It takes just one extra snowflake to start an avalanche and boom! Indeed, according to Harry S. Dent Jr., aka The Contrarians Contrarian, flurries could come in July: The ever-building market bubble is likely to blow at the end of this month, if not September, predicts Dent in an interview with ThinkAdvisor. Stocks have no place in investors portfolios, he argues, forecasting that most equities will plummet 80% by autumn.
It will be the biggest crash of our lifetime, he predicts. The worst year for the stock market in our lifetime is likely to be around the end of 2022 and for the economy, 2023.
The economist correctly called Japans 1989 bubble bust and recession, the dot-com crash and the populist support that catapulted Donald Trump into the White House.
In the interview, the author of What to Do When the Bubble Pops: Personal and Business Strategies for the Coming Economic Winter (G&D Media-April 2020) zeroes in on a specific strategy and timing he recommends for selling equities and buying them back or acquiring new ones.
Youll never see an opportunity like that again, he enthuses.
Investors remain bullish longer term, but the economy keeps telling us things arent as good as they used to be.
The economy isnt the same, idiots! The current economic rebound wont last, declares Dent, who in the interview discusses what he sees as the first sign of a downturn.
He heads the research firm of HSD Publishing, which produces monthly newsletters that he and Rodney Johnson, HSD president, each write.
It will take one more crash to convince investors that the economy isnt as robust as they think it is, says Dent, who publishes his insights in a free daily e-newsletter.
He isnt entirely gloom and doom about whats on the way. He has high hopes for Bitcoin but after it plunges 90% to 95%.
In the interview, Dent reveals his personal investing strategy for the digital currency.
ThinkAdvisor held a phone interview with Dent on July 7. He was speaking from his base in San Juan, Puerto Rico. Upcoming: a free Financial Prophecy Summit webinar July 20-22, in which Dent and Robert Kiyosaki forecast the economy.
Here are highlights of our interview:
THINKADVISOR: What worries you about the market and economy right now?
HARRY S. DENT JR.: Im not afraid or worried about whats going to happen. Its just the wait. Im waiting for the economy to get back to normal and quit having central banks manipulate and stimulate it like a drug pusher with a heroin addict.
Theyre going to keep stimulating and doing whatever it takes to try to keep this bubble. But you cant just keep pumping money and pushing up financial asset prices. We now have a bigger bubble than ever.
Investors are still bullish longer-term. But the economy keeps telling us, no things arent as good as they used to be. Look how much stimulus its taken to grow at 1.6%!
The economy isnt the same, idiots! But people are still assuming it is. Its going to take one more crash to convince them.
No amount of stimulus is going to cure this, and investors lose.
Whats your outlook for the stock market, then?
This is the longest bull market and the most bubbly. When this thing goes, its going to go big.
It will be the biggest crash of our lifetime. The central banks will lose control. The worst year for the stock market in our lifetime is likely to be around the end of 2022 and for the economy, 2023.
You told me in an interview this past March that the biggest crash ever would likely occur by the end of this June. What are your thoughts on why that didnt happen?
Its the same old story: Weve been rebounding since COVID crashed us in March of last year. The stimulus was off the reservation! The central banks said, Well triple down. But that stresses the system: not letting the economy rebalance, not washing out zombie companies. Twenty percent of large public companies cant meet their debt service.
So it was massive stimulus and the natural recovery [Americans] had to hold back [spending] for months. So now we have this bounce.
Weve been rebounding since COVID crashed us in March of last year. But I dont think its going to last, and the markets dont think its going to last. The bond markets are saying, Yeah, now weve got 3% or 4% inflation, but its temporary.
Governments will keep this bubble going no matter what. So the question is: When does it blow?
When does it blow?
I think the end of this month is one of the most likely times, if not September. Its pretty hard to hold this thing up, and the biggest reason is home sales, which is the single most important thing that we buy.
Housing is the biggest part of the economy. If sales keep slowing, then prices get weak. Thats the type of thing that tips this thing over.
What Im seeing No. 1 right now is that prices on home sales have gone down. Real estate is still bubbling up, but U.S. home sales have gone down 22% or 23% in just a matter of the last five or six months. Thats a sign theres a limit to the bubble.
So thats the beginning. But the downturn is going to be hard and fast because the economy is way overstretched, including low interest rates. People just assume this is going to last forever, but when it hits, its going to hit hard.
How much snow does it take for an avalanche? One snowflake because its been building up and building up. One extra flake and boom!
Please elaborate on your inflation forecast.
Everyone is wrong on this. We have inflation up maybe [3%-4%] temporarily, and thats mostly because of COVID recovery, not real core inflation. Hyperinflation isnt going to happen.
Poster Comment:
He is wrong about Hyperinflation. When the Dollar Dies, we will have to buy gold at $10,000 an ounce to get a gold letter of credit because foreigners won't take dollars.