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Our next guest is warning of the largest
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most significant stock market crash
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we'll see in our lifetime.
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He is Harry Dent, founder of HS Dent and
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a pioneer of Demographics Research.
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Harry is the best-selling author of
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several books including
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"The Great Boom Ahead" and his latest work
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"Zero Hour".
His claim to fame has been
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predicting correctly calling
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"The End of the Japanese Boom in the 80's"
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and "The Boom That We Saw
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Subsequently in Europe and the US".
Harry...
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welcome to the show.
It's a pleasure
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speaking with you today.
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- Yeah, nice to be here David.
- We have a lot
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to go through starting with your macro
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outlook.
You
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are an expert on all things demographics
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and how that influences
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the macro landscape.
Let's set us up here
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before we talk about
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your outlook on the stock market.
What
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are some of the significant demographic
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trends
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- that you like to discuss today.
- Well you
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know
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the most predictable thing in the
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economy, something economists really
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don't know much about,
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is the spending of households.
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People enter the workforce at 20.
They
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are cost before that.
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They go through a spending spree until
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they're 46 to 47,
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until their kids leave the nest.
And then
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they spend less the rest their life.
So,
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I came out with a tool called "The
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Spending wave in 1988"
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and that's what told me, oh my gosh
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Japan's at the top
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of their generational spinning wave.
We
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just lag the birth index.
This is how
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simple it is, David.
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46 years in the US, 47 years in Japan and
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Europe
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for the peak and spending of the average
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person.
That simple.
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Japan was peaking in the late 80's.
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US and Europe
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we're just getting going with Europe,
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a little bit lag the US, so
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I could see that crash in Japan and then
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the great, not just the boom.
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The greatest boom in history, because the
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baby boom was so
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large, not just here.
The baby boom was a
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global phenomenon.
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So I can predict spending in any country
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in the world
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and we can predict it from cradle to
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grave.
From young people getting into
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apartments
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to the nursing homes and assisted living
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facilities, that they end up dying and
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- everything in between.
- Yeah, let's talk
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about spending now.
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You wrote some of your...
You wrote your
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books before Covid and as you know in
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2020 spending fell off a cliff.
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This was an anomaly obviously.
I don't
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think anybody could have predicted Covid.
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But how has this phenomenon changed
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spending?
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- Has it changed at all?
- Oh I mean it was
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like a mini depression.
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I mean it's a shock to the economy.
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Similar to the hurricane.
I'm in Puerto
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Rico now.
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For five years some of the Hurricane
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Maria we had
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knocked out the economy like an A-Bomb.
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For three months we had to move to New
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York, you know.
Hide out in New York for
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three months.
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This is like that.
It's a short term what...
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what I call it is the perfect trigger.
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Ever since...and here's the key point
Ever
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since the baby boom
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in the US peaked in spending in late
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2007,
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something I predicted all the way back
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in '88 when i came up with that indicator,
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we've been living off of quantitative.
Oh...
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we got to keep the economy going well.
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It wants to decline.
It wants to
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deleverage all the debt
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from this great boom.
And the Central
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Banks won't let it.
So we keep pumping up...
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pumping up going to new highs.
Note that
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the economy remains weak and slow
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but the stock market keeps going to
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record highs.
That's a huge
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disconnect.
I call the Covid the perfect
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trigger because it's something that
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Central Banks couldn't easily dance
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around.
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And right now the market's going to new
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highs, thinking oh, after the big crash in
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February March
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and a 12,000 point that's 40%
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of the entire 30,000 Dow.
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40% of that was made just since March low
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and now it's at new highs.
Thinking oh...
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we'll be back
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to new highs and good old times,
early to
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mid next year.
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No, it will not happen.
The demographic
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trends
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and the debt trends continue to weigh.
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And there's a lot of industries we all
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know
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Travel, Entertainment, Restaurants that
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could go on and on and on.
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That will not get back to normal for a
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year or two.
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In commercial real estate may never be
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- the same.
- Well,
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so you're right.
Uh, the personal
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consumers expenditures, the PCE
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it's up since the the March bottoms.
But
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it's still
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not at pre-Covid levels.
It's still
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rising though, you know.
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Economists have predicted that
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eventually will hit that pre-Covid level.
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But you're saying, no that won't happen
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until maybe a couple years out.
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- Maybe never?
- I...yes, I...I think more than a
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couple years, I think,
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by the first and second quarter of next
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year, we're going to see
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that we don't get back to those levels.
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And the economy starts failing again.
I...
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love the quote.
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19% of publicly traded companies,
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now called zombie companies,
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are not paying their debt service
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interest or principal.
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Oh, those companies are still limping along.
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A lot of small businesses got hit by this.
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Just like the hurricane we saw
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this when we came back to Puerto Rico.
20% of
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the small business, of restaurants around
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me
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never came back.
They can't float bonds
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like the big companies can.
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With a still healthy stimulated bond
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market.
They have to go to stingy banks
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at bad times.
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So there's a lot that's not going to
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come back. We, I think,
we've kind of hit
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the V-shape recovery for let's say the
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80% of the economy
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that did not get permanently damaged.
