Harry Dent: How the 'Everything' Bubble Will Finally Burst

What he is convinced of, however, is that the "everything bubble," as he describes it, is the biggest, longest-lasting bubble in history and that, he says, "there are no soft landings for major bubbles."

What will likely trigger this crash, he says, is increased stress in the private credit arena. It won't be the Iran war, he shares.

Dent forecast the 1989 Japan bubble bust and recession, and the populist movement that netted Donald Trump his first presidential term. But over the years, several of his predictions, based on demographics and market history, haven't materialized.

In the interview, Dent — whose HSD publishing offers free forecasting newsletters ahead of a paid subscription — lays out what he says is a probable scenario for today's big bubble to finally crater. He also gives his recommendation for aggressive investors to profit from what he says is the "avalanche" that will hit when a monthslong market correction escalates into a crash. (His market-shorting vehicle of choice is not one that most financial professionals would recommend.)

Here are highlights of our conversation:

THINKADVISOR: How long has the stock market been in a correction?

HARRY DENT JR.: Since late last year. Starting on Feb. 2, the S&P finally gave in a couple of months after the Nasdaq did. I'm going to quit my profession and shut up if this bubble doesn't blow soon. I'm sick of waiting.

THINKADVISOR: Do you still think there's going to be a market "avalanche" of everything plummeting when the bubble bursts?

DENT: Yes. There is not one bubble burst in history that was not an avalanche. There are no soft landings for major bubbles.

THINKADVISOR: What do you see rolling out?

DENT: Probably we'll go up to one more new high, and maybe in the fall we'll have another shot. I want this thing to be over with. We have to take out all the zombie companies, the high valuations and the bad debts.

Private credit is the latest place where they can hide weird stuff that nobody knows about. We need something to trigger this to get enough momentum for the bubble to crash. It's probably going to be private credit blowing up.

Even the Iran war doesn't seem to be enough. So far the market's not reacting to it.

This is the biggest, longest bubble in history anywhere, anytime.

And bubbles of this magnitude take close to three years to wash out; so it would be 2029 to 2032.

If we don't see follow-through on the correction this month or next, then probably we'll make a slight new high — and then boom! We'll just go until this thing blows.

If it doesn't happen by June, it's probably not going to happen quite yet. The [U.S. government] will just keep stimulating no matter what happens, and that will keep this bubble going.

The first crash ought to be more obvious by about June or July.

THINKADVISOR: What if it doesn't play out that way?

DENT: If we get through this year and don't have more than a 20% correction and the stimulus isn't pulled back more and we're still in the greatest bubble in history, who am I to predict when? It's just not predictable.

I was able to predict the 2007 top because I knew something that was going to change that [other] people didn't know: The baby boomers were going to peak their spending cycle. I could see that and make a bold forecast, and I was right.

THINKADVISOR: When we talked in March of last year, you said there were two bubbles. Is that the scenario now?

DENT: Everything is bubbling together. Real estate and stocks all around the world are all peaking at about the same time.

Gold and silver have been bubbling too. That was the last major thing to join spectacularly. Gold had doubled in three years, and silver probably had tripled.

THINKADVISOR: What do you mean by "the first crash," as you said a moment ago?

DENT: Every major bubble took about five to six years to build exponentially and then 2 1/2 to three years to burst, twice as hard, twice as fast.

THINKADVISOR: Is there an artificial intelligence bubble that's tangential to or part of the big bubble?

DENT: With this bubble, crypto came in as the biggest driver, and we had AI coming in the last few years ... We're at a tipping point. Stocks led first because it's much easier for stocks to bubble. The real estate bubble followed on top of it. Now they're peaking together.

This is the perfect time for the bubble to burst. But even I'm skeptical. This whole thing should have been over for good 2019 to 2022.

THINKADVISOR: A year ago, you recommended that investors exit the stock market and invest in Treasury bonds. What's your advice now?

DENT: For the more aggressive investor, the best way to play this is to short the stock market: Buy SQQQ [the ProShares UltraPro Short QQQ ETF]. So short the QQQ, which is the Nasdaq 100 tech-oriented stocks, which should fall the hardest. Everything will fall eventually, but the Nasdaq stocks should lead.

I like the SQQQ triple short, the most liquid way to short the most dynamic part of the broad stock market. You could short that, the Russell [2000] and the S&P 500 if you want to diversify.

If, say, your portfolio is $1 million, buy a third SQQQ. When we see the first crash down 40% or 50%, sell that and wait for a bounce and then get into bonds.

If you long the Treasury bonds at the beginning, you'll do pretty well, but not nearly as well [as later]. Bonds don't respond as fast. But when they become the last thing standing, they make the whole show.

With Treasurys, you'll make 4.5% for sure rather than sitting in cash while the crash is happening.

Half or more of the damage in that first crash is done in just a few months. Bonds do the opposite on the tail end, the last third of the crisis. When everything goes to s---, bonds soar.

They're like the last Hail Mary when everything is down, and it looks like the thing will never end.

That's when 10- and 30-year Treasury bonds become the only safe haven because even gold is crashing by then.

When the first crash looks like it's over, I'd get out of that stock short because you'll lose half of it right back.

THINKADVISOR: So then the next move is to buy Treasury bonds?

DENT: Yes, either 100% or just keep moving into them increasingly. If the stock market comes back 50%, you could short stocks again.

If stocks look like they're getting ready to slam down again, get back in stocks, or buy half stocks, half Treasury bonds.

The key thing is to make sure to be in bonds the last third of the crisis because they'll be the heroes, and you don't want to miss that last hurrah.

[The government] can print money to pay off their bonds. That's the secret to Treasury bonds.