Economist and author Harry Dent delivers his most urgent warning yet: the U.S. economy is heading into the biggest crash in modern history, and the fallout will be far worse than 2008. In this explosive interview with Maggie Lake, Dent explains why the bubble is already bursting, how stocks could fall up to 90%, and why real estate is ground zero for the coming collapse.
In this hard-hitting interview:
- Why $27 trillion in stimulus distorted the economy
- How zombie companies and malinvestment are dragging us down
- What the Fed and Politicians still don’t understand about recessions
- Why Millennials will be the biggest winners of the crash
- The only true safe haven (hint: it’s not gold or Bitcoin)
- And when Dent believes the crash will begin, and end
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Harry Dent 0:00
Tell people this is not a rebalance your portfolio. You got to get out of the way of something this big. And it’s once in a lifetime. This happens once every 90 years, this sort of level of a crash. 29 to 32
Maggie Lake 0:18
Hello everyone. Welcome to wealthion. I’m Maggie Lake, and joining me today is Harry Dent, founder of HS den. Hi, Harry, thanks for being with us. Nice to be here mag before we jump in. Just a reminder to all of you who are listening. If you have comments or questions, please drop them below. We’d love to hear from you. And if you want to take a fresh look at your asset allocation, you can get a free portfolio review from one of the advisors in the wealthion network. Just go to wealthion.com/free and we may all want to do that, Harry, after we talk so you have been vocal about the fact that you believe we’re headed for a financial crisis. What has you cons so concerned? What sort of macro framework are you operating?
Harry Dent 0:58
Okay, let’s step back for a minute, I was the most bullish person in the entire world, or at least the United States, by four back in the 80s and 90s, when everybody thought, oh my gosh, Japan and East Asia is going to take us over. We’ve had our day in the sun. We’re no longer leading the world in anything. I’m like, no, look at all the high tech industries. And on top of that, look at the baby boom generation. This was a global phenomenon, but we had the biggest, best baby boom generation and highest educated and I was just showing people in the early 80s how this they’re going to cause the greatest boom in history into 2007 which even exceeded some of my predictions, because I could show how big I just lagged the birth index forward 46 years for the actual peak and spending of the average person in this country. It’s 47 in a lot of other countries. But it’s very accurate thing. And it said, you know, greatest boom in history, and then in 2008 Ford, well, you got the baby bus dragging us down until now, currently, the millennials kick back in, but the millennials will never be the force. Everybody says there’s more millennials and baby boomers, but I look at the size of a wave for economics, and the baby boomers were the wave we have not seen before and will not see afterwards, especially as a maturing country and most developed countries. So, so, so, so the real story is okay, well, 2008 hit, and suddenly, for no reason, boom, we’re in the deepest recession since the Great Depression. Well, no surprise to me, but what was a bit of a surprise is the government’s Ben Bernanke thesis was the Great Depression Maggie. And so he knew what a great depression looked like. And I saw 2008 just like 1930 and he saw the same thing. So he just stepped on the pedal and, and I know the Fed, you know he and the Fed and and public officials thought, Okay, well, this is just a short term financial crisis. We’ll get over this and we’ll be back to normal. No, my research says no, it’s going to take 12 to 14 years to bottom, not till 2022 23 and so that’s why we’ve had so much stimulus. The first trillion turned into $27 trillion nobody’s nobody’s put that number out there. I counted it all okay. And 19 of it is massive government deficits. And the other nine, eight or nine, is money printing, just printing just printing money out of thin air and injecting in the economy. The money that’s the deficits goes more directly into the economy, and the money that is printed goes more directly into financial markets. So both economy is much stronger than we would have seen, and stock valuations and all are much higher than we would have seen, and we had, you know, the greatest boom continue. You know, crash in eight, 2008 early, 2009 but now we’ve had stocks go to massive new highs. So from my point of view, that the biggest existential question from markets now is, did we successfully skip over what I would have seen is more like the 1930s I have a four season cycle, and that would have been the deflation, Ira downturn, 1930 to 42 part of the cycle over over two generations, baby boom and millennials. Did we just skip over a depression, and there’s no cost of that, and now we just go sloshing into the millennials boom, which started at beginning of 2024 and I think not, because the problem is is people don’t understand. Everybody thinks recessions are the enemy, especially Federal Reserve. Their job is to keep the economy growing at something like three to 4% with one to 2% inflation, and really never have a recession unless we really have, you know, recessions are the best thing the economy does. I know this. I was a turnaround manager early on for Fortune 100 companies and