Economist and cycle trend forecaster Harry Dent sees crushing deflation ahead for nearly every financial asset class. We are at the nexus of a concurrent series of downtrends in the four most important predictive trends he tracks.
Laying out the thesis of his new book The Sale Of A Lifetime, Dent sees punishing losses ahead for investors who do not position themselves for safety beforehand. On the positive side, he predicts those that do will have a once-in-a-generation opportunity to buy assets at incredible bargain prices once the carnage ends (and yes, for those of you wondering, he also addresses his outlook for gold):
All four of the cycles I track point down now. One after the next has peaked in the last several years. All four point down into early 2020 or so. That's only happened in the early to mid-'70s when we had the worst stock crashes back then, the OPEC embargo, etc -- the worst set of crises since the 1930s.
Of course, in the early '30s we had this same configuration of all four of these fundamental cycles, cycles that have taken me 30 years to hone and say "these are the four that matter".
The next three years are likely to be the worst we see in our lifetimes. It will be more like the early 1930s when stocks hit a debt bubble and financial asset bubbles crashed, which they only do once in a lifetime such as the early 1930s. Stocks will be down 70, 80, 90% -- that's to be as expected in this stage of the cycle after such a bubble.
I went from being the most bullish economist in the '80s and '90s to now being of the most bearish because what goes up goes down. That's what cycles do. At heart, I'm a cycle guy. Demographics just happens to be the most important cycle in this modern era since the middle class only formed recently -- its only been since World War 2 that the everyday person mattered so much; because now they have $50,000-$60,000 in income and can buy homes over 30 years and borrow a lot of money. This was not the case before the Great Depression and World War 2.
And based on demographics, we predicted that the U.S. Baby Boom wouldn't peak until 2007, and then our economy will weaken -- as both did in 2008. We've lived off of QE every since
That's a brief summary of my fundamentals and of why I tell people this is not the time to believe in the Trump rally. I'll go into that. I'll show you why that cannot last and he cannot create 4% in growth.
Then we also go into which areas will have been favored by demographics and by our cycles. You'll never see prices this low if you protect your capital now and convert it to cash or to safe, long-term high quality bonds, then you can take advantage of the sale of a lifetime. If you don't, you'll have seen your financial assets wiped out a good bit more than they were in 2008 and '09, and the markets won't come roaring back to new highs next time.
Click the play button below to listen to Chris' interview with Harry Dent (44m:31s).
Ok, let’s be clear here. If stock prices actually fall that much, is there any feasible way the bond markets don’t blow, and with them the debt leveraged banking system as well as global trade? I mean, I’m a pessimist, I know, but…but…that kind of collapse of equity prices in today’s circumstances strikes me as “game over, man.”
Right?
If it DOES unfold this way, you can bet Hillary Clinton will look back and thank the heavens she lost the election just as much as President Trump would rue the day he won.
I read a post somewhere that equated Trump with Hoover. Business man with no political experience becomes President immediately before a major market top.
Instead of Hoovervilles, they’ll be Trump Towers.
I like disaster stories as much as the next guy, but Harry Dent calls for asset prices to crash every year. Of course, gold is also going to $350 or whatever as well. He had Dow 5500 all over his site last year. Before that, it was 6000 or something. Eventually, he may be right…especially if he predicts it long enough.
I wonder the following about the equity markets:
Who’s going to mass liquidate to cause a crash? Aren’t the retail investors out…at least compared to historical norms?
2a) Will CBs even let the markets fall?
2b) If no, how long can they hold them up? Seems like indefinitely.
If the US remains the best house in a bad neighborhood (likely), where else is capital going to go?
These are the things I think about, and they cause me a great deal of concern about the validity of any 70-90% crash ideas. Can the markets still have a decent sized correction? I guess so, but Number(s) 2 above make(s) me even wonder about that.
To those who wonder, Harry Dent’s fourth cycle or his “secret short term factor nobody knows about” is the sunspot cycle that lasts around 11 years. He used to call this a “10 year cycle”, because the cycle seemed to last for about 10 years and he recalibrated it to 11 years in the late 1990s - 2000s. Harry Dent stopped mentioning this about 2-3 years ago after being ridiculed for looking at sunspots that no other financial forecaster cares about. I don’t personally have an opinion on this one way or the other, just informing the curious.
It’s really interesting how all of these long term bubbles are coming together to produce a financial rogue wave. There’s one super bubble that will dwarf them all and it’s also peaking right about now, the environmental collapse bubble. In the next couple of years the summer arctic ice cap will finally disappear. Ice core studies have shown that the rate of this present day heating and melting is orders of magnitude greater than those in the natural cycles. Global warming is going to explode. The best investment will be in one of those New Zealand bunkers. A million bucks a square foot?
Harry mentions holding cash in brokerage accounts like Schwab and Scott Trade. Given the bail in rules, cash under the mattress has been compelling for a couple of years, but the recent moves to ban physical cash have changed the math. Lots of talk out of Davos on the subject this year has me thinking we’re maybe 6 months away from a surprise announcement that the $50 and $100 bills are being “phased out” probably with high tax penalties for unaccounted bills being deposited. So, brokerage accounts are certainly one option, but what about local credit unions? How do we check their financial health/exposure? Is it smart to convert some cash to low denomination bills, or is that risky too?
I agree that the bail-in rules change everything for cash accounts. Your cash in a bank or any other institution is not safe when that institution has outstanding derivative bets. Cash will be confiscated and turned into shares in the institution. Those will likely be worth a fraction of your original account balance.
Aside from the bail-in issues, recall what happened with MF Global. They weren’t allowed to touch the cash in customer accounts but they did anyway. Nobody would have known if their bets hadn’t gone south. How many brokerage institutions are doing that now and we don’t know?
