Harry Dent: Crash of a Lifetime Is Here; Sell Stocks Now

Q&A August 29, 2022 at 04:52 PM

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Strategist Harry Dent Jr., "The Contrarian's Contrarian," has been predicting "a great reset of the biggest financial asset bubble in history" for some time. Now it is here, he tells ThinkAdvisor in an interview.

"The biggest crash of our lifetime is in progress," he declares. "We're probably about 30% of the way into it. I'm calling this 'Tech Wreck 2' because it's the second crash led by tech stocks."

Dent is strongly recommending that investors "Get out of risk assts. This is your last chance to sell. Get out of the way of the crash! Sell right now!" he urges.

"You don't wait [till fall]. The market will go down harder and faster" than it did earlier this year, he says. By the end of 2022, it will be at "new lows. By then it will be too late for most."

"You can burn me at the stake if I'm wrong," he declares.

The long-time newsletter publisher is famed for his market and economic prognostications, a good deal of which have failed to come about.

But the Harvard MBA correctly predicted Japan's 1989 bubble bust and recession, the dotcom crash and the populist surge that made Donald Trump the 45th president of the United States.

In the interview, Dent recommends "get[ting] out of real estate, normal bonds and junk bonds." Holding them, he says, "will decrease the value of your assets; and you'll not get back to new highs on those for decades."

He continues. "Before we see a bottom, it will be at least the end of 2023. The S&P will be down roughly 86% before this is over, and the Nasdaq will be down 92%.

"This is not another correction," he emphasizes. "This is a crash that has been put off now for 13 years. This is not something you sit through."

Hence, "Do not listen to your financial advisor because they'll say, "Well, just rebalance," Dent counsels.

"This is truth or consequences. You're going to be down in your stock portfolio 55%-60% or more wondering why you weren't more cautious when the market had the biggest bubble in history," he argues.

Dent recommends moving all risk off the table for two years, then being ready to reinvest at "the sale of a lifetime of all financial assets."

In the interview, he reveals his personal portfolio and recommends what investors should buy now.

As for the Federal Reserve's aggressive stance on raising interest rates, the strategist said four days before chair Jerome Powell's August 26 comments: "I think that the Fed is saying, "Brace now."

"The Fed overstimulated … [and] was forced to tighten because inflation finally kicked them in the butt," he says.

Dent's HSD Publishing, an independent research firm, generates monthly newsletters that he and Rodney Johnson, president, each write.

A free daily newsletter is available prior to subscribing to the paid HS Dent Forecast and Rodney Johnson Report.

ThinkAdvisor interviewed Dent on Aug. 22. He was speaking by phone from his base in San Juan, Puerto Rico.

He supplies his forecast for crypto, paralleling the status of the new asset class to the dotcom bubble before it burst.

"Tons of [tech companies] went down 100% or 90-something percent. That's what's going to happen to crypto," he says.

Here are highlights of our interview:

THINKADVISOR: Are we in "the crash of our lifetime," which you've been predicting for some time now?

HARRY DENT JR.: The biggest crash of our lifetime is in progress. We're probably about 30% of the way into it.

This will be much worse than 1973-1974 or 2000- 2002. Before we see a bottom, it will be at least the end of 2023.

I'm projecting that the S&P will be down roughly 86% before this is over, and the Nasdaq will be down 92%.

I'm calling this "Tech Wreck 2" because It's the second crash led by tech stocks.

This will not be a correction. This will be the crash of our lifetime unless they come up with some new magic wand, and I'm telling you they won't.

Do not listen to your financial advisor because they'll say, "Well, just rebalance."

This is not another correction. This is a crash that has been put off now for 13 years. This is not something you sit through.

This is truth or consequences. You're going to be down in your stock portfolio 55%-60% or more wondering why you weren't more cautious when the market had the biggest bubble in history.

Why is this time different?

People will be in shock because they didn't think the central bank would let this happen.

They've pumped up our economy time and again whenever there's been a correction. They've stretched it so far. But they're not going to be able to stop it from blowing.

When will it blow?

By the end of the year, we'll be at new lows. By then, it will be too late for most.

What's an investor to do?

This is your last chance to sell stock. Get out of the way of the crash!

So should investors sell in September or October?

No! Sell right now. Now! You don't wait. Can I be more clear than that? This [August] bounce looks like it has already run its course. We had a 34% downturn in the Nasdaq, and then retraced about half of that.

Now it's ready to go back down. And it will go down harder and faster than it did in January to June.

Should people sell other types of investments too besides stock?

You've got to get out of real estate, normal bonds and junk bonds. You've got to get out of risk and just be safe for about two years.

You can preserve your money near the top of the market and reinvest about two years or less from now at the sale of a lifetime of all financial assets — stocks, bonds, real estate.

What's your rationale for selling right now?

The Nasdaq can go down another 3,000 or 4,000 points to 7,500 by January. Now it's down over 50%.

By then, you'll be down 50%-60% in your stock portfolio, crying, "Why didn't I listen?"

The third wave down should take till the end of the year to possibly January of next year.

You'll get one more bounce maybe in the spring of next year. My good guess is that you'll get that final wave down at around the end of next year. By then, it will be clear whether we're going into a deeper downturn.

But if you wait to see, you will have lost a lot.

