Original subtitles

Our next guest is warning of the largest

most significant stock market crash

we'll see in our lifetime.

He is Harry Dent, founder of HS Dent and

a pioneer of Demographics Research.

Harry is the best-selling author of

several books including

"The Great Boom Ahead" and his latest work

"Zero Hour". His claim to fame has been

predicting correctly calling

"The End of the Japanese Boom in the 80's"

and "The Boom That We Saw

Subsequently in Europe and the US". Harry...

welcome to the show. It's a pleasure

speaking with you today.

- Yeah, nice to be here David. - We have a lot

to go through starting with your macro

outlook. You

are an expert on all things demographics

and how that influences

the macro landscape. Let's set us up here

before we talk about

your outlook on the stock market. What

are some of the significant demographic

trends

- that you like to discuss today. - Well you

know

the most predictable thing in the

economy, something economists really

don't know much about,

is the spending of households.

People enter the workforce at 20. They

are cost before that.

They go through a spending spree until

they're 46 to 47,

until their kids leave the nest. And then

they spend less the rest their life. So,

I came out with a tool called "The

Spending wave in 1988"

and that's what told me, oh my gosh

Japan's at the top

of their generational spinning wave. We

just lag the birth index. This is how

simple it is, David.

46 years in the US, 47 years in Japan and

Europe

for the peak and spending of the average

person. That simple.

Japan was peaking in the late 80's.

US and Europe

we're just getting going with Europe,

a little bit lag the US, so

I could see that crash in Japan and then

the great, not just the boom.

The greatest boom in history, because the

baby boom was so

large, not just here. The baby boom was a

global phenomenon.

So I can predict spending in any country

in the world

and we can predict it from cradle to

grave. From young people getting into

apartments

to the nursing homes and assisted living

facilities, that they end up dying and

- everything in between. - Yeah, let's talk

about spending now.

You wrote some of your... You wrote your

books before Covid and as you know in

2020 spending fell off a cliff.

This was an anomaly obviously. I don't

think anybody could have predicted Covid.

But how has this phenomenon changed

spending?

- Has it changed at all? - Oh I mean it was

like a mini depression.

I mean it's a shock to the economy.

Similar to the hurricane. I'm in Puerto

Rico now.

For five years some of the Hurricane

Maria we had

knocked out the economy like an A-Bomb.

For three months we had to move to New

York, you know. Hide out in New York for

three months.

This is like that. It's a short term what...

what I call it is the perfect trigger.

Ever since...and here's the key point Ever

since the baby boom

in the US peaked in spending in late

2007,

something I predicted all the way back

in '88 when i came up with that indicator,

we've been living off of quantitative. Oh...

we got to keep the economy going well.

It wants to decline. It wants to

deleverage all the debt

from this great boom. And the Central

Banks won't let it. So we keep pumping up...

pumping up going to new highs. Note that

the economy remains weak and slow

but the stock market keeps going to

record highs. That's a huge

disconnect. I call the Covid the perfect

trigger because it's something that

Central Banks couldn't easily dance

around.

And right now the market's going to new

highs, thinking oh, after the big crash in

February March

and a 12,000 point that's 40%

of the entire 30,000 Dow.

40% of that was made just since March low

and now it's at new highs. Thinking oh...

we'll be back

to new highs and good old times, early to

mid next year.

No, it will not happen. The demographic

trends

and the debt trends continue to weigh.

And there's a lot of industries we all

know

Travel, Entertainment, Restaurants that

could go on and on and on.

That will not get back to normal for a

year or two.

In commercial real estate may never be

- the same. - Well,

so you're right. Uh, the personal

consumers expenditures, the PCE

it's up since the the March bottoms. But

it's still

not at pre-Covid levels. It's still

rising though, you know.

Economists have predicted that

eventually will hit that pre-Covid level.

But you're saying, no that won't happen

until maybe a couple years out.

- Maybe never? - I...yes, I...I think more than a

couple years, I think,

by the first and second quarter of next

year, we're going to see

that we don't get back to those levels.

And the economy starts failing again. I...

love the quote.

19% of publicly traded companies,

now called zombie companies,

are not paying their debt service

interest or principal.

Oh, those companies are still limping along.

A lot of small businesses got hit by this.

Just like the hurricane we saw

this when we came back to Puerto Rico. 20% of

the small business, of restaurants around

me

never came back. They can't float bonds

like the big companies can.

With a still healthy stimulated bond

market. They have to go to stingy banks

at bad times.

So there's a lot that's not going to

come back. We, I think, we've kind of hit

the V-shape recovery for let's say the

80% of the economy

that did not get permanently damaged.