then for small business. That’s what I did in the 80s. Turnaround failing companies, failure allows to wash out. The losing companies, the zombie companies, restructure bad debts, which people never do unless they’re forced to and clear the deck so you can stay healthy and grow again. Recessions are necessary. We’ve had a major recession every decade, once a decade, since World War Two, and now, now, all of a sudden, geniuses at the Federal Reserve who’ve never had sex or run a business, by the way, okay, most of the economists there, I think that that, no, no, we should have an economy that always grows and doesn’t have recessions. This is insane. We we stopped having recessions. Innovation would crawl to a damn near halt because, because people are at their best, and anybody knows this in wartime or crisis people, people become heroes, you know, when there’s a crisis, and so every day enough, so. So to me, it’s a it shows the misunderstanding of the economy by the people who are supposed to be steering it, which is number one in error. Free market capitalism says we don’t need steering. We need rules. We need rules of how to play and compete fairly. We do not need to steer the economy. We let it grow from the ground up. That’s exactly what the invisible hand. Adam Smith invented this whole concept in the late 79 he called it the invisible hand. What I say now, folks is all we have is the visible hand, and it’s going it’s doing the wrong thing. It’s suppressing the economy from flushing out the massive bad debts in zombie companies created in the last greatest and it was the greatest boom in history. And nobody thought that was going to happen, except for me. Back then, people thought I was crazier than being bearish. Now, they thought I was crazier in the in the 80s for saying this was going to be the greatest boom in history. Everybody thought United States
Maggie Lake 6:42
was done, yeah. And by the way, we’re hearing that again, but we’ll get to that. So let me so let me ask you. I hear you talking about two, two things, malinvestment and population issues. So let’s talk about the the malinvestment first, the sort of period of zero interest rates, I’m assuming this is what you’re referring to, the medicine that the Fed gave in order to prevent the wheels coming off a depression like downturn, which is what we
Harry Dent 7:14
were at, make money, pour money in the economy and make it low bar. And arguably, when
Maggie Lake 7:19
they did that, they didn’t think it was going to last for, you know, the better part of 15 years. That was supposed to be a short term remedy, but it your your feeling is that it lasted way too long.
Harry Dent 7:31
What 16.3 years, and they’re still doing right?
Maggie Lake 7:35
So where, what do you identify as, as zombie companies, or the sort of, you know, bad decisions that were made, the bad debts. When you look across the economy, what does that look like? Because a lot,
Harry Dent 7:50
well, there’s two things they do measure zombie companies are companies that are only alive because they’re not paying their debt service. So they’re able to barely stay alive by operating but they have to stiff their creditors do it. So they’re basically technically in bankruptcy, but still operating. So that’s something can measure. And we have record numbers of zombie companies.
Maggie Lake 8:09
Are they in the Russell is it? Is it all the money that happened in the private credit market?
Harry Dent 8:15
They’re probably more private companies, because smaller companies, you know, that aren’t public, even the small cap companies are huge. You know, in the big realm, we deal in, in stocks and stuff in the stock exchanges, so it’d be more small credit. But no, there are plenty of large companies that are in the same position. The other thing Maggie is there’s an excellent measure of this only Lacey hunt, my favorite economist out of Austin, Texas is called Money velocity. Money velocity is only positive when, and this is the whole economy. It’s measuring government, consumers and businesses, when, when all of us are investing money, getting good returns on it, and then reinvesting those returns and getting return money will money velocity will only keep going positive if that’s happening. Well, guess what it’s been doing since 1997 right after the first tech bubble, stop falling like a rock. Guess what the last time it did? That was 1918 to 1932 the entire roaring 20s bubble was saying what you said earlier, Mal investment, unproductive investments are being made. Why? Because money’s so easy and not having recessions to shake out the zombie companies and all this sort of stuff. So money velocity has had a bigger drop this time than it even did into the Great Depression. So the so money velocity would have been the number one indicator back in the roaring 20s, it was said, Wait a minute, this is, this is not a normal, healthy boom. This is a bubble boom. A lot of over investment, a lot of malinvestment in unproductive things that are not paying off and being reinvested in money velocity. Reflects that long before the economy Yes, so So this should not have been a surprise to anybody. Economists don’t study this because they don’t like
Maggie Lake 10:07
it. So what? So let me ask you, obviously, the Fed had embarked on an extraordinary hiking cycle, and with the thought that it would perhaps take out some of the excess in the economy that you have identified, but it didn’t. It didn’t it didn’t have much.
