It’s not the time for panic. It’s time to look at the coronavirus pandemic with a clear head to figure out what we should do. It’s a bad situation, but we can get through it. With the right knowledge and precautions, we can protect ourselves and our finances.
Today’s guest is economist Harry Dent. He will give us a detailed look at the good, the bad, and the ugly — not necessarily in that order. Harry talks about where we are now with the COVID-19 pandemic, what’s happening in different countries, what happened during past pandemics, what’s likely to happen with this one, the risk to our health, the risk to our finances, and some ideas on where we might want to put our money. He’s been predicting a financial reckoning for some time now and is often described as the voice of doom and gloom, but he doesn’t sugar coat the truth and that’s what we need right now. This pandemic is a big wake-up call.
Harry is the co-founder of Dent Research. He’s appeared on “Good Morning America,” PBS, CNBC, CNN, and Fox News. He’s been featured in Barron’s, Investor’s Business Daily, Fortune, Success, U.S. News and World Report, Business Week, The Wall Street Journal, and many other publications. He’s written several best-selling books including: The Great Boom Ahead in 1992,The Demographic Cliff in 2015, The Sale of a Lifetime in 2016, Zero Hour in 2017,and Spending Waves in 2019. And he shares much of his research and insights in the blog: Boom & Bust.
For more information on our guest or to sign up for his free newsletter, visit www.HarryDent.com.
Kathy Fettke: Harry Dent, welcome to The Real Wealth Show. I’m a little afraid you’re going to really panic our listeners and viewers, but that’s okay. You’re used to it.
Harry Dent: Are they not already panicked?
Kathy: All right. Okay.
Harry: How can I do much more?
Kathy: Well, you mentioned something actually that was quite calming. Let’s talk about this. You think that this all might peter out in a bit. What do you mean by that?
When Will This Virus Disappear?
Harry: First of all, these viruses are all different and we don’t know everything about this one. As a general case, most flus and viruses go down in the spring and summer. Even the great Spanish flu. The first one was in July, right in the heat of World War I. They didn’t talk about it and they suppressed it. It expanded when it hit fall. The big surge was October, November 1918. There was a final strong surge, not a peak one, into the end of winter.
It went away and World War I ended and all that stuff. April alone should start to see warming weather work against this. I am tracking each country. China is the only full case. You know what? I think within two months, China had peaked out, growing very slowly. Now, they’re going back to work and back to– Starbucks is opening up again and dah-dah-dah-dah and Apple stores and stuff. It doesn’t take that long.
Kathy: Do you think it would have been worse though if they hadn’t done what they did and shut everybody?
Harry: Yes, absolutely. These are exponential. The Spanish flu was not reacted to. They took more, I hate to say more, of a Trump view like, “Hey, we don’t want to scare anybody, so let’s not talk about it and make a big deal out of it.” No, you do have to stop this thing early on. Italy was late going, but man, they’ve been locked down now for weeks. Now, everybody is locking down. People are following Italy’s example.
Kathy: We’re not here. They’re talking about it. My daughter and all of her friends just came back from a semester abroad. They were in Europe. I’ve got my daughter locked up in the guest house and she’s not coming out, at least not anywhere near me. Her friends are out and about and they just came back from Europe. Are we really containing it here?
Harry: Well, I’ll tell you. The key cities, New York is locking down. San Francisco just went to 24-hour curfew. I’m in Puerto Rico and they’re very last. We’ve only had five cases on the whole island thus far.
Kathy: It’s warm there.
Kathy: It’s warm there.
Harry: It’s warm. That’s the reason why, but Puerto Ricans are like the Italians and Spain, who is also accelerating very rapidly. They’re very affectionate. They touch and kiss and dah-dah-dah. When they start drinking, forget it. We’re on curfew. Yesterday, 9:00 PM to 5:00 AM curfew. Restaurants are takeout only.
The only thing I’ve been to in the last few days, I walked into Starbucks this morning, walked in. They’re wiping the counter as I walk in. They’re probably wiping it every five minutes, the big order counter. All the chairs are up. You cannot sit down. You come in. You order, you take out, you leave.
