I started my career as a consultant at Bain and Company, helping large Fortune 100 companies reverse market share losses resulting from new technologies and innovations. When I grew tired of the slow pace of change inherent in most large companies, I started consulting with startup ventures in California.
You see, I was an entrepreneur at heart, not the corporate consultant and manager I was trained to be.
Through this work, I discovered that many new companies were growing exponentially by working with the innovations of the Baby Boom generation, not just in new computer technologies, but new lifestyle products and services. Young people often drive radical innovations in our economy by questioning the prior generation’s assumptions.
I became fascinated by the Baby Boom generation. I was transfixed by its massive size and its thirst for innovation. I read all I could on the subject, and found a treasure trove of income and spending data in the U.S. Bureau of Labor Consumer Expenditures Surveys.
My intellectual curiosity led to a discovery of the wonders of demographics— the most predictable and scientific influence in economics — and the best leading indicator ever!
My research in demographics greatly expanded my keen interest in cycles. From my life experience and education, I saw clear evidence of up and down cycles throughout history. I always believed that there must be a way to predict such cycles as they were so consistent and pervasive.
I studied and documented every cycle I could find throughout an exhaustive search of history, which led me to a “holy crap” insight in 1988.
On my desk was a long-term chart of births in the U.S., along with the S&P 500 Index adjusted for inflation. I looked at these two charts and saw that they were the same – except for an approximate 45- to 49-year lag. In other words, a large increase in the U.S. birth rate foretold a large increase in the S&P 500 Index about 45 to 49 years later.
To me, this was no random correlation. My demographic research told me otherwise. What I was seeing was the peak in spending of the average family. As we refined our data, this became an approximate 46-year leading indicator for the economy.
I knew I had found something profound. Then, one year later, I found a similar correlation between inflation rates and workforce growth with a 2.5-year lag.
You mean, it’s possible to predict inflation rates decades in advance? Yes!
From there, I integrated the S-Curve and the product life cycles for technologies and businesses … and the Dent Method was born.
Through our method, we can tell when the average person will do most things in life, from cradle to grave. Short-term cycles are harder to predict because human nature allows us to get over-optimistic when times are good and too dour when times are bad. Naturally, things only get worse when we factor in the government’s manipulations in its efforts to control a naturally cyclical economy!
The Wisdom of Cycles
We at HS Dent have continued to refine our analytical method over the years, on both macro and micro levels. Our approach has provided us with unique insights, which often run contrary to popular opinion.
We aren’t afraid to make bold calls. We are here to provide the unvarnished truth, with a more realistic view of trends so you can prosper in good times or bad – and over the long haul.
The demographic cycles we study say bad times will continue after this leading indicator peaked in 2007, with a particularly rough stretch from 2013 to 2014 or so. We also see lean times remaining into 2020 to 2022. Then the good times will follow again. Yes, life goes in cycles!
There are many key cycles we study, but demographic cycles are the most important, and the most revelatory. Why? Because humans are predictable in large numbers, as life insurance actuaries learned a long time ago.
Ahead of the Curve with Adam O’Dell
One cycle that dominated the markets this year was the “risk-on, risk-off” cycle. With the continuation of the Fed’s zero interest rate policy, the U.S. Treasury market certainly wasn’t driven by rate changes in 2012. Instead, waves of fear shuttled investors into the perceived safety of U.S. T-bonds.