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Harry Dent, the financial newsletter writer and CEO of economic forecasting firm HS Dent, has one of the most bearish calls on stocks we’ve heard in a while.Appearing on CNBC yesterday, Dent explained the demographics-driven thesis behind his Dow 3000 call:
We track demographics. We were more bullish than anybody in the 1990s and 2000s because we saw this giant generation spending more money, borrowing more money, technologies, internet rising.
Now, it’s the opposite. From 2008 to 2020, the “Baby Bust” points trends down. There’s going to be less home buying, less spending. Baby boomers are going to be saving for retirement. There’s no way you can stimulate your way out of this.
I would agree with Seth – in normal times – [that] 20,000 is a reasonable target [for the Dow]. But hey, just like we boomed unprecedented bubbles in the last few decades, when we see a correction after a major a debt and demographic bubble like this, you see the markets fall 70 to 80 per cent.
When asked when this fall to 3,000 on the Dow would happen, Dent replied:
Over the next decade. We think the worst is likely to happen when this big debt bubble deleverages. The government has been preventing this by forcing money into the banking system. We don’t just have $16tn in government debt – we have $42tn in private debt that is deleveraging, and $66tn (or $80tn by different estimates) in unfunded entitlements.
We have the biggest debt bubble in history. This debt bubble needs to deleverage. That’s when stocks collapse the most. We had a big debt bubble deleverage from 1930 to 1933. That’s why we saw such an extreme crash.