Part 2: Crystal Ball hard for even experts to decipher!
In the second installment of this series, noted financial experts Harry Dent, Doug Ramsey, and Peter Schiff offer their insights and disclose predictions for the nation’s economy!
Mr. Dent is generally seen as one who tends to view the economy in a negative light. He has appeared on many financial news TV shows, and inevitably his remarks tend to focus on the uncertainty in the U.S. economy. With that in mind, we were interested in determining the basis for his continued negativity. In March of this year, he stated that evidence of a declining economy is piling up in this year’s presidential race. What we have now, surprising to most political analysts, is a genuine voter revolt
Dent predicts “much greater civil unrest ahead.” He equates the political considerations in the U.S. with the prospects of a recession on the basis that political decisions drive the growth of the debt in this country with a negative effect on the economy.
Typically, growth in debt means that the growth of business produces higher employment for the masses and a rising standard of living. However, with the current circumstances, economic activity is greatly inhibited.
When we first introduced Harry Dent as an expert for this article, we mentioned that in the 1980s, he forecast that the Japanese economy — then the darling of the world — would soon enter a slowdown that would last for more than a decade. In the early 1990s, he predicted that the Dow Jones industrial average would reach 10,000. Both of these predictions were met with much skepticism yet both eventually came to pass.
According to Gene Epstein of Barron’s magazine, “Harry Dent knows how to sell books. But whether his stock market strategies make sense– or money for investors– is another question.” Jeffrey Laderman suggested in a Bloomberg Business week article that, “Harry’s explanation of the stock market is a simple one that resonates with investors”. Market Watch Columnist Chuck Jaffe suggests “tell people what they want to hear, and they will flock to your door.”
Leuthold Group’s Doug Ramsey sees a bear market coming. He predicts a declining S&P 500, and hints that foreign stocks could be a better bet. In commenting about the state of the stock market, he claims that the economy has been a full-blown bear market for everything except the Dow Jones Industrials and the Standard and Poor’s 500.
In reviewing the factors that informed his opinion, he spoke about high valuations, public and individual participation, and negative investment in a key sector of the economy. Clearly, the tightening of the money supply by the Federal Reserve and its move away from an easy money policy are the primary basis of Mr. Ramsey’s analysis about a Bear Market. Typically, there are downstream weaknesses in the economy, which can be caused by a great many things other than simply a loose monetary policy. But, Mr. Ramsey who spends his time reviewing the stock market and its effect on the economy has concluded that a Bearcat market is on the horizon.
Schiff is another of the analysts whose glass is typically half-empty. However, he says, not too modestly: “People just don’t want to give me credibility by acknowledging that I had it right, because it means that they have to acknowledge that they had it wrong.”
As a stockbroker and financial analyst, Schiff has been advocating that people buy gold as a hedge against financial uncertainty. His critics point out, in part, that his persistent and unrealized post crisis calls for the Fed’s ultra-loose monetary policy may well lead to soaring inflation and a dollar collapse.
Instead, the big fear for global policymakers right now is the prospect of deflation, while the dollar has rallied sharply since mid-2014. Critics have taken Schiff to task for his refusal to put a date on his inflation calls.
Schiff says his inflation forecasts haven’t come to pass yet because he didn’t foresee how far central banks could go in pursuing easy money policies! How far will they go? Note: Recent reports state the Fed may seek a modest boost in interest rates during June.
Schiff’s sharpest criticism about the state of the markets has been reserved for Federal Reserve Chairwoman Janet Yellen and central bankers abroad.
“We’re still early in the process of Fed capitulation,” he proclaimed.
His argument is that the central bank should not have raised rates and should be acknowledging that the US economy– and the global economy for that matter– is in poor shape.
“The real mistake was lowering rates and leaving them there for as long as they did. What I’ve been waiting for Yellen to say is that the market is much weaker than she thought.”
Editor’s note: Next week, in Part 3 of his series, reporter John Woodard offers his take on the views of other economic prognosticators.