1. HS Dent
Independent Economic Research Company Forecast economic change based on three key tools: 1. Demographics and demographic trends 2. Predictable consumer spending patterns, and 3. Technological innovation acceptance rates

2. H.S. Dent Past Forecasts
“For the 1990s and Early 2000s – Our Greatest Boom: Dow Rises to 10,000.”
Our Power to Predict, back cover (1989)
“After those enormous deficits into 1992, the government will likely be in a balanced budget or surplus by ”
The Great Boom Ahead, pg 62 (1994)
“The next great depression will be from ”
The Great Boom Ahead, pg 16 (1994)
"No amount of government stimulus will prevent it…"
The Great Boom Ahead, pg 35 (1994)

3. Forecasting Doesn’t Always Work Out
I think there is a world market for maybe five computers. - Thomas J. Watson, 1943, Chairman of the Board of IBM We don't like their sound, and guitar music is on the way out. - Decca Recording Co. rejecting the Beatles, 1962 With over 50 foreign cars already on sale here, the Japanese auto industry isn't likely to carve out a big slice of the U.S. market. -Business Week, 1958

4. HS DENT VIDEOS
THE BASICS OF HS DENT
THE SPENDING WAVE
THE FOUR SEASONS
THE HOUSING BUBBLE

5. Who Spends What in the Economy 2010
Source: U.S. Department of Commerce, Bureau of Economic Analysis

6. Change in Spending at each Age & Stage of Life
46-50
Family,
College
Kids
22-30
Young
Married
31-42
Young
Family
50+
Empty
Nesters
18-22
Single
60+
Retired

7. The Immigration Adjusted Birth Index
Immigration Adjusted Births

8. The S-Curve Percent Adoption Innovation Maturity Growth 100 90 80 7010 20 30 40 50 60 70 80 90
100 1%
10%
50%
90%
99%
Innovation
Maturity
.1%
99.9%
Growth
Percent Adoption

9. The Immigration Adjusted Birth Index
Immigration Adjusted Births

10. The Spending Wave Births Lagged for Peak Spending
Dow Adjusted for Inflation
Immigration-adjusted Births Lagged for Peak Spending

11. Average US Home Prices January 1994 – August 2010
-33%
Seasonally Adjusted In Thousands
-55%
-65%
Source: Standard & Poor’s Case-Shiller US 10-City Index

12. Foreclosures & Delinquencies % 1995-2011
8 Updated 8/31
Source: Information provided by LPS Applied Analytics, 2011

13. Mortgage Resets Trigger for the Next Financial Meltdown
9/2011
10/2010
Source: Loan Performance, Amherst Securities

14. Real Personal Consumption Expenditures January 1995 through June 2010
Missing Growth
This happened when the US was adding 100 – 120,0000 more labor force age people per month
Source: Bureau of Economic Analysis

15. Daily Consumer Spending Monthly Average, January 2008 – January 2011

16. Notes from Tampa

17. DR. GEORGE FRIEDMAN
Dr. Friedman is the founder and Chief Executive Officer of Stratfor ( a company he began in 1996 that is now a leader in the field of private intelligence. Dr. Friedman guides Stratfor’s strategic vision, helping shape the firm’s long-range geopolitical forecasts as well as overseeing and tasking tactical intelligence operations.
Dr. Friedman is also the author of numerous articles and books on national security, warfare and intelligence. His most recent book, America’s Secret War (Doubleday, 2004), a Barron’s Best Book of 2004, describes America’s covert and overt efforts in the global war against terrorism. Dr. Friedman’s next book, The Next Hundred Years: A Forecast for the 21st Century, is set for a January 2009 release.
Major television shows and radio programs such as CNN’s Lou Dobbs, Fox News’s The O’Reilly Factor, and NPR frequently invite Dr. Friedman to appear as a national security and international affairs intelligence expert. Barron’s has cited Stratfor’s analysis on numerous occasions and Barron’s cover article featured an interview with Friedman in October He has also been featured in Time magazine, The New York Times Magazine and The Wall Street Journal and quoted in reference to global issues in the New York Times, USA Today, Fortune, International Herald Tribune and many other domestic and international publications. Dr. Friedman has been the keynote speaker at numerous conferences and industry specific events for private organizations and government agencies.
Dr. Friedman received his bachelor’s degree from the City College of the City University of New York and holds a Ph.D. in government from Cornell University.

