Investment founded after Talebs book was published.  These three, while having run OPM during their careers, I also lump them into the category of “doomers”.  Other notable Perma bears over the last few decades who continue to be promoted for their financial prowess by CNBC and other financial network, , Mark Faber of the Gloom, Boom and Doom Report, Gary Shilling, and “Dr. Doom, Nouriel Roubini.”

However, while these 6 individuals have been quite visible and loud over the last 10 to 25 years depending on whom we are discussing, they have also been largely consistently wrong in their outlooks. Generally, wildly negative outlooks for the USA economy and US stock markets.

Let’s recap Harry Dent’s forecasting ability over the last 20+ years. I’m going to pick on Harry Dent because he is near the top of the list of doomers that our clients seem to ask about time and time again regardless of how wrong he’s been.

As full disclosure, for a short time, I was one of a group of portfolio managers during the early launch of the AIM Dent Demographic Fund in 1999. One can do timeline Google searchers and see for yourself, while loudly and confidently broadcast in books, on TV, and elsewhere, how poorly Mr. Dent’s forecasts have been.  That or you can read from Roger Wolhers research done for his December 2021 article “Harry Dent’s Stock Market, Economic Predictions, 1999-2021: How did they turn out? Here’s a link to that great article.

https://www.thinkadvisor.com/2021/12/22/harry-dents-stock-market-economic-predictions-1999-2021-how-did-they-turn-out/

Mr. Dent: October1999, Mr. Dent releases his best-selling book “The Roaring 2000s: Building the Wealth and Lifestyle You Desire in the Greatest Boom in History,” published in October 1999.  He predicted that the stock market would experience a significant boom during 2000’s.  Mr. Dent predicted that the Dow could hit 35,000 in the upcoming decade, based demographic changes.  He cited the Baby Boomer generation reaching their savings window for his optimism.  At the time the Dow was trading around 11,000.  What happened?  The Dow peaked at just under 12,000 on January 14, 2000, and went? Absolutely nowhere, with very high volatility for the next 10 years.  2000 didn’t enter the roaring 20’s as Mr. Dent surmised but instead the lost decade of no stock returns net.

Mr. Dent: in January 2006 published another book with a similar optimistic view titled, book “The Next Great Bubble Boom: How to profit from the Greatest Boom in History”.  If you followed his advice, you did have a good 18 month run in the markets before the onset of the Great Financial Crisis started to brew in mid-2007 and before the market truly crashed in 2h08 and 1q09.

Having been twice burned by being overly optimistic on the economy and markets, Mr. Dent pivot to doomer in his next book, “The Great Depression Ahead: How to Prosper in the Crash, in? December of 2008. Of course this could be Mr. Dent’s worst call the last 25 years as since the stock market bottomed on March 9, 2009, we have seen returns in most US stock markets. In Harry Dent Jr.’s 2011 classic doomer book, “The Great Crash Ahead,” he predicted the Dow would drop from 11,000 to 3,500 by 2013. Oops, that call proved a little off base.

More recent Harry Dent articles and headlines: December 2016: Donald Trump is elected President. Mr. Dent predicted Dow Jones 3000-5000 on CNBC. As of this writing, the Dow is about 10x higher than that range sitting near 40,000.

March of 2021, Mr. Dent called both price and time for his next coming crash. The market would drop over -45% by the end of June 202, making the GFC look like a cakewalk. Of course, that didn’t happen.  Ooops.  Harry was unflustered and doubled down in July 2021 calling for equities to fall by -80% before Thanksgiving 2021. Why not?  Didn’t get the call right 4 months ago but go all in with your money.  Get out!  And what happened?  The market went on to make major new all-time highs near S&P 500 4800 into yearend 2021.

Unfortunately for investors intent on following Mr. Dent’s advice, in 2023, doubled down, and predicted both a recession in 2023 and another “big wave down” in stocks for 2023.  Dent predicted that Bitcoin and cryptocurrencies, in general, would be the hardest-hit assets in 2023. Wrong on all accounts, in a big way.  Bitcoin rallied well over 200% in 2023.  The S&P500 rallied over 20%.  Of course, many other financial soothsayers also got 2023 wrong.  Either the economy or stocks or both are wrong like Mr. Dent.

Another financial doomer and often quoted by the financial press is Robert Prechter.  Yes, that Robert Prechter from Elliot Wave charting fame who got it right once back in late 1987. For the better part of the last 20 years Prechter has taken an apocalyptic view of the future. In 2002 he published “Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression.” Ooops.  Baby Boomers looking back to 2002 now, could only wish they ignored RP advice and dollar cost averaged into stocks during the coming “lost decade”. Which was a grind for most, but was not as Prechter predicted, a 1930s-like Great Depression basing his opinion on the Elliott Wave Theory. In 2010, he doubled down, foreseeing the Dow Jones Industrial Average cratering to 1000 by 2015. Oops another whiff for Prechters analysis and use of his own methodology.  But he has pretty much doubled down on this doomer and depression theory each and every year the last decade, including again in 2017 in this interview where he is referred to as a “legendary chartist”.  https://www.marketwatch.com/story/legendary-technical-investor-robert-prechter-is-awaiting-a-depression-type-shock-in-the-us-2017-04-21

Robert Kiyosaki’s track record on predicting stocks?  I won’t give you’re the detail, but heres a link to a US News and World report that walks you through how bad it is.

https://money.usnews.com/investing/articles/robert-kiyosaki-track-record-stock-market-crashes

The OHFG client base is loaded with individuals who are labelled “baby-boomers”.  That’s the demographic born between 1946 and 1964, currently between the ages of about 60-80.  So looking backwards in time, most of these investors entered the workforce at say age 23 between years 1970 and 1987. Lets look at the stock returns of this cohort over time and maybe ask the question why so many boomers I meet are doomers on the economy and stock markets.  If you first invested on 1/11970, way back when inflation was running double digits, each dollar in the S&P 500 has gained over 28000% in total return and 5880% in price terms to compound at close to 10.9%, near the the high end of the often quoted 8-12% annual return from stocks.

