E Expect Turbulence

We are living in perilous times.  Consider:

What happens next — inflation or deflation?  Stock market boom or bust?  It is unclear, even to economists and investors with glistening track records.

Economist Martin Armstrong – who predicted the 1987 stock market collapse, among many great calls – predicts investors’ loss of confidence in both government and the banking system will lead them to “park” capital in the stock market.  Investors will prioritize the preservation of capital instead of the rate of return, and will ignore traditional stock valuation metrics such as the price earnings ration.  He believes this could well result in a stock market boom. Also this podcast.

By contrast, investor Peter Schiff – who predicted the 2007 housing crash – sees debasement of the dollar once the debt bubble bursts and politicians seek to keep the illusion of financial solvency at a time of $20 trillion of federal government debt.  The result will be runaway inflation.  As a hedge against inflation, Schiff believes investors should buy gold and silver.  As he told CBS Marketwatch, “There really is no limit to how high gold prices can rise.”

Economist Harry Dent, Jr. – who predicted the collapse of the Japanese economy in the late 1980s and the boom of the American economy in the 1990s – sees falling prices and deflation due to changing demographics, fewer workers in the workforce as the Baby Boom generation leaves it, and as Americans unwind from unprecedented levels of debt.  Dent believes the Dow could crash by more than 50%.  When the markets figure out that workplace growth will be flat for the foreseeable future, the markets are going to crash.