The Roaring 2000s Investor: Strategies for the Life You Want - Couverture rigide

Dent, H. C.

Couverture rigide

ISBN 10 : 0684862328 ISBN 13 : 9780684862323

Editeur : Simon & Schuster, 1999

Synopsis

Book by Dent Harry S

A propos du livre

Extrait :

Chapter One: A Lifetime Planning and Investment Horizon Today

When I first published The Great Boom Ahead in late 1992, most experts and people felt the long-term prospects for our economic future were dim at best. Bankruptcy 1995 was the bestselling book of the times. Similarly, I published The Roaring 2000s in early 1998 just as the markets were about to take their biggest correction since 1990 and the developing world was falling into a severe recession. I predicted a correction in the Dow to the 7200 to 7600 level by August to November of 1998 on page 292. In that book I was even more bullish, projecting a Dow as high as 35,000 by 2008. The astounding market rebound since early October 1998 has again vindicated the basic fundamentals driving our economy, the massive spending and productivity trends of the largest generation in world history, the baby boom. In this book I will look at the very specific investment strategies for leveraging the greatest boom in history that will see its grand crescendo in the next decade, especially from around late 2002 into 2008 or 2009. But your life and your investments will have to thrive beyond this great boom. I will show you how you can prosper in good times and in not-so-good times or even the worst of times. It all comes down to understanding long-term trends.

Let's face it. There have been many good books on investments and financial planning. But they all tend to focus on the same issues. You need to save more and spend less. You need to have a long-term strategy and stick to a disciplined system of investing. You need to take advantage of tax-deductible and tax-deferred vehicles like your 401K. But everyone has heard this, and some of us practice this boring approach, while most investors continue to think they can beat the pros by selecting their own stocks, save commissions by trading over the Internet, and time the markets by listening to the best experts on TV. In fact, most studies show that the boring investors who stick to a systematic plan and use an objective financial advisor do much better. But what is the real secret to successful investing?

The secret to successful investing is understanding very fundamental long-term trends...and buying when companies and investments in those sectors are undervalued, when no one wants them. There are always investments that are booming, even in bad times. And we will see a very difficult economy after 2009.

This is another popular topic in investment books, how you can use your own common sense to spot new trends. But can you really spot the next Wal-Mart in its early stages, as Peter Lynch did? Did you see the potential worldwide for Coca-Cola in the early 1980s, as Warren Buffet did when the market was getting saturated in the United States? Are you going to spot the next hot mutual fund or sector in the economy when it is down and unpopular? Or are you going to buy that mutual fund right when it is at the top of its cycle, with the highest ratings, and then watch it underperform and sell it before it starts singing again? Are you going to anticipate the next 10% or 20% correction in the stock market and get out right at the top and back in right at the bottom? Will you buy Japan 10 years from now, when it is booming again, after it has been a terrible investment for almost two decades? Will you buy bonds when the Dow is at something like 40,000, after bonds have yielded the lowest returns in decades?

So the real question is how do you understand long-term trends and how do you actually get on a systematic investment plan that keeps your emotions from working against you? Your emotions will always tell you to buy what is already hot or to avoid what has underperformed! How many of you trading on your own have beat the S&P 500 in the last 5 or 10 years? Forget how much fun you have investing -- or gambling, as some would put it. Forget the ego trip of beating the pros on your own computer. The Beardstown ladies seemed to do this, until they were audited! They made 9%, not the 23% claimed, while the S&P gained 18%.

Are you willing to compromise the rest of your life and underperform the markets by as much as 4% to 10% (as studies have consistently shown) in this extraordinary boom? Do you know the price of that on your net worth and life and retirement options 20 to 40 years from now? The difference between 10% compounded annually, which most people tend to get, and the average 17% growth rate of the S&P 500 since 1982 over the next 10 years alone is 96.79%. And I will show how you could earn as much as 20% to 24% over the coming decade without taking substantially more risk than an index fund. How do you beat the S&P 500? By investing in the best sectors of the S&P 500, sectors that diversify each other and reduce the risks of investing! But you can't just pick the sectors that did the best in the past; that is a proven way to underperform the markets. You must understand what sectors will do well in the future, based on fundamental trends.

And what will you do when the stock markets in the United States start going down for many years, as they did from 1929 to 1942 and from 1968 to 1982? If you have been underperforming in this great boom, how will you do in the next great bust? Won't your emotions tell you that the stock market is the best bet when it has been going up for 26 to 27 years? That is when it goes down by past history.

