High Probability Trading Strategies

I recently read Harry Dent’s latest book, The Great Depression Ahead. I found it very worthwhile reading. It is the first book of his I have read. I do remember his forecasts for DJIA 36,000 a few years ago. He claimed in the book that the target was cut in half by 2006 to around 15,000. Pretty close considering the Oct. 2007 high was 14,198.

The central thesis is demographic trends effect and can predict economic trends. He does a convincing job with this thesis for various trends from real estate to stock market. Since he has written several books since the early 90”s, I go ahold of The Roaring 2000’s published in 1999 and skimmed through it. He was basically right on about the direction of the major trends. His method is definitely not pin point accurate regarding the time of major changes or the extreme targets, but, what do you want when your major cycle is 84 years. If you can at least recognize that you are in a broad period when a major change in trend that could last a decade or longer is near, there are other much better methods than demographic shifts to help narrow the time and price target for the change.

I only put time in to someone else’s analysis and predictions if I understand exactly how the analysis and forecasts are being made. There is no secret with Dent. He clearly explains exactly what he is doing and why. To get more background, I subscribed to his monthly newsletter. Low and behold, he has all monthly newsletters going back to Jan. 2000 achieved. Now that is someone who has confidence in his work. Right or wrong, here is what he has been saying month-by-month for the past nine years.

I have not read all of the newsletters but have scanned a number of them. The bottomline – for the most part he and his staff suck at near term analysis. They latch on to a date for a major change in trend and don’t let it go regardless of what the current market activity may be saying. In 2008, Dent was still looking for higher stock index and real estate prices, largely because his demographic studies pointed to a top in 2009-2010.

My recommendation – Read the book. It is very worthwhile. Forget the newsletter unless you have an academic interest to follow his work and not be influenced by his month by month analysis and recommendations.

I am not recommending the book because I necessarily think all of his forecasts will be the outcome over the next few years, although I think he will be more right than wrong. But it is well written and thought provoking. Information you should be aware of.

For those who are interested in the probable long term trends of the major financial markets, I’ve issued several long term reports for DT Report subscribers for real estate, interest rates, gold, dollar and stocks. You might consider a subscription to a DT Report at www.DynamicTraders.com.