Harry Dent 10:26
Let me describe excess for you. Out of that 27 trillion, I described most of it, 40% of it, 11 trillion came from COVID Two years after COVID. So they’re the ones that caused the 9.3% inflation. They’re the ones that force them themselves to pull back and tight. They were tightening an economy already running away because they dumped 11 trillion of it, like 80% of GDP in it a couple of years. So they, when you say overreacted to COVID,
Maggie Lake 10:55
the government as well as the Fed, right? So this is the fiscal side as well as the monetary side. Yeah, and
Harry Dent 11:03
remember, the fiscal side was two thirds of all this 27 trillion stimulus, including that 11 trillion in two years after COVID, and the money printing was a third. So it’s been the government deficits, and now we’ve stopped printing money. They even reduced the balance sheet 2.2 trillion. So that’s starting to tighten, but the government deficit still 2.2 trillion a year. So we’re now getting closer to neutral instead of stimulative or tightening. But to me, in an economy in this big a bubble that’s so overstretched with so many bad debts and zombie companies, even neutral is not I mean, the only way to keep a bubble going is to keep upping the ante. That’s true of any bubble, any exponential trend in history. So so they’re, they’re in a bad place. And again, they created the stimulus. If, if a trillion a year for a couple years wasn’t enough, then they should have let the economy go in a recession, okay, and let the economy flush out and clean up the economy. Because economy is very good at that, by the way, does it very quickly, very efficient, because it’s merciless, and it just lets the companies go that can’t survive a shakeout, and it cleans it out, and nobody has to make the choice.
Maggie Lake 12:13
So if that’s the case, why do you think the bubble is close to bursting now? Or what’s the trigger that’s going
Harry Dent 12:22
to because, because they’re not feeding it enough, they’re not feeding the beast. The the last exponential jump was the overrea. I mean, overreaction to COVID. That was their bit. If you’re going to do this and be here, to me, it’s reckless, irresponsible, something for nothing, living on stimulus. None of that’s good stuff. It’s like taking a drug until it takes you over, okay? That any addiction has the same outcome, okay? It takes more and more and more and then until you just fall on the ground and damn near kill yourself. Okay, so, so what they did, COVID would have been the perfect time to say, oh, wait a minute. Okay, we got this outside influence. Everybody’s a little sick. Okay, we’ll let the economy that would have let the economy shake out a lot of this excess. But no, they doubled down and stimulated more than f. That was the mistake, and that, and that caused the 9.3% inflation out of nowhere that forced them to ease up, to tighten strong. This is the strongest tightening since 1980 81 which caused the deepest recession back then, since the Great Depression. So so they created this all themselves, and they don’t understand what drives the
Maggie Lake 13:30
comments the Fed had has attempted to tighten and and is resisting calls to ease right now, trying to keep a handle on things. Would you what’s the role of fiscal would you be pushing through a spending bill that increases the deficit even further? What? What should Congress do?
Harry Dent 13:51
No, no, that’s the problem. It appears most people, oh, they, they dropped the balance sheet. 2.2 Sure. Oh, they’re, you know, they raised interest rates. 525 days, they’re tightening. The deficits larger than ever. And okay, I can tell you that one thing right now. If I’m right, and we’re close to going a recession, and you got a 2.2 trillion deficit at the top of a boom, that deficit would double to 4 trillion in the first year of the recession and keep going up. Now you see debt going from 36 to 38 next thing you know, they’re projecting 50 trillion and blah, blah, blah, blah blah. And then the bond market starts raising yields and say, oh my gosh, the 10 and 30 year treasuries don’t look like like risk free bonds anymore. And now you got to pay five 6% interest. You know, they gotta. They gotta, you know, charge five to 6% interest instead of four. And blah, blah, blah, blah, blah, yeah, and so, so, so this is just over stimulus. They, we. Everybody believes in free market capitalism until something goes wrong, right? And people think recessions are bad. Recessions aren’t bad.
Maggie Lake 14:57
You’re using the pronoun they, they. Let it go. So I’m just trying to get a handle on if the Fed has tried to do what it can with its toolbox. It sounds like the they you’re referring to is on the fiscal side of things.
Harry Dent 15:14
The government has not run a balanced budget since 2001 and I’m just counting the deficits 19 trillion since the 2008 recession, they they have reacted by just saying, well, we’ll just keep running bigger and bigger deficits and and the Fed is saying we’ll keep printing money when we need to. So what they do is try to just print their artificially stimulate your way out of a Great Depression a big ShakeOut. I like to call it a shakeout. Shakeouts are necessary because I have a model in every one of my books, innovation, growth, boom when they first move mainstream, shake out down to the leaders that really bring it cost effective and make it mass affordable, and then a maturity boom to mass markets, four stages, two booms to bust. The booms are longer than the bust. It’s all a natural cycle. And suddenly my problem is the people, especially at the Fed governments, too. Governments just doing what they do now. People the Fed, think they should make the economy a machine that just grows at three to 4% a year, with no inflation, with 2% inflation and no recession, they’re saying that, which means they’ve totally rejected free market capitalism, the thing that’s made us the richest in all of history. You can’t even compare the last 250 years to any period in history with the progress we’ve made since free market capitalism and democracy got married. And by the way, those are opposite concepts. That’s the way they work. So
Maggie Lake 16:45
the So, if the ShakeOut is inevitable and should happen in order to usher in the next period of prosperity, what is the nature of this Fallout we you know, in Oh, eight, it was sort of rooted in housing and then spread. What do you think? What does this shake out look like in your mind?
