Shadow Demand, Creative Destruction, and Quantitative Easing

Jason Hartman interviews returning guest, Harry Dent, to discuss the economy, company buybacks, and quantitative easing. They talk about the age of someone’s peak earning power and peak spending and how it will affect the housing market. Jason and Harry also give their thoughts on the fake economy and the role of the government in stimulating the economy. Harry also explains the repo-market and what has become of the baby boomers.

Announcer 0:01
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Jason Hartman 0:12
Welcome to the American monetary associations Podcast, where we explore how monetary policy impacts the real lives of real people. And the action steps necessary to preserve wealth and enhance one’s lifestyle. My pleasure to welcome a returning guest back to the show, Harry dent, the prolific author that I discovered back in 1995, and I’ve been following for many years. He’s an economic demographer. I think that’s the proper way to say it, he can correct me if it’s not. And he has some interesting things to share with us today. For those of you listening, I just want you to know that this will also be on our YouTube channel, because there are several visual aids that Harry came prepared with charts and graphs, and interesting stuff to look at. So after you listen to this, if you’re not watching the video, feel free to go to the YouTube channel, and you can actually see it there. But for those of you listening, not able to watch, we will try and describe the charts as well so that you get the best of both worlds.

Harry, welcome back. It’s great to have you. I think this is your eighth time on my show, right?

Harry Dent 1:16
Yeah, sounds right.

Jason Hartman 1:17
Yep. Something like that. And you’re coming to us today from where you live in Puerto Rico. Correct.

Harry Dent 1:22
Puerto Rico, yes, better weather than Florida. Everybody thinks it’s hotter. Down here, it’s

Jason Hartman 1:26
less hot at extremes. lower costs, especially for a beachfront condo compared to South Beach where I used to live. And the taxes. advantages are incredible down here for people from the United States. Oh, the Puerto Rico tax benefits are literally the best deal in American can get in the entire world, because the IRS is one of the only taxing authorities on earth that actually taxes Americans on all worldwide income. But Puerto Rico has a very unique exemption to that. Many of my friends have moved there to take advantage of it. Of course, the famous or infamous Peter Schiff lives there. Yeah. And I saw

Harry Dent 2:06
him yesterday. We were at a conference both of us on panels, different panels, but yeah, good stuff. Yeah.

Jason Hartman 2:11
I saw him in Dorado beach when I was there in November.

Harry Dent 2:14
So what I called gringo Disneyland. Hey, do you think you got to move down here and can’t live in the best of American style? You’re wrong. And Dorado is a great example.

Jason Hartman 2:23
It’s a Ritz Carlton resort. It’s gorgeous. But Harry, I’ll tell you it is very expensive, the real estate and

Harry Dent 2:29
that the rest of its affordable. I’ve got a $500 square foot condo that would be $2,000 for the similar location and quality in South Beach where I used to live. So that’s Yeah, Dorado. You’re right. dorados above I wouldn’t be buying in Dorado. Yeah,

Jason Hartman 2:45
very expensive. Well, hey, listen, you are famous for your predictions on all aspects of the economy. We’ve got a chart up now that says QE quantitative easing creates Frankenstein markets on crack 120% overvalued. And then it says births are lagged for peak spending versus the real Dow Jones Industrial Average. Now, I was actually talking about this on on my show just yesterday about how births need to be lagged. So for example, you talk about the peak spending time and the peak earning time and people’s career. And so you can’t say well, you know, there’s a lot of people being born today, you need to look back, what 46 years, right?

Harry Dent 3:31
Yeah, kids are liability. Kids cost kids growing up causes inflation, especially as they enter the workforce. And businesses have to invest after governments and education and parents raising them. What’s key is people spend money dramatically higher from workforce entry, age 20, on average, into 46. For the boomers, it’s now 47. For the millennials now more driving the economy incredibly, increasingly, and it’ll be it looks like to be about 48 for the millennials to follow. So yeah, if that this was my first breakthrough indicator, Jason back in the late 80s, when I saw how big this boom was going to be because the baby boom was so giant, it just moving forward, the birth index adjusted for immigration, which I can also do accurately, for the peak spending of the average person household and it’s it tells you when the economy is going to boom and bust. It called everything perfectly. I mean, again, I this indicator, I came up 1988. I said this booms gonna peak by the end of 2007. And it did and we’ve been living on quantitative easing ever since after the baby boomers slow down on their spending, right, the next generation doesn’t come along till about 2023 the millennials, and this shows how much the markets been overvalued simply because of quantitative easing. Slow down for a second, okay,

Jason Hartman 4:47
I want to just get some foundational things, make sure the listeners and viewers understand them. So first of all, what is the age of someone’s peak earning power and peak spending? What are those two are there they’re about the same Same, right?

Harry Dent 5:00
About the same. It’s It was 46 for the baby boomers. 46 years 87 today for the millennials and and when I look at in the past and Europe, and Australia and other markets, I deal with most other places. It’s about 47.

Jason Hartman 5:15
Okay, so is that peak spending and earning? are they spending

Harry Dent 5:19
a lot? Well, the spending is what matters to the economy because people as they get a little older, they they save more, the spending is the critical by their earnings peak close to that, but the spending is what correlates with the markets the most.

Jason Hartman 5:33
Okay, great. So 46 years old for the baby boomers, the millennials, they’re a year behind is 47.

Harry Dent 5:41
Now that’s built into this lag. So the lag is naturally extended to 47 as we switch to millennials in this chart,

Jason Hartman 5:48
okay. Now, you also mentioned xennials, and I haven’t heard anyone refer to it that way. But that’s Generation Z, right? Yes. Okay. So understanding these demographic cohorts is very important. As I’ve said many times, baby boomers, you know, depending on who you ask about 76 million Americans, millennials, about 80 million Americans, my generation in between the two, tiny little generation about 46 million, I guess, Gen

Harry Dent 6:15
X Gen X that’s that’s the downs. That’s the lower birth generation, which caused the downturn after 2007. Well,

Jason Hartman 6:22
sorry about that, folks. Yes, I’m in this little lonely generation with your

Harry Dent 6:29
you get to buy everything at the bottom. You can you know, okay, so so you’re actually you know, it’s an advantage My father was in the smaller generation. Born in the 30s, early 30s. Before the baby boom, every house, everything he bought always went up. Oh, baby boomers drove them up coming after him. Oh, yeah. That’s interesting. Millennials drive up things for the extra.

