Barefoot Investor takes down Harvey Dent

“Housing to Fall 50% by 2020”
"Hi Scott,

After reading your column on mortgage stress, I was curious what you think of American demographer Harry Dent’s predictions for Australian property. He seems like a pretty educated man and his predictions seem terrifying ‒ our housing market could fall by over 50% by 2020, according to him.

Neil



Hi Neil,

Harry Dent has, in his own words, “predicted nearly every major economic trend over the past 30 years”.

True.

Though that’s possibly because Dent predicts the future like my two-year-old plays ‘How many fingers is Daddy holding behind his back?’

Namely, by yelling out random numbers and giggling hysterically: “12!”, “4!”, “382!”

Or in Dent’s case, his financial finger game is about predicting how much Aussie property prices will crash:

“55%!” (2009), “60%!” (2011), “50%!” (2014). All wrong. Not only did prices not fall, since 2009 they’ve risen nationally by 69%.

And now he’s saying prices will fall “50% by 2020”.

Mind you, he’s had no more luck picking the Dow Jones index: “40,000!” (2004), “5,600!” (2014), “3,000!” (2018).

(The Dow is currently at 25,000.)

Dent’s economic theory is based on tracking how the life-stage spending of Baby Boomers affects the share market and property prices. And that’s one point we agree on: that our demographics eventually become our destiny. Yet, as Dent has also proven, that doesn’t mean it gives him a crystal ball that will pick future prices.

The bottom line is this: you have zero control over what the market does, but total control over what you do.

Plan accordingly."

 

Dents a tossa

 

Bears pointing out that Harvey Dent is the Gotham City villain Two Face.

Didn't know Scott was masquerading around with a black cape

 

Harvey Dent isn't completely wrong. There is a lot of debt, and our populations are aging (baby boomers are moving through the cycle like a tennis ball moving through a hose).

Where I think he gets the analysis wrong, is that our currencies have tended to absorb the shocks of asset deflation. If you normalise for currency devaluation, Dent's thesis does play out to some extent.

 

Harvey Dent is just one of hundreds that do this. Doomsayers that just throw out random figures and eventually something sticks and they gloat “See I told you so!”.
Forget the fact those that didn’t listen are Now rich because it took 10 years to eventuate and even if the prediction is right and 50% is lost there would still be gains.

 

Even a broken clock is correct twice per day.

 

Hi Andy, love your description of 2 year old!

And for the respondents, I think it's Harry Dent, not Harvey Dent.

I read the baby boomer book and I thought, 'this is great' and then after that, there was that big fracas with the Mount Kosiusco wager and ever since then, Harry Dent had been more and more like a 2 year old.

As far as I'm concerned, he's lost all credibility and I'm really amazed how the academic world can even treat him seriously.

I'd respect him more if he had the intelligence to acknowledge that he was wrong. He would wait another lifetime before he can buy back the apartment he sold for what he got for it.

KY

 

Hi again, on reflection, I might have got him mixed up with Christopher Joy. It's been a long since we had those discussions.

However, I'm fairly sure I remember the bulge in the python baby boomer thing. I still have the book.

To give myself credibility, I shall read his latest books.

KY

 

I think you might be thinking of Stephen Keen, not Harry Dent. Both big gloomers and both seem to be expert at being inexpert.

http://www.abc.net.au/news/2010-02-16/economist-keen-to-walk-canberra-kosciuszko/333138

What I love is that back then in 2008 (10 years ago) Stephen Keen was still adamant he was right even when proven wrong. Have a read of this little bit from that article:

So, fast forward 10 years, did we see the 40 per cent drops Stephen Keen was predicting?

Cheers,
Michael

PS I built my unit development in Mona Vale when Stephen Keen was spruiking his version of the end of the world. That development alone has allowed me to retire very comfortably whenever I now choose...

 

I picked up Harry Dent's latest book, Zero Hour, from the library the other day and am reading it now.

While his obsession with cycles may be a bit hard to swallow, his analysis of demographics is reasonably convincing (like Barefoot says) and shows an impending spending demand drop at a time when market valuations are high based on a decade of easy money being parked there and on optimistic earnings growth projections and is therefore a harbinger of an impending major market correction.

Amusingly, Dent says that if a major financial crisis doesn't happen by early 2020, that he'll quit his profession and become a limo driver on the Gold Coast in Australia. Time will tell I guess!

 

Hi Michael, thanks. I forgot about Keen. It's been a long time since those heated discussions and
they sort of run together . My mind is getting old and tired.

I do miss those discussions. things are so tame now!

I was really impressed by Dent's The roaring 20s and then got disappointed by the later books.

2020 is not so far away and he still has a chance. I think we're due for a major correction somewhere1

KY

 

Hi team,

I think Dent has some important things to say. I am an optimist when it comes to Australian demographics and our property market. But if you look at real vs nominal prices, he and Keen haven't been that far off. If you normalise for currency devaluations and layer that into his thesis (which he doesn't do), they have something to say. Check these charts out:

Sydney Property Prices Peaked in 2004 - Bridge to Bricks