People pretty much– You stay at home and take out food. Now, they’re banning the beaches. Now, that’s crazy to me because you got plenty of airflow and easy space for people to keep space. They’re doing it here because they know the people and they know they’ll go to the beach and then they’ll start drinking and then all the stuff goes out the window. They’ll be kissing and hugging and blah-blah-blah.
Kathy: They’ll be kissing and other things. Oh boy, it sounds like Puerto Rico is the place to be. [laughs]
Stopping the Spread of COVID-19
Harry: Spain is locking down. Germany and France are getting more serious. People are responding. It does seem like overreaction, but it is true what you hinted at right off the bat. You have to stop this in its tracks initially. It is so exponential. The infectious rate is much higher than a normal flu and the death rates are way higher. The death rates, Kathy, in Italy are over 7%, roughly double what they were in China and what they’re averaging globally.
They were 1% in South Korea because South Korea came right out, tested hundreds of thousands of people, quickly identified the people that had it, quarantined them rather than the whole nation and also determine quickly, “Where’s this coming from? Is it this country or that country or this city or that city?” They ended up with 1% death rate and they are already played out a week or so ago. It’s over in Korea. It was over in three weeks in Korea from start to slowing down and peeking. That’s what happens when you really do it the right way.
Kathy: Why? I get a lot of research on Facebook because I find out what’s going on in the brains of Americans. So many people have said, “Well, why would it work to quarantine and to shut down cities because it can just come back?” That doesn’t seem to be the case in these other places who have been able to enforce containment.
Harry: Well, two things there. South Korea did not shut down like they did Wuhan in China 100%, stop all traveling and stuff or like what’s happening in some places in Europe. Italy is shut down. I heard a newsletter writer get out to say to his group, “I’m trapped in Italy. I went to Italy and I can’t leave.” You can’t leave Milan. They didn’t do that. They did the smartest thing.
They got on it and tested everybody that had any overseas travel, any this or that, anything. They tested everybody and quickly isolated the people. That’s better than locking down everybody. That’s the best response. Well, it was too late in Italy for that. It’s probably too late in the rest of Europe and even in U.S. The worst place is Washington State in the U.S., but it’s quickly becoming the New York area.
The Urgent Need for Testing
Kathy: We’re not testing here either. I keep people saying, “The cases are so low. When you compare to Italy, there’s no way we’re even close because there’s so many more of us and the percentages will be so low.” I’m like, “How can you think that when we haven’t been testing?” I know people who are sick with fevers who go to the hospital and they ask for a test. They’re told to go home. When they have a 104-degree temperature, “Come back and maybe we’ll test you then.” By then, you’ve already contaminated thousands of people. We’re doing it wrong here. That’s what scares me.
Harry: We are doing it wrong. Fortunately, for us, only the Northeast and the very upper Northwest and maybe Upper Midwest are really in the colder zones. So far, it’s not breaking out, but it’s starting to. No, we are not handling it right. We’re doing the least testing. Testing is the number one thing. Social isolation, they are moving. In Puerto Rico, it quickly went from, “Oh, don’t meet in groups of 100 to 50.” Now, it is a 20. Yes, it’s 20. It’s 10 in some places. That’s the best way. The larger the group is even more important than the number of people infected.
Kathy: Really? I didn’t know that because, see, I won’t let anyone come over because I have asthma and I’m not going to take the risk. I’m 55. I’m not elderly, but I’m old enough to be scared. Man, people have better got their hands washed and been in complete quarantine before they come visit me.
Harry: That’s the best way to do it. Again, we’ll see. Italy did not test early on, did not react as early as South– South Korea was the model here. South Korea and Singapore and Taiwan just nailed it. Right away, heavy testing and quarantining non-stop without locking down the whole country like Italy did or China ultimately did. They did it the best. No, we’re not doing it. Europe didn’t do that. It really does come down, “Okay. Well, then we got to limit social contact extremely.”