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But there's this other
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15-20 percent that's not coming back.
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And we've got more debt than ever,
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and more debt how much the government put.
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3.4 trillion in the last year in money
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printing
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as much as they did in the entire QE
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cycle before in less than a year.
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And 2.2 trillion in fiscal spending with
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a three trillion deficit they're
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supposed to come up with.
Another two to
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three trillion soon.
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This is, uh...just going to cause debt
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pressures to get worse.
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While consumers continue to naturally
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spend a little less because the baby
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boomers are still in their decline
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the millennial generation, and again this
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cycle is very proven now, back
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50 years, the millennial generation will
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drive us
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up from 2023 forward but not
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until then.
So still weakness and
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demographics
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massive debt, I say we don't ever fully
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recover for this.
And by early next year
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we realize that and the stock market
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goes Oops...
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Uh we got a little high on crack and
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and you know...
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Now we're coming back down to reality.
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I think you're going to see a big crash
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starting late this year, early next year.
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So you don't think
So you don't think
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we're going to have a V-shape recovery?
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What about a K-shape?
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No, we have had a V-shape recovery.
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We have up to about.
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We just we don't keep going now.
There's
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nowhere to go from here.
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Yeah you're right.
Ok, so what about
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what about a K-shape recovery?
The notion
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that some sectors are continually going
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to outperform.
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Whereas the rest of the economy lags.
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Yeah...yeah...
But...but overall I mean this
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still
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uh...makes consumers more wary.
People are
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more in debt.
The government's more in
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debt.
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Companies have had to borrow to get
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through this.
So, so you still get this
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weight
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on the economy, and and again you got to
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remember,
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we we we would have been in natural
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demographic cycles
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in a downturn from 2008 to 2022-23.
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I said that back decades ago.
So they
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basically
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blew us out of this downturn.
In fact I
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tell people
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the 2008-9 stock crash that was only
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17 months.
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That was half as long as the 1929 to '32
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crash
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after a similar generational and bubble
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and
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technology bubble economy that crash if
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that, if we had not
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printed, 20 now, 24 trillion dollars
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globally since then
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had not printed that much money.
Um...to
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keep the economy growing at a measly two
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percent.
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We would have been in a long off and on
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downturn, and we would not have had this
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stock rally, and we would not have rising
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corporate earnings,
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and people wouldn't be borrowing at zero
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rates adjusted for inflation.
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Which makes everybody wealthier and
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financial assets have been
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turned straight up.
People have to
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realize, normally in a recession
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that the central banks will make credit
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easier and push it out
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lower interest rate, hoping that people
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borrow more.
Well, we came into 2008
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already over borrowed in consumer's
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businesses
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and government, and we didn't need more
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debt.
So what they found out by
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accident, when they pumped a bunch of
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money in, oh they...they bought
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bonds to do it, and that caused financial
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assets to go up because they're...they're
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putting
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more money in the same financial asset
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pool, and it's driving up.
So we're not
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getting consumer inflation like the gold
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bugs predicted.
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We're not getting a strong recovery like
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economists would expect.
With this much
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stimulus
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and thinking everything's OK, because
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they don't understand the demographic
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and dead right.
274
00:08:41,679 --> 00:08:44,240
So we get this very modest recovery that
275
00:08:44,240 --> 00:08:46,240
only takes a trigger like Covid
276
00:08:46,240 --> 00:08:48,959
to show us oops...
yeah no, we're weaker
277
00:08:48,959 --> 00:08:50,240
than we thought we were, and that's what
278
00:08:50,240 --> 00:08:51,200
I said.
I think my...
279
00:08:51,200 --> 00:08:53,680
my... Here's my forecast.
And you can not
280
00:08:53,680 --> 00:08:54,959
listen to me after this,
281
00:08:54,959 --> 00:08:56,720
if we don't see strong weakness in the
282
00:08:56,720 --> 00:08:58,560
economy by mid next year,
283
00:08:58,560 --> 00:09:00,880
showing that all this stimulus is not
284
00:09:00,880 --> 00:09:02,399
enough to put humpty dumpty back
285
00:09:02,399 --> 00:09:02,959
together.
286
00:09:02,959 --> 00:09:05,200
Then just don't listen to me anymore.
287
00:09:05,200 --> 00:09:07,120
Ok, so your forecast...
Let's recap your
288
00:09:07,120 --> 00:09:08,000
forecast for the stock market.
289
00:09:08,000 --> 00:09:10,640
So you're saying that 2023
290
00:09:10,640 --> 00:09:12,399
millennial money is going to drive us
291
00:09:12,399 --> 00:09:12,800
to a
292
00:09:12,800 --> 00:09:15,519
- new era of growth before then?
- Nope, not
293
00:09:15,519 --> 00:09:17,120
going to happen in terms of growth.
294
00:09:17,120 --> 00:09:18,640
So we're going to see a stock market crash
295
00:09:18,640 --> 00:09:21,040
before 2023 is what you're saying?
