Gerald Celente Raises Market Alarm About a Hawkish Trump

March 20, 2018 at 03:12 PM

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The Trump administration is "a freak show" building up to a hawkish march to war that will crash the stock market, veteran trends predictor Gerald Celente forecasts in an interview with ThinkAdvisor.

Famed as a perpetually gloomy Gus in predicting the markets and economy, Celente, 71, describes himself as a "fearless teller of the truth." Indeed, over the decades, he has forecast more than a few monumental events.

To wit, the founder of the 38-year-old Trends Research Institute predicted Donald Trump's presidential victory nearly six months before the election, the 2008-2009 financial crisis, the dot-com fiasco and 1987's Black Monday market crash, among other shocks.

He bases predictions on his Globalnomic Methodology, which identifies trends in economics, business, technology, politics and more. They are published the quarterly Trends Journal, soon to be expanded.

For 2018, the top trend is "Market Shock and Mass Murder," Celente argues; specifically, "a war that will be the most deadly yet of the 21^st century" and precipitating another dreadful market meltdown.

Proclaiming the Trump rally over, he sees trends that point to a bear market en route. When will it occur? "No one can predict the future," he declares.

Detractors call the pundit's forecasts general and based largely on hunches.

Consultant to industry and government, Celente has been a keynote speaker for American Express, Bank of America and the Food Marketing Institute, among other organizations.

Bronx, New York-born, he began his career running political campaigns in New York's Westchester County and became the executive assistant to the secretary of the New York State Senate. He now calls himself "a political atheist."

ThinkAdvisor recently interviewed the trend detector, speaking by phone from his Kingston, New York, office. Amidst forecasts, he opined on Donald Trump, Larry Kudlow, Gary Cohn, Robert Mueller's Russia probe and "Big Brother" (not the TV show). Here are highlights:

"There's lunacy unfolding in the White House," you told me last August. What do you say now?

It's a freak show! Trump has brought in this woman to run the CIA [Gina Haspel] who was head of the secret torture program. Wonderful! Isn't that a great moral statement of who we are!

What's your biggest concern overall?

I'm most worried about war, particularly because of what's going on with the Trump administration. He's putting in a secretary of state [CIA director Mike Pompeo] who champions regime change, whether in Syria or Iran. We're very worried about the heating up of rhetoric on Iran and the problems going on with Israel's [Prime Minister Benjamin] Netanyahu. When all else fails, they take you to war. We're mostly concerned that there could be an eruption in the Middle East.

What would another war do to the U.S. securities markets?

It will crash the markets. They're overvalued and overleveraged. If there's an outbreak of war in the Middle East, kiss the markets goodbye. You saw what happened in February with just a tiny little shock about the rise of interest rates. A real shock will knock the markets out.

Do you think that Conor Lamb's winning the special House election in Pennsylvania is the start of a trend toward Democrats winning the congressional midterm elections?

Look who they elected — a military guy [former Marine major]. That's the trend! Do you know how many military people and CIA people are running in the Democratic Party this year? Dozens!

That means more war. Which war did you like better? The Syrian War or the Libyan War? Maybe you liked the Iran War. Maybe the Afghan War is your favorite.

But haven't wars been good for the U.S. economy?

No. Wars are destructive. That saying has been repeated since the end of the Great Depression. But wars have only dragged the country down. It's squandering dough, and they always use that stupid excuse to get away with it.

What's a significant example?

All the money dumped into the Vietnam War was the beginning of the end for the American economy. The U.S. trade deficit was building. Didn't the Iraq War enrich us all? No! The Afghan War, the longest war in American history, where we spent more money rebuilding than during the Marshall Plan, adjusted for inflation, has made us poorer.

What do you think of Trump's pick of CNBC's Larry Kudlow as economic advisor replacing Gary Cohn?

Kudlow is perfect for Trump because this is The Presidential Reality Show, and he picked a reality-show guy. Kudlow is a TV guy. He's perfect.

What do you expect Kudlow to do for America?

His agenda is Wall Street, not Main Street. So "by their deeds you shall know them."

What's your assessment of Cohn as economic advisor?

They call him a centrist. Sure, the president of Goldman Sachs is a centrist! He helped craft the tax-cut plan: the 1% get over 80% of the benefits. That was the wonderful Gary Cohn. What a guy!

Last August you predicted a 10% market correction in the fall. We had one in February. Do you forecast more corrections this year?

We definitely see the market going back into correction territory. And the markets' being so overvalued and overleveraged can bring them into bear market territory, down 20% to 25%. But nobody can predict the future because there are too many wild cards. There's no wilder card than the Trump card. This guy is capable of doing anything!

You've written that the Trump rally has peaked. Why do you say that?

The major reason is that the market can't take an increase in interest rates. What kept it going up was bringing the money back at very low tax rates and the tax breaks. What's putting the damper on the market going higher is the [expectation] of [the Fed's] aggressively raising interest rates. Look how investors freaked out [in February] when the markets started tanking because of fear of rising interest rates.

Do you think the system is bollixed up?

The whole thing has been nothing but one big Ponzi scheme since they made up this stuff called Too Big to Fail, quantitative easing, and zero and negative interest rates. It's been very good for the markets, and now they're concerned that they can't keep it going at the same level because they can't keep getting all that money for free anymore.