The Human Cost of Herd Immunity
As extreme as it sounds, it makes sense to do that for the next month. I’m just saying. I think there’s likely. If there’s not, it will be more worrisome that by late March to mid-April, we’re going to see more places playing out like China did and then, all of a sudden, is like, “Oh, this doesn’t blow up.” In fact, 50 to 70%, as a lot of scientists are saying, can happen. That did happen with the Spanish flu. When you get to that level of infection, the experts are saying you get herd immunity and then the virus dies for good.
Now, the second point for something you said earlier, it does come back. That’s the danger. We could see this start to tail off into spring and summer and then come back right around election time into the fall in the next winter and come back stronger than ever because we certainly– If it starts to limit as I’m saying and we only have tens of thousands die instead of millions, then you’re not going to get that herd immunity and it can come back.
If people are back socially active and stuff and everybody’s not scared of it, it can come back in the winter and stuff. That’s a distinct possibility. Again, that’s why the theory– Some people have this theory, which to me is suicidal. Well, let’s just let everybody get it. Yes, there’ll be some death, but then we won’t have to worry about it anymore because we’ll have mass immunity.
Well, then you already lost the game because you’re going to get mass immunity one way or the other if this thing totally blows up. It doesn’t make sense. It makes sense to limit it now. I tell you. People would be wise to recognize when it comes back to, I know, October next year, November, you better damn get cautious again because this thing could come back faster than ever.
The Long Wait for a Coronavirus Vaccine
Kathy: Maybe they’ll have a vaccine, probably not. The longer we wait, the better the chance.
Harry: That’s probably the earliest. They say a year is the earliest and that’s if they push it through. They should do that too. They should cut some bureaucracy. They’re testing on in Seattle literally starting yesterday. If that proves and they better push that through because if you don’t get that vaccine by September or October, then it’s going to be too late. That’s important too. That’s the only way. Either the mass immunity, the herd immunity they call it, or having an effective vaccine that’s widely administered, the only two ways you can knock this out for good. Otherwise, it will come back.
Kathy: The herd immunity basically means that enough people have had it that now, they’ve been self-immunized, right?
Harry: Yes. That 60 to 70% for you to get that and then with a death rate of 1 to 2%, that’s millions and millions of people dying. That’s not a good solution.
Kathy: [laughs] Yes, when you put it that way. Well, then why do people keep saying that it’s not as bad as the flu? Maybe because they just don’t understand that it’s exponential and many, many, many more people would die if we don’t contain it now.
Harry: Okay. Well, the thing is the flu, it happens every year and you get millions of people. In fact, you get 40,000 deaths a year just from the everyday flu. It’s only a 0.1% death rate. That’s why people, “Okay. One out of 1,000 dying.” My God, everything else can happen. There’s so many things can happen. Walking down the street or getting in your car or slipping in your bathtub is much higher than that.
It’s happened forever that the death rates are so small. Collectively, they’re not small. That’s why some people say, “We overreact to this,” but the difference is the flu happens all the time. Yes, it spreads, but the death rate is so low. It never wipes out a substantial part of the pie. Even if everybody got the flu and 0.1% died, it would still be a small effect. It wouldn’t be anything like the Spanish flu.
The Importance of Social Distancing
The difference with these viruses, they are more infectious or their contagion period is longer before you even have something. That’s the most dangerous part. This thing can be anywhere from a week to three weeks where you don’t have the symptoms and have no idea you have it and you’re infecting people. You get the flu quickly. You know you have it and then you go in your bed and take NyQuil for a couple of nights and knock it out or whatever, so that’s the difference. That’s why these are more dangerous. The flu does kill way more people than these viruses have collectively.
Kathy: If we don’t contain, then it could be much worse, right?
Harry: Yes. If you don’t contain, this thing can go much more exponential and, again, with high death rates. They’ve been about 3.5% on average and in China and they’re up to 7.7% now in Italy. I think Iran is 6.4%. I’m watching Italy and Iran the most. Even in Germany and France and Spain. Spain is a little more mature on this. Even in Spain, the death rates are more like three-and-a-half like China. Italy and Iran are the most dangerous at this point, so I’m going to be tracking them the most closely.
Kathy: Okay. The bottom line, stay inside. Now, my daughter, like I said, she’s quarantined herself. It’s not the worst place. [chuckles] She was having a blast in Prague two weeks ago. Now, she’s locked up, but she agrees. She wants to stay away from people for two weeks. You’re hearing now that it could be three weeks?