Here's the real truth: Life should be interesting; investment and financial planning should be boring. You should focus on what you enjoy and do best in life and let an objective financial advisor put you on a proven system for building the wealth that you deserve to achieve your life goals. Or you can set up such a system yourself if you have the discipline. But you can do that only if you understand the fundamental trends driving our economy.

In the greatest boom in history, you should be able to live an enjoyable lifestyle and plan adequately for your future. I don't think that The Millionaire Next Door necessarily represents the guide to your best strategy for the future. It was an enlightening book precisely because it showed how not to enjoy life from being successful. The typical millionaire profiled got rich by saving money and having a very boring life that entailed constant scrimping and doing everything himself or herself. The rise in our standard of living throughout history has instead come from focusing more on specialized skills and delegating more life tasks to others who specialize in what they do best. You should be able not only to retire in style but to choose even more what you really want to do in life after your kids have left the nest.

The key to achieving your dreams is to understand the most fundamental trends driving our economy. Only then can you be clear enough to plan your life and to find and trust a competent advisor to put you on a systematic investment plan that you can feel good about. A plan you can stick with even when the markets are down 20% or more for a few months, as in late 1998. The greatest mistake is selling in such corrections and not buying more instead. But you can't have the conviction to do that even with the urging of a good financial advisor or mentor unless you understand the most fundamental of trends and know that the markets are heading higher.

It's not enough to trust long-term statistics that prove that stocks and equities provide superior returns over time. What if you had bought a blue chip stock portfolio in 1929? You would have suffered up to 90% losses into 1932 and had to wait until 1953 to break even. If you'd had to retire on that portfolio in the 1930s and 1940s, you would have been in deep trouble. The same would have occurred to a slightly lesser degree after 1968. Such a blue chip portfolio would have fallen 70% (adjusted for inflation) into 1982, and you would have had to wait until 1993 to break even.

The purpose of this book is to take a very different look at economic trends that I will summarize from my earlier books, The Great Boom Ahead and The Roaring 2000s. You can see all of the important trends that will affect your investments for decades to come. Just because economists don't understand our economy doesn't mean that you can't. Our economy is driven by the predictable habits of people like you. Hence, you will be able to understand how to prosper in good times (the next decade) and bad times (the decade to follow). But what I will do in this book is look at the nitty-gritty details, from the predictable changes in your cost of living to the specific sectors you need to be investing in to the intricate subtleties of tax and estate planning. And perhaps most important, how to choose the right financial advisor for you, someone who represents you, not a salesperson for investment products.

But let me start by giving a new, more summary view of the very simple generation-based trends that drive all the key long-term trends in our economy and investments.

The Generation Wave

The most important forecasting tool for our economy and the stock market in my past books is the spending wave shown in Chart 1-1. The peak of spending of the average family today in the United States (and in most developed countries) is age 46.5. This comes from reliable surveys of consumer spending taken every year by the U.S. Bureau of Labor. I simply lag forward the birth index, adjusted for immigration, for this peak in spending, 46.5 years later. This simple indicator will tell you when our economy and stock markets will boom and when they will bust almost five decades in advance. Refer to The Roaring 2000s for a more detailed explanation.

The critical insight is this: The massive baby boom generation will drive spending and productivity trends higher into late 2008 to mid-2009. Therefore, this unprecedented economic and stock market boom will continue for the next decade. Then there will be an economic downturn that will change your life and your investments. You have to plan for the boom and the bust today! And obviously your kids' jobs and education prospects will be affected by this cycle.

And where do I see the stock market headed? Likely to around 40,000 on the Dow by 2008.

That may sound outrageous, but it's not. That is simply the same 16% average annual rate of increase on the Dow and S&P 500 since this boom began in late 1982. Chart 1-2 shows the Dow channel of growth on a ratio graph, or a constant rate of growth, instead of a normal numerical graph. It projects a peak of around 41,000 by late 2008, even higher than my 35,000 forecast in The Roaring 2000s. If the boom were to peak a year earlier, the top of the channel would be at 35,000. And it is likely that this top channel trend line would be exceeded briefly at the top of this bull market.

