For at least six years now, controversial strategist Harry Dent Jr. has been forecasting "the crash of a lifetime." Now he's getting specific.
His "line in the sand" is "one more new low" to break Nasdaq's low of 10,088 hit last October. "The next thing you know, we'll be down 50-60%," the "Contrarian's Contrarian" predicts in an interview with ThinkAdvisor.
That will cause a major recession, if it's not already here. "You won't be able to put Humpty Dumpty together again," Dent argues.
"The [market] top in our lifetime" came when the everything bubble peaked with the 34% Nasdaq crash from November-June 2020, Dent insists. That was the top for the S&P 500 and the Russell 2000 too, he says.
This year, will be, says the well-known newsletter publisher, "the worst" for the U.S. economy since "1973 or 1974 or 81-82, or even back to 1931." And "we won't come out of this till 2025," he predicts.
Three or four decades or so ago, Dent was prominently, consistently bullish. But numerous and ubiquitous market bubbles turned him bearish, he says.
Right now, the market is super-inflated with what he terms "the first everything bubble" — both stocks and real estate.
It's more damaging than the bubble of 1929, he says. "And that ended up with an 89% stock crash."
Dent correctly predicted Japan's 1989 bubble bust and recession, the dotcom crash and the populist surge that catapulted Donald Trump into the White House.
A number of his prognostications, however, never panned out.
He is no fan of the Federal Reserve, which, he says, is trying to "play God" by manipulating the U.S. economy.
By the time the central bank brings down inflation close to its target 2% by hiking interest rates, the market "will be down 50-60%," he contends.
The stock market rally that began last October will continue two more months at most and won't be "terribly strong," he says.
Dent's independent research firm, HSD Publishing, produces monthly newsletters that Dent and partner Rodney Johnson, president, each write.
There is also a free newsletter available prior to subscribing to the HS Dent Forecast and the Rodney Johnson Report. The latter covers practical issues and includes a strong focus on bonds.
In the interview, Dent, whose father was special White House counsel in the Richard Nixon administration, discusses his current safe investments and predicts that bitcoin will be "the global standard for a digital monetary system."
ThinkAdvisor interviewed Dent by phone on Jan. 11. He was speaking from his base in San Juan, Puerto Rico.
Any hope for a soft landing for the economy?
"That makes zero sense," he says. "There's no soft landing from a major bubble ever, ever, ever, ever."
Here are highlights of our conversation:
THINKADVISOR: What can prevent the crash of a lifetime that you've been forecasting?
HARRY DENT JR.: The best way to prevent a big crash is not to let a bubble get out of control because bubbles burst.
What sort of bubble is the one we have in the stock market now?
In 2021, there was an extreme bubble in stocks, and now real estate has joined at the same time.
This is the first "everything bubble." It's more extreme than 1929, and that ended up with an 89% stock crash.
The bigger the bubble, the bigger the burst and the harder they crash.
Bubbles get extreme. They get into an orgasmic phase, which is pretty obvious because they go almost straight up and then go back to a predictable point.
I looked at every bubble since the 1700s. What I found was when bubbles crashed, [the market] never went back to new heights.
When will the everything bubble peak?
When we got that 34% Nasdaq crash from November to June 2020, I said the bubble finally peaked and we're not going to make new highs.
So to me, it's already confirmed that we made a long-term top in Nasdaq, the S&P and the Russell 2000 with that crash. That's the top in our lifetime.
Stocks and real estate in the U.S. and most of the developed countries have peaked forever as far as our lifetime is concerned.
When do you think the crash will occur?
As soon as we make one more new low — 10,088 [the low hit last October] is my line in the sand in the Nasdaq. The next thing you know, we'll be down 50%-60%, and this thing falls apart.
People will then realize this is not a correction. This is a major downturn there's no stopping.
We'll probably see the S&P at 2,190 or lower.
The stock crash will cause a major recession, if it's not already here.
This is going to hit the high end much harder than the Homer Simpsons [lower income consumers] because rich people — the top 1%-10% — spend a lot more money, hands down. They'll be crying, "I just lost my $3 million condo!"
But what about the rally in the stock market that we've been having? How long do you think it will continue?
We're in a bounce since October. But it's not likely to last more than days or a couple of weeks. It could last a month or two, but I don't think it's going to be terribly strong.
Do investors feel more optimistic now?
Yes, [the rally] gave them a little sobriety. People are hoping we saw the worst in June. Most would say, "We'll probably see a new high in the next year or so." I'm saying: No!
2023 will be the worst year we've seen in the economy since 1973 or 1974 or 1981-1982, or even back to 1931.
We don't come out of this till about 2025 with the millennial generation. We're still in the long demographic downturn between the baby boom and the millennial boom that doesn't end till about 2024.
When is the next boom?
The boom will be 2025-2037, roughly, but won't take stocks and real estate to new heights because the [highest levels] we achieved were in bubbles. Once major bubbles burst, [new] bubbles don't appear for decades and decades.
So stock and real estate valuations won't get back to those levels for a long rime.
What will happen as soon as the crash occurs?
Once the stock market goes down that much, people will lose confidence in the Fed, lose confidence in the economy, will be scared about their financial assets.
That's when things will change, and you won't be able to put Humpty Dumpty together again.
Many people are still expecting or at least hoping for a soft landing. Your thoughts?
That makes zero sense. The only way to have a soft landing is not to have a hard bubble. There's no soft landing from a hard boom — a major bubble — ever, ever, ever, ever.
This bubble is worse than the one in 2000 or the peak into 2007. This one tips us into recession.
The Fed is fighting inflation by raising interest rates to slow economic activity … but further rate hikes might trigger a recession. Right?
The Fed thinks it's their job to prevent a recession at all cost. That shows they're dumber than hell and don't understand a damn thing about the economy.