Harry Dent 17:05
Well, I tell you, what is most unique Maggie about this downturn. The roaring 20s was majorly a stock in a business. I mean, an unbelievable stock bubble and business bubble and all that sort of stuff. It was not a real estate bubble. Real estate loans back then were 50% down five year terms, and you had to be much richer to qualify. Okay, now real estate is the biggest part of this bubble, and it’s global. Everybody’s been able to fire real estate at almost no money down. Forget 10 or 20% down, almost no money down, at very low interest rates. And so that’s what’s allowed there to be so much debt. And again, there’s nothing wrong with borrowing in a boom, as long as it’s some relationship to the actual growth. And is long, and you’ve got a great gage that no economists pay attention to, because it would tell them they’re doing the wrong things most of the time, money velocity. If money velocity is flat to going up is meaning this is healthy growth. If money velocity is dropping, it’s saying no businesses and consumers and governments are not investing money productively. That’s a bad thing. That means the debts are not going to be able to be repaid
Maggie Lake 18:13
if, if the real if real estate has been too loose, people would argue from Oh, wait, that that credit standards tightened a lot in the wake of the subprime mortgage, and that it has been harder to get a mortgage, and we are looking at higher interest.
Harry Dent 18:27
It was a short, short period of time. It was, yeah, there’s never been an easier time for more people to I mean, again, the roaring 20s was roaring. It was not roaring for real estate, because borrowing was not easy. And even in the roaring 20s boom, with same thing near zero inflation, low low interest rates, there was not the borrowing surge. There was, except in business.
Maggie Lake 18:49
So do you? Do you believe that we are likely to see another wave of defaults? Is that what? Yeah, what happened?
Harry Dent 18:56
I think real estate is going to have to I’ve got two targets. They’re extremely simple. And hey, now let me, let me jump back real quick. Anybody that I study charts up the wazoo, anybody that reads charts, and they saw the charts of long term charts of real estate and of the stock market, like, like, say, the s, p5 or NASDAQ, they would say, Oh yeah, we’re in a big Fifth Wave top, and we’re going to have a a wave crash that’s going to go back to the fourth wave low. The fourth wave low is March 2009 for stocks. You know how big a stock correction that is, 94% for the NASDAQ, 86% for the s, p5, 100. How much that is for the average house, 60 to 70% this would make the 2008 downturn, where housing went down 34% and stocks went down 57% looked like nothing. That’s what the charts say then. And what is basically showing you is how much longer and bigger this bubble was than the bubble that led to the tech crash in 2000 2002 and then the generational bubble peak that led to the downturn 2008 nine. I call that. 1008 downturn, like 25 years before it happened, down to late 2007 because that’s when the baby boomers would peak in their spending and shift the momentum down with Generation X. So very simple math.
Maggie Lake 20:11
So if, if you are expecting that that sort of economic wealth destruction in this downturn through housing in both stock market, you’re talking about two areas where people have a lot of their net worth. How do investors prepare is, where is there a safe haven? What do you
Harry Dent 20:29
do? First thing, there’s going to be winners and losers. Who are the winners, the young people coming along that have to buy a house and can’t afford one? Okay, now that they’ve gone up there four times what they were just 20 years ago. And that’s what you do. You have to look at your asset and say, look where I was it. A lot of people I know have a main house and have some sort of vacation house. Well, at least sell one of them. A lot of people in the main house are thinking of retiring in the vacation house anyway, when their kids get totally out and nest, they retire. Okay, well, sell, sell, and I would sell the one with the most equity and not the one with the most debt, because if you get a real debt crisis, banks are going to be forced to write down a lot of these loans that they made. They’re the responsible party. They’re the smart money here. You can’t blame the average person for saying, well, everybody told me, and the banker told me, I could borrow this much. I didn’t do anything wrong. The banks lent all this money to ever appreciate through the same house. It’s now four times the price it was 20 years ago. It’s the same house. It’s not like a stock that’s grown and has new markets, is moving into Asia. It’s the same damn house four times the price, and people lent and borrowing up the 90 200%
Maggie Lake 21:35
so so sell, if you have multiple homes, or if you can sell, you sell
Harry Dent 21:43
your real estate first. Same thing, stocks are easy to sell. The good thing about stocks if you say, Well, I don’t know if Harry’s right or not, well you can wait, but I’ll tell you another fact I’ve researched throughout since the stock market was created, the first crash of a bubble, not a normal bull market. Of a bubble is 42% in three months. So that first crash, if you wait till then, you’re going to get whacked really hard, and then you’ll sell, but you’ll already be down a lot, and then you’ll sell, and then it’ll bounce halfway back, and you’ll think you missed that, and then it’ll keep going down, and you’ll end up looking like a hero in the end, but it’s just you sell any real estate you can, that’s the most important, and erase those debts for yourself and but most and sell stocks. And if you’re going to wait on something, you got to sell the real estate now, because real estate clams up quickly. If you say, okay, sell your real estate now and then, if it keeps looking like I’m right, then sell the stocks too. That’d be a stair step way to do it. And
Maggie Lake 22:42
where do you what do you do? Do you stay in cash? Do? How do you feel about bonds? They used to be a safe haven, but a lot of people have been questioning if that is still the case.
