Yesterday Business Insider said the stock market is heading for a lose-lose situation. Today they ran a piece saying the markets could be heading for a big correction. Everyone’s finally catching on!

One of their most notable points is that investors trust central banks won’t let anything bad happen to the precious markets. They interfered last time, after all! This pretty much forces investors to hold onto their risks. It’s Stockholm syndrome, and the central banks are our captors!

It always comes down to this — humans are just terrible forecasters, period!

Prudential’s running a great commercial featuring Harvard psychologist Daniel Gilbert. You’ve probably seen it. On the first wall people post a series of good and bad experiences from the past. On the other, good and bad expectations for the future.

The first wall comes out about 50/50. The one for the future comes out about 80/20 — with more good expectations than bad ones. This means two things: as a species we are both really optimistic about the future… and really delusional.

But that’s not necesarily a bad thing. As Winston Churchill stated: “Life is one damn thing after the next!” Life’s tough! We have a positive bias to survive and beat it. It’s our most unique trait — the ability to imagine, to project into the future. It has given us the means to innovate on a scale way beyond any other species. But imagination also runs haywire — we know we’re going to die, and we’re aware of a million different things that can go wrong.

Other species worry when they are threatened — to survive and avoid danger. We worry all the time about 98% of things that will never happen. Positive bias, optimism, delusion — whatever! The truth as Gilbert points out is that we derive pleasure from imagining our future any which way we want it. It’s not that we should change this bias… but we should be aware of it so we can accurately plan for the future.

Gilbert’s book Stumbling on Happiness is an absolute must-read. I can’t do justice to it here. It is much easier to read than most on human behavior… and humorous to boot. But it accurately explains how positives biases often set us up for failure.

I have a Human Model of Forecasting that shows we assume everything runs in a straight line. Reality is completely different. It’s exponential and cyclical. But people don’t like cycles. We don’t like change. And we don’t like pain. When it comes to accurately predicting the future, we’re worse than monkeys throwing darts! At the same time, we misread the past. As Rodney explained yesterday, humans are really bad at letting go of recent future. It’s why the Fed‘s policies to prop up the housing market were an epic failure!

That’s why we strive to forecast the future from an objective view here at Dent Research. We adjust for these natural and even beneficial human biases. We constantly search for what really makes a difference and test it against the past as far back as possible. We aim to identify reality and act accordingly. We find cycles that we can reliably project into the future. Demographics just happen to be the most impactful and reliable. For 100 years we’ve lived in a middle class economy where spending is the driving force.

What I’ve found is opposite to what economists preach. Longer cycles are far easier to predict than shorter ones, whose variables are much more random and complex.

You have an ideology and bias that best serves your life. My team and I provide the unbiased tools you need to make the best decisions for your life, your business, your family and your investments.

To get a better feel for what Dent Research does and how profitable our research can be, I recommend attending our Irrational Economic Summit in Vancouver from September 10–12, where we will bring a broader variety of experts on this subject. We’ll explain why you should listen to the folks who are catching on to the market’s predicament, so you’re well ahead of the chaos that ensues when stocks start tumbling before our eyes!

Harry Dent

Harry

Follow me on Twitter @harrydentjr

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Harry Dent
Harry S. Dent Jr. studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of his chosen profession that he turned his back on it. Instead, he threw himself into the burgeoning new science of finance where identifying and studying demographic, technological, consumer and many, many other trends empowered him to forecast economic changes. Since then, he’s spoken to executives, financial advisors and investors around the world. He’s appeared on “Good Morning America,” PBS, CNBC and CNN/Fox News. He’s been featured in Barron’s, Investor’s Business Daily, Entrepreneur, Fortune, Success, U.S. News and World Report, Business Week, The Wall Street Journal, American Demographics and Omni. He is a regular guest on Fox Business’s “America’s Nightly Scorecard.” In his latest book, Zero Hour: Turn the Greatest Political and Financial Upheaval in Modern History to Your Advantage, Harry Dent reveals why the greatest social, economic, and political upheaval since the American Revolution is on our doorstep. Discover how its combined effects could cause stocks to crash as much as 80% beginning just weeks from now…crippling your wealth now and for the rest of your life. Harry arms you with the tools you need to financially prepare and survive as the world we know is turned upside down! Today, he uses the research he developed from years of hands-on business experience to offer readers a positive, easy-to-understand view of the economic future by heading up Dent Research, in his flagship newsletter, Boom & Bust.