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Harry Dent Outlines His Four Most Predicvtive Trends

Renowned Harvard Economist Harry Dent joined Peak Prosperity’s Chris Martenson to reveal his forecasts for the months ahead and discuss how cycle trends are leading us to the point of significant financial downturns. Harry outlines four of the most predictive trends and cycles he uses to forecast different markets and financial assets. Don’t miss Harry’s latest economic predictions for 2017 and on…

Transcript : welcome to crash concept where the 0:04 economy energy and the environment are 0:06 explored up next fresh ideas and 0:09 insights into the fasteners that are 0:10 driving the world is shaping your future 0:12 presenting information you can't afford 0:14 to live without 0:15 here's Chris Martenson welcome to this 0:17 peak prosperity podcast it's January 0:19 2016 2017 and i am your host Chris 0:23 Martenson now as i'm recording this the 0:26 u.s. stock markets are excitedly hitting 0:28 new all-time highs 0:30 the dow is just cracked the 20,000 mark 0:32 in the world equity markets are powering 0:35 to New 17-month highs looking at 0:37 all-time highs as well the narrative is 0:40 that this has something to do with Trump 0:43 although i cannot find anybody who can 0:46 explain to me why Europe's markets 0:48 should be anything but threatened by the 0:50 trade stances of Trump regardless that's 0:53 the narrative being used to explain all 0:55 these seemingly unstoppable stock market 0:58 advances 0:59 however as you already well no the 1:01 explanations put forth in the media to 1:03 explain things are nearly always an 1:06 accurate just plain misleading sometimes 1:08 or just wrong 1:09 my own favorite theory is the stock 1:11 markets are no longer divination 1:14 machines capable of discounting the 1:16 future but merely liquidity gauge is 1:18 telling us that the world's central 1:20 banks have overdone it again important 1:23 too much fuel into the furnace now to 1:26 really understand the probable future 1:29 you have to be rooted in the 1:30 fundamentals always always always and I 1:34 know that fundamentals are out of favor 1:36 right now but trust me they will come 1:39 roaring back they always do today I'm 1:42 very excited to have with us one of the 1:44 world's great economist yes some do 1:46 exist and a master of the fundamentals 1:49 carry dent Harry is the author of the 1:52 sale of a lifetime and editor of the 1:54 free newsletter economy and markets 1:56 which can be found at Harry dent dot-com 2:00 mr. debt has correctly called nearly 2:03 every major economic trend over the past 2:05 30 years including the 1991 recession 2:08 Japan's lost decade the 2001 tech crash 2:11 the bull market and housing boom 2:13 last decade and most recently the credit 2:16 in the housing bubble now he's saying 2:19 that US equities are going to quote 2:21 crash to a degree we haven't seen since 2:25 the Great Depression and quote he has 2:27 recently predicted a drop in the down to 2:29 6,000 and quote when the dust settles it 2:32 will eventually plummet to 3300 long the 2:36 wait will see another real estate 2:37 collapse 2:38 gold will sink to 750 dollars an ounce 2:41 and unemployment will skyrocket it's 2:43 going to get ugly and quote certainly 2:46 provocative use that i know we are all 2:49 excited to explore with mr. dent Harry 2:51 welcome to the program a nice to be here 2:53 Chris 2:54 well thanks not hearing before we dive 2:55 into current events and your predictions 2:58 I would love for you to tell our 2:59 listeners about your methodology so they 3:01 understand the basis for your views and 3:03 predictions 3:05 what's your framework well you know 3:07 first what I do Chris I don't study 3:09 government policies because government's 3:11 react to what the real economy does in 3:14 the real economy eighty percent of it to 3:16 be exact is driven by consumers and 3:18 businesses and that's mostly consumer 3:20 spending so I definitely i look at the 3:22 predictable things people do as they age 3:25 and I look at things that impact 3:27 consumer spending and business growth 3:29 everything from the aging of the 3:31 population and people get you know it's 3:33 been more money and it there mid mid to 3:35 late forties get more productive his 3:38 workers i look at technology cycles and 3:40 when technologies come together most 3:42 favorably for business and productivity 3:45 of workers and and these things are 3:49 crystal clear and they're very easy to 3:51 forecast what I tell people against what 3:54 economist say the long term is easy to 3:57 forecast and see it's the short term it 4:00 can be incredibly difficult because more 4:03 and more cycles come in as you get more 4:04 short-term more and more political 4:06 factors i mean i mean just imagine how 4:09 hard it would have been an even the 4:11 smartest money I track didn't get this 4:13 one to predict the Donald Trump number 4:15 one would win against clear polls that 4:18 said Hillary had it in the bag eighty 4:20 percent chance of winning and then if he 4:22 did win by surprise would go against all 4:25 the pundits saying oh my gosh 4:27 he's going to create so much uncertainty 4:28 the markets are going to crash or go 4:30 down the opposite happened that that's 4:33 how difficult the short term can be to 4:35 predict what the long-term yes I could 4:38 see that Japan's baby boom generation 4:40 was peeking decades ahead of the rest of 4:43 the world because it was born my 4:45 primarily at peak just before and after 4:48 World War two art and in the japan was 4:50 going to crash in the nineties when the 4:52 rest of the world's baby boomers where 4:54 they're strongest spending stages in the 4:56 United States and Europe and other 4:59 countries and and you know we could see 5:02 that housing was gonna peek ahead of the 5:05 economy because housing spending peaks 5:07 ahead of peak spending and so i 5:09 summarize the most important indicators 5:12 i have I got into a tease 5:14 I is the first one was suspending way 5:16 it's simply a 46-year lag on the birth 5:20 index which I adjust for immigrants 5:23 legal and illegal that are here today 5:24 and when they were born on average and 5:27 and 46 years when the average family 5:31 spends the