Harry Dent 22:53
Well, all you have to do is look at 2008 and I’ve got a lot of people here in Puerto Rico, Peter Schiff, and a lot of people who have the same story, I do bubble, overspending over debts. Gotta burst financial bubble. And they say, Buy Gold. Well, in 2008 gold did hold up at first, but it eventually went down with everything else and ended up being down about 40% Well, that wasn’t the worst place to be, but gold is not the safe haven. There is one safe haven mag, and all you gotta look at is any deflationary downturn in history, like the 30s or in in what we’ve seen in 2008 and nine treasury bonds, the longest term, the best thing to appreciate and then will be the safe haven. Much more than gold would be 10 and 30 year treasury bonds in the 30 years. Even better, there is a an ETF called TLT, which is half 30 year, half 10 year treasury bond. That’s the best ETF to buy that went up 40% in 2008 when everything, including gold, finally went down. And this time I’m projecting TLT could double just that simple little ETF with 10 and 30 year the highest quality, lowest risk bonds in the world could double in value if we get as deep a recession as I see. In other words. And I tell people the way, how do I rate this downturn? They cut the 2008 downturn early. Okay, it would have been deeper, longer, this downturn should be roughly. Stock declines, real estate declines one and a half times as bad as 2008 so if you thought 2008 was tough and you barely got through that, well now you’ll see why you really, especially gotta sell real estate. Because, again, you can, you can, you can be wrong about stocks. They can crash 40, 50% but then then take back half of that, and you can still get out there and only be down 20, 30% okay, you wouldn’t kill you, but if you get, if you don’t get out of expense, especially high end real estate, you’ll you’ll never get it out of a good price, and you’ll lose a lot of money. If
Maggie Lake 24:57
you have any questions about how to navigate the current environment. Wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time. Again, that’s wealthion.com/free thanks so much for joining us. How do you feel about Bitcoin?
Harry Dent 25:19
Bitcoin is proposed as a safe haven not. I love Bitcoin. Okay, it took me a while. I I noticed that it was acting just like Amazon and in the.com stocks in the early in the two in 1994 to 2000 bubble acting just like us. So I knew that this crypto was the next big thing. I didn’t understand why at first, what did they do? What does Bitcoin do? Well, a guy was speaking in my conference years ago, and he said, It’s the digitization of all financial assets and money. And I’m like, Oh, now I get it. I’m the only guy in the world that right there could have told you $630 trillion in financial assets globally, the biggest financial number in the world, five times global GDP. So so if crypto is about restructuring and making highly efficient, tradable, carvable, anything you know, manipulatable, financial assets in a time where more and more people are becoming millionaires, or near millionaires, everyday people are retiring as millionaires. That’s going to be a big deal. So that’s when I got, oh, this is the next big thing. And so crypto is the big sector, and coming behind that close something I always touted. I call it the automated of professional and managerial jobs in my roaring 2000 books way back AI, so automating business and management. So, so that’s Nvidia and and a bunch of stocks around that area. So, so the the first things I want to sell, these are the most bubbly stocks, from Bitcoin to Nvidia. Look at them. Both of them bubbled more than anything. When things crash. Those would be, if I had to buy two things coming out of this, it’d be Bitcoin and Nvidia, because those are going to be leading the two supercharged sectors that are in their innovative stage about the move mainstream once we we clear out this again, it’s another reason get my thing is get the damn crash over you if you carry all these debts and all These zombie companies on your back into the next boom, if we somehow wiggle through this so without a deep recession, the boom is going to be compromised by carrying all that extra fat, and it’s going to be fat. That’s why the economy gets rid of them. That’s why recessions are necessary. And again, we have had a deep, a substantial recession once a decade since World War Two, is there any enemies only got stronger? Because
Maggie Lake 27:46
Is there any way, along your lines of thinking there? There’s a downturn is necessary. I presume that they will never happen with I presume that you do not feel like a depression is necessary. Is there a way to mitigate or to cushion, so that we get the reset you’re looking for without the collateral damage that a broken system or a depression would bring? Okay?
