“People think I’m crazy when I say the stock market will go down 86% on the S&P — the worst case but also my most likely case,” Harry Dent Jr., the candid, controversial strategist, argues in an interview with ThinkAdvisor.
“People say, ‘Harry, the Fed won’t let that happen,’” says Dent. “Well, in the end, when there’s a battle between God and central bankers, I’m going to bet on God!”
Several of Dent’s forecasts have been off-base, but the “Contrarian’s Contrarian” has been on target with some significant prognostications.
He correctly predicted Japan’s 1989 bubble burst and recession, the dotcom crash and the populist surge that thrust Donald Trump into the presidency.
For several years now, Dent has been forecasting “the crash of a lifetime.” Now, he says, 2024 will be the year it hits — “two years later than it should have,” according to his calculations. But “it’s starting now,” he insists.
In the interview, the strategist — whose independent research firm, HSD Publishing, produces monthly newsletters that Dent and partner Rodney Johnson each write — predicts big crashes in both the stock market and real estate, which will set off a deep recession.
Beware of a weak January 2024, he warns. It will foretell “the type of crash I’m talking about.”
Anything smart to invest in right now?
“There’s nowhere to hide” except “the best safe haven”: Treasury bonds, Dent maintains.
In the recent phone interview with Dent, who was speaking from his San Juan, Puerto Rico, base, he declares: “We need a recession to throw out the bad stuff so we can go into the next boom lean and mean.”
Here are excerpts from our conversation:
THINKADVISOR: Are Federal Reserve policies a help or hindrance?
HARRY DENT: People think I’m crazy when I say the stock market will go down 86% on the S&P — the worst case but also my most likely case.
People say, ‘Harry, the Fed won’t let that happen.’ Well, in the end, when there’s a battle between God and central bankers, I’m going to bet on God!”
“If [the market] doesn’t go down that much, the central bank is compromising the next boom — which will be the greatest boom.
In my interview with you in January, you predicted “the crash of a lifetime,” which you’ve been predicting for some time now. You said then that after “one more new low, we’ll be down 50%-60%.” Why hasn’t that happened?
It’s two years later than it should be. But the crash has started.
My error is so simple. My charts pointed to late 2022 as the biggest down cycle in modern history.
I didn’t think it would be possible to keep pumping up something [the economy] on pure fumes — just printing money, throwing money into the markets, which keeps the rich, rich and spending.
So the [up] market has lasted longer than I thought. But I think it’s cracking. All the market needs to do is break down to a new low, but it just can’t do it.
Do you still see a recession looming?
Yes. We need a recession. This is the longest we’ve ever gone without a recession or a major stock market correction or crash to clear the decks and throw out the bad stuff so we can go into the next boom lean and mean.
The longer the boom, the more the overinvestment, zombie companies and debt. You have to wash out all the excesses.
Even though the Fed is hiking like crazy, people think they’ll change on a dime if they have to and will stimulate again. They don’t think the Fed will let the market fall too far.
What are the implications?
If we keep doing this forever, it means that the next boom will probably be a nothing-burger with the millennials because they’re going to be sharing all our excessive, overly valued financial assets and bad debts into the future since we didn’t allow those to be weeded out.
This is a war of central banks against free markets. In the end, the free markets are going to win because they’re the closest thing to God when it comes to money; and the central banks are a bunch of academic people who never ran a business.
What’s a big mistake that the central banks made?
Overreacting to COVID. They printed $5 trillion [in stimulus money] in two years to fight a temporary crisis that would have gone away on its own. That’s where they blew it.
That created 9% inflation almost overnight and forced them to raise interest rates the most in 40 years. I’m just waiting for that huge stimulus to wear off, which is due about now.
What’s your forecast for next year?
There’s no way that 2024 doesn’t end up a bad year, and with the bubble in financial assets, which hasn’t been allowed to deleverage, there’s going to be a big crash, which will cause a deep recession.
We should look out for a weak January. A bad January almost always means a down year; and with this bubble, 2024 will have the type of crash I’m talking about. It’s going to be the stock market bubble bursting and the top 20% getting their asses kicked.
I predict the market going down [at least] 50%. Not only do we have a big bubble [in equities] but a real estate bubble. So this time we’ll have both stock and real estate crashes.
Stocks have started to crash, but the market is going, “We don’t want to go down.”
When will the market collapse?
In the next year and a half, all of sudden the market will crash; and people will say, “What happened? The economy is doing fine.”
The economy is not doing fine because it’s on crack. And when that wears off, it will go into detox.
The government gave the market a bunch of crack. That’s why it went up so high and the economy kept growing.
Then the Fed bought bonds and threw more money into the financial services pool. That money always ends up chasing the highest return, which means it always ends up in stocks and real estate, not in bonds.
Now the bubble is starting to burst, but it’s having a hard time because everybody assumes the government is going to swoop in and save [the economy] again.
You have to wait for that to wear off. I think that next year the economy is going to fall apart, and there won’t appear to be a reason.
But it’s because it’s happening on a [time] lag [as a result of the stimulus].
The economy needs to take a break [to] shed a lot of record bad debt and zombie companies to get healthy again.
What investments are safe right now? Do you still recommend 30-year Treasury bonds?
That’s the one.
Some say that gold will be the real money, but I say, “No, Treasury bonds are the safe haven.” Even in a downturn, the [United States] is the best house in a bad neighborhood.
This is an everything bubble, and there’s nowhere to hide except the best safe haven, and 2008 [financial crisis] already proved that [with Treasury bonds].
In 2008, everything went down, including gold. [Recently] gold tried to go over $2,100 three times but went back down.
What should financial advisors be telling their clients, who may be waiting for the other shoe to drop?
Stockbrokers are dead. They don’t have the wisdom and knowledge to fight this.
I’m bearish, but they can’t be bearish: They always have to say, “invest for the long term.”
That’s the problem. They’ve been preaching to stay invested and it will work out OK.
That’s true like, 80% or 90% of the time. But that didn’t work from 1929-1942 or from 1968-1982, and it’s not going to work now because of this everything bubble.
Advisors aren’t equipped to deal with a once-in-a-lifetime crash like this because nobody has ever seen it. It sounds crazy.
[Today] there’s no diversification model. You go into the safest bond; and if you don’t even trust that, you go into cash.