In this episode of the Creating Wealth podcast, Jason Hartman spoke with founder of Dent Research and author of Zero Hour, Harry Dent about demographic trends and their predicted outcome on society, as well as the length of time that technology takes to become mainstream. Dent explained sunspots and their impact on the environment and economy, as well as why the new tax reform has been developed to cure a problem that does not exist and the tax reform impact on the country.
New Experiences Make New Impressions
Jason Hartman begins the podcast by explaining that he’s now in Lakeland, Florida after having returned from the Ice Hotel trip in Sweden. He landed in Fort Lauderdale and is now driving to Tampa to meet with 30-40 people involved in the trade of real estate. He notes that some people at the meeting will be real estate investors while others are in the business of flipping homes, wholesaling, and info marketing.
Hartman states that after a two-day Mastermind meeting with them, he is setting off to Puerto Rico again to check out their amazing tax deal. He mentions that he knows a couple who recently moved there, so now he is revisiting to eliminate the idea of moving there.
Though he adds that he is not the biggest fan of Puerto Rico, the idea of reducing his entire tax burden to 4-8% is appealing.
He mentions that it’s important to remember that when we learn or see something for the first time, we get one impression of it. If we experience it again, we get a different impression. Sometimes it takes a few times to really expose ourselves to something.
Hartman explains that Harry Dent is returning to the podcast for around the seventh time with some new predictions. In the past, some of Dent’s predictions have been right and some have not, but predictions can be hazardous so it’s wise to give him some slack.
This interview was recorded around the time Dent’s last book came out, so it was a couple of months ago, and Hartman explains that he noticed it wasn’t broadcast yet. Like Dent, Hartman mentions that he has been right about a lot of things but has been very wrong in his predictions on interest rates.
Another prediction he admits to being wrong about was when Snapchat declined Google’s offer to buy the company. Hartman states that he thought Snapchat was nuts for not selling, but their value went up afterward. It’s in trouble again, but it was doing well.
Airbus Cargo Sleeping by 2020
Hartman mentions that he read an interesting article in USA Today that explained how Airbus was working on a plan to offer a sleeping option in the cargo hold of their planes by 2020. At first, he states that he thought it was a tacky idea but looked at the artist’s conception of what the sleeping holds would look like. It looks quite neat.
For safety, passengers have to be in their designated seats for takeoff and landing, but during the length of the flight, passengers are going to be able to rent a space in the cargo hold to sleep. This might lead to a big shift in the industry.
There are two events coming up in the Northeastern part of the country for the first time. The Creating Wealth event is going to take place in Philadelphia on May 19th. Hartman adds that this event does not have a large ballroom, so it is limited in size and is anticipated to sell out soon. Not all of the events sell out, but this one looks like it will. Ticket prices are going up and selling well, so if you’d like to attend the only Creating Wealth event happening this year, get your tickets asap.
The Venture Alliance Mastermind trip will take place the following week in New York City during Memorial Day weekend. Hartman states that both events have great hotel rates and for the Venture Alliance event, guests are welcome to attend. For more information, visit www.jasonhartman.com/events.
Harry Dent on Sunspots
Hartman welcomes to the podcast Harry Dent, founder of Dent Research and author of Zero Hour among many other books. He is joining the episode out of Puerto Rico, and Hartman explains that Dent had to relocate to New York for a couple of months during the storms.
When asked about his research on sunspots, Dent begins by explaining that the Farmers’ Almanac lives by the sun’s phases, and it predicted the current cold weather. He states that there are low and high ends of a sunspot cycle and that the sun gets colder roughly every five years and then warms up afterward for five to six years. The cycle is roughly 11 years long on average, and one theory is that the pull of larger planets like Jupiter causes these cycles.
Dent states that solar energy can be 20% higher or lower during the highs and lows of the cycles, which is a big deal because this has an effect on people. Dark, foggy places have high suicide rates because people don’t feel well when they don’t have any sunlight. The exposure to the sun affects investment psychology as well, which Dent mentions is documented back around 170 years.
He explains that recessions happen 88% of the time in the downward cycle, and all of the major financial crises have happened in a downspot. We are in the middle of one now that began around 2008 and is expected to bottom out around 2020.
Dent adds that he gets a lot of flack when he discusses sunspots, and people discourage him from discussing it, but he explains that this isn’t astrology. It’s science, and it has been working throughout history.
Hartman mentions that Bob Proctor has been on his show before and talked about a similar concept. He also stated that people in the economy share their emotions with one another and that this has an effect on people. Hartman notes that California used to be an optimistic place.
Dent adds that depressed people don’t buy stocks. When something that he can’t explain is coming up, he says, he starts looking for a cycle that he might be missing. He cites the case of a man who used to be one of the top mutual fund managers in his field. When he noticed a sunspot, the cycle was peaking in March of 2000, he got out of the market and avoided the tech crash of 2002.
Now, we are at the bottom end of the cycle, says Dent. The cycles have been lower in their peaks since the 1960s. There’s warming occurring from CO2 but there is also cooling from the sunspots. The globe is both warming and cooling and there are natural changes coming that are massive. Right now, the biggest thing we might notice is that it is going to be a little colder in the next few years.
NOT Time to be Cutting Taxes: Tax Reform Impact
In reference to the recent tax reform, Dent explains that he has been saying for over a year that there’s a time to cut taxes and a time not to. Businesses have had free money from the Fed and they’ve used it to buy back their own stocks and pay higher dividends. These businesses are not investing in expanding capacity for new jobs. They’re hiring people back that were laid off in the recession and are at full employment now.
