By Stephanie Landsman
He’s a market watcher known for making bold calls spanning decades. Now, Harry Dent is arguing that the Trump rally is setting investors up for an inevitable stock market crash.
Investors have embraced President Donald Trump’s victory by sending stocks on a tear to new record highs. Dent, however, thinks there’s trouble brewing.
“I think this is going to be a stock market peak of a lifetime followed by a crash very similar to the early 1930s. This happens once in a lifetime,” Dent Research Founder Harry Dent recently told NBC’s “ Futures Now .”
He added: “I think this is the last rally in this bull market.”
Dent may be calling for the rally’s last hurrah, but he’s also forecasting another jump for the Dow over the next few days.
“The markets are assuming that he is going to create three to four percent growth on a sustainable basis,” said Dent. “It is demographically impossible…. When the markets figure this out, they are going to crash.”
Dent makes the case that the U.S. workforce will see negative growth, estimating that the population will grow just over a quarter percent over the next 50 years. He also points to rock bottom productivity that not even tax cuts can solve in the immediate term.
“You can’t have stocks keep going up at this rate when earnings are going nowhere,” said Dent. “”I think it [Dow] is going to end up between 3000 and 5000 by next year.”
Dent, who is also the editor of the “Survive & Prosper” newsletter, says there are other major factors which will spark an ‘epic’ pullback.
“I think the trigger is people seeing that Donald [Trump] will not be able to do everything that he said, and the economy will be slowing by then,” he said. “The biggest trigger, kind of like the subprime crisis in 2008, is going to be Italy. Italy is bankrupt. Its bonds are trading at lower rates than ours which is ridiculous.”
Not only could Italy send the European markets into a tailspin, Dent is also particularly worried about China.
The world’s second largest economy “has the greatest real estate bubble, an overbuilding bubble, in all of modern history. That’s going to blow, ” warned Dent.
Yet, he says that this could also be the best time in decades to re-position for huge gains. “In the next few months, investors will have the best opportunity to switch their investment strategies and profit dramatically,” he said.
“I make bold forecasts, and especially with things like [quantitative easing] and massive government intervention — yes, I’m going to miss some things. But, I have the guts to make these bold calls,” argued Dent.
Several noted economists and distinguished investors are warning of a stock market crash.
Jim Rogers, who founded the Quantum Fund with George Soros, went apocalyptic when he said, “A $68 trillion ‘Biblical’ collapse is poised to wipe out millions of Americans.”
And the prophetic economist Andrew Smithers warns, “U.S. stocks are now about 80% overvalued.”
Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89% and 50%, respectively.
Even the Royal Bank of Scotland says the markets are flashing stress alerts akin to the 2008 crisis.
They told their clients to “Sell Everything” because “in a crowded hall, the exit doors are small.”
Blue chip stocks like Apple, Microsoft, and IBM will plunge.
But there is one distinct warning that should send chills down your spine … that of James Dale Davidson. Davidson is the famed economist who correctly predicted the collapse of 1999 and 2007.
Davidson now warns, “There are three key economic indicators screaming SELL. They don’t imply that a 50% collapse is looming – it’s already at our doorstep.”
And if Davidson calls for a 50% market correction, one should pay heed.
Indeed, his predictions have been so accurate, he’s been invited to shake hands and counsel the likes of former presidents Ronald Reagan and Bill Clinton — and he’s had the good fortune to befriend and convene with George Bush Sr., Steve Forbes, Donald Trump, Margaret Thatcher, Sir Roger Douglas and even Boris Yeltsin.
They know that when Davidson makes a prediction, he backs it up. True to form, in a new controversial video, Davidson uses 20 unquestionable charts to prove his point that a 50% stock market crash is here.
Most alarming of all, is what Davidson says will cause the collapse. It has nothing to do with the China meltdown, Wall Street speculation or even the presidential election. Instead, it is linked back to a little-known economic “curse” that our Founding Fathers warned our elected officials about … a curse that was recently triggered.
Bankruptcy guru Edward Altman sees similarities to 2007 in the credit market today By Julia LaRoche
Legendary bankruptcy expert Dr. Edward Altman cautioned that this benign credit cycle — characterized by low default rates, low yields, low spreads, and lots of liquidity — could come to an abrupt end.
