Dent, like David Rosenberg：Following the epic 2012 bottom, Dent

Making Sense of Today’s Schizophrenic Markets

While Dent’s demographic forecasting models have been extremely accurate in forecasting long-term economic trends, he readily admits that the immediate short term is often much more difficult to predict. And that’s never been more true than it is now, as many experts are scrambling for a clue. This economic and investing environment is truly a once-in-a-lifetime event.

How to Manage Your Life During Deflation

In your personal life, Dent similarly believes that cash flow is king during this deflationary depression. If you run a business, he recommends you cut all unnecessary expenses, and work to maximize your cash flow and efficiency.

Thinking of buying a home? You may want to wait until at least 2012 or 2013, as mortgage rate resets are set to continue through 2011. Given a one-year lag on price declines, we won’t see a housing market bottom until 2012 in the earliest.

In the meantime, your cash will increase in value, possibly quite significantly (see Nikkei chart above!) and you’ll be able to get much more house for your buck if you sit tight and wait (also see my Renter’s Manifesto for an admittedly biased rent-versus-buy rant)!

Countries With the Most Favorable Demographics

Out of the world’s major countries, Dent likes India’s demographics the best. China doesn't compare as favorably due to their baby nightmare “one child per family” policy. He thinks China will get old before it gets rich, and that per capita, their wealth will never reach that of the current US.

Looking at emerging markets, Dent loves the promise of Southeast Asia, and Vietnam in particular. He’s also intrigued by the Middle East and sees opportunity there, provided politically speaking the area is able to keep it together (a big if, for sure!)

Investing abroad will be very important for Americans after the current crash is worked out, he believes, because the cherry days of investing in America are over. While sectors such as health care may perform well as the US wheels itself into the nursing home, history has shown that the most compelling investment opportunities are often found in countries that are roaring up Dent’s spending wave curve.

Summing It Up – Big-Picture Forecast

Dent expects a major bottom in the stock market sometime around 2012. He thinks that the previous lows will likely be taken out, with the market falling significantly once again (Dow anywhere from 3800-6440). If that happens, you obviously don’t want to be in stocks.

Between now and then, he’s allowing for another potential rally that could set new highs in the market, and carry all the way into next year. That’s not required, though, as he thinks it’s possible the stock market rolls over sooner as people come to the realization that the economy isn't actually improving.

Bottom line: He sees very little upside to stocks at this juncture, and a lot of potential downside.

Following the epic 2012 bottom, Dent says we could see a bear market rally as long as five years, eventually giving way to another gentle slump that would take us up to the next spending wave uptick in 2022.

Dent, like David Rosenberg, believes that ultimately austerity measures will win out in America. It will be a painful 10-plus years, but this is what the “winter” season is for, as Dent refers to it: to clean out the excesses of bubbles past, and prepare for “spring," a new season of growth.

It’s not the end of the world -- you can come out of this financially fine, and even ahead of the curve, if you're smart about navigating these deflationary waters.