296
00:09:21,040 --> 00:09:23,519
Yes, between now and late now.
Remember,
297
00:09:23,519 --> 00:09:25,519
the stock market's a leading indicator.
298
00:09:25,519 --> 00:09:28,240
So I expect a stock market peak right
299
00:09:28,240 --> 00:09:30,000
here.
I'd say by somewhere between
300
00:09:30,000 --> 00:09:32,800
early December and mid-January.
We see a
301
00:09:32,800 --> 00:09:34,480
peak and I think under.
I think more
302
00:09:34,480 --> 00:09:37,600
early side and we see a two-year crash
303
00:09:37,600 --> 00:09:39,600
that really continues.
The crash that
304
00:09:39,600 --> 00:09:41,120
started in February.
305
00:09:41,120 --> 00:09:44,399
So, this is not...
This is not a crash or
306
00:09:44,399 --> 00:09:45,839
if you want to call it a crash, you know
307
00:09:45,839 --> 00:09:48,399
a major sell-off like we saw in March,
308
00:09:48,399 --> 00:09:48,959
where
309
00:09:48,959 --> 00:09:50,800
that just rebounded right away?
This is a
310
00:09:50,800 --> 00:09:52,000
structural
311
00:09:52,000 --> 00:09:55,519
uh, downtrend in the equities markets?
312
00:09:55,519 --> 00:09:57,600
Yes, it's a reset for the greatest
313
00:09:57,600 --> 00:09:59,440
financial asset bubble in history.
314
00:09:59,440 --> 00:10:01,279
Partially caused by a good economy at
315
00:10:01,279 --> 00:10:02,720
first like the roaring 20's,
316
00:10:02,720 --> 00:10:04,880
but greatly goosed up by Central Banks
317
00:10:04,880 --> 00:10:06,560
artificially. And the fact
318
00:10:06,560 --> 00:10:09,200
that yes, the demographic trends here, and
319
00:10:09,200 --> 00:10:11,279
in East Asia and in Europe, all the
320
00:10:11,279 --> 00:10:12,480
developed countries
321
00:10:12,480 --> 00:10:15,040
continue to get worse.
Especially in the
322
00:10:15,040 --> 00:10:16,560
next two to three years. So...
323
00:10:16,560 --> 00:10:19,200
so yeah, no easy recovery from this, when
324
00:10:19,200 --> 00:10:21,279
the stock market realizes that.
325
00:10:21,279 --> 00:10:24,160
Yes, I say we have a reset, and then
326
00:10:24,160 --> 00:10:26,160
stocks can grow again, then real estate
327
00:10:26,160 --> 00:10:27,200
can grow again,
328
00:10:27,200 --> 00:10:28,880
and then the the millennials are going
329
00:10:28,880 --> 00:10:30,480
to be the biggest benefits
330
00:10:30,480 --> 00:10:33,519
if we get this debt and bubble out of
331
00:10:33,519 --> 00:10:35,279
the way, because it's stymieing
332
00:10:35,279 --> 00:10:37,600
- investment and productivity.
- You say that
333
00:10:37,600 --> 00:10:39,040
the stock market is eventually going to
334
00:10:39,040 --> 00:10:41,120
realize the economic
335
00:10:41,120 --> 00:10:43,680
uh, condition that we're in.
But has..
336
00:10:43,680 --> 00:10:45,519
I mean, why haven't they realized it yet?
337
00:10:45,519 --> 00:10:47,920
Why haven't invest equities investors
338
00:10:47,920 --> 00:10:49,519
you know, what you're saying about the
339
00:10:49,519 --> 00:10:51,519
economy it's not really...
340
00:10:51,519 --> 00:10:53,360
it's not really news we know, that the
341
00:10:53,360 --> 00:10:55,279
economy is in terrible condition?
342
00:10:55,279 --> 00:10:57,279
We know that monetary stimulus is what
343
00:10:57,279 --> 00:10:58,399
been...what has
344
00:10:58,399 --> 00:11:00,480
been the primary driver of equities
345
00:11:00,480 --> 00:11:02,720
prices.
Why haven't people realized that
346
00:11:02,720 --> 00:11:03,360
yet?
347
00:11:03,360 --> 00:11:05,519
- We're still seeing the Dow at 35.
- I am
348
00:11:05,519 --> 00:11:07,519
surprised.
I am surprised David, because
349
00:11:07,519 --> 00:11:09,519
how long does an economy have to limit
350
00:11:09,519 --> 00:11:12,320
with this level of stimulus in the past.
351
00:11:12,320 --> 00:11:13,120
You would have had
352
00:11:13,120 --> 00:11:16,079
super growth and inflation both,
and we
353
00:11:16,079 --> 00:11:17,120
have neither.
354
00:11:17,120 --> 00:11:20,480
It shows how dead the economy is.
I think
355
00:11:20,480 --> 00:11:23,200
that we're...we're about to see one more
356
00:11:23,200 --> 00:11:23,680
crash.