most money in their life and 5:33 then we get yearly updates from the 5:36 government and the Consumer Expenditure 5:37 survey on not only total spending and by 5:41 age but from cradle turn to nursing 5:44 homes 5:45 you know what i can tell you when potato 5:46 chips peak that's age 42 when cruise 5:50 ship travel piece that's age 70 nursing 5:53 homes are going to be the hottest thing 5:54 for the next three decades we've ever 5:56 seen because the baby boomers are just 5:59 about to start entering that last thing 6:01 that peeks at age 84 and largely for 6:04 women so we look at demographics but i 6:07 also look at geo political cycles on 6:10 time by the way the demographics which 6:12 we peeped predicted way back in the late 6:14 eighties when Japan was declining we're 6:16 predicting that we said hey the us baby 6:18 boomers not going to peak until 2007 and 6:21 then our economy will weaken as it did 6:24 on that 46-year leg in 2008 we've been 6:27 living off of QE ever since but there 6:30 was a cycle that I had to kind of come 6:32 up with because the second lumen bubble 6:35 from 2002 2007 which we predicted but I 6:39 i thought it would be much stronger 6:40 or might look much like the first bubble 6:42 from 95 to 2,000 I had to go back and 6:46 dig and find out why I found a 6:47 geopolitical cycle that it's positive 6:50 every 17 18 years you know 6:53 kumbaya in the world and then it's 6:55 negative well that cycle hit in 2001 for 6:58 obvious reasons 911 and has been 7:00 terrible ever since that cycle doesn't 7:03 bottom until around 2020 and then things 7:07 get more favorable again i've also track 7:09 a technology cycle i do you just look 7:12 back I mean this is one of the most 7:14 clock light every 45 years you know the 7:17 steam engine came and then peak and its 7:20 impact in factories and then steamship 7:22 speak on 1875 and then railroads peak in 7:26 1920 and automobiles saturation and 7:29 super highways and 1965 and now recently 7:32 the internet we've all got the internet 7:34 we've all got google email broadband all 7:37 these things and smartphones and stuff 7:39 and now innovations down to social media 7:42 and to me facebook is great but it but 7:44 it's entertainment dancing cats and dogs 7:47 it's not not going to triple the 7:49 productivity my research business like 7:51 Google and email did and then finally 7:53 there's a roughly ten year boom-bust 7:56 cycle which I have a secret way of 7:58 forecasting which nobody's aware of our 8:01 and and here's the point on Chris all 8:06 four of these cycles point down now 11 8:10 at the next is Pete in the last several 8:12 years all four point down into early 8:15 2020 or so that's only happened in the 8:18 early to mid seventies when we had were 8:20 stock crashes back then and an OPEC 8:23 immuno cartels and always thought the 8:25 worst crisis since the 1930s and of 8:28 course in the early thirties we had this 8:30 same complete figuration of all four of 8:33 these fundamental cycles that taken me 8:35 30 years to hone and say decent for that 8:38 matter 8:39 another problem economist chris is very 8:41 simple 8:42 they look at so many indicators and 8:44 short-term stuff that they can't see the 8:46 forest for the trees that's why they 8:47 missed these long-term trends that are 8:49 so predictable so the next three years 8:52 is likely to be very very light 8:54 really be the worst we see in our 8:57 lifetimes it will be more like the early 8:59 nineteen thirties and and when stock 9:02 shit this sort of debt bubble and 9:03 financial asset bubbles crashes which 9:06 they only do once in a lifetime like the 9:08 early 1930s stocks are going to be down 9:11 seventy eighty ninety percent that 9:12 should be expected in this stage of the 9:15 cycle after such a bubble so I've gone 9:18 from being the most bullish economist in 9:21 the eighties and nineties to now one of 9:23 the most bearish because what goes up 9:24 goes down and that's what cycles do in 9:28 in at heart I'm of cycle guy and 9:31 demographics just happens to be the most 9:33 important cycle in this modern era sense 9:37 and only sense we've had a middle class 9:40 format that the only really since world 9:42 war two has the everyday person mattered 9:46 so much because they have fifty sixty 9:48 thousand incomes and in can buy homes 9:51 over 30 years and borrow a lot of money 9:53 a distant this was not the case before 9:56 the Great Depression and World War two 9:58 so that's a brief summary of my 10:01 fundamentals and why i am telling people 10:05 this is not the time to believe in this 10:07 Trump rally and I'll go into that i'll 10:09 show you what that cannot last 10:12 and he cannot create four percent growth 10:13 and people should be getting real safe 10:16 especially for the next three years now 10:18 after that and the point of this book 10:19 new books available i think it's going 10:22 to be one opportunity at the next to buy 10:24 stocks or emerging market stocks or 10:26 commodities or gold or real estate and 10:29 we also go into which areas are going to 10:31 be favored by demographics and our 10:33 cycles but there is going to be you're 10:36 never going to see prices this low if 10:39 you protect your capital now and 10:41 converted to cash or safe long-term 10:44 high-quality bonds then you are going to 10:47 be able to take advantage of the Civil 10:48 lifetime if you don't you're going to 10:50 see your financial assets wiped out a 10:54 good bit more than they were in two 10:55 thousand eight and nine and the markets 10:57 aren't going to come running back to new 10:59 highs next time now hear water 11:02 prerogative and very interesting 11:03 information in there 11:05 let me start here with this then because 11:06 I think we can build off this nicely a 11:09 very open question for myself my 11:12 listeners all over the world as well 11:14 obviously is is this going to be 11:15 inflation or is this deflation you're 11:17 talking deflation that's what I'm 11:19 hearing a fallen in the financial asset 11:21 prices so when I have somebody like John 11:23 husband on or grant williams or other 11:25 astute fed observers axel merk people 11:27 like that who know the Fed the central 11:29 bank's well they say they committed some 11:31 of the most egregious