Jason Hartman 6:52
Oh, yeah. Okay, interesting. You know, especially real estate. interesting idea. Yeah, definitely. Okay, so what does this chart tell us? So we’ve, so really, we’ve been living on quantitative easing coming out of the Great Recession, which means, effectively, you know, the easing of the money supply, the increase in the money supply. Part of it is, you know, money creation, money printing, as they say, you don’t really printed much nowadays. What does that mean? I mean, what tell us what that means. Okay? Real quickly. This

Harry Dent 7:19
is very important. It’s not actually a substantial increase in the money supply. Normally what the central banks have done in the past, they lower interest rates, they make money more available, they do expand the money supply and create more reserves for banks, so banks will tend to lend money. What happened with the Federal Reserve when we came into the great recession is they didn’t realize consumers and businesses had already overborrowed, overbought housing, overexpanded businesses and capacity. They didn’t need to borrow. And of course, banks tighten up. So so that didn’t work. What ended up happening is Federal Reserve in doing quantitative easing, rather than just reserves and lower rates. Quantitative Easing is not putting money into the bank system and lending It is literally buying financial assets like bonds, which puts more money into the pool that’s actually chasing financial assets. And that drives up financial assets. So what this chart is showing, while the economy kept slowing, and you gotta remember, this is the slowest recovery in all of history. 2% average real growth versus four or 5%, or more and past recoveries, and that’s with all with $16 trillion, printed by by Central Bank, but the money did not go into the banking system did not go into consumer lending, which does expand the money supply. We got and this is why the gold bugs were wrong. We did not get an inflation surge or hyperinflation. What we have is the greatest financial asset bubble in history great in the roaring 20s in the stock market. I mean, it’s true of real estate, Real Estate’s gone up everything else to bonds are in a bubble, but real estate is the strongest bubble, and where that benefits the most from low interest rates, more money chasing financial assets. And so what this thing is showing this blue line in the background shows where the economy should be in stocks normally followed that Justin for inflation. But even with this weak recovery, which would have been worse than weak, it would have been a down economy without all this stimulus. stocks have gone straight up like it’s the best economy in history, and they now are 120% overvalued. And I’ll show just let me steal one more chart that that 120% difference is the difference between the black line here which is earnings per share of stock, versus the blue line, which is total corporate earnings, which came back up after recession strong standard,

Jason Hartman 9:47
and they’ve hardly

Harry Dent 9:48
grown cents. earnings per share had been grown because companies are buying back their stocks. That’s their chart, you know 5.6% remember the Fed printed about 3.7% central banks around the world about 16 trillion to 3.7 was printed 5.6 trillion because of the low long term rates, and then the flush money in the economy 5.6 trillion have gone to buying stocks back shrinks the number of shares, which leverages greatly leverages the earnings per share, and therefore the stock price. So this artificial bubble and stocks that has nothing to do with the economy, which the blue line shows you where it should be,

Jason Hartman 10:29
okay, okay, slow down on that one. So you’re It sounds like you’re saying that the stock market is really not increasing in value as much as it would seem? It’s it’s simply generated by smoke and mirrors of stock buybacks that are increasing the numbers in the stock market, right?

Harry Dent 10:50
Yes, yes. And company stocks are going up mostly because of the leverage of shrinking the number of shares rather than the growth in the economy, which again, 2% average since 2009, this whole recovery, the slowest recovery by far, and all even the great, the Great Depression, we came screaming out of that stock crash from 1933 Ford. So this is a fake economy, and particularly an artificially overvalued stock market, which means and here’s the important thing, stocks, which have only been bought this fourth line, by the red line is companies buying their own stocks, everybody else is basically neutral. So investors aren’t even net buying stocks. And in what it creates is a big financial bubble in stocks that most crash, which you’ll see in the fist chart here, people in Wall Street, keep saying, well, this isn’t a bubble because of this or that and that, look at this bubble, we’ve had four bubbles, two minor, the big one with tech in 2000, which everybody agreed was a bubble. Now look at this bubble, this bubble makes all of them look like nothing. This is the greatest bubble in history is global. That the real point here and I don’t want to focus on this chart. Well, I

Jason Hartman 12:02
have a question is the entire I mean, look, you say the economy is fake. And you’re you’re not wrong about that. But hasn’t it always been kind of fake? And like most countries around the world? Are these fake propped up economies through funny fiscal and monetary policy? I mean, you know that that’s not exactly unique to the last 10 years. Is it?

Harry Dent 12:25
Right? No, it’s not me. I’ll give you a quick example of federal

Jason Hartman 12:28
I always like to ask, compared to what, right? Yes, it’s true that the economy is built on a smoke and mirrors. But it’s been that way for a long time. In fact, this was very important.

Harry Dent 12:41
Let me make this crystal clear. Okay. Governments always stimulate the economy, right? Try to prevent recessions, lower interest rates, they always push things. This they’ve never done quantitative easing on this man. This is a this is a cannon bazooka compared to a pistol. Okay, got it. So so the Federal Reserve was created, we didn’t have a Federal Reserve before 1913. And guess what happened, they kept lowering interest rates every time there was the least slow down, and then kept the economy from rebalancing and shaking out bad companies and bad loans, which, which keeps you more imbalanced. And we just got a bigger and bigger bubble into 1929. And then 20 years after the Fed was created in 1933, we were at the bottom of the worst depression, and all of us history 25% unemployment, blue chip stocks, like Ford and General Motors and RCA back then it’s like Microsoft, and Apple and Google today, down 89%, they created a bubble, because of constantly stimulated and then it crashed. But the difference is, the stock market still generally went with that spending wave I had, it just gets higher than it should be. And then it crashed with the economy, what we have this time, our economy that should have kept going down with slower spending. But all this stimulus made the rich people now let me here’s another important statistic, very simple. to one of the top 20% of households, the most affluent in this country, college educated professional workers own 88% of the financial assets outside of people’s own home. 88%. So they’ve made they’ve been made rich by this bubble, they’re spending more than ever, everyday households that did not benefit who own very little stocks, and they own smaller homes that didn’t bubble as much because they’re in everyday places. And that’s why they’re much better value now. So they’re not experiences, so they’re spending very slowly in the high end. Now that 20% you say but it’s only 20% they control 50% of the consumer spending. So 20% controls 50%. So here’s how I would describe our 2% growth economy. Zero for everyday people. 4% for the affluent, and we averaged 2% and a normal boom, both would be spinning, we’d be average. trudging forward.

Jason Hartman 15:00
Okay, so the moral of that is the rich are getting richer, the middle class is disappearing, or at least the lower part of the middle. Yes, some of the middle class is moving up and moving into that upper middle class. But the lower middle class is, is declining, sadly, and the poor are still poor. Yeah. Okay, next chart. Okay, so

Harry Dent 15:21
we looked at by Batman $5.6 trillion. That’s what’s made the stock but this is new money. This is shrink. This is leveraging stocks, it’s companies taking money out of their strong cash flow in an artificial economy that would be much weaker without super low interest rates and all of this stimulus, that it’s affecting the upper class, and they’re just shrinking their shares, it’s leveraging they are leveraging their own shares, which says two things, Jason, they’re going to go up way faster, which that first chart showed how much they’re overvalued. 120%, which means it means they’re going to crash more when they come down on and all of a sudden, their stockholders are going to say, two or three, four years from now. Oh, why aren’t we buying our stocks back now that they’re cheap? Oh, you know why we spent all of our cash flow buying them when they were expensive companies. Now. I tell people, it was the shoeshine boys. You know, the dumb money. I hate to say it buying stocks in 2019. It is the fortune 500 executives and the richest people in this country. Most buying stocks everyday people are not driving this stock bubble. It I showed that. Oh, here’s that. Here’s the next chart. Oh,