Harry Dent 28:14
There is a way but, but first of all, if you’re going to blow up financial assets to six times g5 to six times GDP, and that’s what it is, okay? And they’re going to come down at least in half. You’re going to that. That’s where money gets destroyed. It’s not pulling out the money or the money’s already this is in people’s net worth and balance sheets, okay? That’s going to get destroyed if this happens. The best thing, the only thing you can do to mitigate this, and there’s no way to turn it into no recession. You might be able to have a deep recession instead of depression. Is if governments were to turn around to the banking system and help accelerate this. In other words, say, look what we’re going to do to cushion this. Instead of just running deficits and stuff, we’re going to every dollar you write off in bad debt. We’re going to take 30, let’s say 30% of it, some some decent percent to give the banks and get. It’s a limited time off for banks. You got two years to do this. Any debts you write off. We’re going to take 30% of it. We’re going to take that on our debt, because we borrow cheaper than anybody, for the good of the system, and then help mitigate this so it becomes but there’s no way to have net worth of everybody drop this much and companies go zombie. Companies go on it, because there’s a ton of them now without at least a deep recession. But yes, it could be 10% 12% unemployment. The Great Depression was 25 and Maggie, that’s one of the things that tell me. The difference between a recession, even a deep recession and a depression is depressions follow bubble booms when financial assets get way out of line with economy, not just growth and plants, equipment and stuff. Financial assets get overinflated, and that much money suddenly gets pulled out of the economy. The crash 29 to 30 2s, and p5 100, these are blue. Chip companies went down 89% and did not get back to there for 25 years. Are you? That’s why I tell people, This is not a rebalance your portfolio. You got to get out of the way of something this big, and it’s once in a lifetime. This happens once every 90 years, this sort of level of a crash 29 to 30.
Maggie Lake 30:20
Are you concerned that if we start to see a financial crisis, that officials will pull out the same playbook of 08 Are you concerned that they
Harry Dent 30:32
will, that’s what they’ll do, and at some point, the markets will say, didn’t you do that last time? And now we’re in a bigger that’s all we’ve done since, since, since the, you know, since the early 80s. Every time there’s a recession, we stimulate our way out of it, then we end up in a worse one, because the stimulus causes a bigger bubble and stuff. And we’ve had, you know, two bubbles and all this sort of stuff. I mean, the diff, I’m telling you, if you stand back and see that the difference with me, I’m not in the system I went to. I got out of the system when I left Harvard Business School. Okay? I went in the entrepreneurial realm. I started my own business. I consulted to entrepreneurial companies who created the future I could get care less about fortune 500 company. They’re gliding from the past, okay, and moving into the third world now. Okay, so, so, so, so, you know, I, I don’t see recessions as bad. Recessions are part of the process. It’s the ShakeOut innovation absolutely necessary. You don’t have new trends, growth boom. They got to first prove themselves and niche markets, and then to the upper classes shake out, down to the ones that really survived that. And then the maturity boom takes it to everybody. You know that nobody had a car. In 1900 1914 only a couple percent had cars. And by 1929 90% of people who live in the cities had an automobile. That was a huge step in society. It happened in this four stage progression. If you compromise the four stages, you don’t get there or you don’t get there strongly. So they’re messing with free market capitalism. That’s my gripe. These people who’ve never had sex, and I’ll say that never had sex, or at least look like it, never run a business guaranteed any Fed chairman, you pull out, okay, probably. And they don’t understand the economy, because they don’t understand that failure. George Gilder was my favorite economist because he celebrates failure. So it’s failure that accelerates success as well as success. Can’t have success. Let me
Maggie Lake 32:27
ask you about another narrative that’s floating around in in this next shakeout reset that will come. I think a lot of people agree with you that that in some way, shape or form, maybe not in some way sometime, maybe not your exact scenario, that you’ll this time around it, the US exceptionalism has ended, and that it is the rest of the world that will outperform now, and that this is The decade for emerging markets for some of these countries who and you’re not going to see that that downturn is not going to be the refresh for the US. It’s actually going to happen elsewhere. And this safe havens or the opportunities coming out of it are not going to be in US companies they’re
Harry Dent 33:17
in. This is a very good point. Very good question. Number one? Yes, we’re in the maturing developed world. All developed countries maturing, you know, the ones going to last longest Australia, because they get massive immigration of edge educated agents. They’re not getting uneducated people move coming across the border from from Latin America. They’re getting educated people in Asia. So Australia, if I pull up Australia’s spending wave chart into the future. It looks like an emerging country, okay, but most developed countries are peaking and plateauing for a while and will eventually decline. We’re the best house in that big neighborhood. We us in Northern Europe are going to hold up a lot longer. Southern Europe’s already declining. Japan, South Korea, China already declining in demographics, okay? And China is the first emerging country to peak and decline. So, so, so, but, but, but there’s still going to be developed countries, and we’re still going to be richer than most emerging countries for a long, long time, I’d say, almost forever. So the US is never going to grow like it did in the 50s and 60s, or even 70s, 80s and 90s, but we can still be a modest growth economy and still the wealthiest major country in the world if we clear out these debts and get into and at least make the most of a slowing situation. So it’s that simple, this improves, this shakeout, will make everybody stronger, except the weakest companies and weakest economies. And we’re not the weakest economy in developed world. We will, we will come out stronger out of this, relative to Europe, than we are now, and much stronger. Japan is already dying. I was the first guy to say in late 80s that Japan is the one that’s going to burst. Everybody said. The US was going out say Japan’s going down because
Maggie Lake 35:03
they aged first. Do you still feel that way? Absolutely.