18. EXCERPTS FROM BOOK: THE NEXT 100 YEARS
A little over a decade away from the likely commencement of the first crisis of the twenty-first century, we should already be able to glimpse its beginnings. There are three storms on the horizon. The first is demographic. In the late 2010s, the major wave of baby boomers will be entering their seventies, cashing in equities and selling homes to live off the income. The second storm is energy. Recent surges in the cost of oil may only be a cyclical upturn following twenty-five years of low energy prices. These surges could also be the first harbingers, though, of the end of the hydrocarbon economy.
Finally productivity growth from the last generation of innovations is peaking.
The crisis of 2008 was not really a demographic driven crisis. But it showed a process that will reveal itself more fully over the next twenty years: an equity crisis driven by demographics. Declines in residential real estate prices are startling. They have not been drivers in the past. This one is hardly a defining moment. Think of it as a straw in the wind, a sign of things to come – from pressure on real estate to greater government control of the economy.
When we talk of economic crisis, all fears turn immediately to the Great Depression. In fact, historically, the terminal crisis of a cycle has usually resembled deep discomfort more than the profound agony of the Depression. The stagflation of the 1970s or the short, sharp crises of the 1870s are far more likely than the prolonged, systemic failure of the 1930s. As will be true for the crisis of the 2020s, we don’t have to be facing a Great Depression in order to be confronting a historical turning point.

19. MORE FROM NEXT 100 YEARS
Here’s a fact that should get you thinking: When government benefits set the retirement age at 65, the average life expectancy for a male was 61. It makes us realize how little they were designed to pay out. The sudden surge in life expectancy has changed the math of retirement entirely.
Retirees will divide into 2 groups . Those lucky or smart enough to have equity reserves or houses will be forced to sell those assets. The second group will have little or no assets. If they rely on government benefits, this will leave them in abject poverty. The pressure to maintain standards of living & health care for the baby boomers will be intense, & they will continue to retain political power. Retirees vote disproportionately to other group, & the boomer vote will be particularly huge. They will vote themselves benefits.
The gov’ts will be forced to either increases taxes or borrow heavily.

20. presented by Harry S. Dent, Jr.
Why This Will End Badly:
A Look at The Global Debt Crisis
presented by
Harry S. Dent, Jr.
(1993)
(2011)

21. Debt to GDP Ratios of U.S. Debt, 1947-2011
Chart 11
Data Source: Federal Reserve, 2011

22. Debt to GDP Ratios of Japan Debt 1980-2010
Chart 11
Data Source: IMF and World Bank, 2011

23. Japan Household Savings Rate 1985-2005
Source: “Outlook for Financing Japan’s Public Debt,” Kiichi Tokuoka, Cabinet Office. IMF, 2010

24. U.S. Government Deficit or Surplus 1970-2011
In Millions
Data Source: St. Louis Federal Reserve, 2011

25. U.S. Trade Balance 1970-2011 In Billions
Data Source: St. Louis Federal Reserve, 2011

26. US Private Debt Creation 1980-2011
$ Trn
Private Debt
In Trillions
Data Source: Federal Reserve, 2011

27. Total U.S. Debt - 2008 Total: $56 Trn ! Government $14Trn Financial
Corporate
$11Trn
Consumer
$14Trn
Total:
$56 Trn !
Source: Federal Reserve Flow of Funds Report

28. Total U.S. Debt - 2010 Total: $54.8 Trn ! Government $16.6Trn
Financial
$14.1Trn
Corporate
$10.8Trn
Consumer
$13.3Trn
Total:
$54.8 Trn !
Data Source: Federal Reserve Flow of Funds Report, 2011

29. Unfunded Entitlement (Medicare + Social Security) + Underfunded Entitlement Expenditures (Medicaid) = Among Largest Long-Term Liabilities on USA Inc.'s Balance Sheet
$66 Trillion!!!
Source: Kleiner, Perkins, Caufield & Byers - USA Inc. February 2011

30. Social Unrest and Global Food Prices
Source: Australia Financial Review, 2011

31. Shares of GDP GDP is measured in 4 main categories:
Consumer Spending, Government Spending, Private Investment (Business) and Net Exports
Below is a comparisons of the shares of GDP in World