357
00:11:23,680 --> 00:11:25,519
It won't be the end game, but it'll be
358
00:11:25,519 --> 00:11:27,440
one more crash that takes the stock
359
00:11:27,440 --> 00:11:28,000
market to
360
00:11:28,000 --> 00:11:31,200
new lows by April, is my forecast between
361
00:11:31,200 --> 00:11:32,240
now and April.
362
00:11:32,240 --> 00:11:35,519
Another 40% crash greater than the S&P
363
00:11:35,519 --> 00:11:38,800
down 34 35% greater than the 20% crash for
364
00:11:38,800 --> 00:11:40,560
that ever since 2018
365
00:11:40,560 --> 00:11:42,800
top, which was the first bubbly top, we've
366
00:11:42,800 --> 00:11:45,360
seen every crash take us to new lows, but
367
00:11:45,360 --> 00:11:46,640
every stimulus
368
00:11:46,640 --> 00:11:48,800
rebound take us to new highs.
I think
369
00:11:48,800 --> 00:11:50,560
we're going to see the high
370
00:11:50,560 --> 00:11:52,480
soon.
And we're never going to see this
371
00:11:52,480 --> 00:11:53,760
high for years.
372
00:11:53,760 --> 00:11:55,440
And that the next crash is where
373
00:11:55,440 --> 00:11:57,600
investors lose confidence
374
00:11:57,600 --> 00:12:00,079
in the Fed.
And governments endlessly
375
00:12:00,079 --> 00:12:00,959
stimulating
376
00:12:00,959 --> 00:12:04,320
a dead economy, and then investors
377
00:12:04,320 --> 00:12:05,839
withdraw.
You've got to realize.
378
00:12:05,839 --> 00:12:08,600
Here's an important fact, david.
Globally
379
00:12:08,600 --> 00:12:10,480
255 trillion in debt
380
00:12:10,480 --> 00:12:13,519
way more than three times GDP.
Way more
381
00:12:13,519 --> 00:12:15,600
than ever.
But financial assets because
382
00:12:15,600 --> 00:12:16,399
the QE
383
00:12:16,399 --> 00:12:19,760
is twice. That over 500 trillion now.
384
00:12:19,760 --> 00:12:22,240
Just that financial asset bubble
385
00:12:22,240 --> 00:12:22,959
crashing
386
00:12:22,959 --> 00:12:25,120
will take 200 trillion or more out of
387
00:12:25,120 --> 00:12:26,480
the global economy.
388
00:12:26,480 --> 00:12:29,600
Three times GDP.
And that is enough to
389
00:12:29,600 --> 00:12:30,720
cause a depression
390
00:12:30,720 --> 00:12:32,800
- without anything else is.
- Harry are you
391
00:12:32,800 --> 00:12:34,399
short right now then
392
00:12:34,399 --> 00:12:36,000
yeah.
Well, now I'm getting ready to get
393
00:12:36,000 --> 00:12:38,079
short.
I'm looking at early December
394
00:12:38,079 --> 00:12:40,320
is the next.
I think the markets are
395
00:12:40,320 --> 00:12:42,639
going higher here.
I think they got
396
00:12:42,639 --> 00:12:45,360
one more rally in them at a minimum.
397
00:12:45,360 --> 00:12:47,200
I think that could.
I'm looking at a target
398
00:12:47,200 --> 00:12:48,240
of about 3750
399
00:12:48,240 --> 00:12:52,240
to 3800 on the S&P.
Uh maybe thirty
400
00:12:52,240 --> 00:12:54,079
you know one thirty two thousand in the
401
00:12:54,079 --> 00:12:55,600
Dow, and then I think this thing
402
00:12:55,600 --> 00:12:58,079
may be over.
And again you have to ask
403
00:12:58,079 --> 00:12:59,600
yourself, are you gonna go for that last
404
00:12:59,600 --> 00:13:00,720
five percent,
405
00:13:00,720 --> 00:13:02,560
when the next crash within a matter of
406
00:13:02,560 --> 00:13:04,880
months?
Could be more than the last flash
407
00:13:04,880 --> 00:13:05,600
crash.
408
00:13:05,600 --> 00:13:07,519
I mean we're looking at possible
409
00:13:07,519 --> 00:13:09,040
triggers for this crash?
410
00:13:09,040 --> 00:13:10,800
We've been seeing nothing but good news
411
00:13:10,800 --> 00:13:12,800
out of the economy for the last couple
412
00:13:12,800 --> 00:13:13,040
of...
413
00:13:13,040 --> 00:13:17,519
couple of weeks.
Vaccine, Stimulus
414
00:13:17,519 --> 00:13:20,079
you know, data points to recovery.
415
00:13:20,079 --> 00:13:21,440
Maybe not to the same extent
416
00:13:21,440 --> 00:13:23,839
as pre-Covid levels.
I...I just...I just don't
417
00:13:23,839 --> 00:13:25,839
see a trigger here.
Help me out.
418
00:13:25,839 --> 00:13:27,519
Yeah, you know, I think it's going to be
419
00:13:27,519 --> 00:13:29,279
continued disappointing
420
00:13:29,279 --> 00:13:32,399
data now.