policy blunders 11:33 ever because they tried to do things 11:34 like prevent the very cycle you're 11:37 talking about at least the business 11:38 cycle and assets cycles they want to see 11:40 if they can smooth those out prevent 11:42 them from going bust all of that and and 11:45 at this point when we try and resolve 11:47 the inflation vs deflation question 11:49 there are some who say that when this 11:51 next sort of deflationary wave comes the 11:53 central banks will they know what to do 11:56 they're just going to keep printing 11:58 you're saying they're going to lose that 12:00 battle don't have that right yes it and 12:04 i'll tell you why they've already 12:05 printed 13 trillion dollars globally and 12:08 of course Japan and Europe are still 12:10 going at it rapid rates especially Japan 12:13 and guess what we've gotten out of that 12:15 0212 2% at best inflation and all the 12:19 developed countries that are printing 12:21 all this money it's because this money 12:22 is being printed to stop and and Kane 12:27 deflation because deflation means dead 12:29 is deleveraging banks are failing 12:31 businesses are failing prices are going 12:33 down that squeezes margin it's the gets 12:36 that's what happened in the Great 12:37 Depression deflation is a wrecking ball 12:40 now the biggest problem here as you're 12:43 saying these other experts were 12:44 correctly saying this is terrible policy 12:47 to try to smooth out these cycles and 12:50 the economy the economy grows through 12:53 the dynamics of opposite free market 12:55 capitalism is the opposite of democracy 12:58 just like men and women are opposites 13:00 and you know positive and negative poles 13:03 on a battery that's how you create 13:04 energy and dynamic growth inflation and 13:08 deflation are part of this cycle booms 13:10 and busts third part of these cycles in 13:13 the bust in an inflationary and 13:15 deflationary x is when we get the 13:18 greatest enemy 13:18 nations that then move mainstream with 13:21 the next demographic boom 13:23 so this dynamic is necessary and by 13:25 stopping this dynamic and just creating 13:28 a coma economy where Japan has been 13:30 growing 0% now for 26 years and the US 13:34 has been growing it two percent now for 13:37 eight years and that's not going to even 13:40 last with demographics getting worth you 13:42 just basically freeze innovation you 13:44 kill the Golden Goose i call it so this 13:46 is this is terrible policy but also they 13:49 are fighting such persistent long-term 13:52 downward demographic and even 13:54 technological innovation trends and all 13:57 this sort of stopped 13:58 I mean retirement here's what happens in 14:00 an economy for the first time in history 14:02 where you have the baby boom generation 14:04 in most developed countries larger than 14:08 the millennial generation following them 14:10 as we move forward you get to the point 14:12 where there's more baby boomers retiring 14:14 the Millennials entering the workforce 14:16 all the workforce is not growing which 14:19 it's not it's negative for the next 14:21 several years then it's just above 14:22 fairly positive for decades to come how 14:25 do you grow four percent with that 14:27 productivity has been going down ever 14:29 since the baby boomers started to 14:31 retiring in the very late nineteen 14:33 nineties and it's gonna get it's gone 14:35 from sixty-seven percent now 62 and a 14:38 half percent and by the time they fully 14:40 retired by 2024 it's going to be fifty 14:43 eight percent by projector we're going 14:45 to lose another four and a half million 14:46 of our workforce how do you grow at four 14:49 percent with a declining workforce for 14:51 decades to come 14:52 how do you grow it it near zero 14:55 productivity were the lowest 14:56 productivity rates since the Bob Hope 14:58 generation was retiring in mass in the 15:00 early eighties them down of their cycle 15:03 and it's going to get worse so so this 15:06 Trump think he's gonna like just shift 15:08 around the pie and in ship taxes from 15:10 the government to the consumer and 15:12 businesses you know in and cut off some 15:15 regulations and things like that built 15:17 an infrastructure this is not going to 15:19 happen you're not going to create four 15:21 percent growth its demographically 15:23 impossible Japan has been stimulating 15:25 much longer than us at three times the 15:28 rate of quantitative easing in the last 15:30 several years and they're still 15:32 long-term growing 0 with 0 inflation and 15:36 0 productivity and they would have had 15:38 deeply shin and bank failures if they 15:41 had not printed so much money for the 15:43 money being printed is to keep the banks 15:45 from falling over like the Great 15:47 Depression but the price of that you go 15:49 into a coma economy like Japan you never 15:52 go from what I call the winter 15:53 deleveraging deflationary season back to 15:56 the next spring mild inflation boom as 15:59 we get going from the 30 to 40 50 60 so 16:02 this is horrible policy I if we don't 16:05 let this crisis happened and let some 16:07 banks fail and some companies fail and 16:08 gone to this we'd be over the worst by 16:11 now the great depression the worst of it 16:13 was over in three years and then we did 16:16 nothing but grow for decades after that 16:19 because we lifted a lot of debt offer 16:21 consumers and businesses when banks fail 16:23 it's because they have bad loans they 16:25 have to write them down or write them 16:27 off and then that that's why they go 16:29 under and then the stronger bank take 16:31 over their assets and you reorganize the 16:33 banking system but you come out of it 16:34 with far less debt japan now has more 16:38 depth than ever we have more depth than 16:39 ever and and our deficit our government 16:42 deficit which is the smallest part of 16:44 our death private debts much larger is 16:46 is doubling every eight years has 16:49 anybody noticed this 5 to 10 trillion 16:51 under Bush 10 to 20 under Obama it's 16:54 gonna be 20 to 40 over the next two 16:56 administrations and I don't think it's 16:58 gonna be Donald Trump I said when he got 16:59 elected I i would not be surprised if he 17:02 doesn't last the first year either 17:04 because he does something so stupid