Is Harry Dent’s Warning of a 98% Crash in Nvidia for Real?

On June 10, Fox Business aired an interview warning of a major downturn in the U.S. stock market, Nvidia, and real estate. The segment claimed that Nvidia could fall 98% and the Nasdaq 92%, an almost unbelievable and shocking prediction.

That interview has also been picked up by various Korean media outlets, drawing considerable attention.

Harry Dent is an American economic author who founded the asset management firm HS Dent Investment Management.

His books include:

1993: Great Boom Ahead: Your Guide to Personal & Business Profit in the New Era of Prosperity

2009: The Great Depression Ahead: How to Prosper in the Crash Following the Greatest Boom in History

2012: The Great Crash Ahead: Strategies for a World Turned Upside Down

Great Boom Ahead, Great Depression Ahead, Great Crash Ahead…

He has written other books as well, but overall you can tell he has a clear preference for gloomy visions of the future.

Earlier this year, Dent appeared on another outlet, Kitco, where he also called for a crash.

If you look at the YouTube upload of that interview, you’ll find plenty of sarcastic comments.

He called for a crash back in January and was wrong, yet he hasn’t quit. Is it because this time the warning is truly critical, prompting him to raise the alarm again on Fox Business after his Kitco appearance?

In this article, we’ll compare the two interviews to see exactly what he is worried about and whether he has walked back any of his earlier claims.

Setting aside the question of whether his forecasts are right or wrong, I’m curious what kind of framework leads him to such extreme numbers.

Looking at Harry Dent’s January interview, he explains that the stock market will experience a decline of more than 50% by the end of 2024.

He expects the stock market to go through three separate downturns:

The first wave of decline has already happened — when the Nasdaq fell 38% and the S&P 500 dropped 28% in 2022,

The second wave is expected to hit by the end of this year, with a 50% drop in the Nasdaq and a 60% drop in the S&P 500,

And after that, a third wave of decline will follow, but he warns that most of the damage will come from the second wave — in other words, around the end of this year.

He also said real estate will not be spared from the downturn. “From 2006 to 2012, over six years, average home prices fell 34%, and it took another six years for them to recover,” he noted,

and this time, he projects prices could fall as much as 50%, an even steeper drop than before.

In a January 2024 interview with Kitco, Harry Dent pointed to central banks’ fear of failure.

In his view, capitalism grows in a healthy way by allowing failures to occur, but overly aggressive stimulus from central banks gets in the way of that process.

Dent drew a parallel to the baby boomer spending boom that began in 1982, rose through 2007, and then peaked just as the economy began to deteriorate.

Because of this aggressive stimulus, public and private debt ratios have climbed to record highs. Private-sector debt is now three times the size of public debt, he warned, highlighting the risks posed by private debt and arguing that an economy cannot be fixed by a government that consistently spends more than it takes in.

When the Kitco reporter asked what he sees as the safest investment right now, Dent pointed to 10- and 30-year Treasuries, which rallied during the 2008 downturn. The fact that he cites a period when even gold fell suggests that the crash he is anticipating could be even more severe than 2008.

Dent went on to say that government stimulus has already peaked and that a major wave of decline is coming soon. As a signal that this downturn is beginning, he pointed to Bitcoin.

He offered the following reasons to explain why Bitcoin is an important signal.

For these reasons, he explains that Bitcoin falling below 40,000 dollars is the first signal, and then, as stocks decline, the Nasdaq index falling below 10,088 is the second signal.

At the time of the January 19 interview, Bitcoin was at 41,000 dollars and the Nasdaq index at 15,310.

As of June 21, Bitcoin is at 65,000 dollars and the Nasdaq index at 17,721.

Let’s go back to his June 2024 interview with Fox Business.

In that interview, Harry Dent again pointed to the artificial bubble and inflation that had been built up over 14 years through post-Covid government stimulus. He also said real estate would fall 50% and recommended pulling assets out of the stock market and buying long-term Treasuries. This stance is largely unchanged from his January interview.