32. Total Debt to GDP Ratios of Major Countries
Percent of Selected Debt to National GDP
Data Source: IMF, 2011

33. United States, Debt to GDP Ratios of Major Categories
% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011

34. Japan, Debt to GDP Ratios of Major Categories
492% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011

35. Ireland, Debt to GDP Ratios of Major Categories
468% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011

36. Britain, Debt to GDP Ratios of Major Categories
462% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

37. Portugal, Debt to GDP Ratios of Major Categories
379% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

38. Spain, Debt to GDP Ratios of Major Categories
367% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

39. France, Debt to GDP Ratios of Major Categories
359% Total Combined Debt to GDP!
Percent of Selected Debt to Canada GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

40. South Korea, Debt to GDP Ratios of Major Categories
331% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011

41. Italy, Debt to GDP Ratios of Major Categories
315% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

42. Canada, Debt to GDP Ratios of Major Categories
259% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

43. Germany, Debt to GDP Ratios of Major Categories
286% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

44. Greece, Debt to GDP Ratios of Major Categories
291% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

45. Switzerland, Debt to GDP Ratios of Major Categories
312% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

46. Australia, Debt to GDP Ratios of Major Categories
*GOLD STAR*
154% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: Steve Keen of DebtDeflation.com, 2011

47. China, Debt to GDP Ratios of Major Categories
212% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011

48. Brazil, Debt to GDP Ratios of Major Categories
147% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

49. India, Debt to GDP Ratios of Major Categories
131% Total Combined Debt to GDP!
Percent of Selected Debt to National GDP
Data Source: IMF, 2011

50. Russia, Debt to GDP Ratios of Major Categories
71% Total Combined Debt to GDP
Percent of Selected Debt to National GDP
Data Source: IMF, 2011; The Economist, “World Debt,” 8/24/2011

51. Greece 10-Year Bond Index
% Bond Yields
Source: Bloomberg

52. Italy 10-Year Bond Index
% Bond Yields
Source: Bloomberg

53. BOND MARKET VALUES COUNTRY: ITALY GREECE INVESTMENT: $100,000.00
$75,200.00
$28,250.00
RATE: 4% 7%
18%
YR 1
$104,000.00
$80,464.00
$33,335.00
YR 2
$108,160.00
$86,096.48
$39,335.30
YR 3
$112,486.40
$92,123.23
$46,415.65
YR 4
$116,985.86
$98,571.86
$54,770.47
YR 5
$121,665.29
$105,471.89
$64,629.16
YR 6
$126,531.90
$112,854.92
$76,262.40
YR 7
$131,593.18
$120,754.77
$89,989.64
YR 8
$136,856.91
$129,207.60
$106,187.77
YR 9
$142,331.18
$138,252.13
$125,301.57
YR 10
$148,024.43
$147,929.78
$147,855.85

54. 10-Year Treasury Bond Yield 1989-2023
Source: Yahoo Finance

55. Japan Nikkei Bubble From 1985-1989
Source: Masters and Johnson

56. Bubbles Are Like Orgasms Masters and Johnson Sexual Response Cycle
Excitement & Plateau (Arousal)
Desire (Appetitive
Source: Masters and Johnson

57. Adjusted for Inflation
Dow Comparison vs
Adjusted for Inflation
Source: Yahoo Finance

58. Dow Comparison vs. 2011
Data Source: Yahoo Finance, 2011

59. S&P 500 Scenario 1 January 2011- March 20124 3 1
Data Source: Yahoo Finance, 2011

60. S&P 500 Scenario 2 January 2011- March 2012
Data Source: Yahoo Finance, 2011

61. Growth Rates of Real After Tax Income, 1979-2007
Source: “Trends in the Distribution of Household Income Between 1979 and 2007,” Congressional Budget Office. October 2011

62. Income of Top 1% of Earners 1979-2007
In 2007 Dollars
Source: “Trends in the Distribution of Household Income Between 1979 and 2007,” Congressional Budget Office. October 2011

63. Looking Forward on the Canadian Economy
What Is Examined:
Shares of Gross Domestic Product
Home Price to Income Ratio
Growth of Retiree and Workforce Populations
Health Care Spending
Models of U.S. Spending Used for Comparison

64. in the Canadian Economy 2010
Who Spends What
in the Canadian Economy 2010
Source: National Economic Accounts, Statistics Canada, 2011

65. Who Spends What in the U.S. Economy 2010
Source: U.S. Department of Commerce, Bureau of Economic Analysis

66. Long Term House Prices vs. Inflation
Source: Robert J. Shiller, Irrational Exuberance, 2nd Edition, Princeton University Press, 2005.