“It’s been a terrific market for investors for quite a long time and if anything is concerning it’s that we now are more than ten years into a benign credit cycle,” Altman, a professor at NYU Stern School of Business, told Yahoo Finance. “We’ve never had such a long benign cycle. And just that one little fact is something that we should be concerned about because if it comes to one and it could come to an end very dramatically.”
Altman, the creator of the financial-distress sniffing Altman Z-Score, warned in mid-2007 of a “Great Credit Bubble” and that there was going to be trouble in the market. He predicted that a meltdown would stem from corporate defaults. While the primary culprit of the financial crisis turned out to be mortgage-backed securities, investors who heeded Altman’s warning nevertheless avoided a lot of grief.
So, how does today’s market compare to the market in 2007.
“There are some similarities, yes, although the situation back in the great financial crisis was pre-meditated by the mortgage-backed securities and we don’t have that problem now,” he said.
Troublingly, Altman sees the reckless behavior of 2007 surfacing again.
“Back in 2007 prior to the crisis in ’08 and ’09, the fundamentals of credit risk of the companies issuing bonds and taking out loans were quite low,” he said. “And the similarity that I see now between 2007 and 2016 is very similar fundamentals, quite a bit high risk and it doesn’t seem to bother the market because it’s the only game in town in terms of getting yield greater than what you can get for low-risk securities like governments and high-grade corporates.”
In other words, investors aren’t buying junk bonds just because the risk-reward balance is favorable. They’re buying because the rewards of investing in lower risk bonds just aren’t cutting it anymore.
Altman is perhaps best known for the Z-Score, a formula he created 50 years ago that’s used to predict bankruptcies. Since that time, he noticed that bankruptcies have gotten increasingly bigger.
“[What] I’ve seen over the years is larger and larger companies filing for bankruptcy on a regular basis. On average, in the United States, something like 15 more than $1 billion companies, in terms of liabilities, go bankrupt every year, on average,” Altman said. “This year already it’s 13. Last year, it was almost 40.”
He noted that inflation has something to do with it, but what’s actually happening is companies have been taking advantage of debt and low interest rates like never before, and the corporate debt ratios are way up.
“Speaking about the Z-score, if you compare the average Z-score of companies in 2007 with the average in 2016, which is the last time we looked at it, guess what. The average is actually lower today than it was in 2007, and 2007 was right before the great financial crisis, and of course, in ’08 and ’09 we saw a tremendous increase in corporate bond defaults and loans.”
Low Z-scores are associated with financial distress.
He added: “So the good news is that it’s no worse, but the bad news is, fundamentally, the companies are no better than they were back in 2007 at least by our model.”
At the moment what’s keeping companies from going bankrupt as they did during the financial crisis is the incredible amount of liquidity and low interest rates.
Fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers
Nobody knows when reality will overtake the rhetoric, lies, phony statistics, wishful thinking, fake prices and tiresome poseurs pretending to be world leaders. The situation is universal, a consequence of incompetent leaders and careless (or ignorant) citizenry. Global problems are continuing to mount, along with the risk that the consequences of years of bad policies and inept leadership compound (as sometimes happens) in a short window of time.
Unemployment figures are also a source of faulty or misleading data. A 35-year low in the workforce participation rate, a policy-driven transition from full-time to part-time jobs, and the transition from high-paying jobs to relatively low-paying service jobs, all combine to make the headline rate a poor measure of employment health. Support for our statement is provided by the data on real wages, which have been stagnant during the entire post-crisis period.
Guggenheim’s Minerd warns of a possible replay of 1987 stock market crash By Jennifer Ablan, Reuters
Investors should brace for a possible replay of the 1987 stock market crash later this year, given this month’s slump came against the backdrop of Federal Reserve interest rate hikes and rising inflation, Scott Minerd, Global Chief Investment Officer at Guggenheim Partners, said on Tuesday.
On Monday Oct. 19, 1987, following large declines on Asian and European markets the previous week, the Dow Jones Industrial (.DJI) Average plunged 508 points, or 22.6 percent, for the biggest-ever single day decline in percentage terms by the blue-chip benchmark.
“Today, investors have the same sorts of concerns they had in 1987,” Minerd said. By August 1987, equities were at record highs, the Fed was raising rates, the U.S. dollar was under pressure and there were increasing concerns over inflation, Minerd noted.
