Brief Book Review: What To Do When The Bubble Pops
Posted: Thu Dec 24, 2020 1:24 am
I just finished reading Harry Dent's What To Do When The Bubble Pops. It is a book with some interesting insights, but I overall found that it lacked rigour and substance.
To his credit, Dent has been consistent with his message over the years. His two-pronged message: 1) demographic trends tell you everything you need to know about where the economy is headed; 2) we are headed for a deflationary spiral.
Demographics are apparently the underlying force for just about everything we've ever discussed on this forum. From 1929, the inflationary period of the 70s, to the 2008 crisis.
The middle of the book is the part that I found most interesting. Dent claims that the epicentre of the next bubble is China. China's entire economy is driven by government spending, and not by the invisible hand of the markets. The Chinese have consistently reported 7%+ annual economic growth, but it's likely that at least half of that is manufactured. He cites a real estate bubble in China that has spread to other parts of the world. The Chinese citizenry buy up real estate around the world as a way to get their assets out of the country that circumvents capital controls.
China along with the world's low interest rates and bubble-ish tonality is what causes Dent to come to the conclusion that we will enter a second Great Depression with a deflationary spiral. His recommendation? Naturally it is long-term treasury bonds.
The entire book reads like someone just took the long-term bond chapter out of Craig and Tex's book and amalgamated it with a narrative as to why it's the most likely outcome.
People who subscribe to the approach of the PP will likely not find the book particularly convincing. But as mentioned, some of the perspectives on China were interesting. Given how quick of a read it was, I'd recommend it overall.
To his credit, Dent has been consistent with his message over the years. His two-pronged message: 1) demographic trends tell you everything you need to know about where the economy is headed; 2) we are headed for a deflationary spiral.
Demographics are apparently the underlying force for just about everything we've ever discussed on this forum. From 1929, the inflationary period of the 70s, to the 2008 crisis.
The middle of the book is the part that I found most interesting. Dent claims that the epicentre of the next bubble is China. China's entire economy is driven by government spending, and not by the invisible hand of the markets. The Chinese have consistently reported 7%+ annual economic growth, but it's likely that at least half of that is manufactured. He cites a real estate bubble in China that has spread to other parts of the world. The Chinese citizenry buy up real estate around the world as a way to get their assets out of the country that circumvents capital controls.
China along with the world's low interest rates and bubble-ish tonality is what causes Dent to come to the conclusion that we will enter a second Great Depression with a deflationary spiral. His recommendation? Naturally it is long-term treasury bonds.
The entire book reads like someone just took the long-term bond chapter out of Craig and Tex's book and amalgamated it with a narrative as to why it's the most likely outcome.
People who subscribe to the approach of the PP will likely not find the book particularly convincing. But as mentioned, some of the perspectives on China were interesting. Given how quick of a read it was, I'd recommend it overall.
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