Lockdowns Are Temporary
Harry: Well, I just think once you get a lockdown, it’s got to last at least two weeks and a month is probably even better. Beyond that, it should be working by then. Again, when I’m studying these S-curve accelerations, we’re well into it in Italy and Spain. China is already through it. South Korea is already through it and Taiwan. These things shouldn’t last that long if the lockdowns are reasonably effective. This lockdown, unless it fails, should mean within two to four weeks in most places. We start to lighten up just like as our– Again, China is lightening up already.
Kathy: I wish I could be excited for you, but there was a huge concert in Denver two days ago with 17,000 people. The word just doesn’t seem to be getting out. In California, it is because it’s here and we’re scared and there’s a lot of us in one place. Do you think at some point, there will be a shutdown here where people will stop flying? I sit and I look at LAX from my balcony and it’s constant plane still.
Harry: Well, all I know, American, who I fly on the most– I was going to go in Australia and do my normal tour in May. Well, that’s gone. I knew that was going to go. I just learned about it last week, but that’s gone. July would be the first time they’ve locked down that sort of thing, foreign travel and stuff and a lot of stuff in through June in Australia and stuff. Overseas flights are going to go down 70-80%. That’s what the airlines are saying.
Kathy: What about domestic?
Harry: Domestic could be next. Domestic is not as restricted yet. It could be soon, so I would expect more lockdown everywhere. I would not have expected the curfew in Puerto Rico this quick. San Francisco’s 24-hour curfew, which means you only go out for the drugstore or the grocery store if you have to. I’m not sure if they allow takeout food there. I would imagine they do. I’m sure in New York, they do. New York, it’s the best in takeout food. They got delivery people everywhere. Basically, places are moving towards, “You stay at home, except for a few vital functions.” You do not go out and socialize and you don’t even go to the beach in Puerto Rico for crying out loud.
Buffering the Economic Blow
Kathy: Well, let’s talk about the economic ramifications. Obviously, people are freaking out. There’s always opportunity in the midst of turmoil, so what would you say? Let’s have a positive note here. Is there opportunity? Is there a stock we should be buying? Is there gold we should be buying, staying in cash? What are your thoughts?
Harry: Well, real quickly, another thing that just opened in this crash. I’ve been saying gold is not the safe haven. It does well in the early stages and then it goes down like everything else, which is exactly what it did in 2008. It was up for the first six months of the crisis because they were sensing all the money printing coming stuff. When the deflation of the downturn hit gold, when right down 33%, silver is 50%, they were not the safe haven.
The safe haven was the US dollar and, more than that, the US Treasury bonds and the AAA corporate bonds of international companies in the US. That’s what’s happened here. The Treasury bonds went up 24% for most of this stock crash until the stock crash got so bad that all these traders and hedge funds were having to cover their margin calls by selling their bonds and gold. A few things that were going up a little bitter.
Gold vs. Treasury Bonds
Gold went up at first. Now, it’s down 10%. Gold failed again. Treasury bonds are still up about 11%. In this crash, we’re up 24% at best and everything else went down. Stocks go down and all types of stocks and think junk bonds go down. High-risk bonds go down, of course. Really, what does well in the crash is the highest quality bonds. Same in the ‘30s. Now, we’ve already seen most of this crash.
This is the first crash which I warned from the beginning. I tracked every major stock bubble burst, including the Japan one, closing 1929 to ’32, the tech wreck 2000 and 2002. Seven major stock crashes around the world, but in bubbles, not ordinary boomer, in bubble markets. The average first crash was 42% within the first two and a half months. We’ve been down 32%. I think the Dow, 30-31%. The S&P, 29-30% on the NASDAQ already.
Stock Market Bounce
We’re projected by some of my downside to be down 40% on the S&P, 44% on the NASDAQ at worst. That would fulfill that first crash. From there, you get a 50-60% retrace. It even happened in 1929. Stocks were down 49% in the first two and a half months, but retrace 60-70% of that for five-six months rally before you go into the long downturn. It lasted two years after that. There will be a rebound rally. It will be substantial.