“The concern was the Fed was behind the curve as it accelerated rate increases,” he said. “By October, things were becoming unhinged. Bond yields had risen in the face of an extended bull market in stocks. The market reached a tipping point and began its infamous slide.”
As the Fed continues to raise rates this year, valuations of risk assets based upon faith in ultra-low rates and central bank liquidity will come into question, Minerd said.
JIM ROGERS: The worst crash in our lifetime is coming
“We’ve had financial problems in America — let’s use America — every four to seven years, since the beginning of the republic. Well, it’s been over eight since the last one.
This is the longest or second-longest in recorded history, so it’s coming. And the next time it comes — you know, in 2008, we had a problem because of debt. Henry, the debt now, that debt is nothing compared to what’s happening now.
In 2008, the Chinese had a lot of money saved for a rainy day. It started raining. They started spending the money. Now even the Chinese have debt, and the debt is much higher. The federal reserves, the central bank in America, the balance sheet is up over five times since 2008.
It’s going to be the worst in your lifetime — my lifetime too. Be worried.”
The End of Social Security
By Christopher R Rice
The U.S. was the largest creditor in the world. Now the debt is in the trillions of dollars. Trillions of dollars transferred from the worlds richest and most powerful country. This is a form of destructive economic management at a level of graft and corruption that has NO parallel. There’s nothing comparable to that in history.
The national debt is in the trillions of dollars, even our kids will never see it paid off. As the administration and Congress argue over cuts in social programs, inequality in America grows more extreme each day. Even the great financial crash didn’t derail this trend. The richest 400 Americans, for example, increased their wealth by 54 percent between 2005 and 2010, while the median middle-class family saw its wealth decline by 35 percent.
It’s not the result of mysterious global forces, or technology, or China, or structural problems concerning the skills and education of our workforce. Rather, it is the direct result of policy choices made by Democrats and Republicans alike.
The U.S. policy (includes tax policy, financial deregulation, trade policy, anti-labor policy, and much more.) for the past 30 years has been aggressively dedicated to shifting income share away from the poor and middle class and into the pockets of the already rich.
The top 1 percent of the U.S. population now owns about a third of the wealth in the country. Since the late 1970s wealth inequality, while stabilizing or increasing slightly in other industrialized nations, has increased sharply and dramatically in the United States.
Instead of taxing the Super Rich our politicians want to slash social programs, after school programs, instead of making corporations pay their fair share, our politicians want to take a knife to social security and Medicaid.
TRUMP and SOCIAL SECURITY
Back in 2000, Trump wrote a book in which he referred to Social Security as a “Ponzi scheme”, proposed increasing the retirement age to 70, and claimed, “Privatization would be good for all of us.” As recently as 2011, he said he was on board with plans to cut Social Security, Medicare, and Medicaid — but that Republicans should be very careful “not to fall into the Democratic trap” by doing it without bipartisan support, or they would pay the price politically.
I think most people remember what happened to all of the mentally ill in this country when Ronald Reagan switched to block grants for the states? Which is what they plan to do to Medicaid and Medicare. People with mental disabilities were thrown out into the streets, where they remain today. The same thing is about to happen to Americas senior citizens. The wall that Trump keeps talking about building along our southern border is not to keep the refugees out, but to keep us in.
According to economic journalist, David Cay Johnston, author of “Perfectly Legal,” this trend is not the result of some naturally occurring, social Darwinist “survival of the fittest.” It is the product of legislative policies carefully crafted and lobbied for by corporations and the super-rich over the past 25 years. New tax shelters in the 1980s shifted the tax burden off capital and onto labor. As tax shelters rose, the amount of federal revenue coming from corporations fell (from 35 percent during the Eisenhower years to 10 percent in 2002). During the deregulation wave of the ’80s and the ’90s, members of Congress passed legislation (often without reading it) that deregulated much of the financial industry.
If corporations paid taxes, our government could have a surplus – roads, dams, hospitals and schools would not be in disrepair or overcrowded because the government would have plenty of money for all these things as they once did and would not be looking for ways to cut social security or other social programs.
Debt Bubble(s) and the Digitization Of All Trade
Business tax payments plunge, while workers pay more
Homeless U.S. Veterans
Socialism for the super rich and Capitalism for the poor
War on Poverty FAILURE
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