Harry Dent 35:07
Japan and South Korea are the fastest aging countries, and in the merging world, China is the only especially large emerging country that’s already in an aging pattern. They’re going to lose 40% of their population in the next 5060, years. What does that do to so that’s not growth. That is shrinking. So you’re Japan, South Korea, China shrink for as far as we can see, for 5060,
Maggie Lake 35:32
years. So you’re bearish those regions. Now I wonder, as somebody who pays attention to demographics, how you feel about technology and robotics, you mentioned being very bullish. Ai, does that change your focus on demographics into the future? Maybe not right now, but in the future,
Harry Dent 35:49
no, every technology. How many farmers do we have in the country now? About 2% producing more than we can eat by foreign and we’re one of the biggest exporters in the world. What happened? We made them more and more productive. And so farmers went into factories, and then factory workers went into offices, and officers went in, and people go into upper management. And then, with the biggest trend today, Maggie. And what have to happen with AI entrepreneurship, I’m an entrepreneur. 1989 I became an entrepreneur and left everything in the corporate world, ban and company consulting to Fortune, 100 working for Fortune, 100 everything, and went into the entrepreneurial realm, where you create something that doesn’t exist before. That’s what aren’t that’s what I call radical innovation. Now everybody’s involved in some sort of incremental innovation, or you can’t keep your job or advance in life to one or 2% of people the Jeff Bezos, just to be extreme, what did that guy create? And then look at it, was he lucky? No, he named his company Amazon. From the beginning, he saw it being the widest River in retail, not just another river. He saw that that’s a visionary, and he looks crazy half the time. Okay. Well, I like people like that. I work in the entrepreneurial realm. It is a realm of people who take risk, who do not fit in, and do something that didn’t exist before. That’s the real value added. And this is what the US still does better than any country in the world. So that’s why we’re still going to be the best house in the maturing neighborhood. We still have high immigration compared to other developed countries, and people talking about cutting now, the last thing we should do is cut immigration. We should just make it more legal, you know, and make it more official and not be you have people hiding and stuff, and all our immigrants are what keep us growing. Without immigration, we would, we would be a shrinking country, and people don’t admit that, right? So, and that’s why, also, Australia is my model. They have high quality, high end, high income and educated immigrants, not lower than average, that are going to rise. They they’re having people from their company that are already at the level of their people who are entrepreneurial and going to get better. On top of that, Australia, if I had to invest in just one country and just let the money sit, it’d be Australia in the developed world. Interesting, so, but the developed world is all plateauing and eventually slowing. And you’re right that the other 8 billion going towards 10 billion are in the emerging world, and they are, I’m telling you, I’ve done all the projections. And people think people in China can be as rich as in the US, never, none on any of our lifetime. They’d be lucky to get up to 30,000 GDP per capita versus our 85 and that’s going from five, which is a huge 6x okay, the emerging world is not going to be as rich as us, but there’s many more of them, and they are what you said earlier is 100% all the growth in the future going to come from the emerging world. From about here on out, we just want to be the best house in the developed world. So
Maggie Lake 38:56
let’s finish on this thought, and it was, I’m glad we were able to touch on areas that you’re bullish on as well as what you’re concerned about. I’m,
Harry Dent 39:05
again, the most bullish guy in the world. You can’t have booms without busts. So if anybody wants says you can be bullish and never be bearish, then they’re an idiot. They don’t understand. They’re like the Federal Reserve. People that don’t understand the con can’t have booms without
Maggie Lake 39:17
so let’s end on on timing, on this. And no one has a crystal ball. But what is your well, especially now you’re right, what is your timeframe? So if people are thinking about trying to take your advice and reduce their exposure to real estate, maybe take that equity out and sell the home, move into TLT, which are the things that you’re looking at. Timing is terrible. Nobody rings a bell at the at the top or the bottom. That’s right. What are you expecting is this? Is this an event?
