Frequently Asked Questions
How to Align Harry and Adam’s Economic and Market Views
Why does Harry Dent see deflation as likely given the massive expansion of the monetary base by the Federal Reserve and given Congress’s out-of-control deficit spending?
These are valid points, to be sure. All else equal, a rapid expansion of the monetary base would indeed lead to rampant inflation, as would reckless borrowing and spending by Congress. The problem is, all else is not equal. What we are seeing is that the velocity of money has slowed dramatically, meaning that each of the new dollars “created” by the Fed are circulating through the economy less rapidly as our economy has slowed down. Furthermore, we continue to see banks, companies, and individuals “destroy” more money than the Fed is creating via the process of deleveraging. In other words, all of that excess credit the Fed is creating is dead capital at the moment; it’s sitting in reserves unused. So long as this trend of deleveraging continues — and we believe that demographic trends suggest it will for several years to come — inflation should not be a concern.
You provide three paths with your guidance: email updates, asset allocations and the new ETF. Which path should be followed by which type of investor i.e. short- vs long-term, aggressive vs conservative?
The various options we offer are not necessarily to be considered mutually exclusive. They can be used together or in combination. The updates, for example, are primarily intended for aggressive, shorter-term traders. But, they can also be used by more conservative investors to help them time rebalancing decisions or the timing of allocating new monies. Meanwhile, we created the DENT Tactical ETF to act as a growth vehicle that can be used within most allocations. You should always consult your financial advisor on the proper place for the DENT Tactical ETF in your portfolio, but it is our view that it can be an appropriate piece for the growth/equity portion of most portfolios. The most conservative investors — those with an income or preservation of capital mandate — should stick with a conservative asset allocation of cash and bonds, which is consistent with HS Dent’s long-term forecast for a secular bear market.
What does Harry Dent think about the US Dollar?
Longer-term, Harry Dent believes the dollar should rebound nicely. During a deflationary environment and during times of crisis, the dollar can do quite well. Given its current condition of being oversold, the dollar could actually do quite well in late 2011, 2012 and during 2013.
What are Harry Dent’s views on gold?
Gold is generally a poor investment, as its long-term returns are quite bad, and it pays no interest or dividends. That said, it can do quite well in times of crisis. Investors might want to keep a little “insurance” gold for diversification. But for the most part, we believe gold should be a very small part of your portfolio at most.
What are Harry Dent’s views on oil?
Long-term, we believe that oil will fall by a considerable amount. In an environment of weak demand and sluggish growth, the price of oil should remain low. Buying from emerging markets like China might offer some support, but our view remains that supply is likely to overpower demand, leading to falling prices.
When Harry Dent recommends getting defensive by going into T-bills, what does that mean?
T-bills are short-term US government bonds with maturities of less than one year. These are the most liquid investments and are considered to be “risk free.” T-bills can be purchased in most regular brokerage accounts and IRAs or through the government itself at www.treasurydirect.gov. Some investors may prefer to simply stay in cash, preferably with FDIC insurance. The key is safety and liquidity.
Dent Research posts model portfolios on the site and in the newsletter, but these sometimes seem to conflict with what Harry Dent says in the updates. Why is that?
The allocations given in the newsletter are revised quarterly and are intended for investors who cannot move quickly. The e-mail updates are generally for short-term traders who have the speed to get in and out of the market. So, from time to time, these two will conflict with each other.
When Harry Dent recommends “shorting” the market, what does that mean? How can I do this?
“Shorting” or “selling short” is essentially betting against the market. If the market falls, you earn a profit, but if it rises you take a loss. You should always be careful when shorting, because while your gains are limited (a stock can only fall as low as 0; it can’t go lower), your downside is theoretically infinite (in other words, if the market rises indefinitely, you lose an ever greater amount of money).For most retail investors, buying a bear fund or bear ETF (also called inverse funds) will be the most sensible way to do this. This way, your worst-case downside is limited to the money invested. As always, we recommend you consult a financial advisor before making such a trade, as it may not be suitable for all investors. Generally, conservative investors should avoid shorting.
What is Harry Dent’s view on the Foundation for the Study of Cycles (http://foundationmember.org/)?
We are delighted to see renewed academic interest in cycle research, which we believe is one of the most powerful tools for analyzing the economy and the financial markets. We suspect that, over time, our views will often overlap with some of those expressed by the cycle. As with all areas of technical analysis, there will no doubt be times when our views differ. But on balance, we are thrilled to see more people taking an interest in this type of work.
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