The cyclical bull market for equities is over; after December, stocks will begin a secular multi-year decline, starting with a 40% correction by April, said Harry Dent, founder of HS Dent. "If we see another new low in the stock market, I predict we are not going to see new highs on the Dow, S&P, NASDAQ, biotech, you pick anything...you're not going to see new highs on anything for decades," Dent said.
Our next guest is warning of the largest, most significant stock market crash. We'll see, in our lifetimes, he is Harry dent, founder of HS dent, and a pioneer of demographics research. Harry is the best-selling author of several books, including the great boom ahead. And his latest work is zero hour. His claim to fame has been predicting correctly, calling the end of the Japanese boom in the eighties and the boom that we saw subsequently in Europe and the us.
Harry, welcome to the show. It's a pleasure speaking with you today. Yeah. Nice to be here, David. We have a lot to go through, starting with your macro outlook, you are an expert on all things, demographics and how that influences the macro landscape. Let's set us up here before we talk about your outlook on the stock market.
What are some of the significant demographic trends that you like to discuss? Well, you know, the most predictable thing in the economy, something economists really don't know much about is the spending of households. People enter the workforce at 20 Bayer costs. Before that they go through a spending spree until they're 46 to 47 until their kids leave the nest and then they spend less the rest of their lives.
So I came out with a tool called the spinning wave in 1988. And that's what told me, Oh my gosh, Japan's at the top of their generational spending way. We just lag the birth index. This is how simple it is, David. 46 years in the us, 47 years in Japan and Europe with the peak and spending of the average person that simple Japan was peaking in the late eighties, us and Europe were just getting, going with Europe a little bit, lag the U S so I could see that crash in Japan.
And then the gray, not just the boom, the greatest boom in history because the baby boom was so large, not just here. The baby boom was a global phenomenon, so I can predict spending in any country in the world. And we can predict it from cradle to grave from young people, getting into apartments to the nursing homes and assisted living.
So funny is that they end up dying and everything in between. Yeah. Let's talk about spending. Now you wrote some of your, you wrote your books before COVID and as you know, in 2020 spending fell off a cliff, this was an anomaly, obviously I don't think anybody could have predicted COVID right. But how has this phenomenon change spending?
Has it changed at all? Oh, I, I mean, it was like a mini depression. I mean, it's a shock to the economy. It's similar to the hurricane. I'm in Puerto Rico. Now for five years, some of the hurricane Maria, we had knocked out the economy like an, a bomb for three months. We had to move to New York, you know, hide out in New York for three months.
This is like that. So short term, Well, what I call it as the perfect trigger ever since in, and here's the key point ever since the baby boom, in the U S peaked in spending and late 2007, something I predicted all the way back in 88. When I came up with that indicator, we've been living off of quantitative.
Oh, we got to keep the economy going. Well, it wants to decline. It wants to de leverage all the debt. From this great boom and the central banks won't let it. So we keep pumping up, pumping up, going to new highs note that the economy remains weak and slow, but the stock market keeps going to record highs.
That's a huge disconnect. I call the COVID the perfect trigger because it's something that central banks could easily dance around. And right now the market's going to new highs thinking, Oh, after the big crash in February, March. And a 12,000 point that's 40% of the entire 30,000 down. 40% of that was made just since March low.
And now it's at new highs thinking, Oh, we'll be back to a new highs and good old times early to mid next year. No, it will not happen. The demographic trends and the debt trends continue to weigh. And there's a lot of industries. We all know travel entertainment. Restaurants, I could go on and on and on that will not get back to normal for a year or two in commercial real estate may never be the same.
So you're right. The personal consumers expenditures, the PCE it's up since the, uh, the, uh, March bottoms, but it's still not at pre COVID levels. It's still rising though. You know, economists have predicted that eventually we'll hit that pre COVID level. But you're saying no, that won't happen until maybe a couple of years out.
Maybe never. Yes. I think more than a couple years, I think. By the first and second quarter of next year, we're going to see that we don't get back to those levels and the economy starts failing again. I love the quote, 19% of publicly traded companies now called zombie companies are not paying their debt service interest or principle.
Oh, those companies are still limping along. A lot of small businesses got hit by this, just like the hurricane. We saw this. When we came back to Puerto Rico, 20% of the small businesses, the restaurants around me never came back. They can't float bonds. Like the big companies can with a still healthy stimulated bond market.