What’s going to drive it? What do we already heard? Fed is going to allow three to five trillion, not billion, trillion dollars for the repo crisis to keep the banks alive. It’s really just anything to keep the banks alive. They can borrow for any reason, but they’re calling it repo. Now, we’re talking about a fiscal stimulus package. Just today, 850 billion probably end up higher. Mitt Romney is talking about it.
Trump has been talking about it, sending direct cash, one, two, three thousand, to households. We’re cutting the payroll tax to zero for the rest of the year. That would give the average household at 60,000 income, 2,000 to $3,000 over the rest of the year and put the money directly consumer hand. First of all, money printing for the banks already failed. This was announced the biggest bazooka of money printing trillions and trillions.
Between Thursday and Sunday night, the market went down 3,000 points, Monday anyway saying, “You know what? Been there, done that. You’ve been doing this for dying 10 years and we keep ending up down. This ain’t working.” I’ve been warning there would come a point where they would print so much money that the markets would finally say, “Oh, this is bullshit.” Pardon my French.
Fed Stimulus Is Not Working
Harry: It is not working and they failed to react to it. It wouldn’t work and that just happened. I think you know how the House in the emergency room, all these television shows, people keep flatlining. They keep doing the defibrillator, boom. Well, they do it five, six, seven times and they pronounce them dead. The economy was just pronounced and quantitative easing was just pronounced dead on Monday when the markets went down 3,000 points after the biggest injection in stimulus in all of history in a matter of days.
That QE has seen its limit, but they haven’t put the money in consumers’ hand. I’ve always said if you’re going to print money, which is bad, except in an emergency, I would have printed the first trillion for the banking crisis in late 2008, early 2009, and that would have been it. Give some liquidity so the banks don’t have to overreact, but let them shake out. Let them write down loans. Let them deleverage. That’s what makes you healthy again just like the common cold when you get one.
Get bad stuff out of your body. People think it’s the enemy. No, it’s your friend. When you suppress colds, you get sicker. When you suppress recessions, you end up with a depression. That’s what happened in the early 1900s. Fed was created. Stimulate, stimulate. Keep lowering interest rates. Don’t let the economy shake out along the way and then you get a depression instead of a recession. Now, that’s what we’re getting. We’re going to see a depression here after 11 years of money printing.
When to “Get the Hell Out”
Don’t let the economy reset. Fight recessions at all cost, which they’re doing again, just won’t work that long this time. We are going to get a bounce here with this new fiscal stimulus. The difference, I think the markets could be bottoming here. There’s some key support points I’m looking at. I think it’s more likely in the next month or so, we go down a little lower. We hit that 40% correction, then the NASDAQ goes from, say, 5,500 up to 7,500, 8,000. Back down just maybe 10, 15% from the highs and then I say, “Get the hell out.”
Kathy: What would cause that bounce back up?
Harry: The election, everybody’s going to promise everything. Joe Biden’s promising– Bernie Sanders– free everything, free Medicare, free student debt, free what– Trump’s going to keep throwing stimulus. Again, 40%– Real quickly, I look back to the Spanish flu. 500 million people got it. Roughly, 50 million people died of it. The worst in history. 5% of the population. You know how much the Dow went back down? 11% at worst because we were in World War I.
Stocks weren’t overvalued. People weren’t all cheery and bubbly like today. The stock market didn’t wrap that much. They knew it was temporary. This is going to be temporary even if it wipes out half of– That whole thing was over in less than a year. It’s temporary. The markets are reacting because they’re overvalued. It doesn’t matter what the first trigger was. It could have been China blowing up.
Real estate developers blowing up in China finally or the shale oil producers blowing up at high leverage when oil prices go down here. It could have been anything. First point is 40%, 50% max is plenty enough to get a very strong bounce in the markets that will last a number of months. I’m going to be telling people, “If you didn’t get out before or didn’t get out early in this crash, look for that rebound.”