that 17:08 he kind of gets pushed out or in peace 17:10 or he gets shocked if anybody's going to 17:12 get shot people who shake up things and 17:14 he's shaking up things more than anybody 17:15 in history the most rapid rate people 17:18 who shake up things like Reagan like 17:20 Kennedy like Lincoln often get shot 17:25 well now there's a this decision we can 17:29 feel the pressure is building right so 17:30 you said we got nothing for all of our 17:32 queue is not quite right we got the 17:33 world not weekend to four percent growth 17:36 we wouldn't had in week we did stop a 17:39 banking system collapse like the 30 2008 17:42 look just like 93 no I i get Republicans 17:45 say that all 17:45 find me Chris you know Terry this 17:47 quantitative easing did nothing oh no it 17:50 it did a lot the problem is there's a 17:52 big price for it kills the whole free 17:54 market system and and and kills free 17:57 markets in general they did the central 18:00 banks have taken over the bond markets 18:02 and push down long-term risk free rate 18:05 and everything else real estate bonds on 18:09 stocks are heavily impacted by the 18:12 sub-zero rates hope not just impacted 18:16 but i'll give you the other thing that I 18:17 was heading towards is that it also gave 18:20 us the largest wealth gap in all of 18:22 history you know last year 62 people had 18:25 as much well it's half the world this 18:27 year that number is eight right 18:29 this breathe sort of social injustice 18:31 and we're primates for humans like we 18:33 hate unfairness this is deeply unfair 18:35 that the central banks are printing out 18:37 of thin air and its really 18:38 preferentially showing up in a very 18:39 small set of pocket book that's not 18:42 really good for the social experiments 18:43 we have a lot of tensions around all of 18:46 this but it lets talk about what hasn't 18:47 done it hasn't led to a real resurgence 18:50 in corporate R&D and the next wave of 18:52 investments that are going to do great 18:54 things for growth or future economy or 18:56 productivity we've got you know 18:58 financial engineering we've got 18:59 speculation we've got prop trading we 19:01 got listen Rome went down this path you 19:03 debase your current so you just printed 19:05 out of thin air out here you know you 19:06 know make your coins lesser and lesser 19:08 actual metal content and people catch on 19:12 we're smart we go hey if that's the game 19:14 i'll do this all out why would i expend 19:16 effort trying to create real new valued 19:19 products and services it's risky and 19:21 it's hard work i'll just go over here 19:22 into this a highly speculative arena 19:24 pool knowing that the central bank has 19:26 got my back 19:27 they're going to bail me out if I really 19:28 screw up here and make bad enough that's 19:30 right i just thought why not just like 19:32 not slip ons and speculated tech stocks 19:35 and I know exactly it's just something I 19:38 think economy its artificial it's 19:40 growing for the wrong reasons and all it 19:43 has created and people keep saying all 19:45 the feds going to hit massive inflation 19:47 at some point no they're not the problem 19:49 with the feds policies what's going to 19:51 kill them and defeat this is all they've 19:53 done is create even greater bubbles in 19:56 debt and in financial asks that's real 19:59 state and stocks and everything then we 20:00 had in 2007 and they're going to burst 20:03 again bubbles only birth and they don't 20:05 even need something big to happen real 20:08 estate started going down before the 20:10 economy went down before the subprime 20:12 crisis got nasty because it got too 20:15 expensive and baby boomers were running 20:18 out of their home buying cycle so 20:21 bumbles always burst and so that's the 20:24 danger here is what's going to trigger 20:26 this next bubble I mean a banking crisis 20:29 is already brewing big-time worse than 20:31 greece in southern Europe and Italy 20:33 Germany has worse demographics than the 20:36 Japanese had going in the nineteen 20:38 nineties in the decade ahead and 20:40 everybody thinks Germany's going to be 20:42 the strongest country in Europe that 20:44 holds it together and Deutsche Bank is 20:46 going down you know like a flaming plane 20:48 already so that china's got bubbles in 20:52 real estate that are so extreme they're 20:54 gonna have to burst in the next few 20:56 years and when that happens you're going 20:58 to trigger a tsunami around the world in 21:01 real estate crashes so so this thing is 21:03 not gonna last much longer and these 21:06 bubbles are going to burst and that's 21:07 the price we're gonna pay for this free 21:10 money something for nothing economy were 21:13 like you say people get rid of the rich 21:15 get extremely Richard this does favor 21:18 and it's not the top 1% I look at it the 21:21 top pointone percentage that runaway may 21:24 have as much wealth as the rest of the 21:26 one percent put together these are the 21:29 people making the most money off of 21:31 three money because they can leverage 21:33 and they have the money to invest in 21:35 these financial assets and and they're 21:38 the ones that benefit while homer 21:40 simpson has very little in the markets 21:42 and only their home and of course that 21:44 home got killed in in the last great 21:47 recession and it'll get killed worse 21:49 again so you're right this is income 21:51 inequality off-the-charts that's exactly 21:54 what the economy looked like in 1929 21:56 before the Great Depression not just the 21:59 peak of a generation spending not just 22:01 the debt bubble not just financial asset 22:03 bubbles but we had the same one percent 22:07 of people controlling fifty percent of 22:08 the wealth are just like we have now and 22:11 it's kitty getting even 22:12 so yeah this is not sustainable period 22:15 and when it crashes it's going to be 22:17 worse than ever 22:18 I mean all they've done is create a 22:20 bigger bubble we've added fifty seven 22:23 trillion more debt around the world you 22:26 know to the hundred and fifty trillion 22:27 we had at the top of the last bubble and 22:30 most of this in the emerging world that 22:32 which is the least stable and is getting 22:34 crushed by crashing commodities prices 22:38 I