Welcome to another edition of Financial Fitness Friday. Today is April 30th, 2021, and today, we’ll be talking about the possibility of the biggest crash EVER.
I’m basing today’s information on an interview conducted in March by the website Think Advisor, with their guest Harry Dent. Harry is a graduate of the Harvard Business School with an MBA, and he is a very polarizing figure & analyst in the financial services industry.
He is often attacked by his critics for some incorrect predictions that he’s made; however…
The strategist has correctly predicted some huge events – such as Japan’s 1989 bubble bust; the dot com crash of 2000; and the populist swell that carried Donald Trump to the presidency in 2016, among others.
I’ll cover as much as I can here today, but I’ll link the article at the end. Please read the interview for yourself, and discover all the reasons Harry believes that his prediction will be correct… and why it wasn’t entirely correct in the past.
His big prediction is this: he’s expecting that the next crash could be the biggest crash ever… and he expects that will likely hit by the end of June – just 2 months away.
How much risk is there in the stock market right now?
He says, “It’s the riskiest market since 1929. The difference is that ’29 wasn’t as global. This is an everything bubble.”
“There’s no way you can [keep] having fake earnings, fake GDP, fake interest rates, and super-high valuations. Financial assets have to come down to reality.”
He also points out that with the $1.9 trillion fiscal stimulus bill, we’re willing to stimulate 40% of GDP just to prevent a slowdown in the economy – 40% of GDP!
“That’s going to go down in history as the most insane thing ever. They’ll say, ‘What were they smoking?’ ”
He believes this may be the biggest bubble crash ever — stocks, commodities, real estate. “The next crash will be the initiation of the next big [economic] downturn, which will be much worse than the one in 2008-2009.”
He predicts the S&P will fall to around 2,100 — which is even lower than the Coronavirus Crash of March 2020— and that would be close to a 50% drop from recent highs.
“This next crash will be worse than the last one because it will come from higher levels and [plummet] to lower levels.”
Why will this downturn be so harsh?
He maintains that the only reason the 2008 downturn didn’t turn into a full-blown depression was that they turned on the money printing spigots so hard, that they blew us out of it…. But that kept the bubble going.
They kept printing money and put it off. Now we’ve got a bigger bubble.
He says that this upcoming downturn is going to be the Great Depression that the deep recession of 2008 was falling into before they put it off by massive money printing.
He says that they’ll try to print their way out of it again, but it won’t work this time. He cites all of the stimulus spendings for recent relief efforts just to keep us afloat, and once the economy begins to falter, the printing won’t be enough to keep the bottom from falling out.
Now I don’t have time to get into all of it in this blog today, but there is also a great discussion on what he believes will happen with cryptocurrencies like Bitcoin, what he sees happening with the economy once the pandemic substantially subsides, and his take on inflation.
Hint: “Not a chance in hell” we see substantial inflation.
His reasons are sound, and it has to do with the velocity of money. (If that phrase isn’t familiar to you, that’s just another reason I will highly encourage you to check out the full interview and increase your financial IQ!)
He also has some really interesting predictive indicators based on 90-year cycles and then shorter 40-year cycles of demographics that influence booms & busts.
He gives an in-depth analysis of the spending habits of the Baby Boom generation, and how that has allowed him to correctly predict so many of the events that he has – such as in the late 80s, predicting the Dow would hit 10,000 points by the year 2000, which everyone called him crazy for, but then had to eat crow.
They also talk about the influence of the Reddit forums, Robinhood investors, and what happened with Gamestop stock. This is what they had to say about the influence of the average Joe, do-it-yourself investor…
During the interview, Think Advisor mentioned: “There’s a discernable euphoria now among investors. But John Templeton, the renowned investor, and fund manager, famously said that “bull markets die on euphoria.”
Do you agree with that?
Harry replied yes, absolutely. And then he referenced Jeremy Grantham (GMO co-founder) who said on Jan. 5 that “this level of euphoria means you’re within months — not years — of a major bubble peak. You’re at the end.”
Why?
I’ll reiterate a line I quoted earlier: “There’s is no way you can [keep] having fake earnings, fake GDP, fake interest rates and super-high valuations. Financial assets have to come down to reality.”
So what does that look like, in the opinion of Harry Dent?
Loans will fail by the boatload. Then money dries up. That will cause bank failures and business failures.
But he implies that this is okay and that it will ultimately be a good thing.
He believes we have to get all the financial leverage, dead financial assets, and debt out of our economy.
He says, “20 % of public companies are zombies. They can’t even pay their debt service in a growth economy. They’re already dead. We’ve just been keeping them alive with embalming.”
“If the economy finally falls apart after this much stimulus, economists will flip from being endlessly bullish to endlessly bearish.” Many will say that we’re in for a decade-long-plus depression, like the 1930s.
But Harry says, “Nope, this thing WILL be hell. But it’s going to do its work very fast. By 2024, it will be over.”
By 2024, he predicts we’re going to be coming out of this hell, and into what he calls the next “Spring Boom.”
Is he right? Are we going to see a major market crash in the coming months? I can’t predict for sure. I’m not going to say that I agree with him, but I DO agree with some of his reasoning.
I’ve been saying myself for a while now that many of the fundamentals are lousy, and the markets are being manipulated & propped up.
Are we in the middle of one of these infamous market melt-ups right before a huge crash?
If you think it’s possible that we’re going to see some tough economic times in the near future, why would you take the risk?
Get ahold of me right away, so we can create a financial strategy that will protect you against potential downturns, but still keep you in a position to take advantage of the opportunity as it presents itself.
Working with a financial professional like myself, you can implement a volatility buffer into your retirement plans – such as a combination of bank savings, insurance, or annuities.
This can provide the protection, liquidity, and income that we need to confidently weather short-term volatility, and continue to protect your investments as they grow over the long term.
Especially if you’re retirement age, you can’t afford to make a big mistake at this stage in the game. You owe it to yourself to make sure that you’re properly positioned as you prepare to make this big transition in your life in the next few years.
Get ahold of me, I’m happy to talk – with no cost and no obligation.
Article:
Title: Harry Dent: ‘Biggest Crash Ever’ Likely by end of June (Think Advisor, March 10, 2021)
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