Rollercoaster Recession On Its Way
That rebound is likely to peak anywhere between a couple of months before the election to a month or so afterwards. I’m telling you after this election, if not before, the next phase of this is the big one. We will see a recession in the second quarter deep. We will maybe blend in the third quarter. We’ll see a comeback into maybe the fourth quarter of this year and then we’re going to go down hard more like the Great Depression, more like 1981 to ’82.
They had 11% unemployment there. I think we’re going to see 15% plus. We’re going to see a depression and stocks are going to end up going down 70, 80, 90% before it’s over. I’m saying people have between now and then to not over-panic on this crash. Wait for this rebound and sell into it, especially as we get closer to the election. You won’t be down that much and then you’ll avoid the worst downturn of your lifetime. You’ll be able to buy stocks at bargains and real estate at bargains and everything else.
The Benefits of High-Quality Bonds
The high-quality bonds I talked about earlier will be the way– You can be in cash because that preserve while everything drops. It’s even better to be in a 30-year Treasury bond that may pay you 1%, 1.5% percent yield, then it appreciates when those yields go to zero or negative. You appreciate instead of just being in cash and then those bonds are very liquid. Their big bubble will end when stocks bottom at the end of this.
I’m projecting, by the way, Kathy, a bottom this whole mess, probably around late 2022 for stocks and for the economy. In real estate and stuff, more like 2023 and then we’re over this winter season that started in 2008. We start a less glorious spring boom from 2023 for maybe 2036 or 2037 globally again. It won’t be like the last boom with the baby boom and massive demographics and massive stimulus and bubbles.
The next boom will not be a bubble boom just like the ’40s, ’50s, ’60s boom wasn’t. It will not last as long. It will not be as grand, but stocks will go up again. We can tell people exactly where there’s going to be growth. It won’t be everywhere. It’ll be in Southeast Asia and India primarily. Africa for sure. In the aging sectors of countries like the US and Europe, nursing homes will be on a tear.
Kathy: Wow. Okay, so–
Harry: There will be places doing best. My said, the trick here, and I hate to say it, Kathy, this is where you just have to not listen to your damn stockbroker, financial advisor. They’re going to give you wisdom that works 80, 90% of the time. They’re just going to say, “Hold on. Diversify. Don’t panic and stocks will come back. Real estate will come back.” They will not come back to these levels ever possibly, and certainly not for decades.
That’s what happened after the ’29 crash and the ’72 crash that ended the last two generational booms. There are times when stocks don’t just correct and go higher, they correct big time and take decades. It took 23 to 25 years in each of those generational boom pop for stocks to get back to where they were. You don’t want to sit through this in stocks. You don’t want to sit through in real estate unless you’re on Omaha, which didn’t bubble because nobody wants to live there in the first place other than Warren Buffett.
Financial Security with Affordable Rentals
Kathy: That’s really my question. A lot of us have rental properties and flat markets like that, Ohio. That’s been our focus and parts of Florida that are affordable where a lot of older people would want to go. Again, it’s warm and affordable. What are your thoughts on those? I’m talking like $100,000 properties.
Harry: Yes. There’s a couple in real estate. I already I said the high-quality bonds. The same thing in real estate. The high-quality rentals. By that, I don’t mean the upscale rentals. Those are the ones that will go down. It’s the ones, the affordable houses that are already in this bubble renting out at positive cash flow. You think you can rent out a positive cash flow in San Francisco, even an affordable rental or in New York? No, you can’t.
Harry: You cannot. You can in Ohio. You can in many places. You can, like you said, in affordable parts of Florida and stuff. The affordable rentals, apartment buildings, particularly aimed at the everyday market, rentals only go up in downturns because people can’t buy because they can’t get a loan. The economy looks too bad and they’re scared to death. Of course, they rent. Rentals hold up.
Lease and rentals for medical facilities. Medical facilities are in the strong demographic, still a baby boomers. They’re more recession-proof. People don’t not go to the hospital or buy a pharmaceutical drug or whatever because the economy’s down. That’s something they don’t do. REITs and real estate and apartments and in medical facilities are good. Commercial rentals, dead, horrible.
They go down the most because businesses are heartless. They just cut their expenses, break their leases, whatever and run more than households do. Commercial real estate rentals, terrible. Residential affordable positive cash flow, they will hold up and that’s it. Boy, high-end real estate, the worst thing people tell me, Kathy, the dumbest people I talked to today are the richest.