mean what we got the worst downturn 22:40 unconvinced next three years worst 22:42 financial crisis in bubble burst of our 22:45 lifetimes and when we will not see 22:48 something that's bad against oh hey 22:50 stocks are way over value got this very 22:53 irrational trump rally which I call the 22:55 final blow off phase i don't think it 22:58 lasts past July but i do think it goes 23:00 higher i think we're going to see dr. at 23:02 least ten percent higher from here 23:04 before the economy figures out that we 23:07 can't grow at four percent no matter 23:09 what does crazy person does annie is a 23:11 crazy person he may be smart a lot of 23:13 ways but he is crazy any psychologist 23:15 would mark him off on a few things right 23:18 away arm so when adverse people going to 23:22 be surprised and in one of the things I 23:24 born people most crisp yet people say 23:26 well guys I don't want to get out of 23:28 this bubble bee 23:29 yeah maybe it's a bubble but it keeps 23:30 going up here's the problem with bubbles 23:33 they're going to go down typically 23:34 eighty percent 7290 wherein especially 23:38 in stocks and commodities but half of 23:40 that crash and most of bubbles in 23:41 history has come in the first two to 23:44 three months when the markets finally 23:46 get it and the smart money runs like 23:48 crazy and the dumb money and most people 23:50 are in upholding stocks to go down forty 23:52 to forty-five percent in two to three 23:54 months this happen in 29 crashed it 23:57 happens in the nikkei crash and in 1990 24:01 it happened in the tech rec on in early 24:04 two thousand and it happened just last 24:07 year you can see this just last year 24:09 China's second stock bubble burst 24:13 forty-five percent in the first three 24:15 months in late 2015 and you had everyday 24:17 household lost everything they were 24:20 getting money on margin stuff the 24:22 government encouraged this stupidly to 24:24 try to offset 24:25 real estate slow down and then people 24:27 just got wiped out so that's the danger 24:29 if you hold out right now I think this 24:32 Trump rally has enough behind it that 24:35 people are probably okay into the summer 24:37 but i tell you it we see this market 24:39 keep going up into the summer and we we 24:41 start approaching that classic crash 24:44 season from late july too late October 24:46 i'm going to tell people you've got to 24:48 get out you just got to be safe if you 24:51 miss another five percent and hey you 24:53 could have gotten slammed you know forty 24:56 percent in three months so better to do 24:58 that now you that at the heart of all of 25:02 this of course so so you've got these 25:03 big trends you name these four big 25:05 trends and they have a very good both 25:08 explanatory and predictive power and 25:10 makes sense right we can say well what 25:11 is an economy its wealth people buying 25:13 and consistently stuff so maybe we 25:15 should track the people i get it now 25:17 what you talked about those with the 25:18 debt the federal debt United States 25:20 doubling every eight years using my my 25:23 handy-dandy rule of 72 that's a 25:25 9-percent compounded annual rate of 25:28 growth so nine percent alright and 25:30 verses that reverses gdp exactly it's 25:33 been growing anywhere with 2% recently 25:35 in 33 and a person event I mean wewe and 25:38 that's one starts statistically quote 25:40 from 1983 2008 in the baby boom debt 25:44 grew at 2.6 times the rate of gdp any 25:48 economist that does not see that turning 25:50 into a debt crisis down the road should 25:52 not be an economist and should be barred 25:55 from practicing the most retarded and 25:57 say hold this 25:58 ok it's not okay well it's not in so you 26:02 know that the Cunard I have to bat 26:04 around all the time somebody say well so 26:06 it lets you japan it's the ultimate 26:07 Petrie to show this why that country 26:09 hasn't gone down in flames right now I 26:11 don't understand because the total 26:13 amount of debt that they're carrying 26:14 right now per household is about a 26:16 million dollars per household write its 26:19 result two charts and that's what I'm 26:20 looking at the total debt of the country 26:22 people over Chris they owe it to 26:24 themselves 26:25 what do you say to that one Harry well 26:28 first of all the greatest amount of debt 26:30 in our economy all economies developed 26:33 world is private debt 3 23 times 26:36 typically government debt as much as 26:39 four times in the boom and and that is 26:41 owed to banks and then people like that 26:44 and they go under or you go under when 26:47 you can't pay it or you lose your house 26:49 or you buy stocks on margin and you lose 26:52 everything so it's not rude and 26:55 governors themselves ok but you know a 26:57 lot of his death is supposed to be used 27:00 I mean our government finance be used to 27:03 pay us social security and health care 27:05 which is underfunded by guest get this 27:08 about 70 trillion dollars just like a 27:11 lot of pension fans fun plans have to 27:14 report the amount of pensions or or 27:17 healthcare benefits they promised their 27:19 workers that has not been funded in an 27:22 investment in a conservative investment 27:24 plan to meet those the government 70 27:26 trillion unfunded so they get in in in 27:30 in a debt crisis or they can't grow 27:32 their debt further because nobody wants 27:34 to buy their bonds anymore because their 27:35 debt ratios are hot 27:36 how are they how are they going to pay 27:39 our benefits when they're not gonna be 27:40 able to pay them despite the debt crisis 27:42 but that only makes it worse so it's it 27:44 served to say oh we owe it to ourselves 27:48 just let me know studies show that when 27:50 government debt gets above ninety two 27:52 hundred percent it starts to slow gdp 27:55 growth it's a burden on the economy it's 27:57 the same thing when household debt you 28:00 know it gets to you know a hundred 28:02 percent or more of gdp it slows their 28:06 spending because they're paying more and 28:08 more interest in the government's paying 28:09 more and more interest than right now it 28:12 is is we talked about earlier by 28:14 suppressing the artificially pushing 28:17 their bond rage down 20 short term and 28:21 more