Jason Hartman 16:31
I got a question, though. before you move on about stock buybacks. You know, a lot of people criticize stock buybacks, Harry, but I’m wondering, is it really that bad? I mean, when when a company buys back its own stock? It’s kind of doubling down. Right. It’s showing faith in itself, isn’t it? Yeah. I mean, I mean, look, here’s one of the metrics people look at is they look at what are the insiders doing? And if the insiders are selling, investors lose faith in that company here essentially, with the buybacks the insiders are buying. I mean, maybe it’s the Treasury account, but

Harry Dent 17:08
yes, they’re buying if you’re doing it in normal times, if you just like slowly over a boom like the 50s and 60s, bottle them or you stock Yeah, you just you’re just making a little more advantage a little more leverage for things. When you buy into a bubble like this, and I just you know, steepest bubble in all of history. You’re taking precious cash flow, which company Believe me, the companies in the 30s that survived a bubble crash of this level. The ones that survived were General Motors that had better cash flow and could get through it the other ones went under and so the surviving companies buy their assets for nothing takeover their customers, cash flows everything you’re using your cash flow in a boom to leverage your stock and make it bubble like so it will crash more and the worst consequence you won’t have that cash in the downturn to survive and then to reinvest and leave your competitors in the rearview mirror. So yes, if you did it normally and over time and judiciously it’s just like having okay it’s like having a glass of wine a day most people say oh, that’s good for you relax a little bit. You have a couple bottles a day No, that’s not it. That’s what this is. This is a couple of bottles in the late stages of a greatest bubble and these pumped is telling you Jason I’m saying this today so I can remind people few years now these are going to look like the stupidest people in history that bought took their share these successful companies to put their shareholders money and gambled it on their own stock leveraging it up as as the stocks weren’t doing okay as well and basically screwed their shareholders Okay, that Interestingly though, will redistribute some wealth

Jason Hartman 18:53
back into the middle maybe

Harry Dent 18:55
we don’t need Bernie Sanders This is going to be the fastest wealth redistribution from the rich today every day just like in the 30s the rich got richer in the 1929 and into 75 you know for many things they lost some of their advantage and share of wealth and income that’s going to happen here very quickly in wealth and then okay I mean, so I said the only people buying this one chart here shows the red line is corporations buying their own stocks. The blue line is foreigners so just barely buying but less so the green line is households they have not been buying into this bubble they’re scared to death they got killed in the last bubble in 2008 nine when a crash 54% and they didn’t know why. And then you got the instance the blue the purple line that’s the smart money the institutional investors they have net not been buying they don’t see value in this market getting so overvalued so. So that’s what’s happening. And that’s what’s created this next chart. It’s just show this is look

Jason Hartman 19:56
okay, and we’re in we’re still we’re still focused on the stock market. So we’ll get to the broader economy again, I’ll

Harry Dent 20:01
tell you why Jason because the stock market is the best leading indicator of the economy and gets way more overvalued than real estate in a bubble but real estate’s in a bubble too, but it’s more on the high end. And in certain places, as you know, cyclical markets. Yeah. But the stock market is a good way to say, Gosh, are we in a good place? Or are we about to see the crash of a lifetime and I’m making the argument we’re about to see something worse than 2008 and nine and we saw what happened to real estate and economy and banks and and people underwater and mortgages and what did well like affordable housing, and apartments versus what high end houses and and what did the worst bubbly stocks?

Jason Hartman 20:42
Yeah, right. High End houses are like high flying calm stock sense. You know, they are they really have trouble in bad times. You know, when you look at all of these charts, and we talk about all of these crazy numbers, whether it be the QE numbers, or debt numbers or, you know, stock buybacks or whatever, are these things adjusted for inflation? Like, you know, the chart you’re showing now, dates show this one first bubble? Yeah. Okay, the first bubble in 1986, a minor bubble, and then another one in the mid while mid to late 90s. That’s the.com bubble, I guess. Right? That was the.com.

Harry Dent 21:19
Bubble, considered? Oh, my gosh, huge bubble.

Jason Hartman 21:23
And then there’s the post 911 bubble, okay, which was because of all that 911 stimulation, and now there’s the stock market bubble we’re in now. Yeah.

Harry Dent 21:33
So when somebody says any analyst for any reason, there’s a million reasons. This is not a bubble. My response is, looks like a bubble walks like a bubble quacks like a bubble, it’s a bubble. This is the This makes 1925 to 29 look like nothing and look at it compared. Now, again, this is not the NASDAQ, which is more bubbly. This is the Dow and compared to the bubble back in 95 to 2000. So again, that was a major bubble. We had a minor bubble before not and one of the reasons I use this chart also JSON will tell people, we have four seasons in the economy. The bubble boom is the fall season, like we saw in the early 1900s. And this, you expect bubbles. And just even though that 87 was a small bubble, it was a 40% crash in two weeks. That never happened in the entire 1942 to 1968 stock market boom, it was in a bubble boom, the corrections were 20%. They weren’t 40 50%. Here, I’m projecting 70 to 85% when this one blow. So again, the point here though, forget all the complications of this. If this stock bubble blows anywhere near what I’m saying, you know how much wealth disappears.

Jason Hartman 22:48
Just Just the other day, when the stock market hit the first Coronavirus scare when it started paying attention to that. And then the following day was also down. Literally everything was down. I can’t remember the stat I read but it was just a monumental amount of money was just 1.1 point 7 trillion in two days. Wow.

Harry Dent 23:10
That’s what it was. Now, look at this next chart real quick. We look at this whole bubble. You see how much more bubbly This is the blue line is stock financial assets. And it is dominated by stocks but it is real estate. It’s outside of private home but all other financial assets bonds, commodities, stocks, investment real estate. Okay, so

Jason Hartman 23:29
like 23

Harry Dent 23:31
trillion. Can

Jason Hartman 23:32
we wait, let’s talk about the real estate component investment real estate we’re talking about, you know, the commercial real estate sector like office buildings, industrial properties, maybe large institutional multifamily housing.

Harry Dent 23:47
But even I think vacation home, you know, not your primary home. That’s what this is. Interesting. So we look at the normal range back all the way to 1950 of how much financial assets should be compared to GDP. So so we’re really in this sense, adjusting them for GDP, we’re adjusting them for inflation we’re measuring relative to the growth of the economy underlying it. We’ve been in increasing bubbles since the early to mid 90s. Right when the tech bubble came and up and up and up. We now have 100 just in the US $123 trillion in financial assets owned by households. And if we just go back to normal valuations down 50% and note in the chart before I’m projecting the Dow the most bubbly stocks, the stocks are more bubbly than than these other asset categories like bonds and commodities and investment, real estate. If overall assets go down 50% which would bring them down to reality. $60 trillion, that is three times our entire annual GDP disappears from brokerage accounts, bank accounts, blah, blah, blah, blah. Don’t you think people would spend a little less money in the economy week when they lost that much money? Yeah,

Jason Hartman 25:00
who’s really

Harry Dent 25:02
who’s keeping our economy going? This top 20%, the top 1%? Top 10%. They’re the ones who are going to pull back much more than Homer Simpson this time.