But there's this other

15-20 percent that's not coming back.

And we've got more debt than ever,

and more debt how much the government put.

3.4 trillion in the last year in money

printing

as much as they did in the entire QE

cycle before in less than a year.

And 2.2 trillion in fiscal spending with

a three trillion deficit they're

supposed to come up with. Another two to

three trillion soon.

This is, uh...just going to cause debt

pressures to get worse.

While consumers continue to naturally

spend a little less because the baby

boomers are still in their decline

the millennial generation, and again this

cycle is very proven now, back

50 years, the millennial generation will

drive us

up from 2023 forward but not

until then. So still weakness and

demographics

massive debt, I say we don't ever fully

recover for this. And by early next year

we realize that and the stock market

goes Oops...

Uh we got a little high on crack and

and you know...

Now we're coming back down to reality.

I think you're going to see a big crash

starting late this year, early next year.

So you don't think So you don't think

we're going to have a V-shape recovery?

What about a K-shape?

No, we have had a V-shape recovery.

We have up to about.

We just we don't keep going now. There's

nowhere to go from here.

Yeah you're right. Ok, so what about

what about a K-shape recovery? The notion

that some sectors are continually going

to outperform.

Whereas the rest of the economy lags.

Yeah...yeah... But...but overall I mean this

still

uh...makes consumers more wary. People are

more in debt. The government's more in

debt.

Companies have had to borrow to get

through this. So, so you still get this

weight

on the economy, and and again you got to

remember,

we we we would have been in natural

demographic cycles

in a downturn from 2008 to 2022-23.

I said that back decades ago. So they

basically

blew us out of this downturn. In fact I

tell people

the 2008-9 stock crash that was only

17 months.

That was half as long as the 1929 to '32

crash

after a similar generational and bubble

and

technology bubble economy that crash if

that, if we had not

printed, 20 now, 24 trillion dollars

globally since then

had not printed that much money. Um...to

keep the economy growing at a measly two

percent.

We would have been in a long off and on

downturn, and we would not have had this

stock rally, and we would not have rising

corporate earnings,

and people wouldn't be borrowing at zero

rates adjusted for inflation.

Which makes everybody wealthier and

financial assets have been

turned straight up. People have to

realize, normally in a recession

that the central banks will make credit

easier and push it out

lower interest rate, hoping that people

borrow more. Well, we came into 2008

already over borrowed in consumer's

businesses

and government, and we didn't need more

debt. So what they found out by

accident, when they pumped a bunch of

money in, oh they...they bought

bonds to do it, and that caused financial

assets to go up because they're...they're

putting

more money in the same financial asset

pool, and it's driving up. So we're not

getting consumer inflation like the gold

bugs predicted.

We're not getting a strong recovery like

economists would expect. With this much

stimulus

and thinking everything's OK, because

they don't understand the demographic

and dead right.

So we get this very modest recovery that

only takes a trigger like Covid

to show us oops... yeah no, we're weaker

than we thought we were, and that's what

I said. I think my...

my... Here's my forecast. And you can not

listen to me after this,

if we don't see strong weakness in the

economy by mid next year,

showing that all this stimulus is not

enough to put humpty dumpty back

together.

Then just don't listen to me anymore.

Ok, so your forecast... Let's recap your

forecast for the stock market.

So you're saying that 2023

millennial money is going to drive us

to a

- new era of growth before then? - Nope, not

going to happen in terms of growth.

So we're going to see a stock market crash

before 2023 is what you're saying?

Yes, between now and late now. Remember,

the stock market's a leading indicator.

So I expect a stock market peak right

here. I'd say by somewhere between

early December and mid-January. We see a

peak and I think under. I think more

early side and we see a two-year crash

that really continues. The crash that

started in February.

So, this is not... This is not a crash or

if you want to call it a crash, you know

a major sell-off like we saw in March,

where

that just rebounded right away? This is a

structural

uh, downtrend in the equities markets?

Yes, it's a reset for the greatest

financial asset bubble in history.

Partially caused by a good economy at

first like the roaring 20's,

but greatly goosed up by Central Banks

artificially. And the fact

that yes, the demographic trends here, and

in East Asia and in Europe, all the

developed countries

continue to get worse. Especially in the

next two to three years. So...

so yeah, no easy recovery from this, when

the stock market realizes that.

Yes, I say we have a reset, and then

stocks can grow again, then real estate

can grow again,

and then the the millennials are going

to be the biggest benefits

if we get this debt and bubble out of

the way, because it's stymieing

- investment and productivity. - You say that

the stock market is eventually going to

realize the economic

uh, condition that we're in. But has..