like two percent long-term instead 28:23 of typically five to six percent with 28:25 the inflation rate so that they're 28:26 cheating they're able to to handle this 28:31 debt burden short-term because they push 28:33 they buy their own bonds and push race 28:35 down 28:35 well that's cheating and that's not 28:36 gonna laugh in a long-term we're going 28:38 to go back to you know treasury bonds 28:41 being more like five to six percent and 28:44 then they did japan would be bankrupt 28:46 overnight their entire budget would be 28:48 interest if we just went back to normal 28:51 you know 28:53 weight percent inflation in five to six 28:55 percent long-term bonds they be bankrupt 28:57 overnight and and we would have interest 29:00 would start to consume a huge portion of 29:03 our government budget so so no this this 29:07 is not sustainable and and it's just 29:09 another ridiculous bubble talk when you 29:11 get in bubbles 29:12 I'll tell you why people are stupid 29:14 that's what these books about Chris 29:16 people never see bubbles because they 29:18 don't want to they're in denial they're 29:20 getting something for nothing 29:21 their house is going up at fifteen 29:23 percent a year instead of the normal 29:25 three percent a year with inflation 29:27 stocks are going up at twenty percent 29:29 higher year instead of the normal seven 29:31 percent or something like that and in 29:33 and in their mortgages costing them four 29:36 percent instead of six to seven percent 29:38 in the car my car loans and leases are 29:40 two percent now they used to be at six 29:43 percent we're getting a free lunch 29:45 people love that it makes them feel good 29:47 make sure you feel high when somebody 29:50 like me says sorry folks we're in a 29:52 death bubble in a financial asset bubble 29:55 and every one of these that looks like 29:57 this in history has busted and it busted 29:59 horribly wanted to have people got wiped 30:02 out people want to shoot me they want to 30:04 shoot the messenger 30:05 they don't want to hear at CNBC Kate's 30:08 me some people in fox business like me 30:10 because they see they understand the 30:14 debt is not good like this but most 30:17 people just don't want to hear it now is 30:20 you know let's let's section the people 30:22 out a little bit there was this really 30:23 interesting article just came out the 30:24 most recent issue of the new yorker 30:26 where the very wealthy including tech 30:29 mogul who really made it like the 30:30 startup founder co founder of reddit but 30:33 as well as many hedge fund managers 30:35 private-equity people they're very 30:38 wealthy people they've obviously got 30:39 access very good information and they're 30:41 they're buying bunkers in New Zealand so 30:44 it here's the thing i run into here yet 30:46 is that the retail level like that the 30:48 average person on the street very hard 30:50 to communicate some of the stuff to 30:51 definitely shooting the messenger and 30:53 people who really don't want to believe 30:54 otherwise but the people who are the 30:56 most worried right now are the people 30:58 who have the most experience in the 30:59 financial markets 31:00 I mean you know I talked with guys and 31:02 gals with decades of experience you know 31:03 running headphones for 30 years and they 31:05 look at all of this 31:06 is a dis is a mess and it worries them 31:09 because they're worried that when this 31:11 next turn comes it's not going to be 31:13 like your grandpa has turned where 31:14 humans and little red orange and red 31:16 coats start trading pieces of paper and 31:18 things get a little out of hand these 31:19 are computers making decisions at 31:22 Lightspeed operating in microseconds 31:25 saying uh we're out of this market 31:27 potentially so they're worried about 31:28 these flash crashes that we see in small 31:31 markets really somehow you know 31:33 perpetuating across the larger market 31:35 structure that is I think we've had an 31:37 SEC asleep at the wheel we I believe 31:39 that you know are using cell arnoc and 31:42 another guy's is demonstrating that 31:44 these are broken markets in many 31:46 respects because we don't really have 31:48 the same governing structures on them 31:50 that we used to it it's uh it's a little 31:53 bit worrisome and maybe you've seen this 31:55 as well you know when you see something 31:57 like the dollar or the pound for us 31:59 treasuries move by whole percentage 32:01 points in a matter of minutes you know 32:03 6789 Sigma move shouldn't happen once 32:06 every ten million to a billion year kind 32:08 of stuff it just speaks to me that this 32:11 is a reason to be edgy and the edgy as 32:13 people I know are the ones who are the 32:15 most sophisticated in these markets and 32:17 I don't know that most people have 32:18 really connected those dots yet 32:22 yeah that's that that's what i call the 32:23 smart money and and and that's what I 32:26 track i look at the commitment of 32:28 traders got small percentage of traders 32:30 who with the commercial headers always 32:33 tend to be on the right side of the 32:34 market at a major top there hedged 32:37 bearish and a major bottom their heads 32:40 bullish and that's the people in and 32:42 these people are are you know are the 32:45 people who understand this and are 32:47 saying oh my god this thing's gotta go 32:49 down there the people who understand the 32:51 higher market goes the more vulnerable 32:53 it is for most investors the moment the 32:56 longer they see real estate or stocks go 32:59 up the more confident they get that they 33:01 won't fall and that's different that's 33:04 that's a total misunderstanding of 33:06 history and investing so you're right 33:09 only a small percentage of people get 33:11 this and it's the same people i talked 33:13 to I i just i'm just not going to be a 33:17 mainstream forecaster at this point 33:19 because I'm 33:20 everybody's hoping this works out and 33:22 everybody's much as people no trumps got 33:25 the impulse control of a grease fire and 33:27 he's kind of a crazy person they're like 33:29 well but we hope he does some stuff and 33:32 turns it takes us back to four percent 33:33 they're hoping anybody that looks at the 33:36 fundamentals anybody that looks at 33:38 cycles debt