They have to go to stingy banks at bad times. So there's a lot. That's not going to come back. We, I think we've kind of hit the B shape recovery for, let's say the 80% of the economy that did not get permanently damaged, but there's this other 15, 20% that's not coming back and we've got more debt than ever and more debt.
How much the government put 3.4 trillion in the last year. And money printing as much as they did in the entire QE cycle before and in less than a year. And 2.2 trillion in fiscal spending with a 3 trillion deficit and they're supposed to come up with another two to 3 trillion soon. This is, uh, just going to cause debt pressures to get worse while consumers continue to naturally spend a little less because the baby boomers are still in their decline, the millennial generation.
And again, this cycle is very proven. Now back 50 years. The millennial generation will drive us up from 2023 forward, but not until then. So still weakness and demographics, massive debt. I say we don't ever fully recover, but this, and by early next year we realize that and the stock market goes, oops. Uh, we got a little high on crack and you know, now we're coming back down to reality.
I think you're going to see a big crash starting late this year, early next year. So you don't think so. You don't think we're going to have a V-shape recovery? What about Acacia? No, we have had a V-shape recovery up to about 80, 90%. We just, we don't keep going out there. There's nowhere to go from here.
You're right. Okay. So what about, what about a case shape recovered? The notion that some sectors are continually going to outperform, whereas the rest of the economy legs. Yeah. Yeah, but, but overall, I mean, this still makes consumers more wary. People are more in debt. The government's more in debt companies have had to borrow to get through this.
So, so you still get this weight. On the economy. And again, you gotta remember, we, we would, we would have been in natural demographic cycles in a downturn from 2008 to 2022, 23. I said that back decades ago. So they basically blew us out of this downturn. In fact, I tell people. The 2008 nine stock crash.
That was only 17 months. That was half as long as the 1929 to 32 crash after a similar generational and bubble and tick technology bubble economy that crash. If that, if we had not printed. 20 now, $24 trillion globally since then had not printed that much money, um, to keep the economy growing at a measly 2%, we would have been in a long off and on downturn and we would not have had this stock rally and we would not have rising corporate earnings and people wouldn't be borrowing at zero rates adjusted for inflation, which makes everybody welfare and financial assets had been turned straight up.
People have to realize. Normally in a recession that the central banks will make credit easier and push it out, lower interest rates, hoping that people borrow more. Well, we came into 2008 already. Overborrowed in consumers, businesses, and government, and we didn't need more debt. So what they found out by accident when they pumped a bunch of money in.
Oh, they, they, they bought bonds to do it. And that caused financial assets to go up because there's, they're putting more money in the same financial asset pool and it's driving up. So we're not getting consumer inflation. Like the goldbugs predicted we're not getting a strong recovery, like economist would expect with this much stimulus and thinking everything's okay because they don't understand the demographic and debt.
Right. So we get this very modest recovery that only takes a trigger. Like COVID. To show us. Oops. Yeah, I know we're weaker than we thought we were. That's what I said. I think by my here's my forecast and you can not listen to me after that. If we don't see strong weakness in the economy by mid, next year, showing that all this stimulus is not enough to put Humpty Dumpty back together, then just don't listen to me anymore.
Okay. So your forecast let's recap your forecast for the stock market. So you're saying that 2023 millennial money is going to drive us to a new era of growth before then. Nope, not going to happen in terms of growth. So we're going to see a stock market crash before 2023 is what you're saying. Yes, between now and late now, remember the stock, market's a leading indicator.
So I expect a stock market peak right here. I'd say by somewhere between early December and mid January, we see a peak. And I think on the, or I think more the early side and we see. A two-year crash that really continues the crash that started in February. So this is not, this is not a crash, or if you want to call it a crash, you know, a major sell off, like we saw in March where that just rebounded right away.
This is a structural. Uh, downtrend in the equities markets. Yes. It's a reset for the greatest financial asset bubble in history partially caused by a good economy. At first, like the roaring twenties, like greatly boost up by central banks artificially. And the fact that yes, the demographic trends here and an East Asia and in Europe, all the developed countries.
Continue to get worse, especially in the next two to three years. So, so yeah, no easy recovery who this, when the stock market realizes that. Yes, I say we have a reset. And then stocks and grow again, then real estate can grow again. And then the millennials are going to be the biggest benefit if we get this debt and bubble out of the way.