I mean, why haven't they realized it yet?

Why haven't invest equities investors

you know, what you're saying about the

economy it's not really...

it's not really news we know, that the

economy is in terrible condition?

We know that monetary stimulus is what

been...what has

been the primary driver of equities

prices. Why haven't people realized that

yet?

- We're still seeing the Dow at 35. - I am

surprised. I am surprised David, because

how long does an economy have to limit

with this level of stimulus in the past.

You would have had

super growth and inflation both, and we

have neither.

It shows how dead the economy is. I think

that we're...we're about to see one more

crash.

It won't be the end game, but it'll be

one more crash that takes the stock

market to

new lows by April, is my forecast between

now and April.

Another 40% crash greater than the S&P

down 34 35% greater than the 20% crash for

that ever since 2018

top, which was the first bubbly top, we've

seen every crash take us to new lows, but

every stimulus

rebound take us to new highs. I think

we're going to see the high

soon. And we're never going to see this

high for years.

And that the next crash is where

investors lose confidence

in the Fed. And governments endlessly

stimulating

a dead economy, and then investors

withdraw. You've got to realize.

Here's an important fact, david. Globally

255 trillion in debt

way more than three times GDP. Way more

than ever. But financial assets because

the QE

is twice. That over 500 trillion now.

Just that financial asset bubble

crashing

will take 200 trillion or more out of

the global economy.

Three times GDP. And that is enough to

cause a depression

- without anything else is. - Harry are you

short right now then

yeah. Well, now I'm getting ready to get

short. I'm looking at early December

is the next. I think the markets are

going higher here. I think they got

one more rally in them at a minimum.

I think that could. I'm looking at a target

of about 3750

to 3800 on the S&P. Uh maybe thirty

you know one thirty two thousand in the

Dow, and then I think this thing

may be over. And again you have to ask

yourself, are you gonna go for that last

five percent,

when the next crash within a matter of

months? Could be more than the last flash

crash.

I mean we're looking at possible

triggers for this crash?

We've been seeing nothing but good news

out of the economy for the last couple

of...

couple of weeks. Vaccine, Stimulus

you know, data points to recovery.

Maybe not to the same extent

as pre-Covid levels. I...I just...I just don't

see a trigger here. Help me out.

Yeah, you know, I think it's going to be

continued disappointing

data now. I just said Moderna just said

something this morning. The head medical

director in, the stock market totally

ignored it. He said wait a minute folks.

You don't understand. This vaccine is

proven to reduce

the severity. To make if you do get this

it's going to be a lot.

It may be a nothing burger or less

severe.

That's what it's proven to do. It is not

proven to stop transmission yet.

We hope it does but it's not what

you know. What if you get more

announcements like that? I mean, the stock

market ignored this. This morning

the stock market constantly, it quickly

ignores bad news

and jumps on any good news. The vaccine

oh, up six seven percent

Modernist says this today, totally

ignores it and goes up anyway. Yeah.

Uh haven't we seen that bad news is good

news. When we...when we have bad news in

the economy, that just encourages the

Federal Reserve to stimulate more

- right? - Yeah. Would that be a factor you're

- considering? - Yeah, but you got to look...

look at the ECB and the Fed lately.

They're saying, OK

folks, we have more than done our duty

here.

Fed just printed 3.4 trillion since the

Repo Crisis.

Repo Crisis was the first warning sign

to me. The banks

cannot survive without constitution.

The Fed keep saying, oh...

we just needed to get over this 2008

crisis and we'll be OK.

Ten years later they pull back the

stimulus just a little bit,

2017-18, and then the banks

go illiquid and need need funding from

the Fed to keep alive.

That shows the banking systems week

every time you pull back stimulus.

The economy slows, it shows the demographics

as we beat.

We're weak. It's just a matter of...of I

think...

I think this is my real theory, David.

This Covid thing hit early this year.

OK, February March.

I give that a 9 to 12 months lag before

you really feel those small businesses

and zombie companies.

They don't go down overnight. Stocks can

go down overnight like they did,

but...but bankruptcies and chapters 7's

and 11's take

time. That's what I think... I think by the

first quarter, you're gonna see more

companies going

under. And that's gonna be the trigger

for no

- apparent good reason. - For no apparent

good reason. What about monetary

MMT (modern monetary theory)? Are you a...

subscriber to that theory? That the

Federal Reserve can continuously pump

money

- without concussions of inflation. - Now

that would say that...that...

Uh everybody's missed all the history

everybody's wrong and you really can get

something for nothing.

