Part 1 covered my summary and review of economist Harry Dent Jr.’s book (The Demographic Cliff) and why he believes that there will be a “Great Depression Level” global market crash in the next 5 years. Check out this link to PART ONE.
I want to make clear that I’m not some conspiracy or doomsday theorist. I don’t agree with everything Dent says, but I think it’s important for people to educate themselves and make decisions based on all of the facts, not just the ones you hear from the mainstream news. I’m a realist who understands that markets inevitably rise and fall, and the most adaptable to change will survive the next shakedown ahead, whenever it is. Think for yourself and don’t take what anyone says as gospel.
Be an optimist in that you see the good in every situation, but don’t see things as better than they are. I wanted to do a part 2 because I found this book incredibly interesting and wanted to share more without writing a book of my own in 1 post. I might even do a part 3 if you guys are interested.
The post will cover how Dent recommends businesses and investors can not only survive, but prosper in this great deflationary period ahead. Read on!
Dent opines that by following the spending wave of the baby boomers we can predict which industries will start to boom over the next few decades. As Baby Boomers age and downsize to smaller and more affordable homes, the smaller “echo boom” (millennials) will not be able to pick up the slack.
See, real estate is an interestingly unique resource in that it doesn’t really expire. When a house is built improvements and updates are made, but the house itself stays around for a long time. Because a smaller generation is following a larger generation, the demand for housing will bottom out, meaning that housing prices will plummet as the supply of houses available drastically increases. The myth that “real estate over time will always increase in value” only became common knowledge because we’ve had about 60 years of population boom. More people = increased demand for living space. The days of taking advantage of the real estate market through a “buy and hold” strategy are over — at least for the next couple decades. We are going to reach a point when a HUGE number of houses will become vacant or foreclosed on as prices reach an all time low.
For the investor, Dent says, there will never be a better opportunity. The market WILL re-stabilize and boom again, inflation will increase, prosperity will return, and prices will rise. It’s part of the natural cycle of economics. The fantastically wealthy and successful entrepreneurs and businesspeople are the ones who see a market downturn as an opportunity to buy. Save your money and wait for prices to bottom out. Grit your teeth and minimize your expenses. While the unprepared and unaware are selling their homes to try and recoup SOMETHING for it, the intelligent investors will use historically low prices to accumulate wealth, grind it out through the tough times, achieve market share, and come out on the other end with an unbelievable amount of wealth. Flipping single-family homes into multi-unit rentals, buying foreclosed-on apartment complexes in good areas, and investing in assisted living and retirement homes will bring cash flow and wealth for those who were prescient of demographic trends.
Dent calls for businesses to trim the fat NOW. Get rid of your weak and questionable employees and focus on maximizing cash flow. This sounds callous but better to cut them now and give them a chance to find another job and land on their feet than let them go too late and throw them to the wolves when things are worse later. Get involved in and educate yourself in the markets of the future which will be geared towards the aging baby boomers — health care, pharmaceuticals, assisted living and retirement homes, and health and life insurance will boom with the boomers. Businesses that have too much overhead and aren’t geared towards customization and insane customer service will die out, leaving room for smaller more personal companies to fill in the gaps and expand their market share.
The 1% become the 1% by getting through and taking advantage of economic downturns.
Quit making excuses and stop being a victim of the market.
Educate yourself and be prepared.
Roll with the punches and survive.