Say you were “unfortunate” enough to be born near the end of the baby boom in 1964, thus making your entry into the job market right before the “1987 stock market crash” in early 1987 My trusty Bloomberg calculates, your total return on your initial investment then has returned, almost 5000% since early 1987 composed of about 2175% in price and the rest in dividends.  Your annualized return was? Yeap, 11% per year. Almost identical to the early baby boom demographic.

So if almost every cohort of investor in the baby boom generation, who stuck by their allocation for decades has near the same equity CAGR, why are so many boomers attracted to the doomer messaging on TV?

My thoughts are this.  1. They recall the hyper inflation days of the 1970s when they were in middle school and college just beginning their work careers.  2. They all lived through the October 1987 “stock market” crash where stocks dropped -35% in a few months, but few remember that the market was up over +30% YTD before the crash and it closed flat on the year in 1987.  3. The 2001-2002 Dot.com bubble collapse happened just as many of the earliest Boomers were thinking of taking early retirement around the age of 55 and shocked the youngest boomers who were dealt their second major stock market setback in their 15-year investment careers 4. The Great Financial Crisis in 2007/08.rocked most investors confidence in the financial and global banking system right as the first boomers took early retirement at age 60 and it extended younger baby boomer investor churning into a “lost decade of returns” from 2000 until around 2012.  And finally, 5 – the global economic lockdown during the 2020 Covid pandemic showed how intertwined and fragile the global economy and markets have become.  By 2020, the oldest Baby boomers, were now almost 75 and retired and the youngest, 56 and looking retirement squarely in the eye.

Over the last 40+ years, boomers have had to weather stock market drops of -36% (1987), -50% 2000-2002, -55%+ 2007-09, -35% 2020, and -27.5% in 2022, not to mention the -9% flash crash in 2010 on their way to their +11% CAGR in the S&P500.

Investors remember that pain is much more vivid and memorable to the human brain than pleasure.  Marketers know this. This is why financial networks and social media loves promoting those with the opinion of impending doom magnitudes more than those with optimistic outlooks.

Investors fear sells. Will Mr. Dent and other doomers, finally be correct in their views of the stock markets in some year in the future? Yes. We have not circumvented economic cycles forever. We will have more recessions in the future. Recessions in the stock markets are -30-35% down moves at a minimum.  Will we most likely get another financial crisis in my lifetime given the spending path that both political parties have the US on. Sorry Janet Yellen.

But should you rely on the likes of Harry Dent, Robert Kiyosaki, Robert Prechter, and Jeremey Grantham who have been wrong for not just years, but decades for financial advice and predictions?  “Smart” or “rich” people you have never met to help you make financial decisions about your future and your financial plan?  No.  They are not your fiduciary.

As we’ve previously discussed, if you are a retiree or near retiree who has had a tendency to get emotional about your investments when the markets are down and volatility is high.  When you look in the mirror and honestly reflect on your own personal outlook, are you a doomer or are you a more rational actor when it comes to investing?  Does it take every ounce of your willpower not to sell the lows?  Dot com bust?  GFC recession? Covid pandemic?

If over the years you have found yourself reacting emotionally in your portfolio to Presidential elections and their uncertainty, now is the time to talk to your advisor to walk through your plan.  Well in advance of other investors concerns of will the 3q24 be a soft-landing pullback that refreshes, or the beginning of a much more painful economic and market downturn

Discuss how much risk is in your allocation plan under downside market scenarios just in case the economy rolls over in late 2024 and 2025 regardless of who is elected this November.  While most 3^rd qtr selloffs are just cyclical corrections and short-term pullbacks in otherwise long-term bull markets and economic expansions, it is virtually impossible to tell if that selloff is a mild correction in an economic soft landing, or if it’s the beginning of something more dire like it was in 2000 and 2008. I will argue with all takers that it didn’t matter who was elected those years, Bush or Gore in 2000, or Obama or Cain in 2008, the ultimate winner was already dealt a bad hand by the Federal Reserve and the economy by the time they were elected.

Investors, as I’ve message for the last month with the markets making fresh all time highs, if you are going to make reallocation decisions to shift money out of stocks and equities into less volatile assets, its best to do it when indexes are up, and volatility is low. Not the other way around.

If you are uncomfortable with wider range of possible equity outcomes, the Oak Harvest team has launched a new strategy that retains the ability to go long stocks, short stocks, as well as buy partial hedges and shock absorbers for a stock portfolio.  Information on this exciting new strategy of ours can be found at OakHarvestFunds.com.

Viewers, for those of you who made it this far, I want to give a shout out to the entire OHFG team as last week, USA TODAY, ranked us as one of the Best Financial Advisory Firms 2024. The award is given to top registered investment advisory (RIA) firms in the United States based on two key criteria:

• Recommendations from individuals from among 25,000 financial advisors, clients, and industry experts
• Growth in Assets under Management (AUM) over 12 months and 5-years, respectively

I personally am looking forward to helping us move up this list over the coming years by taking care of our current and future client base. From the whole team here, thank you and have a great weekend.

Do you need a retirement plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at 877-896-0040 or fill out this form for a free consultation: https://click2retire.com/Connect