Jason Hartman 25:12
Hang on a second. Let’s just explain this a little bit. Okay. So this chart is you said goes back to 1950. And what it shows is it shows a range from 1950, on up to really about 99. About 1999 95. Okay, fair enough, that things are sort of in line from 1950 to 1995. After 1995, they start to get really out of whack. And in in relation to GDP, okay, so these financial assets, and I almost want to put the word assets in quote when their financial assets because they’re sort of smoke and mirrors economy, Wall Street economy, not the main street economy, they are showing that they’re in a bubble. Now, the top you said 20%, is responsible for most of the spending and the

Harry Dent 26:03
half the spending, and they own 88% of these financial assets. Got

Jason Hartman 26:07
it? Okay. So in the US and understand how that relates. So when they pull back about 70%, or 72% of the entire s&p 500, is based on consumer spending. And so they spend less, that creates this downward spiral where that all those companies that supply all those goods and services, they will spend less. And so this puts downward pressure on all of those stocks or 72% of them in the s&p, right.

Harry Dent 26:36
Yes. And yeah, really, this financial asset bubble has created this kind of extra wealth. And it’s not all spent. It’s not all spent, like normal income, but some of it spent in mainly by these rich people. So the economy is strong. And it would be I you know, that that spending wave, I showed in the first chart, that big blue wave of baby boomers, and then the downturn with the Xers like you, that shows our economy should have been nominally not growing at 2%, it should have been declining, like it did for most of the 1930s overall. And so even the growth in our economy has been artificial, propped up by this temporary artificial wealth from financial assets. But it’s been mainly this top 20% spending the money, not Homer Simpson, so they’ve been getting, they’ve been having the boom, they’re the reason it’s going up. And when they stop spending, that they’re going to be the biggest reason. In other words, us. Normally a slowing economy causes a stock correction or crash, what’s happened, what’s going to happen this time, a crashing stock market’s going to cause a recession on its own. And then take us back to where we really should have been in a long recession Anyway, when the largest generation of history’s naturally spent less because they don’t have kids to raise and get to college anymore.

Jason Hartman 27:50
Okay, let’s go to that next chart of the 90 year great resets.

Harry Dent 27:55
Yeah, now this is a chart I’ve had some early one of the first charts I had along with the kondratieff wave force season cycle and the 30 year commodity cycle, this shows and now if you go back to late 1700s, right there, we got this dotted line saying we’re going from British stock prices to us. That is when the stock exchange is started before that it’s all just a few big government own stocks like like the South Seas company and the Indian trading company, stuff like that. This is the real

Jason Hartman 28:25
company back a long way here.

Harry Dent 28:28
Since then, you can see now first of all, this chart is adjusted for inflation. And it’s also adjusted for exponential growth and it’s still exponential um, the stock markets have grown so much in this era, that it you can’t even compare it to anything. First of all, we didn’t have stocks much before that but but this is already adjusted for exponential ality and for inflation and look at stocks go up and up and up, and they keep bubbling more and more but note, every 90 years like a clock, you see a more bubbly stock market and a bigger crash. It’d be looked back in the early 1800s 1837. The Panic of 1837 led to the biggest crash in stocks and US history down to 42. And I’m telling you back then Jason real estate was the center of that bubble, everybody moving to the west, government was given away free land free loans, overstimulating lots of speculation. Chicago became the next New York in a matter of decades and then crashed 90 some percent of the biggest real estate crash and that was the biggest depression before the 19 3032 So you see, okay, then stocks after that big big long time to get over that. Then they go up more normal rate. Oh, they’re bubbling in the 1929 Oh, and then big crash at 9%. Crash Great Depression even greater than that one back then. And here we are, then we go up note this time even faster than Before, but then we get really bubbly here and then we’re just we’re right here coming 2019 to 20. That 90 year cycle, I’ve been warning about this for a long time is due to hit. And what central banks have really done is play into this bubble cycle by goosing financial assets. Again, not by lowering interest rates or a little fiscal stimulus, you know, building dams or something or running government that literally pushing trillions of dollars into financial markets to make them go up, way more than they should, as my model shows. And so this bubble is getting ready to crash and cause the next great depression, not recession, not 2008, nine, that was a deep recession, this will be more like a depression. But good news. For me, our fundamental indicators show that we should be done with this by 2023. And back up again, it’s between now and then that I am concerned and warning people to get out of bubbly real estate out of stocks all together. bonds, high quality bonds, or good junk bonds you got to get out of if you’re in affordable housing that can rent out if you’re in apartment buildings, urine medical buildings, and that sort of real estate investment, only high quality bonds. And the best rental real estate hold up in a downturn like this. Everything else stocks, commodities, you know, speculative real estate vacation and everything else goes down.

Jason Hartman 31:26
Yeah. Wow. That’s something now what’s interesting about it is this is a pretty quick downturn, right? It’s why why is it three years? Why Why is it so why is it so quick?

Harry Dent 31:37
I’m glad it’s I’m glad it’s short lived. That’s good. But why? Because when these bubbles burst, it’s just it’s a chain reaction, because there’s so much leverage in the markets and zombie, again, leverage being put in by these s&p 500 executives buying their own stocks, they’re leveraging their stocks. People can borrow money cheap, and they can buy real estate, everybody buys real estate with low money down and all that sort of stuff, and uses profits from existing real estate to roll into even more speculative real estate. So you build these bubbles. There’s a lot of debt and leverage behind it when these debts fail. It just exacerbates the whole thing. So 29 to 32. In 2.7 years, stocks, and again, we’re talking blue chip stocks, not penny stocks, not small cap stocks, not Zimbabwe, stocks are emerging countries, blue chip, US and European stocks, and in the case of the US went down 89% in 2.7 years. And you know what, never saw that again, did nothing. Look, look at the chart, you go back to the 30s, that great reset from the three to the four kind of thing, then in early 30. Stocks did nothing but go up if you bought stocks, and you’d made money forever. If you bought real estate stocks bottom in July 32, the real estate market bottomed in March of 33. And from then if you bought real estate or stocks, you’d have made money for effort, you bought them at the lowest price ever. And you would never see that again. That’s why this is I get scared when I say this, but this is a huge opportunity. Yeah. Okay, let’s look at the NASDAQ and the Fed balance sheet, the balance sheet of Federal Reserve versus the NASDAQ. What’s going on there? Yeah, okay. So that 90 year cycle right now is the most important provable side, it’s actually 245 year technology cycles building. So that’s another part of my model. I’ve got my demographic model, my technology model, the technologies create these bubbles. And then what’s the biggest bubble now Microsoft, Google, Apple, Netflix, these tech leading technology side, since what happened here recently, the Fed had been doing all this quantitative easing into 2014, then they just kind of held off and didn’t just kept it even. They didn’t, they didn’t reduce their balance sheet and stimulus, but they didn’t increase it. But then in 2018, they did they started selling their bonds, instead of buying that means you’re taking money out of the financial asset pool, and things got down the bank reserves went down and stuff until all of a sudden the repo the overnight lending market, for banks to banks, especially banks that are on leveraged speculating and stuff and hedge funds, that sort of stuff dried up and the Fed had to step in the Fed said, oh, we’re gonna taper and you know what, we’re confident tapering because we think the economy is so strong, we don’t need all this stimulus anymore. And I’ve said from the beginning, no, without this stimulus, this economy will die so fast, because it’s so artificial