I just said Moderna just said
421
00:13:32,399 --> 00:13:34,000
something this morning.
The head medical
422
00:13:34,000 --> 00:13:35,600
director in,
the stock market totally
423
00:13:35,600 --> 00:13:37,760
ignored it.
He said wait a minute folks.
424
00:13:37,760 --> 00:13:39,920
You don't understand.
This vaccine is
425
00:13:39,920 --> 00:13:41,839
proven to reduce
426
00:13:41,839 --> 00:13:44,160
the severity.
To make if you do get this
427
00:13:44,160 --> 00:13:45,120
it's going to be a lot.
428
00:13:45,120 --> 00:13:47,519
It may be a nothing burger or less
429
00:13:47,519 --> 00:13:48,240
severe.
430
00:13:48,240 --> 00:13:50,000
That's what it's proven to do.
It is not
431
00:13:50,000 --> 00:13:51,920
proven to stop transmission yet.
432
00:13:51,920 --> 00:13:55,279
We hope it does but it's not what
433
00:13:55,279 --> 00:13:56,240
you know.
What if you get more
434
00:13:56,240 --> 00:13:57,680
announcements like that?
I mean, the stock
435
00:13:57,680 --> 00:13:59,519
market ignored this.
This morning
436
00:13:59,519 --> 00:14:01,760
the stock market constantly, it quickly
437
00:14:01,760 --> 00:14:03,120
ignores bad news
438
00:14:03,120 --> 00:14:05,120
and jumps on any good news.
The vaccine
439
00:14:05,120 --> 00:14:06,800
oh, up six seven percent
440
00:14:06,800 --> 00:14:08,880
Modernist says this today, totally
441
00:14:08,880 --> 00:14:10,639
ignores it and goes up anyway.
Yeah.
442
00:14:10,639 --> 00:14:12,639
Uh haven't we seen that bad news is good
443
00:14:12,639 --> 00:14:14,800
news. When we...when we have bad news in
444
00:14:14,800 --> 00:14:16,480
the economy, that just encourages the
445
00:14:16,480 --> 00:14:18,480
Federal Reserve to stimulate more
446
00:14:18,480 --> 00:14:20,160
- right?
- Yeah. Would that be a factor you're
447
00:14:20,160 --> 00:14:22,480
- considering?
- Yeah, but you got to look...
448
00:14:22,480 --> 00:14:24,480
look at the ECB and the Fed lately.
449
00:14:24,480 --> 00:14:25,680
They're saying, OK
450
00:14:25,680 --> 00:14:28,880
folks, we have more than done our duty
451
00:14:28,880 --> 00:14:29,760
here.
452
00:14:29,760 --> 00:14:33,120
Fed just printed 3.4 trillion since the
453
00:14:33,120 --> 00:14:34,079
Repo Crisis.
454
00:14:34,079 --> 00:14:36,320
Repo Crisis was the first warning sign
455
00:14:36,320 --> 00:14:37,760
to me. The banks
456
00:14:37,760 --> 00:14:40,399
cannot survive without constitution.
457
00:14:40,399 --> 00:14:41,440
The Fed keep saying, oh...
458
00:14:41,440 --> 00:14:43,360
we just needed to get over this 2008
459
00:14:43,360 --> 00:14:44,880
crisis and we'll be OK.
460
00:14:44,880 --> 00:14:46,880
Ten years later they pull back the
461
00:14:46,880 --> 00:14:48,680
stimulus just a little bit,
462
00:14:48,680 --> 00:14:51,440
2017-18, and then the banks
463
00:14:51,440 --> 00:14:53,839
go illiquid and need need funding from
464
00:14:53,839 --> 00:14:55,199
the Fed to keep alive.
465
00:14:55,199 --> 00:14:58,320
That shows the banking systems week
466
00:14:58,320 --> 00:15:00,079
every time you pull back stimulus.
467
00:15:00,079 --> 00:15:02,160
The economy slows, it shows the demographics
468
00:15:02,160 --> 00:15:02,959
as we beat.
469
00:15:02,959 --> 00:15:05,920
We're weak.
It's just a matter of...of I
470
00:15:05,920 --> 00:15:06,480
think...
471
00:15:06,480 --> 00:15:08,079
I think this is my real theory, David.
472
00:15:08,079 --> 00:15:10,000
This Covid thing hit early this year.
473
00:15:10,000 --> 00:15:11,519
OK, February March.
474
00:15:11,519 --> 00:15:14,720
I give that a 9 to 12 months lag before
475
00:15:14,720 --> 00:15:16,720
you really feel those small businesses
476
00:15:16,720 --> 00:15:17,760
and zombie companies.
477
00:15:17,760 --> 00:15:20,240
They don't go down overnight.
Stocks can
478
00:15:20,240 --> 00:15:22,000
go down overnight like they did,
479
00:15:22,000 --> 00:15:24,240
but...but bankruptcies and chapters 7's
480
00:15:24,240 --> 00:15:25,519
and 11's take
481
00:15:25,519 --> 00:15:28,000
time. That's what I think...