67. Key Economic Indicator #4 Case-Shiller 20-City Home Price Index
Seasonally Adjusted In Thousands
Source: Standard & Poor’s Case-Shiller US 20-City Home Price Index

68. Home Price to Income Ratio Explained
The measure of home price to income is the ratio of the average selling price of a home in a given geography divided by the median income of that same area
This measure is an indicator of affordability and housing trends

69. Home Price to Income Ratio in Canada and Select Cities, 2011
Source:

70. 30-Year Fixed Mortgage Rate January 2004 – January 2011
Seasonally Adjusted Fixed Rate
Source:

71. Retirees and Workforce Growth
Retirees are defined by those aged 65 and over.
Workforce population are those between ages 15 and 64
This example uses projections based on the medium variant of fertility rate
The next chart shows both demos overlaid

72. Canada Growth of Retirees
In thousands
Source: HS Dent Foundation, United Nations Population Division, 2011

73. Canada Workforce Growth
In thousands
Source: HS Dent Foundation, United Nations Population Division, 2011

74. Canada Workforce Growth vs. Retiree Growth
In thousands
Source: HS Dent Foundation, United Nations Population Division, 2011

75. The Silver Tsunami
*80 million boomers born between 1946 and *10,000 a day are now retiring *Gov’t benefits turns cash flow negative by * Gov’t benefits runs out of money in *Boomers will be followed by only 65 million gen-Xer’s *don’t count on selling your house to your kids, especially if they are still living in the basement

76. Old Age Dependency Ratio and What it Means to Society
Beyond a simple trajectory of a given demographic, the old age dependency ratio shows the potential strain the elderly would put on the larger population
This ratio is the amount of projected 65+ year olds to the number of those projected to be of workforce age.

77. Continued
The higher the ratio, the greater amount of old age dependents are being supported by workers
The consequences of such lopsided demographics are illustrated by the “Ponzi Scheme” below:

78. Canada Old Age Dependency Ratio
Source: HS Dent Foundation, United Nations Population Division, 2011

79. The Anatomy of a Ponzi Scheme
Current workers far outnumber retirees.
Retirees
Social Security fit this profile at its creation in the 1930s
Workers

80. The Anatomy of a Ponzi Scheme
Current workers struggle to support an increasing share of retirees.
Retirees
Japan is facing this demographic reality.
Workers

81. The Anatomy of a Ponzi Scheme
Retirees
The most extreme example, in which a small population of workers supports a mass of retirees.
China will face a similar crisis due to a generation of the One Child Policy.
Workers

82. Health Care Spending
Spending on Health Care in Canada as a percent of total consumer spending rose over the last decade
The following charts show that, using the United States as a guide, health care spending increases with age
As a larger portion of the Canadian population ages, spending will continue to increase

83. Health Care Expenditures Canada
Personal Expenditures on Medical and Health Care Services (in thousands of Canadian $)
2002
2004
2006
2008
2010
Total Personal Expenditures
$655,722
$719,917
$801,742
$890,601
$940,620
Total personal expenditure on medical care and health services
33,623
38,032
43,848
50,439
55,899
Medical care
15,395
16,997
19,617
22,579
25,623
Hospital care and the like
1,577
1,798
2,044
2,356
2,617
Other medical care expenses
4,546
5,178
5,490
6,371
6,688
Drugs and pharmaceutical products
12,105
14,059
16,697
19,133
20,971
Percentage of all personal expenditure on medical care and health services
5.1%
5.3%
5.5%
5.7%
5.9%
Source: National Economic Accounts, Statistics Canada, 2011

84. Average Annual Expenditures on Health Care United States, 2000-2009
Data Source: Bureau of Labor Statistics

85. Spending on Prescription Drugs by Age81
Source: HS Dent Research