Jason Hartman 34:29
that so then that and that just, you know, compared to what again, that’s every economy on the planet, every now pretty much Lana Yeah,

Harry Dent 34:37
when in fact we’re not Japan’s way worse than China’s way more overleveraged we’re Europe’s got worse demographics, but yet we’re still the best house in a bad neighborhood here. I’m showing how bad it is here.

Jason Hartman 34:49
That’s, that’s that’s the that’s the really amazing thing, Harry, you know, you so aptly pointed out that Japan’s got a huge demographic problem it’s been suffering with for a long time. Japan is got weird stuff going on? You know, there’s just that’s just a strange

Harry Dent 35:04
a colonial like young people not

Jason Hartman 35:06
having sex. Oh, I know it’s totally weird like a woman in Japan marry themselves, they have weddings with just them no groom,

Harry Dent 35:14
it can’t afford to have a man who can afford to have a

Jason Hartman 35:16
kid. It’s just weird. Yeah, Japan is a different kind of bird. But China, and I mean, we’re not even discussing Coronavirus or anything like that yet, or, you know, maybe we won’t at all but but China has a demographic problem due to the one child policy now, that hits that starts to show itself in about 10 maybe 15 years

Harry Dent 35:37
ago. No, no, no, no, no backup, Jason No, it their workforce already peaked in 2011 and has been declining. The second thing they’ve been doing is over amping urbanization, moving people from rural to urban areas, the price of real estate from all their stimulus and overbuilding and growth, and the pollution and the in the traffic are so bad that these rural migrants are actually turning around going to go back to

Jason Hartman 36:01
the country. And now

Harry Dent 36:02
they have two things. Their demographics have been weakening. But if you keep building stuff and urbanizing Well, now the urbanization has stopped. And nobody sees that I dig out this data and say, Hey, the demographics peaked in 2011. The first emerging country to peak like Japan was the first developed country to peak back in the early 90s, China’s the first emerging country to peak and demographics and now their urbanization is backfiring on them, they are gonna go down, you know,

Jason Hartman 36:31
Harry biggest bubble. I remember in the late 80s, all of the xenophobia about Japan, everybody was worried, oh, Japan’s buying the US, they bought Rockefeller Center, they’re buying, you know, the movie studios, the buying everything. And turns out, all that really happened is they bought that stuff at the peak of the market, and paid taxes on it for several years, and then sold it back

Harry Dent 36:55
back at a bargain. It’s like the s&p 500. They’re leveraging in a bubble, these s&p 500 companies, and then people gonna be able to buy their stocks back at a bargain when they bought them at the highest prices and screwed their own show.

Jason Hartman 37:09
I know. And then if anybody listening is worried about you know, if they’re like in the US or in the West, and they’re worried, oh, China’s going to take over? I think I think if you look at the 10 largest economies in the world, the US is, like you said, it’s the best looking house in a bad neighborhood. Okay, the US is in pretty good shape comparatively isn’t

Harry Dent 37:31
we’re gonna come out of this the best in the developed world outside of Australia has got stellar demographics, because they’re getting all this age emigrated. But let me tell you something else, because I just got this the other day, China, they finally had a study by the University of Hong Kong, which is more independent and can do this thing, and show that China’s been over reporting their GDP systematically.

Jason Hartman 37:52
Imagine that.

Harry Dent 37:54
First of all, when you look in US dollars, there are economies only 65% 64%, as large as the US After all, this massive expansion and high growth, when you adjust for the real growth rates, which they said were 1.7 percentage points lower for the last decade. They’re only 54%, the size, their GDP per person, which really counts because they got four times by 9800, under their reported GDP statistics, but under the new ones, it’s 8000. So they are a sixth of our standard of living. So China first and they also said China now even if their growth rates double ours in the past decade or something, they won’t surpass us as the largest economy until 2036. I think they’re gonna have a bigger downturn than anybody thinks. So I think it’s gonna be 2040 or later. And their GDP per capita will never surpass ours. So yes, and I was I came up with my indicators. That was, you know, that spinning wave I showed you and many others in the late 80s. Finally, formally, and it showed me Japan was getting ready to collapse. They had a bubble that we didn’t have, and their baby boom, was getting ready to tank which would trigger that bubble burst, you know, and everybody said back then Japan was going to overtake the US economy in two decades, which back in that case, unlike China with with such massive population, urbanization, that was not even possible, the Japanese would have to have three times that GDP per capita to make up for a smaller generation. So it shows you how economists just project trends and don’t understand cycles and don’t adjust things. You remember when you said before, is this adjusted for, you know, inflation? Well, yeah. And is it are things adjusted for the size of the economy GDP. If you don’t make these adjustments, then statistics don’t make

Jason Hartman 39:45
sense. It’s really something it really is hairy. Are you finished with the charts?

Harry Dent 39:49
Well, just this last chart,

Harry Dent 39:51
okay.

Harry Dent 39:51
The biggest short term thing happening is the Fed because the repo crisis was forced inject money, and they say, Oh, it’s not quantitative. And we’re just buying repo. Every time you inject money

Jason Hartman 40:03
now what your Wait, wait, wait, what you’re talking about is the repo market. Okay, which has been talked about a lot lately that has been in the news big time. Explain the repo market, just so our listeners have some context there, Harry, if you would,

