We’re in talks with a publisher in Germany to begin publishing our newsletters there. (We’re also talking to publishers in Australia and South Africa, although its early days). The prospect of expanding our influence beyond U.S. borders in a meaningful way is exciting.
So, not long ago I chatted with our German contact. He had some great questions, and I think you’ll find my answers valuable.
Here’s what he asked and I answered…
Mr. German Publisher: Harry, your book is titled Zero Hour. For me as an investor: is this hour something good or something bad?
Me: I’m anticipating the greatest crash since 1929-1932, so it’s clearly bad news… and Germany has the worst demographic trends ahead so that makes it even more dire news. Your country is just like Japan was in recent decades, demographically speaking!
Mr. German Publisher: Can Germany learnrn from the 10 to 15 years of Japanese experience?
Me: No one has learnrned from Japan’s massive bubble burst and it’s 28-year bear market. And no one realizes that its Baby Boom came much earlier than the one in the U.S. and Europe. A generation of this magnitude will always cause bubbles. Unfortunately, most people are blind to bubbles and don’t learnrn from mistakes others made.
We also have an 80-year four-season economic cycle that sees an explosion of bubbles during the fall season, as evidenced in the Roaring 20s. When investors are in bubbles they’re getting a free lunch. This makes them “high.” They don’t want to hear that it’s a bubble and that it will burst, so they find every argument against it.
I have rarely been able to talk someone who is in a bubble out of it!
Mr. German Publisher: Your analysis is based on cycles. Could you briefly explain what cycles these are and why you think they are relevant?
Me: We had a major demographic cycle peak in late 2007 for the U.S. and late 2011 for Europe. But we also see a lot of longer term cycles peaking between late 2007 and late 2019. There’s the Geopolitical Cycle, the Boom/Bust Cycle, and the Innovation Cycle that are all having a significant impact on our world today. As is the Commodity Cycle, but that is more worrisome for developing countries than for us (although we’re not immune to its effects).
Mr. German Publisher: What do you think about 2018? Is this already the year of “Zero Hour?”
Me: Yes, I think stock markets will peak in the first half of 2018, and the bitcoin crash is one leading indicator of that, as is slowing in global central bank easing since March 2017.
Mr. German Publisher: Is the recent “flash crash” on the NYSE just the beginning?
Me: Yes, but we’ve been following Scenario #2 on the rising bearish wedge indicator so it may be a few more weeks before this will become more evident. Once the markets break convincingly through the bottom trend-line of that indicator, we could see a 40% crash by late April. But we must convincingly break the trend line through stock bottoms back to 2009. An attempt to do that failed between February 6 and 9.
Mr. German Publisher: What is the main reason for the flash crash? The tightening money supply due to higher interest rates?
Me: There are a number or reasons:
- Collective central bank QE has been declining since March 2017, on a year-plus lag that should see economic weakening in early to mid-2018, just when everyone is convinced tax cuts are going to take us to heaven and 4% growth again. Those growth rates are not possible given the weak demographic trends and low productivity everywhere.
- Sovereign bond yields are rising due to late stage inflation – as I have been predicting; and gold is rising as well. These are not good for stocks.
- Bitcoin and cryptos crashed – down 70% at worst for bitcoin, which means the bubble has burst. That puts fear in investors in all markets and will make them question the parabolic rise in stocks in the last two years as well.
Mr. German Publisher: Where do you think that the final reckoning will start? In the stock market? With interest rates? In real estate?
Tune in next Thursday to see how I answered that and the rest of his questions.
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