This is exactly, David. What they say at

the top of every bubble

In the '29 that Irving Fisher, the leading

economist in the country, says

we've reached a permanent plateau of

prosperity.

We've gone to heaven. We can just die

here. This is what happens.

You cannot create growth by just

constantly printing money,

as if work work ethic technology

innovation.

And all these things don't matter. Hey...

we've seen our technology innovation

from the internet cycle it is peaked and

is declining

we've seen the incredible spending and

productivity of the largest generation

history.

It's declining. We're only living

on short-term free money and it has

diminishing.

Returns that's important diminishing

returns

just like somebody. If somebody's

addicted to anything, let's say crack

heroin, you know you take it, coffee, it

takes more and more and more, to get the

same high or to keep from coming down

until you die from stimulus.

You die or or hit the pavement and go to

rehab. So,

what I'm saying this this downturn would

be the best thing that happens for two

to three years.

We go through a big, let's call it a

detox, the leveraging of debt

in financial asset bubble. When you have

all these people putting money in bad

debt and bubbles,

you're misinvesting for the future and

you're killing productivity, which we've

done nothing but seeing declining

productivity.

And money velocity, David, tells you

how productive you're investing, that's

been declining since 1998

like it did from 1918 to 1932

which ended in a great depression.

So, suppose the stock market does crash

in April, would you be buying at that...

at the bottom there?

Would this be the greatest bounce?

I would say, if we see another new low in

the stock market, I would predict

we are not going to see new highs on the

Dow, S&P,

Nasdaq, Biotech, you pick anything

anything, but maybe

kind of somewhere down the line, Bitcoin.

You're not going to see new highs on

anything

for decades, because you didn't see new

highs after 1929

for 24 years in 1953.

When you get this bigger reset from this

bigger bubble,

- that's what happens. - So 1929 you're

comparing us to the great depression?

We're in a depression right now is what

you're saying?

I'd like to ask you one more question

before we talk about gold. About the

economy you study Japan

in the late 80's and 90's. Now if I

remember my economics history correctly,

what happened in Japan was this period

of steady

deflation. Consumers put off their big...

their big ticket purchases in

anticipation of lower prices. And that

created a feedback that created a

self-fulfilling prophecy.

Well, after the crash, what caused the

crash was they had a bubble.

People don't realize this. They had an

incredible bubble in real estate.

Tokyo was worth more than all the real

estate in the United States for a brief

period of time.

I was telling people this cannot work.

Their stock market bubbled up just like

ours has,

when the rest of the world didn't. Uh, at

that time period nearly as much, OK so

they had a big bubble but there they

were the first

baby boom to peak. Their births peaked in

1949.

Ours peaked in '61. Europe '64.

They peaked ahead of us so it wasn't

just the bubble bursting,

it was then oh... But now there's no people

to spend money anymore.

Their their generation had bought out of

their homes, borrowed all their money

raised their kids.

and guess what they're the...the...the

devastation has been so bad in a zombie

economy for 30 years. That young people

now don't even want to date. Nevertheless,

have sex or get married and have kids.

So their demographic decline. Mark my

words on this too.

Japan's rebound into this year 2020.

Yes, was...was quantitative easing four

times as much as

US relatively. Yes it was Abe's Arrows

and fiscal stimulus.

But it was the millennial generation in

Japan which guess when they're peaking

right now '19 2020 is 1989 for Japan

again

and they're going to see another

generational decline take them to new

lows and demographic

Japan is never ever gonna ever...

ever in my lifetime, or years see the

1989

39,000 Nikkei top again. They only gotten

about 60 70%

there. Now they will go to new lows in

the next few years and

- never bounce. - Actually a lot of

economists do agree with you. The United

Nations has projected that by 2050,

uh the dependency ratio of Japan is

going to be near one. Which means that

for every

one working class person, there's going

to be one person

age over 64 or under 14 that needs to

depend on. That working-class person, I

wonder if somebody

their population is gonna actually

exactly, yeah. Ours just

flattens their strength in

- into the next day. - Do you, well, do you see

the same structural problems today in

North America as Japan

- saw in the 80's? - yes yes we we had a a

big baby boom. It's peak the difference

is we had a millennial generation

that their births and immigration.

Because I factor immigrants into my

birth index. And I can do that with a

computer accurately.

Um...takes us back to baby boom levels

Japan's millennial generation

and most of Europe will be the same.

Most of East Asia going forward, including

China,

will never get back to the demographic

levels of this boom.

We get back to them with the millennial

generation and with some technological

productivity and stuff.

We could see new highs in our stock

market one day.

All of Asia particularly Japan and

East Asia are not going to see

new highs in the stock market ever.

East Asia...

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