Speaker 1: Harry Dent, he’s an investor who accurately predicted Japan’s 1989 economic collapse and the subsequent boom in Europe and the US to come, he also predicted the dotcom crash and wrote a best seller in 2009 called The Great Depression Ahead. And recently he’s come out with some strong opinions on the US market and the collapse that he thinks is ahead.
He said, I expect a stock market peak right here. I’d say somewhere between early December and mid January. And we see a two year crash that really continues the crash that started in February. I think that we’re about to see one more crash that takes the stock market to new lows by April. As my forecast between now and April, another 40 percent crash, end quote. So that’s a big statement to make. You can’t just go out and say, I expect a 40 percent market crash by April without some substantial evidence to back you up. So that’s what I want to do in this video. I want to go deeper into his arguments and reasons why he expects this crash. Now, one of the things Dan talks about is the small businesses and zombie companies falling. This is what he said, the David thing early this year, February twenty twenty. I give that a nine to 12 month lag before you feel those small businesses, those zombie companies fall. They don’t go down overnight. Stocks can go down overnight like they did. But bankruptcies and Chapter seven and elevens take time, I think by the first quarter, twenty, twenty one, you’re going to see more companies going under and that’s going to be the trigger. OK, you see small businesses when tough times hit, they don’t just fall over, give up and shut down. No, it’s what they built for years. It’s their full time income. They do everything that they can to keep going. But if your economy is going poorly and people just aren’t willing to spend money, it’s the small businesses that often get hurt the worst and eventually give it enough time of struggling. They shut down then. Thanks. This will be one of the factors that caused the market crash that he’s predicting. The other thing that he mentioned was the zombie companies. Do you guys know much about these? OK, you see, there’s this trend going on in Silicon Valley where the goal is to make a company get as much hype around as possible, as much people investing in it as possible and grow its size as big as they can in order just to sell it. It’s not necessarily about having a great long term sustainable business model. No, it’s just about borrowing money and then selling the company on and making a fortune. Often when you dig into the income statements and the balance sheets of these companies, you see that they’re barely getting by.
They make just enough money to pay their costs and the interest on their debt, but not the actual debt itself. These companies, they do fine in a bull market. They do fine when the economy is ticking along nicely. But when things start to slow down, that’s when they struggle and the holes or the flaws in the company start to get points it out. It says. The great investor Warren Buffett says only when the tide goes out do you discover who’s been swimming naked. And Harry Dent says these companies, they can hold on for a little while, but eventually they will get found out and have to close down. When these small businesses, when these zombie companies start to fall, there will be one of the cause of the crash, at least according to dance, he said. 19 percent of publicly traded companies now called zombie companies are not paying their debt service interest or principal, but those companies are still limping along OK. And quote, however, at some points that they can’t keep going with an unsustainable business model, especially in tough economic times. The other thing Dan talks about is the diminishing returns of short term free money. One of the things that the Fed has been doing to save the economy, I know you guys know this by now is printing money. A comprehensive report came out recently by the WSP finding that the US central bank pumped out more than nine trillion dollars in bailouts since September.
The government’s been giving the stimulus checks to everybody, the money to the companies, big or small, highly in debt or not. You know, what our parents taught us was actually wrong. Money does go on trees. It’s just called the Fed and then points this out, this money printing. US endless giving away of money can only go on for so long, he said, you cannot create growth by constantly printing money, as if work ethic, technology, innovation and all of these things don’t matter. We’ve seen the incredible spending and productivity of the largest generation in history is declining. We’re only living on short term free money and it has diminishing returns. And, you know, it’s just like as if someone was addicted to coffee or alcohol. You can keep drinking it and you have a very good time. At least in the short term, everything will feel amazing. But eventually you have to come down and face reality. It’s the same with stimulus checks. They show everyone a good time and the short term you can have a lot of fun with free money, trust me. But eventually you have to face reality and someone has to pay the price. As Dan said, here’s my forecast. If we don’t see strong weakness in the economy by mid next year showing that all of the stimulus is not enough to put Humpty Dumpty back together, then just don’t listen to me anymore. So, yeah, we can easily say that he is not a fan of America’s economy in twenty twenty one. OK, you see, one of the things that we all need to realize is that consumer spending has changed short term and long term, at least according to dance. So let’s take a look before the pandemic hits people. They weren’t big savers, as I’m sure you guys all know this as well as I do. Most people, when they get their paycheck, they’re not thinking, oh, let me go save that in the bank. They were thinking, let me go shopping. What’s Amazon selling? What do I need new in my house? That’s well known that our culture is big into spending, but the pandemic seems to have shifted things. As you can see, there’s that big spike in both unemployment and savings. People know that they’re not guaranteed to have a job in the next couple of years. So let’s save, save, save as much as possible. And this has a flow on effect because businesses get hurt by it because they lose customers and in particular, as those businesses in certain industries that relied on people being out and about. As Dan said, 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. And commercial real estate may never be the same. And of course, no one’s dumb. We all say this. The government and the Fed, they see this and then they come to the rescue. Don’t worry, we’ve got this problem sorted. We’ll just print and give away more money. As Harry Dent said, ever since 2018 tops, which was the first bubble, we’ve seen every crash take us to 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, end quote. OK, I want to show you guys this will go back a couple of years. There’s a couple of main crashes, corrections that occurred after the ten year bull market. OK, the first was at the start of twenty eighteen, which rebounded to new highs, then another at the end of twenty eighteen. Again, a rebound to new highs. Then obviously you’ve got the major one which occurred at the start of twenty twenty, which as we all know, rebounded to new highs. Dance says a major factor behind all of this, behind these rebounds was the stimulation of the economy by the Fed and the government, the printing of money, the tax cuts, the stimulus, all of these helped the market grow and not necessarily a sustainable way, he said. It’s a reset for the greatest financial asset bubble in history, partially caused by a good economy at first like the roaring 20s, but greatly goosed up by central banks artificially. And the fact that demographic trends here and in East Asia and in Europe, all of the developed countries continue to get worse, especially in the next two to three years. The demographic trend that he’s talking about is the fact that everyone’s getting older. Back when the USA was getting built and growing ridiculously fast, the median age was 28 29. Now it’s 38. Thirty nine. This means two things. First, obviously, they produce less, a lot of older people are retired. They don’t have the same amount of energy as younger people and it results in less production. But also, at least according to dance, it means less spending. According to his data, 46 47 years is the peak age of spending and then it goes down. He said. People enter the workforce at 20. They are at cost. Before that, they go on a spending spree, before they’re 46 47, until their kids leave their nest and then they spend less the rest of their lives. So it’s not just less spending from a pandemic. It’s also less long term spending as part of a natural cycle due to age.
And this is why you’ve got many economists predicting another crash and then a 10, 15, 20 year recovery, not just a short term blip. What do you guys think anyway? Are we in for another big market crash in twenty twenty one, or will the stock market continue passing along as if unrelated to the economy as Harry Dent? Correct. Only time will tell.