Harry S. Dent: ASX to 1000, Gold below $500, Silver below $10

This article is quite a read. Excerpts below. Any comments?

Harry argues passionately that we are witnessing the end of the third great bubble in debt, hot on the heels of earlier forays into madness in technology stocks and real estate. Add public and private debt from all sources, and it totals $130 trillion, the greatest accumulation of IOU's in history. The Federal Reserve is now manipulating all markets, and the exercise is certain to end in tears. The only way out from this will be to suffer an economic and financial crisis worse than we have seen to date.

....

The triggering factor will be the continued collapse of the residential real estate market. Continued shrinking home equity means that there will be ever fewer buyers in this market. That makes a laughing stock of current bank valuations, which have yet to be marked to market, and still obscure massive losses from the last crash. Have you enjoyed Uncle Ben's wealth effect through rising stock prices? The movie run in reverse makes Freddie Kruger look like a cream puff, and the outcome will be ugly.


Source: resourceinvestor.com

....

There will be no place to hide, as this will be a global event, and that reallocation towards more defensive sectors will be a waste of time. The Australian stock market will vaporize from 6,000 to 1,000, while Hong Kong will get pared back from 24,000 to 8,000. China is the greatest bubble and could take the biggest hit. The rising middle class will not take their first ever big recession lightly, and coming political turmoil is a given. Canada, with a great resource base behind it, a new government, and rising interest rates, will hold up better than most.

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Precious metals. (GLD), (SLV) If oil is wearing a toe tag, will gold be far behind? Coming deflation will cut the inflationistas off at the knees. A strong dollar sends those looking for alternatives into the Looney Bin. Take these frills away, and the barbarous relic becomes just a heavy rock that will take it from $1,550 an ounce, down to $250-$400. Gold bugs are about to get doused with insecticide. As for silver? How about a move from $50 to $4-$8?


Source: resourceinvestor.com

http://www.resourceinvestor.com/News/2011/5/Pages/A-Day-with-Harry-S-Dent-Jr.aspx

 

PM sent for $10 silver

 

Thatguy I buy whatever he has left over

cheer$

 

buzz on $4 silver

 

Hard to say when he cherry picks the graphs and hides the dates like he has (which I'm willing to bet if we could see would show he has picked the best time frame to suit his viewpoint) - personally I call shenanigans on it I think Dent isn't just his last name it's what he has in his head.

 

Fair point on the graph timings. I was hoping for a little constructive criticism beyond that though too. Can you unpack your thoughts more and state your reasoning please?

 

Can't see miners selling silver for half the price it costs to get out of the ground.
Can see shares crashing.

 

That would have sounded pretty dear 10 years ago I guess. Could it sound dear in a few years again? How long is your offer good for? :|

 

I think he ignores at least two big risks being: US defaulting on those IOUs (bad for Bonds) and change to world reserve currency (bad for US dollar).
US failing to default by printing money, probably leading to massive inflation is also bad for US dollar.
So there is some big risk in going cash especially denominated in greenbacks.
I'm still only learning about financial shenanigans so correct me if I am wrong here.

 

i don't believe one word.

 

But what happens to the miners if all the liquidity for exploration dries up, credit freezes and their share prices tumble?

 

For this to get to the levels he is describing (stock market wise) we would have to have a total global meltdown of proportions that make the GFC look lame and I don't think it's going to happen - Asia and South America are starting to steam away up the economic ladder as the established economies stagnate away (but stagnate at close to peak consumption and lifestyle levels - i.e. they've plateau at sustainable consumption levels but aren't declining to much). The amount of resource investment projects in the world at this time is staggering - these people are very rich/very smart and very knowledgeable they have a lot more information than I/we do and they are making these huge investment decisions, that alone tells me something.

 

If you do a regression analysis on Gold and Crude Oil you will see that they are really inversely correlated.

Don't really have a source of recent data but you can do it in excel really easily...

Here's a link on an article from 2006: http://www.gold-eagle.com/editorials_05/milhouse090506.html

They stipulate that Gold and Oil are inversely correlated and factors such as "Oil's upside breakout from its base coincided with the start of a major downward correction in the gold shares" support the findings.

I don't trust this guy simply because he thinks Oil prices dropping means Gold will drop...which is completely wrong since they are inversely correlated. And no I didn't read the article so I might've interpreted your quotes wrong

 

Then the miners go bust and the physical I own becomes extremely valuable because supply falls off a cliff. Then, the mining shares I buy for cents in the dollar rise as liquidity is pumped into the market in massive volumes by rich bastards and hedge funds and other gamblers trying to cash in on rising prices.

 

Yeah, good point. So you're saying the slack will easily be taken up by Asia and that his views are probably a little anglo-centric? I can see that, though it doesn't appear to jibe with the dynamic global markets idea. But honestly I don't understand world markets nearly well enough to know whether his initial statement that "the Federal Reserve is now manipulating all markets" has merit. But if so then shadowy elites :/ could conceivably watch the world markets crash, position themselves accordingly and pick up the pieces on the other side. Isn't that what happened in several crashes anyway? - Increased consolidation and centralisation of power.

 

Not sure here. Given recent unrest I see Copper - and other commods - taking a hit. GLD & SLV to dip & spike. . . .say below 30 up to 40 on SLV; GLD less volume but similar ratios.
Monday I was saying $32 looks like a new floor for SLV but honestly? Worldwide if we're looking at GFC 2.0, you gotta expect a commods hit to kick it off . . . (unless that was April) . . . some certainty would be nice, huh?

 

Eventually sure, but you're assuming a regular old boom/bust cycle. If what he postpulates comes to pass it will be more than a few years before that can occur. I assume you can wait that long so I'm sure even in this scenario you'd be comfortable, but that may not be the case for many stackers/investors.

 

I think he tends to lump all commodities together, like he lumps the share market all together. Someone thinking of buying an index fund needs to think like that.

He's a fiat vigilante which is why he also lumps bonds in with cash, he trusts the US to pay him back and he trusts the US dollar to still be worth something when it does.

Disclosure: I just told my super fund to go 100% cash, but that is mainly because I am starting a SMSF and I want the cash ready to roll over. Nothing to do with how they underrate risk and lost me a big chunk of it in 1998 when the Geelong Football Club struck.

 

Well yeah, I'm looking at Spain and scratching my head. If that pillar falls (maybe this year!) the Euro will begin to topple in earnest. The dollar could profit violently... and Mr Dent's article doesn't look all that crazy.

 

If gold goes to $400 and ASX goes to 1000 then the GOLD:ASX ratio would be 2.5:1. At $1500 gold and 6000 ASX the ratio is 4:1.

Therefore if this scenario plays out, those holding gold would have had their wealth go up 1.6 times while 'everyone else' invested in the stock market would have had their wealth cut to 1/6th of what it was before.....conclusion gold still wins.