Harry Dent 40:17
yeah, yeah, banks, you know, especially in this bubble, boom, do a lot of speculating hedge funds. So Wall Street’s always doing a lot of speculating on leverage and stuff. So banks and financial institutions, you know, like, you know, Merrill Lynch and all these sort of stuff. They have basically, you know, they have certain margin requirements and things they have to meet. And overnight, sometimes a bank, oh, we’re not meeting our regs. So we need to just borrow money, so they just borrow overnight. And what typically happens is the really big banks like JP Morgan and stuff, and Bank of America, really big banks have so much assets and reserves, they’ll just do these overnight loans to make, you know, one and a half 2% and blah, blah, blah, well, when their reserves got down when the when the Fed started shrinking their balance sheet, which shrinks reserves twice as fast. And I want to get into that, but that’s what happens. These banks have said, Well, wait a minute, we don’t have enough liquidity here to keep doing this. And the Fed had to step in. And I’m telling you how much $424 billion since mid September, when this happened, they have put into the market to keep it flush. So basically, they had to go back to injecting money. And I don’t care if they buy t bills, or bonds, or Japan’s even buying stocks, they’re so desperate to put money in doesn’t matter what you buy. It’s increasing the money chasing all financial assets, because it’s its own pool. It’s not going to the bank lending, as I said before, and it’s not going to consumers. If you wanted to really stimulate the economy, you would send a check to consumers, and then it would be spent and it would go on to bank bank accounts and bank lending potentially but so the Fed basically said, oh, we’re taper everything be all right. And I warned No way. The repo crisis was the first sign of many to come. The economy cannot live without crack, its markets on crack. They’re living on stimulus, all this additional liquidity all these super low rates, which makes stocks and real estate more valuable, just the low rates alone. Without it all this thing comes down in the economy class. So this is the first warning Oh, no, if the Fed shrinks their balance sheet, well, now I’m telling you, within months, the Fed is going to be back at their peak before they tapered. But the point is, I now have an indicator on a two and a half week lag. So it gives us a little notice two and a half, three weeks. Stocks are following we’re in this final strength. They’re following this injection by the Fed. Right, right. And I’ve been saying we’re due for a correction which we’re now getting, because that has been moving sideways because the repos have gone down in need. But the feds still pumping money in addition, because they don’t want this repo crisis to come back. And the Fed and all central banks are reacting to the Coronavirus Oh my God, if this thing blows up, we better have a lot of liquidity in the economy, so the economy doesn’t blow up with it. So and this is why stocks are going up now and why they’re going sideways. Now, I think that central banks and the Fed are going to keep stimulating more, but at least now, if they do start to taper, if they have this indicator, the blue line will go sideways or down. And stocks even go sideways to down if it starts to accelerate, which I expect is more likely to happen in the coming months, they’re gonna go right back up again. So this is the short term saying, okay, here’s what’s happening short term, this is how the final bubble is being stimulated by this fed injection. And the same thing happened in the tech bubble. In late 99, the Fed suddenly put in $150 billion, which now would be like 300 billion and equivalent, you know, adjusted for inflation turn, and that goose the last six months of the tech bubble, and then it burst as soon as they pull that back. So So this repo bubble is playing into this final bubble. And I’m just telling people, as much as I know this is going to crash at a time to go run from stocks yet until you see the Fed pulling back, we’re going to be telling our subscribers Hey, you know, we’ll let you know when it looks more dangerous right now, this correction is probably not going to go a lot lower and interesting. If they step up more stimulus, then it’ll it’ll go up again,

Jason Hartman 44:31
many, many years ago, I think back into the mid or late 90s, you made an interesting prediction that I’ve always thought about since I’ve been following you for what 2025 years now. That prediction was that the baby boomers would start to sell off their big mcmansions or just big family houses and become empty nesters. And, interestingly, that has come through I think you were maybe a few years early on that prediction. Possibly they are and Surprisingly, a lot of them are quite content to be renters and just not have. And that’s that’s a surprise to see baby boomers move into the rental market and mass like we’ve seen it right.

Harry Dent 45:11
It’s a surprise. It’s never the baby boomers change everything. What basically happened in a nutshell Jason these the baby boomers grew up in good times, unlike the Bob Hope generation before them, you know, Great Depression and World War Two and they were entering the workforce and starting their careers. Like the millennials today, similar thing. They didn’t say they they watched their house go up, and then there’s the housing bubble, and their stocks go up. And they’re like, Well, why don’t we should say, well, we’ll just when we retire, we’ll be worth so much. Well, what’s happened now, they’re mcmansions have bubbled up and they’re realizing, Oh, my gosh, with the economy slowing since 2008, and being more questionable, and seeing bubbles burst. They’re saying, gosh, we need assets to retire on. And they’re coming to the conclusion, unlike most people who stay in their house or downsize to a smaller, they’re selling their McMansion using those huge bubble profits, which is a very smart thing to do, by the way, by accident, to create an investment plan to catch up with their savings. And then that means though, they need those profits. So they are more and more baby boomers are actually saying, we’re gonna rent in retirement. So what do they want to rent, they want to rent a nice, great apartment building or they want to rent a more affordable, smaller, what would be a starter home, the millennials are to the past boom, they’re gonna downsize to the millennials are moving up into starter homes. The retiring baby boomers are not going to go from a McMansion to another image, they’re going to go to a smaller home or a nice apartment building. So that makes the rental market, which actually would be peaking now, except for a downturn will always boost rental markets. This market, the last I just did a presentation in Dallas for a rental real estate conference, in our space is a no baby boomer is going to cause this second rental real estate to continue to grow for the next couple decades. This has never happened before. And it’s a good trend for everybody.

Jason Hartman 47:03
Yeah, that’s so interesting how that’s changed. You know, I think there’s another interesting element to kind of related things. Number one, not many people have, you know, they talked about how Millennials are under so much pressure, they’ve got student loan debt, they basically have a mortgage, they just didn’t get a house included with it. It’s a crummy deal. You know, they’ve they originally moved into kind of a very anemic job market that improved significantly, so they’re doing a little better there. But I don’t know, it’s a really different kind of a generation. And the thing that I haven’t heard anyone talk much about Harry, is that those Millennials are going to be inheriting money from their aging parents. Now, granted, people could if they take care of themselves live a lot longer. But how do you analyze the transfer of wealth through inheritance? And are the millennials overall in good shape or bad shape? Just in a like a sound bite? What are your thoughts about that? Well,

Harry Dent 48:03
first of all, this inheritance is not going to happen anytime soon, that hot people tend to inherit money in their late 50s, early 60s from their parents who are dying in their late 70s and 80s. So so that’s that millennials are not even the peak, not even enter the workforce, yet. It’s the early millennials that are starting to buy houses and spend money and they haven’t even reached the peak and spending at 47. They’re at about 42 to 43. Today, I can already tell they’re doing everything a year later. That’s why I say they’re gonna pick it 47 they’re not even the early millennials aren’t even at 47 to confirm that yet. So they’re nowhere near inheriting money. They have less financial assets and wealth at their age than baby boomers did, because they’ve seen because they’ve seen a major downturn in stocks and a major downturn, right? I mean, you got to realize baby boomers never saw a major downturn when they were their age. And never thought real estate would always go up and never correct. Well, Millennials don’t think that way after seeing real estate go down 34% on average, and in the bubbly markets, like Las Vegas, Phoenix and Miami and California 60% or more. So millennials do think differently, more like the Bob Hope generation that started entering the workforce in the 30s. And then on top of that, if that wasn’t enough to to slap your ass, oh, how about World War Two. So Millennials are going to be different than baby boomers. They’re not as advantageous now, but what I tell millennials, what I’m talking about this reset and home prices, cost of living and financial assets is going to allow millennials when they need to most in future invest in stocks. Again, invest in real estate again and make money. If you buy real estate now, especially in these bubbles. You buy these bubbles stocks, you’re not going to make any money for decades and you’re going to lose money in a downturn. So this downturn, we talked about taking money from the Top 20% and shifting and more to the everyday household. We’re also who’s going to lose the most money. These baby boomers own these financial assets from housing to stocks. Younger people don’t have as much of that it’s going to shift money from the aging generation to the younger generation and going after this crash, Real Estate’s going to be cheaper, borrowing is going to be cheaper. And you’re going to be able to buy stocks and say, Oh, I could actually make 10% a year on these stocks. Again, you have no chance of that buying stocks at these levels. And there’s very clear models that show that actually the best model shows that we buy stocks, and this does not take into account my demographics and downturn or anything. If you just buy stocks at these valuations. Today, on large on stock, you’re going to lose 2% a year for the next 2012 years compound. Oh, that’s painful, and