I think by the
482
00:15:28,000 --> 00:15:29,360
first quarter, you're gonna see more
483
00:15:29,360 --> 00:15:30,320
companies going
484
00:15:30,320 --> 00:15:32,800
under. And that's gonna be the trigger
485
00:15:32,800 --> 00:15:33,440
for no
486
00:15:33,440 --> 00:15:35,600
- apparent good reason.
- For no apparent
487
00:15:35,600 --> 00:15:37,600
good reason.
What about monetary
488
00:15:37,600 --> 00:15:39,920
MMT (modern monetary theory)?
Are you a...
489
00:15:39,920 --> 00:15:41,360
subscriber to that theory?
That the
490
00:15:41,360 --> 00:15:43,120
Federal Reserve can continuously pump
491
00:15:43,120 --> 00:15:43,680
money
492
00:15:43,680 --> 00:15:45,440
- without concussions of inflation.
- Now
493
00:15:45,440 --> 00:15:46,800
that would say that...that...
494
00:15:46,800 --> 00:15:49,040
Uh everybody's missed all the history
495
00:15:49,040 --> 00:15:50,959
everybody's wrong and you really can get
496
00:15:50,959 --> 00:15:51,839
something for nothing.
497
00:15:51,839 --> 00:15:53,839
This is exactly, David.
What they say at
498
00:15:53,839 --> 00:15:55,199
the top of every bubble
499
00:15:55,199 --> 00:15:58,240
In the '29 that Irving Fisher, the leading
500
00:15:58,240 --> 00:16:00,079
economist in the country, says
501
00:16:00,079 --> 00:16:02,880
we've reached a permanent plateau of
502
00:16:02,880 --> 00:16:03,759
prosperity.
503
00:16:03,759 --> 00:16:05,920
We've gone to heaven. We can just die
504
00:16:05,920 --> 00:16:08,399
here. This is what happens.
505
00:16:08,399 --> 00:16:10,880
You cannot create growth by just
506
00:16:10,880 --> 00:16:12,320
constantly printing money,
507
00:16:12,320 --> 00:16:15,360
as if work work ethic technology
508
00:16:15,360 --> 00:16:16,320
innovation.
509
00:16:16,320 --> 00:16:18,560
And all these things don't matter.
Hey...
510
00:16:18,560 --> 00:16:20,480
we've seen our technology innovation
511
00:16:20,480 --> 00:16:22,320
from the internet cycle it is peaked and
512
00:16:22,320 --> 00:16:23,120
is declining
513
00:16:23,120 --> 00:16:25,040
we've seen the incredible spending and
514
00:16:25,040 --> 00:16:27,040
productivity of the largest generation
515
00:16:27,040 --> 00:16:27,519
history.
516
00:16:27,519 --> 00:16:30,639
It's declining. We're only living
517
00:16:30,639 --> 00:16:32,880
on short-term free money and it has
518
00:16:32,880 --> 00:16:33,920
diminishing.
519
00:16:33,920 --> 00:16:36,160
Returns that's important diminishing
520
00:16:36,160 --> 00:16:37,120
returns
521
00:16:37,120 --> 00:16:38,800
just like somebody. If somebody's
522
00:16:38,800 --> 00:16:40,480
addicted to anything, let's say crack
523
00:16:40,480 --> 00:16:42,959
heroin, you know you take it, coffee, it
524
00:16:42,959 --> 00:16:44,720
takes more and more and more, to get the
525
00:16:44,720 --> 00:16:46,880
same high or to keep from coming down
526
00:16:46,880 --> 00:16:50,079
until you die from stimulus.
527
00:16:50,079 --> 00:16:52,560
You die or or hit the pavement and go to
528
00:16:52,560 --> 00:16:53,600
rehab. So,
529
00:16:53,600 --> 00:16:55,680
what I'm saying this this downturn would
530
00:16:55,680 --> 00:16:57,199
be the best thing that happens for two
531
00:16:57,199 --> 00:16:57,920
to three years.
532
00:16:57,920 --> 00:16:59,680
We go through a big, let's call it a
533
00:16:59,680 --> 00:17:01,600
detox, the leveraging of debt
534
00:17:01,600 --> 00:17:03,440
in financial asset bubble.
When you have
535
00:17:03,440 --> 00:17:05,039
all these people putting money in bad
536
00:17:05,039 --> 00:17:06,400
debt and bubbles,
537
00:17:06,400 --> 00:17:08,400
you're misinvesting for the future and
538
00:17:08,400 --> 00:17:10,000
you're killing productivity, which we've
539
00:17:10,000 --> 00:17:11,520
done nothing but seeing declining
540
00:17:11,520 --> 00:17:12,640
productivity.
541
00:17:12,640 --> 00:17:15,760
And money velocity, David, tells you
542
00:17:15,760 --> 00:17:17,599
how productive you're investing, that's
543
00:17:17,599 --> 00:17:20,640
been declining since 1998
544
00:17:20,640 --> 00:17:23,679
like it did from 1918 to 1932
545
00:17:23,679 --> 00:17:26,000
which ended in a great depression.