Note that the market has been transitioning from the lower end of this channel since 1994 and has yet to hit the upper end and achieve overvaluation to the same extent as in late 1987. That also occurred in the last 26-year bull market from 1942 to 1968, when valuations shifted to higher ranges from the mid-'50s into the early '60s. That is why the gains in the stock markets have been so extraordinary since 1995, averaging closer to 30% per year. By late 1999 to mid-2000 this valuation boom is likely to see its zenith, and then we will have to settle for average annual gains more in the 14% to 18% range into 2007-8. Gains of that magnitude will still double your wealth every 41/2 years! I will show in Chapter 2 how you can construct a portfolio that can be positioned for potential gains in the 20% to 24% range without taking significantly more risk than in an S&P 500 index fund. The Dow could hit the top of this channel between late summer or early fall. We could then see a sharp correction sometime between August and the end of the year that would represent a great buying opportunity.

There are two reasons I have shifted to this slightly more bullish channel since 1998. The first is the strength of the rebound from the late 1998 correction, which shifted the average growth rates even higher. But the most important reason is that this projection of 41,000 in 2008 also coincides very closely with a longer-term channel extending back to 1901 in Chart 1-3 (page 28). This channel projects a Dow of over 250,000 by 2040-plus, when the next generation's spending boom will be in strong force. But we could also see the Dow first go as low as 10,000 to 15,000 during the down phase of the generation cycle into 2020 to 2023.

Generation Cycles Drive All Key Trends in Our Economy

Here's the summary insight. Every major trend in our economy -- from earning and spending to saving and borrowing to inflation and innovation to productivity and business revolutions to our cradle-to-grave spending habits in every product and service industry -- is driven by the predictable aging of new generations of consumers and workers. New generations come in waves about every 40 years, as we can see in Chart 1-4. These generation trends have been documented in great detail (before annual birth statistics were available) in two great books by William Strauss and Neil Howe: Generations (1989) and The Fourth Turning (1997). But for now, simply note the size of the baby boom generation when adjusted for the births of all legal immigrants compared to the Bob Hope generation wave before it. Everything that baby boomers do exaggerates every trend in our economy predictably. This is why you can see all the key economic trends decades in advance and plan your life and investments around them.

Let me summarize my full array of principles from The Roaring 2000s in two simpler charts. The first one, Chart 1-5 (page 30), summarizes the cycle of key events and expenditures in the life of the average consumer, which drives our economy as new generations move through these predictable cycles in peak numbers. As kids we need predictable things, from diapers to baby food. We enter kindergarten and elementary school and then junior high and high school. But let's start here with college. We have to build new colleges and universities as more people turn age 18.

Only after people enter the workforce, typically after high school or college, do these new generations become productive workers and consumers who earn and spend more money and drive economic boom periods. They move into apartments as they get their first jobs, and demand for apartments peaks when they get married around age 25 1/2 to 26 today. They suddenly need stores and shopping malls as they get married and form households. Shopping center development peaked in 1986, 25 years after the peak of the baby boom birth cycle in 1961. They have kids in their late twenties (age 27 1/2 to 28, on average) and then buy starter homes into around age 33 and go into debt at the highest levels relative to their incomes by age 34 furnishing those homes. That's what caused the unprecedented rise in home prices into the late 1980s and the highest debt levels in history just after. The pressures of buying a house and raising kids cause most people to be very price sensitive and to favor discount store...

Présentation de l'éditeur :

THE GREAT BOOM IS HERE

In the New York Times bestseller The Roaring 2000s, Harry S. Dent, Jr., forecast a booming market that will continue to rise through the first eight years of the twenty-first century. Now in The Roaring 2000s Investor, Dent turns his uncanny ability to see our economic future to the specific strategies you can use to get the life you want -- now and for the rest of your days.
Whether you are planning to retire in ten years or forty, looking for a larger home or a smaller one, planning to put several children through college or planning for life after they have graduated, you will find what you are looking for in The Roaring 2000s Investor, including information on:

• The Ultimate Portfolio Strategy for the Roaring 2000s
  
• International Trends in Developed and Emerging Countries
  
• Deflating the Inflation Myth
  
• Why You May Need a Financial Advisor and How to Find a Great One
  
• The Truth About Taxes
  
• Targets for the Dow and NASDAQ by 2008
  

The ultimate goal of The Roaring 2000s Investor is to give investors personalized and effective financial planning advice that fits their specific needs and allows them to achieve their highest life goals through the great boom of the next decade -- and the hard times that Dent predicts will follow.

À propos de cette édition

• Éditeur: Simon & Schuster
• Date d'édition: 1999
• ISBN 10: 0684862328
• ISBN 13: 9780684862323
• Reliure: Relié
• Nombre de pages: 238