Two things have changed from the January interview:

In this interview, Harry Dent predicted that the S&P 500 would fall 86% from its peak and the Nasdaq 92%.

These are far more extreme figures than the roughly 50% drop he mentioned at the start of the year.

However, unlike in January, he did not give a specific timeline such as “by the end of 2024” for when the decline would occur. He only mentioned that “the market bottom is likely to appear sometime between early and mid-2025.” From this, we can infer that he expects the downturn to play out before mid-2025.

If we assume Harry Dent’s forecast proves accurate and put it all together, the market’s path from here would look like this:

The first leg down was the decline we already experienced in 2022.

He explicitly described the halving he forecast for the end of 2024 (based on the index level at the time of the Kitco interview) as the second leg down,

In that case, the decline into the bottom in early to mid-2025 would be the third leg down.

And if we take his comment that the bubble has lasted for 14 years and assume that the price level 14 years ago is what Harry Dent considers fair value,

we get a picture where the time it takes to fall to the bottom is the shortest on record, and there is not even a rebound after the crash.

Beneath the steep rise in the stock market, the seriousness of the US private-sector debt that Harry Dent has been worried about is increasingly coming into focus.

Private debt refers to the debt of the private sector excluding the government. In other words, you can think of it as a term that encompasses both household debt and corporate debt.

In April 2024, Reuters reported that demand was rising for riskier forms of subordinated bonds,

and in May 2024, MarketWatch wrote that “every category of household debt, including mortgages and student loans, has increased, reaching a record high of $17.3 trillion,” and that credit card debt saw the largest jump, rising 16.6% between November 2022 and November 2023.

It is true that when private debt increases, more cash is needed to service loans, which reduces consumption and investment and can slow economic growth.

An article published in 2016 in Democracy points out that, since 2008, the IMF has repeatedly and incorrectly forecast that growth would rebound, and argues that one of the main reasons for these errors is the rise in private debt.

It notes that “even during the period when US debt growth was at its slowest (1958–1968), total debt as a share of GDP fell from 130% to 126%, yet the absolute amount of debt still grew faster than GDP,” and goes on to stress that because deleveraging is difficult, improving the structure of debt is crucial.

From an interview with Fox Business

From an interview with Kitco

However, what Harry Dent is worried about is not a recession but a full-blown economic crisis.

For the rise in private debt to escalate into an economic crisis, there has to be a structural dimension to that debt.

The 2008 financial crisis was triggered mainly by the collapse of complex financial products such as MBS and CDOs tied to subprime mortgages. While private debt did increase, the primary drivers were the housing boom combined with the opacity of financial products and excessive use of leverage.

As for the subordinated bonds mentioned by Reuters: since 2008, the United States has strengthened bond-market transparency and raised risk-management standards through legislation such as the Dodd–Frank Act. On top of that, we have already gone through multiple crises. The financial system is more robust than it used to be, and central banks are not foolish enough to repeat the same mistakes.

The household debt highlighted in Market Watch has indeed reached an all-time high, but the core of household debt is debt related to housing. As of the first quarter of 2024, non-housing debt stands at $4.87 trillion (28%) and housing debt at $12.82 trillion (72%).

The surge in the share of delinquent balances on housing-related debt in 2008 (mortgages, in orange) looks markedly different from what we see today.

Within non-housing debt, which accounts for 28% of household debt, credit card balances are smaller than student loans and auto loans (Table 3). The share of delinquent balances on student loans, the largest category, has fallen sharply, while the delinquency rate on auto loans, the second-largest category, is around its historical average (Table 2).

The debt-related problems Harry Dent points to seem to lack sufficient basis to trigger an immediate economic crisis. And this issue has always been with us, and will still be here ten years from now. We live in a capitalist system, which by design is built on credit.

That does not mean the problem does not exist or can simply be ignored. The importance of staying alert and keeping a close eye on the market is undeniable.

AWARE looks at markets with the conviction that even what seems obvious should always be questioned, so we did not scoff at Harry Dent’s claims. We simply keep watching and responding, as we do every day.