High Value Real Estate Will Fall the Most
Because they think Manhattan and London and San Francisco downtown and Silicon Valley and Singapore, in Sydney, Australia, and all these great places where the rich people buy the most can’t go down because they’ll always buy there. They don’t understand one simple fact. Ted Turner can tell you. He lost 90% of his wealth in two years. 10 billion to 1 billion in two years when the last tech wreck happened.
The rich people own all the financial assets and the most over-the-value real estate and businesses. They will lose the most money. They won’t have all this money to buy $200 million, $250 million boxes in the air in Manhattan and places like that in London. Those places will go down the most. The high-end real estate is the most vulnerable, the affordable stuff you’re talking about, even if you’re living in it and say, “Well, I don’t want to sell my home. I like it. I want to die here.”
Okay. If you’re in that $100,000, $150,000 house in Ohio, it didn’t bubble that much. You can stay in that. You might lose 10 or 20%. Fine. That’s okay. I wouldn’t sell a house over that. High-end real estate, average real estate is going to get down 40 to 50 this time by my bubble calculation. I’ve got bubble models in everything now, Kathy. The high-end real estate is going to go down 60 to 70% and maybe even 80. That stuff, you should sell. It’s the risky–
Kathy: Sell it now, buy it later?
Real Estate Opportunities
Harry: Buy it back later. We are in Puerto Rico. We’re going to end up near the Miami Heart Institute for me since I’ve got propensities in that area when I get older. We’re going to end up back in Miami. I’m not going to buy in Puerto Rico when things go out. I’m going to buy a top-end condo that goes down 70, 80% in Miami and then move there when the doctor tells me, “Time to live down the street from the Miami Heart Institute.”
Kathy: [chuckles] Okay. Do you have any concerns about cash in the banks? Are banks going to survive?
Harry: Yes. I want to have cash, except for paying bills, in brokerage accounts. It can be at a bank. My money outside of my bank account to pay my bills is actually at Ameritrade because they used to be at Scottrade. It’s probably going to be soon somewhere else because they keep buying each other. I’m in a brokerage account that only does transactions. I’m not in a Merrill Lynch account that’s part of a company that does everything from investment banking to speculation and loans and stuff and real estate– registered transactions. Guess what? In a downturn, transaction levels go up when people panic and sell. I’m not worried about them going under. I’m not worried about them lending. If the money is in a brokerage account in my name, they can’t lend that. If your money is sitting in a bank account or a savings account in a bank, they can lend that money against real estate and business loans.
Banks vs. Brokerage Accounts
They can fail and your money can disappear. That’s why you’ve got runs on the banks in the 1930s. The central banks had to print so much money to stop potential runs in the banks in 2008 when real estate melted down. Yes, you can have it cash, but why not have it in a brokerage account? I’d rather have that cash in high-quality, long-term bonds because they’ll appreciate more.
A high-quality treasury bond can be sold in an instant like a stock. It’s more liquid market than stocks. You can sell it if you need the money. Why sell in cash when maybe a 30-year Treasury bond will pay you 1 to 1.5%? A little interest and the more the economy goes down and deflates, the more that will go up again. These Treasury bonds in this brief crash, the TLT, which is averaged 10 to 30-year Treasury bonds, 20-year Treasury bond, went up 24% in a couple of weeks.
24% in the worst crash we’ve seen in a while. You make money on the downside and then you can convert it into cash anytime you want if you decide for a liquid market. That’s my advice on where to have your money in a brokerage account in your name, in cash and/or cash-like, but I want the long-term, high-quality bonds that will actually benefit from a meltdown, not cash holds your value while everything else falls. That’s going to look great. People holding cash are going to look like geniuses. People holding 30-year Treasury bonds are going to look like more than genius.
Kathy: [laughs] Awesome. Very good. I think everyone wants to be a genius. Harry Dent, thank you so much for joining me again here on The Real Wealth Show. All right. Stay safe.
Harry: We’ll do it again, Kathy.
Kathy: All right.