Harry Dent 39:48
I think it’s now because they were finally forced by the overreaction of COVID forced them to go the other way and tighten. And this tightening is going to hit more in this timeframe. So I. Think if the economy doesn’t start going down in the next year, then I’m going to doubt we make that the other scenario Maggie is really simple. You just, you just go into the sunset and mediocrity. You carry all these debts and zombie companies. You’re a weaker economy, less productive, but you don’t, and you don’t take your hits and shake it all out. So but, but you still have some positive demographics and positive areas and technology improving, and so we have a muted boom in the future, or just fade slower in the sunset. That’s not a preferable strategy for me, okay, but that’s what’s going to happen if we don’t allow the economy to wash out these debts. And I’m telling you, the economy can do this in two to three years. 29 to 32 after booming for 25 years, early 1900s roaring 20s, bubble plate, you know, Pinnacle there, washed it all out two to three years, the economy is very good. So you see this, and it does it without judging. You
Maggie Lake 40:51
see this as a second half of 2025, or 2026, type
Harry Dent 40:56
event. Yeah, I see, I see that we’re most likely to be down 26 into sometime in 28 and be coming out there. But again, it has to start first, and there’s a good chance we’ve already peaked on in February, or here maybe in June. Different indices I’m tracking where, when the difference between a long term top and a medium term top is you get a long progression of the money keeping moving into the safer, higher quality, you know, in other words, from the NASDAQ to the S and P and from emerging countries to develop, moving to higher quality assets, until they get the most overvalued, and finally they go down. So we’re seeing that progression in the last couple of years, okay? And a lot of things already peaked back in 2021 including the Russell 2000 small caps, and they do not look like they’re going to make a new higher so that is already a divergence. That’s the classic divergence. Large caps keep going up in the last stage that small caps don’t follow the generals without the troops, as they call it. So that’s already and there’s many divergences like that. In the world, Bitcoin is going crazy. Here, Ethereum is falling like a kite. They’re number two, and they can’t keep up. Okay, so Bitcoins, really, the dumb money comes in the most at the end. I hate to call them dumb money, but they’re just the laugh, and they buy the obvious stuff, like Bitcoin or Microsoft or Apple. They don’t buy the smart money picks all types of interesting small caps. They can find some winners and losers and pick the winners. So everything saying we’re getting increasing divergences, increasing new highs, and everybody thinks like it’s going to go further. But this is exactly what long term tops look like. Instead of short term tops, like, you know, 1987 or 2000 those were short term top. 2007 another short term top. So, so this is looking like a long term top to me. So I say get out of real estate as fast as you can. Look at that the hardest, and start getting out of stock. And if we, if we can get through next year and not and we’re back, you know, we’re still at new highs. Then then, you know, you may just have to say, Look, I’m just going to get back in stocks. I’m still going to, I’d still stay away from the real estate, get back in stocks, and then just have a tight trip, you know, but, but so they have made it tough. It would have been a lot easier if this thing would have peaked. I have two cycles that are very clear, and I call Wayne event the late 2007 was the demographic generation spending cycle top, and that happened. That’s why we had all this stimulus and downturn that nobody expected. And the innovation technology cycle peaked in late 2019 early 2020 and that winter cycle goes into 2032 so that’s the only cycle still negative, but that’s the one that always has the bubbles and the leverage in it. So I think this bubble still has plenty of room to burst in the next several years, and I’m rooting for and preaching for do it now. Get it out of the way. The millennials are coming into their boom. We’re only compromising their boom. US aging baby boomers, because we own the assets and they don’t. They’re the winners. The younger people are the winners that we have this shake out. It’s the baby boomers, the older people who own the overvalued financial assets they’re going to lose. Now, if you’re the economy, okay, and you don’t care about John or Jimmy or Susan or Helen, who do you want to win here, the up and coming generation, or the one that’s going to die in the next 10 to 20 years. So what’s favoring the millennials is what’s best for the economy, and that is a crash in financial assets, so they can buy a house again, and they can invest again. What are they going to invest in if they come into their investment years from 50 to 65 with assets they’re not gonna have
Maggie Lake 44:44
anywhere. Yeah, and that’s a really important conversation, and I can’t think of a better place to end this with, that that everyone can go into a bit of soul searching about population and the role demographics are going to play some
Harry Dent 44:58
and talk to your kids you got. You got, you know, millennials talk to them. They’re, they’re the ones that can really benefit from this and do the right thing here that yeah, which means they don’t, they delay buying,
Maggie Lake 45:09
yeah, very interesting stuff. Harry, this has been a really fascinating discussion. Thank you so much for being with us. Okay, thank you, Maggie. If you have any questions about how to navigate the current environment, wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time again. That’s wealthion.com/free thanks so much for joining us. We’ll see you again next time you.