cycles financial assets 33:40 cycle anybody that looks at bubble this 33:42 whole book has so many charts showing 33:45 that all these bubbles look alike they 33:47 look like the male orgasm chart from my 33:50 own masters and Johnson's back in the 33:52 late fifties and that's exactly what 33:54 they are they're like a financial orgasm 33:56 and orgasms can only go so far till it 33:59 gets too intense and then when they end 34:01 they end rapidly and that's what happens 34:05 with bubbles so I go out of my way to 34:06 say look everybody politicians are 34:09 telling you that's not a bubble goldman 34:10 sachs is saying it's not a bubble 34:12 economist are saying it's not a bubble 34:14 CNBC saying it's not a bubble don't 34:17 listen to these people this looks like a 34:19 bubble quacks like a bobble walks like a 34:21 bubble this is a bubble in bubbles only 34:24 do one thing they don't have soft 34:26 landing they burst violently in the 34:28 typical stock bubble as i said earlier 34:30 is eighty percent that's how much cheap 34:32 and ultimately went down in the Great 34:35 Depression of eighty-nine percent for 34:36 the US stock market we were kinda like 34:38 the China that up-and-coming coming most 34:41 leverage country back then so China 34:43 probably will be ninety percent us will 34:46 probably eighty percent and and that's 34:48 not something you want to sit through 34:50 because after that bubble burst in the 34:52 early thirties stocks took 24 years to 34:55 get back to those 1929 highs you'll be 34:59 dead as a retiree if you wait for stud 35:01 you listen to your stockbroker and say 35:03 well he'll say stocks Goldberg no always 35:06 come back and we have you diversified I 35:08 also ask investors to look at your new 35:10 2008 crash portfolio 35:12 how did diversification work for you 35:14 there when real estate went down 35:16 commodities went down gold and silver 35:18 included every stock market in the world 35:20 emerging markets developed market small 35:23 cats large jobs all went down 35:26 how did that diversification work for 35:28 you it didn't 35:29 well Harry I got to get to the heart of 35:31 the sense i'm going to assume that 35:33 that the safest investment here in your 35:36 view is cash that I'm getting not 35:38 japanese yen either but US dollars is 35:40 that is that fair 35:42 Jack cash and US dollars because the US 35:45 dollar versus other currencies was the 35:47 only one that really rallied and then 35:49 when 2008 meltdown happened it went up 35:51 twenty-seven percent in three or four 35:53 months not because we have good monetary 35:56 policies where the best house in a bad 35:58 neighborhood demographically and we have 36:01 less quantitative easing cumulative than 36:04 Europe and way way less than Japan so 36:07 the WF & dollars but also the highest 36:10 quality bonds in the Great Depression 36:12 for that entire decade where stocks and 36:16 real estate and commodities and 36:17 everything else got decimated the the 36:20 long-term treasury bonds and triple-a 36:22 corporate bonds the highest quality 36:24 long-term bonds roughly doubled in value 36:27 which include their dividends and they 36:30 take higher dividends or there are now 36:33 with with a bounce and heels are paying 36:35 a higher higher dividends and stock and 36:37 I think these years could bounce a 36:38 little farther later this year so yeah 36:41 it's the safest assets highest-quality 36:43 bonds you can bet on the US dollar going 36:46 up at least in the early stage of the 36:47 crisis new ups and ETF attracts that the 36:50 US dollars at a hundred it's forty-five 36:53 percent higher than when the great 36:55 recession started in january 2008 and it 36:57 bottom and i think it's going to at 36:59 least a hundred twenty so US dollar US 37:02 Dollar Index or dollar bullish funds 37:04 highest-quality US government and in 37:08 triple-a corporate bonds and just good 37:10 old cast nothing wrong with having 37:12 liquid cash that everytime assets go 37:15 down you can buy more of them and you've 37:17 got the cast to do it because don't 37:18 think anybody's going to lend you money 37:20 to buy stocks are real estate at the 37:22 bottom of this next crisis you gotta 37:24 have cash or or high quality stuff and 37:27 you can sell those bonds any day and 37:29 guess and in these bonds not only have 37:31 could get three to three-and-a-half 37:33 percent yield on something safe they 37:36 appreciate when deflation brings those 37:38 yields back down the bonds appreciated 37:41 from 1931 in 1941 a 10-year bull market 37:45 after stocks and everything crashed so 37:47 so the bonds that what bonds of the one 37:50 bubble that are getting a setback now 37:52 but the one bubble that will be the last 37:54 burst many years from now i agree with 37:57 that now this brings me to my final 37:58 question which is really about gold and 38:00 I'm not gold and silver are two separate 38:02 words to me I don't lump them together 38:03 gold the monetary asset to me and that's 38:06 primarily why i like it and so here's 38:07 the question as we get into this 38:10 deflationary aspect which I agree with 38:12 you feel like like the end stage to all 38:13 of this 38:14 I no longer trust of the statements of 38:18 any of the major commercial banks i 38:20 think there's going to be an enormous 38:21 banking crisis with that so when you say 38:23 cash if that means cash in the bank i 38:25 think we have to understand which bank 38:27 matters because not all are created 38:28 equal some of them are carrying 38:29 derivatives that nobody can understand 38:31 at this point and gold to me is that is 38:33 potentially a means of having a monetary 38:36 assets outside of a system that frankly 38:38 I've lost a lot of faith in if not all 38:41 of my trust especially with the baling 38:43 provisions and the sneaky war on cash 38:46 stuff courtesy of summers and rode off 38:47 and all those other casting of slimy 38:49 characters and whatnot but but it feels 38:51 to me like like people are being herded 38:53 into a banking system that is just like 38:55 the last corral you ever want to get 38:57 caught in right potentially so when you 38:59 say cash 39:00 what do you mean by that and second 39:01 halves gold into that story 39:03 okay first of