His “line within the sand” is “another new low” to interrupt Nasdaq’s low of 10,088 hit final October. “The following factor you understand, we’ll be down 50-60%,” the “Contrarian’s Contrarian” predicts in an interview with ThinkAdvisor.
That can trigger a serious recession, if it’s not already right here. “You gained’t be capable of put Humpty Dumpty collectively once more,” Dent argues.
“The [market] high in our lifetime” got here when the every little thing bubble peaked with the 34% Nasdaq crash from November-June 2020, Dent insists. That was the highest for the S&P 500 and the Russell 2000 too, he says.
This 12 months, will probably be, says the well-known publication writer, “the worst” for the U.S. economic system since “1973 or 1974 or 81-82, and even again to 1931.” And “we gained’t come out of this until 2025,” he predicts.
Three or 4 many years or so in the past, Dent was prominently, persistently bullish. However quite a few and ubiquitous market bubbles turned him bearish, he says.
Proper now, the market is super-inflated with what he phrases “the primary every little thing bubble” — each shares and actual property.
It’s extra damaging than the bubble of 1929, he says. “And that ended up with an 89% inventory crash.”
Dent appropriately predicted Japan’s 1989 bubble bust and recession, the dotcom crash and the populist surge that catapulted Donald Trump into the White Home.
Various his prognostications, nonetheless, by no means panned out.
He’s no fan of the Federal Reserve, which, he says, is attempting to “play God” by manipulating the U.S. economic system.
By the point the central financial institution brings down inflation near its goal 2% by climbing rates of interest, the market “will probably be down 50-60%,” he contends.
The inventory market rally that started final October will proceed two extra months at most and gained’t be “terribly sturdy,” he says.
Dent’s unbiased analysis agency, HSD Publishing, produces month-to-month newsletters that Dent and associate Rodney Johnson, president, every write.
There may be additionally a free publication accessible previous to subscribing to the HS Dent Forecast and the Rodney Johnson Report. The latter covers sensible points and features a sturdy concentrate on bonds.
Within the interview, Dent, whose father was particular White Home counsel within the Richard Nixon administration, discusses his present protected investments and predicts that bitcoin will probably be “the worldwide normal for a digital financial system.”
ThinkAdvisor interviewed Dent by cellphone on Jan. 11. He was talking from his base in San Juan, Puerto Rico.
Any hope for a mushy touchdown for the economic system?
“That makes zero sense,” he says. “There’s no mushy touchdown from a serious bubble ever, ever, ever, ever.”
Listed here are highlights of our dialog:
THINKADVISOR: What can forestall the crash of a lifetime that you just’ve been forecasting?
HARRY DENT JR.: One of the best ways to forestall an enormous crash is to not let a bubble get uncontrolled as a result of bubbles burst.
What kind of bubble is the one we’ve got within the inventory market now?
In 2021, there was an excessive bubble in shares, and now actual property has joined on the similar time.
That is the primary “every little thing bubble.” It’s extra excessive than 1929, and that ended up with an 89% inventory crash.
The larger the bubble, the larger the burst and the tougher they crash.
Bubbles get excessive. They get into an orgasmic part, which is fairly apparent as a result of they go nearly straight up after which return to a predictable level.
I checked out each bubble for the reason that 1700s. What I discovered was when bubbles crashed, [the market] by no means went again to new heights.
When will the every little thing bubble peak?
Once we acquired that 34% Nasdaq crash from November to June 2020, I stated the bubble lastly peaked and we’re not going to make new highs.
So to me, it’s already confirmed that we made a long-term high in Nasdaq, the S&P and the Russell 2000 with that crash. That’s the highest in our lifetime.
Shares and actual property within the U.S. and many of the developed international locations have peaked endlessly so far as our lifetime is anxious.
When do you assume the crash will happen?
As quickly as we make another new low — 10,088 [the low hit last October] is my line within the sand within the Nasdaq. The following factor you understand, we’ll be down 50%-60%, and this factor falls aside.
Folks will then notice this isn’t a correction. It is a main downturn there’s no stopping.
We’ll most likely see the S&P at 2,190 or decrease.
The inventory crash will trigger a serious recession, if it’s not already right here.
That is going to hit the excessive finish a lot tougher than the Homer Simpsons [lower income consumers] as a result of wealthy individuals — the highest 1%-10% — spend much more cash, arms down. They’ll be crying, “I simply misplaced my $3 million apartment!”
However what concerning the rally within the inventory market that we’ve been having? How lengthy do you assume it’s going to proceed?
We’re in a bounce since October. Nevertheless it’s not more likely to final greater than days or a few weeks. It may final a month or two, however I don’t assume it’s going to be terribly sturdy.
Do buyers really feel extra optimistic now?
Sure, [the rally] gave them slightly sobriety. Individuals are hoping we noticed the worst in June. Most would say, “We’ll most likely see a brand new excessive within the subsequent 12 months or so.” I’m saying: No!
2023 would be the worst 12 months we’ve seen within the economic system since 1973 or 1974 or 1981-1982, and even again to 1931.
We don’t come out of this until about 2025 with the millennial era. We’re nonetheless within the lengthy demographic downturn between the infant increase and the millennial increase that doesn’t finish until about 2024.
When is the following increase?
The increase will probably be 2025-2037, roughly, however gained’t take shares and actual property to new heights as a result of the [highest levels] we achieved had been in bubbles. As soon as main bubbles burst, [new] bubbles don’t seem for many years and many years.
So inventory and actual property valuations gained’t get again to these ranges for an extended rime.
What’s going to occur as quickly because the crash happens?
As soon as the inventory market goes down that a lot, individuals will lose confidence within the Fed, lose confidence within the economic system, will probably be scared about their monetary property.
That’s when issues will change, and also you gained’t be capable of put Humpty Dumpty collectively once more.
Many individuals are nonetheless anticipating or at the least hoping for a mushy touchdown. Your ideas?
That makes zero sense. The one approach to have a mushy touchdown is to not have a tough bubble. There’s no mushy touchdown from a tough increase — a serious bubble — ever, ever, ever, ever.
This bubble is worse than the one in 2000 or the height into 2007. This one ideas us into recession.
The Fed is combating inflation by elevating rates of interest to sluggish financial exercise … however additional price hikes may set off a recession. Proper?
The Fed thinks it’s their job to forestall a recession in any respect value. That reveals they’re dumber than hell and don’t perceive a rattling factor concerning the economic system.