Harry Dent, a US demographer and financial commentator who correctly predicted the 2008 crash, has warned of a “major political and social revolution brewing” very similar to the American Revolution of the late 1700s.
He argues the global real estate and stock market “bubble”, artificially inflated by central bank money printing policies, will pop within the next five years — but most likely some time between the end of 2018 and early 2020.
“I’m talking about a second global crisis because we never solved the problems of the first one,” he said. “We have $57 trillion more debt, real estate and stocks are more overvalued. I’m seeing signs. Bitcoin finally crashed, the US stock market looked like it was melting down, I think real estate comes next.”
Mr Dent, who is currently touring the country to promote his new book Zero Hour, incorrectly predicted a 50 per cent wipe-out in Australian property prices in 2014, but believes this time it’s the real deal.
Critics of Mr Dent liken him to a broken clock that is right twice a day, while Mr Dent hits back that “mainstream media pundits” calling him “crazy, an idiot and a quack” are “nothing new”.
His predictions — the latest in a series of ominous warnings going back decades — include stocks crashing up to 80 per cent “just weeks from now”, real estate prices plummeting by 30 to 60 per cent, and bitcoin by 95 per cent.
On the plus side, he sees the coming crash as a buying opportunity, with Australia one of the best-positioned countries in the developed world. “You’re the number one country I would reinvest in,” he said.
“You’re on the cusp of the best part of the emerging world which will dominate global growth which is India and South-East Asia, not as much China. China’s workforce has already peaked and China has overbuilt its economy.
“This does not have to do with Australia as much. You have the best demographic trends because of the quantity and quality of the immigrants you attract from Asia, you’re one of the few countries that does not have a demographic slowdown problem like Japan or Germany.
“Your problem is you’ve got the second highest real estate costs compared to income in the world. I see Australia as the best house in a bad neighbourhood, but you can’t escape a global crisis.
“I think this time your real estate will come back 20, 30, 40, 50 per cent. That’s good. When young people have to pay 12 times their incomes for a house, that’s not good, so this is where the reset needs to come. I think you will have a recession this time.”
Mr Dent’s warnings are similar to those of economist John Adams, who earlier this month identified 10 signs of looming “economic armageddon”, including record household and global debt, falling savings and the return of risky financial derivatives products.
He said it was not clear what the trigger for the next crash would be, because governments could keep printing money via quantitative easing. “After QE it’s been very hard to predict,” he said.
“The only thing keeping economies going is this printing money, throwing it into the economy, buying your own bonds to absorb the supply and pushing interest rates down artificially to near zero to help them fund it.
“Governments are not only pushing bubbles up on purpose because they can’t stimulate demand otherwise, but in addition, when the Chinese stock market crashed for the second time in late 2015, the Chinese government steps in and buys their own stock market.
“Just like buying your own bonds, this is total manipulation. It’s a fake bubble, a fake boom, and you can’t do that forever.”
Mr Dent said “bubbles watch bubbles”. “Right now they’re thinking everything keeps going up, governments won’t let it go down, but as soon as something serious happens in any market it will turn around. If one big real estate bubble bursts like China, people’s antennas are going to go up.”
According to Mr Dent, analysis of previous market crashes showed when bubbles finally break, the first crash is typically 42 per cent in the first two-and-a-half months.
“Bitcoin is the biggest bubble in all history. That’s starting to burst — I think it’s going to go down 95 per cent before it’s all over — and that has been leading the US stock market by eight to nine weeks,” he said.
“If the US market breaks that critical [42 per cent] level by April or May, people are going to start to worry about other bubbles. It’s a kind of like a domino effect, it does take a trigger.
“Real estate is different because people don’t just dump real estate, but it gets very illiquid and hard to sell fast. I’m telling Australians, you’re in the best position but don’t think your stock market’s not going to crash.”
Mr Dent said it was a “very unique time”. “This only happens once in a lifetime, when you get major bubbles like in the roaring ‘20s, you have to restore things back to reality. It’s like going over a waterfall to find a new level where the river can keep growing and flowing.
“Probably normal financial advisers would say to just be diversified with bonds, stocks, gold, real estate — it doesn’t work. Everything gets reset. The only things that will hold up are the highest-quality bonds and cash.”
His advice was to “take gains” now and rebuy after the crash. “When you have undeserved gains, don’t look a gift horse in the mouth,” he said.
“There are going to be a whole slew of opportunities, I call it the sale of a lifetime. If you’d have bought anything between 1920 and 1930, you would have made money for decades.”
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