Cause it's stymieing investment and productivity. You say that the stock market is eventually going to realize the economic condition that we're in, but has, I mean, why haven't they realized it yet? Why haven't invest equities investors? You know what you're saying about the economy? It's not really. It's not really news.
We know that the economy is in terrible condition. We know that monetary stimulus is what has been the primary driver of equities prices. Why haven't people realize that yet? We're still seeing, you know, I am surprised. I am surprised they have, because how long does an economy at the limp with this level of stimulus, you would have had super growth and inflation and we have neither.
It shows how dead the economy is. I think. We're good. We're about to see one more crash. It won't be the end game, but there'll be one more crash that takes the stock market to new close by April is my forecast between now and April, another 40% crash greater than the S and P down 34 35, greater than the 20% crash for that ever since 2018 top, which was the first bubble we've seen.
Every class Chegg has the new lows, but every stimulus. Rebound take us to new highs. I think we're going to see the high soon, and we're never going to see this high for years and that the next crash is where investors lose confidence and the fed and governments, endlessly stimulating a dead economy.
And then investors withdraw. You don't realize here. Here's an important fact, David. Globally 255 trillion in debt, way more than three times GDP, way more than ever, but financial assets. Cause the QE is twice that over 500 trillion now, just that financial asset bubble crashing will take 200 trillion or more out of the global economy, three times GDP.
And that is enough to cause a depression without anything else as Harry, are you short right now, then? Yeah, well, now I'm getting ready to get short. I'm looking at early December is the next, I think the markets are going higher here. I think they got one more rally in them at a minimum. I think that could, I'm looking at a target of about 37, 50 to 3,800 on the S and P maybe 31, 30, 2000 on the, the, and then I think this thing may be over it.
And again, you have to ask yourself, are you going to go for that last 5% when the next crash within a matter of months could be more than the last flash crash. I mean, we're looking at possible triggers for this crash. I we've been seeing nothing but good news out of the economy. For the last couple of, couple of weeks, vaccine stimulus, uh, you know, data points to recovery, maybe not to the same extent as pre COVID levels.
I, I just, I just don't see a trigger here. Help me out. Yeah. You know, I think it's going to be continued disappointing data. Now I just said, my Madonna just said something this morning, the head medical director in the stock market totally ignored it. He said, wait a minute, folks. You don't understand this vaccine is proven to reduce the severity to make it.
If you do get this, it's going to be a lot. It may be a nothing burger or less severe. That's what it's proven know. It is not proven to stop transmission yet. We hope it does, but it's not what, you know, what have you get more announcements like that? I mean, the stock market ignored this this morning stock market constantly.
It quickly ignored bad news and jumps on any good news. The vaccine six, 7%. Madonna says that the day totally ignores it and goes up anyway. Yeah. Haven't we seen that bad news is good news. When we, when we have bad news in the economy that just encourages the federal reserve to stimulate more. Right.
Would that be a factor you're considering. Yeah, but you got to look at the look at the ECB and the fed lately. They're saying, okay, folks, we have more than done our duty here fed just printed 3.4 trillion. Since the repo crisis repo crisis was the first warning sign to me. The banks cannot survive without confidence.
The feds keeps saying, Oh, we just needed to get over this 2008 crisis and we'll be okay. 10 years later, they pull back the stimulus just a little bit, 2017, 18, and then the banks. Go illiquid and need the funding from the bed to keep alive. That's the banking systems. We, every time you pull back stimulus, the economy slows, it shows the demographics is beat.
We're weak. It's just a matter of, I think I, this is my real theory, Dave, this COVID thing hit early this year, February, March. I give that a nine to 12 month lag before you really feel those small businesses in zombie. No gown overnight. Stocks can go down overnight like they did, but, but bankruptcies and chapter seven 11 take time.
That's what I think. I think first quarter, you're going to see more companies going under and that's going to be the trigger. No apparent good reason for no apparent. Good reason. What about monetary MMT? Modern monetary theory? Are you a subscriber to that theory that the federal reserve can continuously pump money without the cushions of inflation?