Jason Hartman 50:52
that’s without a downturn. Yeah, that is bad. And there’s going to be downturns obviously, yeah. Wow. Okay, so just to get clear, what does Harry dent like? You like cheap rental real estate? Thankfully, I like that, too. I know you like that you don’t like real estate in high flying bubble markets? cyclical markets. I don’t like that either. So we agree there. Is there any other asset class? I mean, you’re not a gold bug. You’ve predicted gold, you know, really going down quite a bit to 750. And maybe to 250. It hasn’t happened. But no, it did.

Harry Dent 51:26
Raise that from 700 to 1000. But it’s still Yes, it’s gonna go it’s in a bear market rally. Now. I think it’ll settle somewhere between 700 and 1000. It will not fall as much as other commodities will not fall as much as stocks but it is not your safe haven, in a deflationary economy, a deleveraging. Economy. It was the safe haven in the 1970s. inflationary bust.

Jason Hartman 51:47
Okay, so what do you like? Is there anything else what Yes,

Harry Dent 51:52
I like high quality bonds. I like the 10 and 30 year US Treasury bonds. They’re even though they’re low rates, they’re gonna go lower the money when everything else falls, real high end real estate, junk bonds, stocks and commodities, people going to shift money in the safest stuff, even though they get low yield, and those yields go lower. And the Great Depression, the triple A corporates, and the treasury bonds, long term did the best, they actually doubled in value over that decade. They don’t lead not only held their value, like cash, they increased in value 1015 20% during the downturn, so that I like that I like apartment, real estate investment trusts around residential, not commercial rentals, residential apartments and medical facilities. And you can find those, those Hold up. The medical facilities have the best demographics, and they’re recession proof because people don’t say, Oh, just because the economy’s down, I’m not gonna, you know, go to the hospital when I break my leg sort of thing. So I like those. And basically, there are no stock sectors. Yes, utilities and consumer staples will do better than consumer cyclicals, or growth stocks. But Jason, I did this decade ago, I looked at every stock sector in the 1930s, there was nothing that held his value and went up in that crash, and would have been a good thing. Now when they crash Oh, then then stocks, particularly emerging countries, I tell people in this crash, you want to buy the again, same type of stuff that starter homes and ultimately the trade up homes, and they’re going to be the biggest bargains that mcmansions buy then that the millennial is going to want and you want to buy Hang on. Let’s talk about the mcmansions. Again, I just feel and this is just kind of a you know, anecdotal, okay.

Jason Hartman 53:46
I just don’t see a market for those mcmansions after the baby boomers let go of them. Because the millennials, they just don’t strike me as the type that would even want a house like that, even if it were given to them. Like if they inherited that house. They just sell it, they would sell it. Yeah, I don’t think so. So I think those kinds of properties are really, they’re they’re a conspicuous consumption. They they’re they’re not environmentally friendly. You know, there’s just nothing about them that I think millennials would be attracted to. Am I right about that just kind of sight I’m talking psychographics here,

Harry Dent 54:26
right. But there’s another side to it. So yes, you’re right. I Millennials are buying later because of caution and student loans and then tighter lending and since family formation and some of them when they finally do buy in their mid 30s. Just go ahead and buy the larger home but you’re right, they’re not as likely to buy that six bedroom, five 6000 square foot on a golf course somewhere, sort of thing. Okay. And that’s going to come a little later anyway in their cycle, but what happens is B is going to be the mcmansions that those smaller homes that they’re buying And that the the we just talked about the baby boomers and retirement are trading down to when they sell a McMansion, those are going to hold up much better in the downturn, they’re going to come out much better than mcmansions are going to be a bargain so so when it comes down to Yeah, I’m not that conspicuous up but I could buy a 4000 square foot house for only 10% more right?

Jason Hartman 55:23
That’s gonna be so

Harry Dent 55:25
I can rent out part of it on Airbnb, right? Because

Jason Hartman 55:28
I’m I’m into the sharing economy and a modern and I like meeting new people. It’s better than couchsurfing. Yeah.

Harry Dent 55:36
Now, let me give you one better than this. And I just spoke for this guy. In the last year, there’s a guy teaching people how to take large suburban mcmansions and turn them into a non nursing homes, assisted living facility with limited, you know, medical stuff and all this other stuff. And make two to three times on those which are less.

Jason Hartman 55:58
Harry, I’m so glad you brought that up. I think that assisted living thing is totally over built. I think it’s over supplied,

Harry Dent 56:06
don’t they? It is today. Let me tell you why. This is why you look at demographics. People think oh, the baby boomers are already nursing. No, they’re not. They’re they’re aging in place are fading because the Bob Hope generation is dying off. Baby Boomers, I do my normal lag for 84 Peak spending on nursing homes and assisted living. For the baby boom, it’s just bottoming in 2018 19. And we’ll turn straight up for 26 years and I think 2042 or 45. I remember correctly, and they will never have enough of these things. Harry.

Jason Hartman 56:43
The boomers will do I disagree for a couple of reasons. Number one, we’ve been talking about the graying of America since the 80s that is been built in their soul. Okay, hang on, let me just finish.

Harry Dent 56:59
I’m talking nursing home or late

Jason Hartman 57:01
70s dialing I get it I get it was not even there. Harry. Harry. Okay. So on. So yes, that’s that’s built in. I understand the 84 year lag, I totally get it. But here’s the thing. Technology is the wild card in there. It’s allowed people to age in place and people want to age in place. They don’t want to go to an institution. And you know, the idea that you can just have your aging parent, wear an Apple Watch, and it will notify you if they fall if their heart rate is too low. If their blood not the blood pressure yet, it’ll do their EKG, that old commercial I’ve fallen and I can’t get up is way high tech. Now. There are all sorts of sensors that can be placed around.

Harry Dent 57:46
You just talk yourself out what is less institutional in a six bedroom home in a quiet neighborhood, maybe a half mile from your kids and their and your grandkids.