What's the backdrop now for the anticipated interest rate increases?

You're seeing new mortgage applications, home sales and auto sales all in decline. Put on top of that the $13 trillion-plus in consumer debt and the debt that the U.S. and the world is taking on. How do they pay all that when interest rates go up? They can't pay it now. And oil prices will likely spike as a result of a [potential] war. All that will bring the economy down on a lot of different levels.

What sparked the Trump rally after his election?

It was everything that he promised that was important to the equity markets. So now he's fulfilled those promises, like cutting taxes, which made corporations much happier, and deregulation.

Who will those corporate tax cuts benefit most?

What they've done is the same thing as when George W. Bush allowed money to be repatriated from overseas: About 96% of it went into stock buybacks. We're already seeing this happen. Since the start of the year, stock buybacks are at a record high.

What's your earnings forecast, then, for this year?

Earnings will be fine. They're estimated to be up 19%. But putting it into perspective: How are retail sales doing? Not so good, are they? And where will the earnings money go? Where it went before: into stock buybacks, not capital improvements. There's a word for this: greed.

Seems as though we've been waiting some time for capital improvement investments.

Keep waiting. They could have been making capital improvements for a long time. Earnings have been fine. It wasn't like we were in a depression. The market kept going up, and more and more money kept going in. How come they weren't making capital improvements then? Why should they do them now? Greed!

Are you forecasting high inflation for this year?

No. Here's my "Five-O Formula" that explains why: Oversupply; Overpopulation — more people than you have jobs for; Overproduction — more production capacity than is needed; Online bringing down the cost of products; and Open Markets, which keep prices down. That's why you won't see high inflation, unless, of course, there's a wild card, like war.

To what extent should the U.S. be worried about China?

China knows what it's doing: The business of China is business. The business of America is war. The U.S. and Europe sold the people out by giving the Chinese all their technology. China now is leading the world in artificial intelligence. So the trade issues are real because the [intention] was: "We're going to get rid of those dirty manufacturing jobs and give you service-center jobs."

What do you forecast for emerging markets?

They can't take an interest-rate hike. It all ties back to the trillions of dollars they borrowed — cheap dollars. Now they have to pay that debt back. So if the dollar gets stronger, their currency gets weaker — and they go deeper into debt.

What's your take on cryptocurrencies?

We said from the beginning that the only thing that will stop them is government regulation. And here you are — more and more government regulations: you can't sell them on Facebook [for example]. But there's a future for them. They're not going away.

What do you see for digital currency in general?

All the central banks will go digital because we're going to have digital currency. It already happened in India in 2016, when 86% of the currencies were called in, ostensibly because there was a lot of black-market money. So the money was returned to the banks, and they gave them new currency. But the real reason was to go digital.

To what extent is digital payment being used elsewhere?

In China, people are using apps, not credit cards or cash.

And in the U.S., now that Amazon owns Whole Foods, you can use your app there to pay for everything. So you're going cashless.

Is that bad?

It's bad for people in the sense that the government now knows every penny that you spend and where you spent it — and they're going to get their piece of it. This goes back to India: that's why they wanted to do it — so they can track all the transactions and get their cut of the money.

Really sounds like "Big Brother is watching you."

Big Brother is worse than Orwell ever imagined. He was right.

What do you think of special counsel Robert Mueller's Russia election-meddling probe?

There's not one piece of proof. Show me the proof. There's nothing but propaganda coming out of the Democratic Party to overthrow Trump. And the same thing with [Britain's prime minister] Theresa May. Where's the proof? Even if it's true that they [poisoned] an [ex-Russian] spy, it wasn't Mary Poppins or Mother Teresa. Really! Look at the trouble May is in. When all else fails, they take you to war. Countries [have] been doing this forever.

You predicted in May 2016 that Trump would win the presidency. What are the chances of his being impeached?

If the Democrats gain a significant majority, there's a possibility. Other than that, he'll make it to 2020.

You personally invest only in real estate and gold. What's your position now regarding gold?

Gold is still the safe haven asset. That's its role. But the stronger the dollar goes, the weaker gold goes. The higher interest rates go, the lower gold goes in the short term. People say that inflation is good for gold. But not the current 2% or 3% inflation. When you see 6% to 8% inflation, you go for gold. It has to spike and stabilize over $1,450 an ounce. Our break-point is $1,385. But it hasn't been breaking past that.

Why don't you invest in stocks?

I don't know how to play the stock market. I stay out of things I'm not good at.

But you're knowledgeable about the market and the economy. Why wouldn't you want to buy stocks?

I don't spend time looking at companies. It's not what I like. I've never been good at it.

You recently wrote that the mainstream media are "serving up hype and crap" instead of facts. Please elaborate.

It's all "identity news": You want to hear one side, turn on Fox TV. You want to hear another side, tune in to MSNBC, CNN, NBC or CBS. I just want the information. I don't want people telling me what I need to believe. You're not getting journalism. Journalism is dead.

What about the reporting in newspapers like The Washington Post and The New York Times?

The New York Times — ugh! They call it "The paper of record." I call it "The toilet paper of record." They're selling propaganda and hate. Disgusting!

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