Dent states that the workforce growth is predicable, and it is going to be flat and nearly down for decades to come. Productivity has declined from 2-3% to .5% and it’s going to continue to get lower because older people are becoming less productive.
When Trump says that if we lower taxes or add more stimulus we can operate at 4% again, he’s wrong according to Dent. We will never operate at 4% again unless we start doubling our life expectancy.
Hartman adds that because of the free money in the economy, the rich have been able to take advantage of new incentives, which has been a stimulus.
Dent counters that this has only helped stimulate wealth and nothing else. One big tax reform impact: it helps the rich but not the common man who doesn’t have the money to make investments. If the rich were to invest in new plants and new jobs, the wealth would trickle down but that isn’t happening. We do not need more capacity, and now all the free money is going toward stock buy-backs.
When Hartman asks what the real effect is with stock buy-backs and mentions that more money is going to flow back into the US from offshore accounts, Dent asks who that is going to benefit. He explains that this only helps the rich, not the Homer Simpsons out there. A small percentage of people in this country possess almost all of the wealth, and it only benefits them.
Tax Reform Impact and Trickledown When It Doesn’t Work
Dent states that we cannot have an economy where the generals advance without the troops for so long. This same thing happened before the Great Depression and it’s going to happen again if we do not move together.
Hartman agrees that he doesn’t want to live in a banana republic even if he is at the top part of it. It’s not good for anything, but he asks that if since rich people are buying yachts and jets, aren’t the companies in the building industries being stimulated?
Dent answers that everything trickles less when growth is going to the 1%, then corrects saying that the top .1% is really where the growth goes. This group owns 25% of the wealth while the 1% owns half. The .1% controls as much wealth as the other .9%. It doesn’t trickle down much in this situation, and while it fuels certain industries, it does not help the everyday economy.
He adds that economies where the rich get richer and the rest fall behind always end in revolution, which could be another tax reform impact. This happened in the 1700s when ordinary people fought the power.
This happens because free market capitalism rewards people who contribute the most and at times it goes too far. Dent likens this to democracy where everyone has a chance but sometimes people all have such a free lunch that no one wants to work for anything anymore.
No One is Planning for Downturns
Dent explains that we have an entitlement situation that isn’t going to be sustainable for the millennial generation. They’re supporting a dying and retiring generation that has been promised too many things. There’s no way that all of these promises can be paid when looking at reality and demographics. Nobody takes into account the downturns, Dent says. These entitlements are not sustainable, and the Boomer generation is going to have to retire later because they’re living longer.
Hartman adds that retirement was set at 65 years of age back when people were only expected to live a couple of years afterward, and now people are living to a much later age. Health has gotten better as well, with engaged and productive older people.
The Delay in Tech
When asked why newer, largely-hyped technologies like AI, virtual reality, 3D printing, and self-driving cars will take longer to pay off, Dent explains that it takes technology decades to move into even the niche markets. When costs finally come down, things tend to take off. When he speaks to tech experts, they say that tech is exponential, which he is aware of.
When technology and innovation come together and move in a curve, that’s when the world changes. People will start using these technologies to move into the suburbs from crowded cities. We saw this happen with the internet. You can get into your phone and either speak to anyone or buy anything you want.
Dent explains that it is going to take a while for nano and biotechnology to make a big difference to people. If we could live 100 to 120 years in this world, that would change the decline, Dent says. If we were working twice as long because we live longer, it could change things. It will happen between 2032 and 2055 but for now we have to wait and deal with slowing demographics.
Dent mentions that steamships and railroads changed the entire world, but this sort of innovation won’t hit for another ten years or so. He also adds that driverless cars are going to reduce as many jobs as they create. They are not going to expand the economy the way that the internet did, but they will add efficiency.
Hartman mentions that demographics are reliable and that we know when people are going to hit a certain age. He recalls back when Dent was the god of Wall Street years ago, when everyone was quoting him. People said the economy would dump out in 2010 with the retiring Baby Boomers due to their spending less. He points out that a lot of that didn’t happen and that it is also hard to predict using only demographics because we don’t know what tech will be like or what the Fed will be doing.
Dent explains that the wild card is government and that the economy weakened in 2008, causing the government to step in and flood the economy with free money. It was like a 20% dividend for everybody. Never in history has that happened before. Dent states that he never thought that the banks would go crazy and replace every dollar with a dollar. It worked longer than he thought it would. He adds though that we can’t live forever on something for nothing economics.
He adds that companies are going to get free money from lower taxes and use it to buy back their own stocks. Even if they aren’t growing as a company, they still get the money from the stocks. It only benefits rich people and is terrible economics.
Big Revolution if No Change
Dent states that eventually, ordinary people are going to revolt, and the economy is going to die. Statistics show that only 26% of people supported the tax reform, and troops are no longer behind the generals—which is one big tax reform impact. People are going to revolt if this continues. There is no leadership here, and Dent points out that major revolutions start with the “make America great again” mentality. Hitler swore he’d make Germany great again, too. He didn’t. Germany went through hyper inflation after WWI, and Hitler didn’t fix the country. Trump started this upcoming revolution.
Dent mentions the Civil War as well, how the south was regressive and couldn’t stand the progress. The North won, and we got even more progress.
In closing the episode, Harry Dent offers listeners his website, where his books are often free with shipping charges. Listeners can opt for a free newsletter, or the paid version. His book is available on Amazon as well. For more information about Harry Dent, visit www.harrydent.com.