546
00:17:26,000 --> 00:17:28,240
So, suppose the stock market does crash
547
00:17:28,240 --> 00:17:30,400
in April, would you be buying at that...
548
00:17:30,400 --> 00:17:31,679
at the bottom there?
549
00:17:31,679 --> 00:17:34,720
Would this be the greatest bounce?
550
00:17:34,720 --> 00:17:37,679
I would say, if we see another new low in
551
00:17:37,679 --> 00:17:39,600
the stock market, I would predict
552
00:17:39,600 --> 00:17:41,919
we are not going to see new highs on the
553
00:17:41,919 --> 00:17:43,200
Dow, S&P,
554
00:17:43,200 --> 00:17:45,360
Nasdaq, Biotech, you pick anything
555
00:17:45,360 --> 00:17:46,559
anything, but maybe
556
00:17:46,559 --> 00:17:48,720
kind of somewhere down the line, Bitcoin.
557
00:17:48,720 --> 00:17:50,080
You're not going to see new highs on
558
00:17:50,080 --> 00:17:50,799
anything
559
00:17:50,799 --> 00:17:52,880
for decades, because you didn't see new
560
00:17:52,880 --> 00:17:54,559
highs after 1929
561
00:17:54,559 --> 00:17:59,280
for 24 years in 1953.
562
00:17:59,280 --> 00:18:01,600
When you get this bigger reset from this
563
00:18:01,600 --> 00:18:02,720
bigger bubble,
564
00:18:02,720 --> 00:18:05,200
- that's what happens.
- So 1929 you're
565
00:18:05,200 --> 00:18:06,480
comparing us to the great depression?
566
00:18:06,480 --> 00:18:08,000
We're in a depression right now is what
567
00:18:08,000 --> 00:18:08,559
you're saying?
568
00:18:08,559 --> 00:18:10,160
I'd like to ask you one more question
569
00:18:10,160 --> 00:18:11,840
before we talk about gold.
About the
570
00:18:11,840 --> 00:18:13,919
economy you study Japan
571
00:18:13,919 --> 00:18:15,600
in the late 80's and 90's.
Now if I
572
00:18:15,600 --> 00:18:17,200
remember my economics history correctly,
573
00:18:17,200 --> 00:18:19,039
what happened in Japan was this period
574
00:18:19,039 --> 00:18:19,679
of steady
575
00:18:19,679 --> 00:18:23,440
deflation.
Consumers put off their big...
576
00:18:23,440 --> 00:18:25,200
their big ticket purchases in
577
00:18:25,200 --> 00:18:27,039
anticipation of lower prices.
And that
578
00:18:27,039 --> 00:18:28,320
created a feedback that created a
579
00:18:28,320 --> 00:18:29,840
self-fulfilling prophecy.
580
00:18:29,840 --> 00:18:32,320
Well, after the crash, what caused the
581
00:18:32,320 --> 00:18:33,840
crash was they had a bubble.
582
00:18:33,840 --> 00:18:36,160
People don't realize this.
They had an
583
00:18:36,160 --> 00:18:38,559
incredible bubble in real estate.
584
00:18:38,559 --> 00:18:40,640
Tokyo was worth more than all the real
585
00:18:40,640 --> 00:18:42,080
estate in the United States for a brief
586
00:18:42,080 --> 00:18:42,960
period of time.
587
00:18:42,960 --> 00:18:45,679
I was telling people this cannot work.
588
00:18:45,679 --> 00:18:47,679
Their stock market bubbled up just like
589
00:18:47,679 --> 00:18:48,720
ours has,
590
00:18:48,720 --> 00:18:51,120
when the rest of the world didn't.
Uh, at
591
00:18:51,120 --> 00:18:53,760
that time period nearly as much,
OK so
592
00:18:53,760 --> 00:18:55,760
they had a big bubble but there they
593
00:18:55,760 --> 00:18:57,039
were the first
594
00:18:57,039 --> 00:18:59,960
baby boom to peak.
Their births peaked in
595
00:18:59,960 --> 00:19:01,120
1949.
596
00:19:01,120 --> 00:19:04,480
Ours peaked in '61. Europe '64.
597
00:19:04,480 --> 00:19:06,880
They peaked ahead of us so it wasn't
598
00:19:06,880 --> 00:19:08,559
just the bubble bursting,
599
00:19:08,559 --> 00:19:10,880
it was then oh...
But now there's no people
600
00:19:10,880 --> 00:19:12,240
to spend money anymore.
601
00:19:12,240 --> 00:19:14,240
Their their generation had bought out of
602
00:19:14,240 --> 00:19:15,760
their homes, borrowed all their money
603
00:19:15,760 --> 00:19:16,880
raised their kids.
604
00:19:16,880 --> 00:19:19,679
and guess what they're the...the...the
605
00:19:19,679 --> 00:19:21,919
devastation has been so bad in a zombie
606
00:19:21,919 --> 00:19:24,000
economy for 30 years.
That young people
607
00:19:24,000 --> 00:19:25,919
now don't even want to date.
