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Dow Chart_Highs-and-Lows_09-06-14_2

The highs and lows of the Dow Jones Average over the last 15 years.

It seems that we hear about a new record-high on the stock market about once a week. Combined, the S&P 500 and Dow Jones Industrial Average (DJIA) have reached 47 different record highs in 2014. So when someone says at least one of those indices is poised for a 65% drop over the next two years, investors tend to be dismissive. They want to hope that the good times will last forever.

But when you look at who’s making that prediction, it bears a closer look. This time it’s Harry Dent, a previous guest on The Crash Proof Retirement Show. Dent believes that over the next 24 months, the Dow will not only correct, but crash to lows unseen for the past 20 years.

Harry Dent is the Editor of the free newsletter Survive and Prosper and recently became a best-selling author for the second time. His storied career is punctuated by predictions that, at the times they were made, seemed risky or even outlandish, but would ultimately prove prescient.

When the Japanese economy was the world’s darling in the late 1980s, Dent went the other way, predicting impending trouble. When the DJIA stagnated around 3,000 in the early 90s, Dent led the charge calling for the index to rise above 10,000 by the decade’s end.

Everyone knows what happened. The Japanese economy continues today to fight to re-attain its 1980s glory. The Dow not only attained but surpassed Dent’s 10,000 prediction by the end of the 1990s. So even the most bullish investor would be wise to look at the data Dent uses in making this latest prediction.

“Stocks have bubbled again,” he cautions, “and when they go down they’re gonna go down hard.”

Dent uses demographics in formulating his predictions, and his ‘magic number’ is 48—as in the age where Americans reach the peak spending period of their lives. When the number of 48-year olds grows, the stock market goes with it—and vice versa.

Some quick math shows us that the last five years of market rallies coincide with the tail end of the baby boom generation reaching age 48. But the birth rate began to drop sharply around the mid-late 1960s—in other words, 48 years ago.

But a 65% drop to 5,500-6,000? “Every crash has taken us to new lows,” reasons Dent, citing the early-2000s and 2008 events. “The last one took us to 6,442 [on the Dow] so the next projection would be around late 2016, early 2017, somewhere around 5,500-6,000.”

Enjoy the good times on the stock market. If Harry Dent’s track record holds true, they won’t be around much longer.

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