all very good question you 39:06 have to have your cash for your safe 39:08 bonds or your dollar index or whatever 39:10 in a brokerage account whether it being 39:13 a bank or brokerage firm I i like to be 39:15 with online brokerage firms because 39:18 they're they're not banks that also lend 39:20 money against real estate and can can 39:22 get crippled and stuff but it if you 39:24 have it in the bank in a checking 39:26 account or savings account they do lend 39:28 that money out into these bubbles 39:30 especially in the real estate and when 39:32 they lose that money your money may not 39:34 be will not be there as it wasn't in in 39:36 early 30 so if you're in a brokerage 39:38 account they can't lend against that 39:40 even if it's in a bank 39:42 I'd rather have it i have my money you 39:44 know with schwab or or or somebody like 39:47 Scottrade because they're not in the 39:49 business of lending or investment 39:51 banking and all this sort of stuff are 39:54 so that's first thing second thing gold 39:57 Gold correlates with one thing long-term 39:59 and one thing only and that's inflation 40:02 also short term gold is an inflation 40:06 hedge that's why it was such a great 40:07 investment in what I call the summer 40:10 season of high inflation and recession 40:12 or stagflation that's a part of my 80 40:15 years cycled it works like a clock and 40:17 but it's not a deflation hedge gold 40:21 people don't get gold was a bigger 40:22 bubble and then the stock market gold 40:24 went up eight times in 10 years between 40:27 2001 and 2011 we told people to get out 40:31 of silver and gold and silver retested 40:34 it's 1984 bubble hi previous bubble high 40:37 and we said this was like a good time to 40:39 get out gold when a little higher in to 40:41 intercept member but basically told 40:43 people get out this is a bubble bubbles 40:45 have to burst and these things followed 40:47 the commodity cycle which is a 30-year 40:49 clock gold did not provide that safe 40:53 haven i look back into late 2008 when 40:56 things really melted down and look like 40:58 we're going in a great depression and 41:00 major banks failing and General Motors 41:01 could have gone on there and AIG and all 41:04 this sort of start gold went down 41:06 33-percent silver went down fifty 41:10 percent they did not protect you 41:12 so I don't trust go for gold erases 41:16 bubble and I look in this book and 41:17 principles and bubbles is they they they 41:20 build up exponentially when they burst 41:22 burst and half a time typically took 41:25 them to built and they go back to where 41:27 the bubble started not the whole bull 41:29 market whatever that is when they 41:31 started to diverge from the fundamental 41:33 trends and go up more expedient enjoyed 41:35 gold has to go down to four hundred 41:37 dollars to race that bubble and it could 41:40 possibly get worse retest those 2001 41:43 lows around 250 i'm looking for gold to 41:46 hit seven hundred give or take in the 41:48 next year or so and i'm looking i'm not 41:50 gonna be interested in gold to it gets 41:52 at least the 400 and then i would love 41:54 it because the next commodity cycle can 41:56 be driven by emerging countries who are 41:58 horrible huge consumers are gold and 42:01 silver huge consumers of commodities as 42:03 a percentage of their income and the 42:05 biggest producers and exporters of 42:07 commodities so I think the next 42:08 commodity cycle is going to be a doozy 42:11 but commodities have already crashed and 42:13 won't turn around until at least 2020 42:15 and and then it goes at 400 bucks 42:18 tonight say you know what I'd buy this 42:20 and think you could go to 4,000 over the 42:22 next commodity cycle and that next 42:24 commodity cycle women peak until about 42:26 2038 2014 so I do not like gold 42:30 it's not a safe haven in a deflationary 42:33 environment it is the safe haven an 42:35 inflationary environment and of course 42:37 once this quantitative endless 42:40 quantitative easing breaks down all 42:42 these bubbles burst again and again real 42:44 question to to summarize their the 42:47 reason you get deflation in this winter 42:50 season is it when deputy leverages money 42:52 disappears loans are written off of that 42:54 money disappears when bubbles burst like 42:57 the dowel goes from 22,000 down to four 42:59 thousand eighty percent of people's 43:02 wealth disappears and doesn't come back 43:04 for a long time that creates less money 43:06 chasing the same goods and financial 43:08 assets and everything else and that 43:10 creates deflation and prices not 43:13 inflation and certainly very much 43:16 non-mainstream views and we have been 43:18 talking with harry reid and author of 43:20 the new book the sale of a lifetime it's 43:23 a chock full of just fascinating 43:25 thinking and of course somebody you 43:27 should be listening to an editor of the 43:29 free newsletter economy and markets 43:30 found that Harry dent dot-com Harry 43:33 anything else you need to tell people 43:35 about events or how they can follow you 43:36 more closely now I think the best thing 43:40 you're not free newsletter so that's 43:41 where you can get the notice i mean i 43:43 think we got you know limited months 43:45 maybe six months left in this market i 43:47 want by the middle of this year you to 43:49 be convinced to make some very hard 43:51 decisions because everybody else 43:53 including your stockbroker and your best 43:55 friend are going to turn the media and 43:57 everything is going to tell you 43:58 otherwise you need to make some hard 44:00 decisions and you're not going to do 44:01 that unless you're convinced so so yes 44:04 get the book and get on our free 44:06 newsletter we also have paid in his 44:07 letters if you want to get more depth 44:09 but but but you need to be convinced so 44:11 so get serious about this and and okay 44:14 this doesn't happen in the next couple 44:16 years and then I'm gonna quit my 44:17 profession and be a limo driver the gold 44:19 coast of Australia alright well you'll 44:21 be fighting the 44 fairs with me 44:24 at that point I'm so Harry thank you so 44:26 much for your time today 44:27 let's do this again sometime soon okay 44:29 thank you Chris

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