Nevertheless,
608
00:19:25,919 --> 00:19:27,919
have sex or get married and have kids.
609
00:19:27,919 --> 00:19:30,000
So their demographic decline.
Mark my
610
00:19:30,000 --> 00:19:31,360
words on this too.
611
00:19:31,360 --> 00:19:35,120
Japan's rebound into this year 2020.
612
00:19:35,120 --> 00:19:37,520
Yes, was...was quantitative easing four
613
00:19:37,520 --> 00:19:38,400
times as much as
614
00:19:38,400 --> 00:19:40,720
US relatively.
Yes it was Abe's Arrows
615
00:19:40,720 --> 00:19:41,840
and fiscal stimulus.
616
00:19:41,840 --> 00:19:43,760
But it was the millennial generation in
617
00:19:43,760 --> 00:19:46,160
Japan which guess when they're peaking
618
00:19:46,160 --> 00:19:51,520
right now '19 2020 is 1989 for Japan
619
00:19:51,520 --> 00:19:52,000
again
620
00:19:52,000 --> 00:19:53,200
and they're going to see another
621
00:19:53,200 --> 00:19:55,120
generational decline take them to new
622
00:19:55,120 --> 00:19:56,480
lows and demographic
623
00:19:56,480 --> 00:19:59,760
Japan is never ever gonna ever...
624
00:19:59,760 --> 00:20:02,559
ever in my lifetime, or years see the
625
00:20:02,559 --> 00:20:03,600
1989
626
00:20:03,600 --> 00:20:06,640
39,000 Nikkei top again.
They only gotten
627
00:20:06,640 --> 00:20:07,919
about 60 70%
628
00:20:07,919 --> 00:20:10,080
there. Now they will go to new lows in
629
00:20:10,080 --> 00:20:11,200
the next few years and
630
00:20:11,200 --> 00:20:14,480
- never bounce.
- Actually a lot of
631
00:20:14,480 --> 00:20:16,080
economists do agree with you.
The United
632
00:20:16,080 --> 00:20:18,960
Nations has projected that by 2050,
633
00:20:18,960 --> 00:20:21,520
uh the dependency ratio of Japan is
634
00:20:21,520 --> 00:20:22,640
going to be near one.
Which means that
635
00:20:22,640 --> 00:20:23,280
for every
636
00:20:23,280 --> 00:20:25,360
one working class person, there's going
637
00:20:25,360 --> 00:20:26,480
to be one person
638
00:20:26,480 --> 00:20:29,440
age over 64 or under 14 that needs to
639
00:20:29,440 --> 00:20:31,440
depend on.
That working-class person, I
640
00:20:31,440 --> 00:20:32,640
wonder if somebody
641
00:20:32,640 --> 00:20:34,480
their population is gonna actually
642
00:20:34,480 --> 00:20:35,760
exactly, yeah. Ours just
643
00:20:35,760 --> 00:20:38,799
flattens their strength in
644
00:20:38,799 --> 00:20:41,120
- into the next day.
- Do you, well, do you see
645
00:20:41,120 --> 00:20:42,720
the same structural problems today in
646
00:20:42,720 --> 00:20:44,159
North America as Japan
647
00:20:44,159 --> 00:20:48,159
- saw in the 80's?
- yes yes we we had a a
648
00:20:48,159 --> 00:20:50,080
big baby boom.
It's peak the difference
649
00:20:50,080 --> 00:20:52,480
is we had a millennial generation
650
00:20:52,480 --> 00:20:54,480
that their births and immigration.
651
00:20:54,480 --> 00:20:56,240
Because I factor immigrants into my
652
00:20:56,240 --> 00:20:57,840
birth index.
And I can do that with a
653
00:20:57,840 --> 00:20:59,280
computer accurately.
654
00:20:59,280 --> 00:21:02,080
Um...takes us back to baby boom levels
655
00:21:02,080 --> 00:21:04,000
Japan's millennial generation
656
00:21:04,000 --> 00:21:06,240
and most of Europe will be the same.
657
00:21:06,240 --> 00:21:08,320
Most of East Asia going forward, including
658
00:21:08,320 --> 00:21:09,039
China,
659
00:21:09,039 --> 00:21:11,120
will never get back to the demographic
660
00:21:11,120 --> 00:21:12,640
levels of this boom.
661
00:21:12,640 --> 00:21:14,640
We get back to them with the millennial
662
00:21:14,640 --> 00:21:16,400
generation and with some technological
663
00:21:16,400 --> 00:21:18,000
productivity and stuff.
664
00:21:18,000 --> 00:21:19,760
We could see new highs in our stock
665
00:21:19,760 --> 00:21:21,039
market one day.
666
00:21:21,039 --> 00:21:24,080
All of Asia particularly Japan and
667
00:21:24,080 --> 00:21:25,360
East Asia are not going to see
668
00:21:25,360 --> 00:21:28,840
new highs in the stock market ever.
669
00:21:28,840 --> 00:21:31,750
East Asia...
670
00:21:31,750 --> 00:21:36,820
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