That would say that that, uh, everybody's missed all the history everybody's wrong and you really can get something for nothing. This is exactly what they say at the top of every bubble. In the 29th Irving Fisher, the leading economist, he said, we've reached a permanent plateau of prosperity. We've gone to heaven.
We can just die here. This is what happens. You cannot create growth by just constantly printing money as if work, work ethic, technology innovation and all these things don't matter. Hey, we've seen our technology innovation from the internet cycle. It is peak and it's declining. We've seen the incredible spinning of productivity of the largest generation in history.
It's the climbing. We're only living on short term free money and it has diminishing returns. That's important. Diminishing returns. Just like somebody, if somebody is addicted to anything, let's say crack heroin, you know, you take coffee, it takes more and more and more to get the same high or to keep from coming down until you die.
From stimulus, you die or hit the pavement and go to rehab. So what I'm saying, this, this downturn would be the best thing that happens for two to three years, we go through a big, let's call it a detox, the leveraging of debt and financial asset. Both when you have all these people putting money in bad debt and bubbles, you're, you're missing investing for the future and you're killing productivity, which we've done nothing but seeing declining productivity.
And money velocity. David tells you how productive your investing. That's been declining since 1998, like it did from 1918 to 1932, which ended in a great depression. So suppose the stock market does crash in April. Would you be buying at that at the bottom? There? Would this be the greatest fight in your life?
I would say if we see another new, low in the stock market, I would predict we are not going to see new highs on the Dow S and P NASDAQ biotech. You pick anything, anything, but maybe kind of somewhere down the line, Bitcoin, you're not going to see new highs on anything for decades. Cause you didn't see new highs up at 1929 for 24 years in 1953.
When you get this bigger reset from this big Ababil, that's what happened. So 1929, you're comparing us to the great depression we're in a depression right now is what you're saying. I like to ask you one more question. Before we talk about gold, about the economy you study Japan, uh, in the late eighties and nineties.
Now, if I remember my economics history correctly, what happened in Japan was this. Period of steady deflation consumers put off their big PR their big ticket purchases and anticipation of lower prices. And that created a feedback that created a self-fulfilling prophecy. Oh, after the crash, what caused the crash was they had a bubble people don't realize that they have incredible bubble in real estate.
Tokyo was worth more than, than all the real estate in the United States for a brief period of time. I was telling people this cannot laugh. Their stock market bubbled up just like ours as when the rest of the world didn't, uh, if that time period nearly as much. Okay. So. They had a big bubble, but there they were the first baby boom to peak their first peaked in 1949.
Ours peaked in 61, Europe, 64. They peeked ahead of us. So it wasn't just the bubble bursting. It was then. Oh, but now there's no people to spend money anymore. There, their generation, it bought other homes, barred, all their money raised there. And guess what? There the, the, the, the devastation has been so bad in a zombie economy for 30 years, that young people now don't even want to date, nonetheless, have sex or get married and have kids.
So their demographic decline. Mark my words on this too. Japan's rebound into this year, 2020. Yes. Was, was quantitative easing four times as much as us relatively. Yes, it was aides, arrows and fiscal stimulus, but it was the millennial generation in Japan, which guests, when they're peaking right now, 19 2020 is 1989 for Japan again.
And they're going to see another generational decline. Take them to new lows and demographic. Japan is never. Ever gonna ever, ever in my lifetime or yours, see the 1989, 39,000 Nikkei top again, they only gotten about 60, 70% there. Now they will go to new lows in the next few years and never bounced. I actually did a lot of economists.
Do agree with you that United nations has projected that by 2050. Uh, the dependency ratio of Japan is going to be near one, which means that for every one working class person, there's going to be one person age over 64. We're under 14. That needs to depend on that working class person. I wonder if their population's going to act exactly flattened there's strength in, into the next D do you structural problems today in North America is Japan saw in the eighties.
Yes. Yes, we, we had, uh, a big baby boom it's peak, the differences. We had a millennial generation. That their births and immigration. Cause I, I factor immigrants into my birth index and I can do that with a computer. Um, takes us back to baby boom levels. Japan's millennial generation and most of Europe will be the same.
Most of these saves are going forward, including China will never get back to the demographic levels of this boom. We get back to them with the millennial generation and with some technological productivity and stuff, we could see new highs in our stock market. One day. All of Asia, particularly Japan and East Asia are not going to see new highs in the stock market ever.
East Asia .