You just said not to wait to sell till September or October. What will the scenario be at that time?

Down, down. The first crash was a pretty good indication of the minimum of what we're about to see in a second wave down.

It will be down about 58% from the top in the S&P and 60-something percent in the Nasdaq.

We saw a first wave down into June, when the Nasdaq was down 34% and the S&P was down 24%. We saw a bounce-up in August, but it looks like the market is turning down again. If this continues, we should see another strong wave down.

Once we make a new low, it will tell me we're in the middle of the biggest crash we've seen since the 1930s.

People are predicting a recession; some think we're already in one. Your thoughts?

This [situation] is worse than a deep recession. This is a great reset of the biggest financial asset bubble in history.

The Fed printed trillions — about $5 trillion each in fiscal and monetary stimulus. That's insane. It was about 50% of GDP.

Printing so much money is going to go down as the financial crime of the century. They stimulated up the wazoo to keep this thing [economy] barely going, and now it's failing anyway.

At some point, it just falls apart. I think it's going to happen in the next year. So get the hell out of the way.

We should be growing at 10%,15% with that much stimulus. And here we are about to go into a recession again. This shouldn't happen after that much stimulus.

Wasn't stimulus the solution?

It's not a solution when the economy slows down to simply inject money printed out of nowhere into it. It doesn't cure the imbalances of bad debts and bad investments.

It just makes things worse, which means you're going to have a bigger downturn to clean out later. It's kicking the can down the damn road.

Printing money till "we feel better" is going to go down as the stupidest thing ever done by economists and government officials in history.

But, presumably, these folks are highly intelligent people. Right?

Not one of the Federal Reserve chairmen — Yellen, Bernanke, all of them — have ever run a damn business. What do they know about the economy? They're academics.

They're experimenting with the economy and don't know what they're doing.

Why will this crash be as bad as you forecast?

This is a crash that's been put off now for 13 years. All the government did was make money cheap again by printing more money.

So people borrowed more, and now we have more debts than ever and more debts to go bad.

They could have done some real constructive things like restructuring and reinvesting in new markets. But no, all they did was print money out of thin air.

Why has the Fed been signaling that it will increase interest rates aggressively?

The Fed so overstimulated during [the worst of] COVID that they're forced to tighten because inflation finally kicked them in the butt. We went from 1.5% inflation to 9.1% almost overnight [now 8.52%].

I think the Fed is saying, "Brace now." They're going to have to tighten till inflation comes down.

That's going to take so long. People will be in shock because they didn't think the central bank would let this happen.

They've pumped up our economy time and again whenever there's been a correction. They've stretched it so far. But they're not going to be able to stop it from blowing.

By the time inflation comes down, the stock market will be down much faster; and once the market breaks, the next wave down will start to scare people, who'll pull back in spending and investing.

What should people be investing in now? In our interview published on March 11, you recommended Treasury bonds.

That's exactly it. Get your money out of risk assets — that means bonds with risk, which means anything but a 10-year or a 30-year Treasury bond — 30-year is best — or a Triple-A corporate.

What are you personally invested in?

Thirty-year Treasury bonds, and I short the stock market. Right now I'm about 20% long Treasury bonds with ZROZ, an ETF; and I'm about 80% short the Nasdaq [with ETF] SQQQ.

I have cash; so I can swing if I need to. These are safe havens.

Isn't gold a safe haven too?

Gold will not be a safe haven and has not been. It wasn't in 2008, and it's worse this time. Gold is not the place to be.

But if you have to have a little gold, it won't be the worst place. It will go down but not as much as stocks.

You're shorting stocks, but you're advising to stay away from risk. Isn't shorting risky?

It's risky if you're wrong.

I'm just saying this is a unique time for a limited period. I'm not showing people to do what I'm saying for the next 20 years.

I'm not recommending 30-year Treasury bonds at 3% yield for the rest of their lives — only for the crisis.

And if you don't trust that, then just be in cash.

Cash will preserve the value of your assets, but the bonds will go up in value in a downturn.

Stocks, real estate and all risky bonds will decrease the value of your assets, and you'll not get back to new highs on those for decades — maybe not until you're dead!

What are your thoughts about crypto now?

Crypto is just like the dotcoms [at the time of the bust]. They were bubbling up so much.

There were big gambles then on tech companies. Tons went down 100% or 90-soemthing percent. That's what's going to happen to crypto.

Where does crypto fit in the investment galaxy?

Crypto is the next big thing. A guy at one of my conferences woke me up to what it is. He said that it's the digitization of all financial assets and money.

It's almost $600 trillion now globally. That's way more than the GDP at $95 trillion. It's way more than any single class, like stocks or bonds.

Turning to demographics, which you focus on, what impact will the millennial generation have on the economy?

The millennial boom will be 2024-2037. It won't be as long or as strong as the baby boomers' boom.

But it will be the last hurrah we'll see in demographics for as far as the eye can see because births have gone down, and there will be fewer and fewer people to drive our economy in the future.

Also, we're getting more restrictive in immigration. This downturn will cause an almost immediate stop to immigration. It's already much lower than it used to be.

Do you see anything positive happening as a result of the huge crash you've been predicting?

The only good outcome is that people will finally realize you don't deal with a bubble by creating a bigger bubble. How stupid is that!

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