Jason Hartman 57:56
I agree that they’re going to sell the McMansion because the technology

Harry Dent 57:59
makes that make no no not sell it. You can take these mcmansions which are closer to and buy them cheap and turn them in and use this you’re right the technology allows you to put sensors in and things that make something like that more sophisticated without having to be a big bureaucrat against the Fair

Jason Hartman 58:17
enough, but they don’t have they don’t have to have any. They don’t have to have any roommates at all. They can just be in their own place. That’s what I’m getting. They don’t need an assistant fair. They can just be in their own apartment or whatever. I don’t know. We’ll see.

Harry Dent 58:31
It’s a pain in the ass to keep granny in your home. And some people do it some people don’t but even at but my mother got in there, oh

Jason Hartman 58:38
my granny and he had a point it

Harry Dent 58:41
was unmanageable. And if I’m an older person and we’ve we’re we have a really good friend is 91 years old, just down the street from us. The mother of some crypto friends, we have her in Puerto Rico. She likes being in the nursing home. She’s She’s a block from her daughter, and she’s a half a mile from us who are best to her son, her best friend.

Harry Dent 59:02
She’s hits with other people, she can play bridge and stuff. Other people like her and do stuff, right. Why would you want to be one older person with a bunch of younger people living with don’t have a lifestyle? Anything like you? Yeah, so just saying it doesn’t take everybody You’re right. More people will age in home. And that’s a good thing. But if you can age in a smaller, more technologically sophisticated home, not far from your relatives, but still have your own thing be taken care of and not be a burden. I tell you. I know older people that don’t specifically don’t want to be a burden on their kids and grandkids by living in the house. When they get more than Listen,

Jason Hartman 59:43
listen, listen, I agree. I’m not saying they’re going to live with their parents. That’s more of an Asian thing that there’s intergenerational housing. You have a little bit of that in the US but not that much. I’m just saying they can agent plates, they can still have their own home for much longer than what is gonna end up

Harry Dent 59:59
with one lady. No man that see, by the time we get 10 to one women, I know and you want to live as a lady by yourself in an apartment where you feel vulnerable with nobody and knows very little technological sophistication that you can afford in a one bedroom apartment, rather than being in something that’s a little more. I’m just saying, I don’t know, it won’t be for everybody. But I do see things changing. And in what she said about technological sophistication is important. We had my wife had her mother and her aunt, which was like our second mother both be in nursing homes, and the service was not good.

Jason Hartman 1:00:37
Yeah, right. Yeah. And there’s all kinds of

Harry Dent 1:00:39
things. I didn’t want to be there. Yeah, right. It was $10,000 a month. So this guy is showing people, you get a few clients like that, and maybe you charge them 5000 a month, and you’re making 20 30,000 a month off a McMansion that if you rent it out might be 5000 and rent.

Jason Hartman 1:00:58
Whoa, well just remember it’s got all so you got all sorts of insurance issues and care issues and liability and grumpy old grumpy old pm Yeah. And, and intrusive, young people children and telling you what to do and, you know, filing complaints against you and it’s nothing is simple. Okay. That’s the point of life. Okay. Nothing is as simple as that looks. Okay, Harry, let’s just wrap up this whole macro discussion we’ve had with anything you want. Let’s wrap it up. Okay. We’ve talked about a lot of stuff today. Well, again, I

Harry Dent 1:01:31
mean, again, I I get nothing but hated and scorn because and I tell people Okay, wait a minute. I’ve called a perma bear. Now this is ridiculous. I and you know, this was the most well, I was the only guy that saw

Jason Hartman 1:01:44
the great boom ahead. You weren’t you were totally bullish through 2010.

Harry Dent 1:01:48
Well, me and Templeton Templeton saw it too. But you saw it because of globalization and emerging market urbanization. I saw it in the developed countries greatest boom in history when people thought the US and Europe was dead. And now I’m saying look, we’ve had that great boom. And now we’ve had this unbelievable money printing scheme. Oh, we’re not going to D leverage debt. We’re just going to cover it over with free money. Oh, does that sound like that would work something for nothing. wave a magic wand print $16 trillion. And all your problems going? We The reason we’re gonna have another big downturn, we have more debt than we had before the great financial sector. We didn’t D leverage debt, some consumer debt, some financial debt. We have way more corporate debt now and a lot of it buying their own stupid stocks. And we have massively more government debt. So So we still have to get the debt down to reality, financial assets down to reality cost of living back down to reality, or these young people, the millennials and millennials. They’re sentenced to a poor standard of living like the Japanese younger people have today. That’s what I was alluding to earlier about. Japanese young people don’t want to have sex date. Don’t think about getting married unless you’re, you know, marrying somebody financially independent. Because you can’t afford to have a kid. They don’t have the benefits their parents have the parents kept that in Japan, young people have this zero coma economy, even with three times the stimulus we’ve been put out comparable, and they’re going nowhere. If we don’t rebalance is that Jason and go through what you always do after a debt bubble and financialized and have these financial assets come down. People lose money, but it may clears the way for the next young generation. We are going to be like Japan in an endless coma economy, even when demographics are good and the countries are so we need to go through this. I’m telling people all you got you can’t control all of this. All you do is get out of the way that like we were saying today, both of it, you’re going to own real estate own of more affordable, less bubbly real estate that you can rent and there’ll be even bigger demand for rent. In these kind of aging baby boomers, smaller houses, Millennials buying smaller houses, the medical sectors, and apartment buildings. That’s what’s gonna hold up everything else. Get out the way Hey, you may want to keep your primary home and live it until you die but certainly, do you use your vacation home that much. I’m living in a condo in Puerto Rico that is a vacation home it’s expensive on the beach, vacation home for wealthy Puerto Ricans and and some gringos and they’re using it four to six weeks a year sell that if you live in your vacation home half you may thought maybe you keep it but but do you really want to keep the vacation homes and then mcmansions will fall the most all stocks will fall the most bubbly the tech stocks will fall the most China you know in emerging countries always get hit the hardest. So just get out of the way. at these levels the model say you’re not going to make much money long term and we get out of the way and then if I’m right even half right and these things crashed down. Then you can rebuy financial assets and then sectors or real estate feel confident about it, but people think, Oh, you know, you know, you just sit through downturns. Yes, you sit through normal downturns. You don’t sit through that 90. I mean, go back and look at that 90 year chart. Every 90 years, we see these super bubbles crash. And we don’t have recessions. We have depressions. You don’t sit through financial assets and depressions except the safest ones. High quality bonds. affordable rental real estate. That’s pretty much it.

Jason Hartman 1:05:29
Yeah. Harry, the one thing I would definitely take away from our discussion today, is that financial assets, in other words, the Wall Street economy versus real assets, the main street economy, the real economy, financial assets are just far more risky. I would Yeah, I would. I would venture to say that all the time. Yeah. Good stuff. Harry, give out your website.

Harry Dent 1:05:55
Okay, Harry dent.com. That’s where we learn more about us and get on our free newsletter.

Jason Hartman 1:06:00
Good stuff. Harry dent, thank you so much for joining us again.

Harry Dent 1:06:03
Thank you, Jason.

Jason Hartman 1:06:08
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