The New Market Bubble Theory

I just read an article on Wired News called "The New Market Bubble Theory". The article is a summarization of a discussion with economist Harry S. Dent. Dent believes that the economy will go into a boom cycle for the next few years reminiscent of the late 90s. He believes that this bubble will burst in 2010 and will cause a much more severe downturn than the last recession that we saw. He says worse than the 1970s but not as bad as the Great Depression.

I am not sure that anyone can really tell what is going to happen in the future. If you could would you really need to make forecasts or would you be living on your own tropical island because you are a multi-gazillionaire. If you have the ability to tell the future, you should be investing or gambling.

On the other hand, the economy is cyclical. It does follow cycles. History has shown that every time we think that we have it under control, we don't.

My biggest issue with the forecasting the future is that you can't tell what the government will screw up or who they will upset. In most big downturns there is a very large political element (Hoover raising taxes during a downturn) or a drastic change world relations (OPEC embargo) that causes them. It is not purely cyclical, it is largely political.