@thetallestmanonearth: Your last sentence: Good idea. @skipr: Climate cycles have always occured. I don’t think we’re capable of knowing what the outcome of this cycle is going to be. That said, it doesn’t mean we shouldn’t prepare. This isn’t to say man isn’t affecting our environment. We surely are to some debatable extent. We also don’t know the extent of Earth’s healing mechanisms. Doomsday scenarios around climate change may not occur or they may occur in ways we don’t expect. This topic is so fraught with absolutes on both sides that makes it almost impossible to debate. All that said, it’s idiotic to think we aren’t affecting our planet negatively. Given that simple fact, we should do what we can to be better stewards of our environment and do our best to be prepared for different environmental conditions in the future.
Interesting ideas, although I have some doubts about gold going to $450. That might be the case in a deflationary environment with a strengthening dollar, but in a full-blown global financial crisis the losses in gold due to dollar appreciation would likely be swamped by the demand for gold by non-US, non-dollar players in the market. I think that Chris wrote an article on seeking alpha about the disappearance of the marginal buyer being the cause of market crashes; the opposite is probably also true, that when everyone piles into a finite market, the marginal buyer ends up driving the price skywards.
I’ve been tentatively convinced (by Charles Hugh Smith and others) that gold and the dollar will counterintuitively rise together. Then the dollar and the dollar system will collapse leaving gold as “the last man standing.” I’m prepared to be wrong, though, and quickly adjust.
And if some idiot pulls a Modi and bans $50 and $100 notes I will convert all of mine into gold within 24 hours. For now I think They are going to continue to try to drive them slowly out of circulation by means of one racket or another, most of which are currently running or in the on-deck circle. What will they do about the majority of Benjamins that are held outside of the US?
we have a beautiful farm mostly out of harms way. alota redundancy with no desire for comforts of the 21st century (ok, antibiotics are nice). stacking junk silver for more than ten years. what else do we need?
Chris M? farming is an an adaptive art, adapt to the extremes.
So, brokerage accounts are certainly one option, but what about local credit unions? How do we check their financial health/exposure?
I had a link to a page at Institutional Risk Analytics that rated the financial health of smaller banks and credit unions, but that appears to have disappeared behind a pay wall. You might try looking more into that, though.
The bottom line is that, although no credit union is completely safe, you can feel better about the fact that your local credit union isn't betting on derivatives with your money.
Trump is Hoover…
Hoover ran in an environment where technological innovation (cars and tractors) put downward pressure on crop prices (as former pasture became farmable land). Most people were farmers, and they were mad about loosing their livelihood. So Hoover came in with protectionist promises. A massive tariff on agriculture also products to bring back farming. That tariff worked its way through congress and after all the pork was attached it wound up being a tariff on almost ALL goods (the Smoot Hawly tariff act). The passage of this legislation very closely marked the stock market peak.
So here we are today. Technological innovation (automation and logistics) is killing manufacturing. Trump comes in with protectionism.
History is cyclical. This is the bad part.
If we do get deflation, then the loan to asset ratios that support the Banks’ balance sheets will go in the wrong direction i.e. the debts retain their value whereas the assets against which they are secured, diminish in value. A deflationary event of the scale predicted by Mr Dent will wipe out many Banks’ balance sheets. If the Banks get wiped out, gold will do well because depositors will want their money out of Banks and into safe haven non-paper assets. In any case, anything that could hurt our precious Banks will be nullified with “what ever it takes” strategies - as they have been doing since 2008/9. They will inflate (also good for gold)!
(Here’s a tip on that site, you can arbitrarily pick an asset size on the screen, click on “See Results,” and it will take you to the next screen where you can modify the results to see the banks / thrifts or CU’s in your state or zip code).
You can click on each bank/CU’s name and get a wealth of info about their finances. All that data turns into info-overload, you have to use your best judgment on what really matters.
I also recall someone recommending spreading your accounts around, and not putting all your eggs into one basket. If I recall, they mentioned something like diversifying the “ecosystems” of your banks, but I’m not clear on exactly what that means.
Hope this helps.
is going to insert, again, his basic pessimism. IF we have a bank and asset price collapse of that magnitude, the US dollar as we know it will have essentially no value. Gold will, but only in a functioning post-financial-collapse marketplace where gold is held in value. So, I agree with the premise that gold would do well if the Dollar loses its inherent value or is simply done away with.
Where I diverge from some people’s thinking is that I highly doubt the social upheaval and unraveling that would certainly result from such an epic financial collapse will leave any marketplace standing. There’s a reason the central banks are doing what they are doing - desperately trying to keep equity prices afloat, and with them the illusion that Everything is Awesome - and while many here on PP believe the Fed is filled with idiots, I’m not one of them. I suspect they are smart enough to know just how serious a predicament they are in, but they lack the intellect (or wisdom) to know how to get out of it, if such a thing is even possible now. Equity markets and market confidence are the last lines of defense, which is why the CBs are throwing everything they have into holding them. When confidence starts breaking, which it seems to be, it’s game over. In this sense, Trump’s injection of chaos and uncertainty into the system seems to be pushing us ever closer to that breaking point.
Ergo, while gold is a great hedge against a post-collapse scenario in which non-essential metals are still valued and traded, if you are not also taking steps to prepare for a world in which anything that can’t be eaten or utilized for basic survival is worthless, you are hobbling yourself. I could be wrong, of course, but this seems to be the trumpet I toot most around here. You can’t eat gold, and flashing the stuff in public in an anarchic world provides its own dangers. So hedge away, but get down to basic prepping too. It’s all fine to say “may the odds ever be in our favor,” but everything you can do to sway those odds TO your favor isn’t wasted money or energy.