I don’t have a crystal ball, so I can’t say for sure what will cause the next recession, but…in my fearless forecast for 2018, I said the Dow would hit 26,500, and we did. I recently told my newsletter subscribers and radio show listeners that I thought we’d have a correction, and we did. I said I thought the Dow would drop to 23,500, and it did. I also said that it would bounce back from that, and it did. And you may know that I told investors to sell in November 2007.
So what do I think will cause the next market crash? It may sound counterintuitive, but that’s economics for you: I believe the next recession (and the crash that leads to it) will be caused by…a good economy. How does that happen? Recessions are caused not by a lack of demand, but by an oversupply. As an example, look at real estate. When the economy’s doing well, everybody’s building. There’s construction everywhere. The next thing you know there’s a gigantic oversupply of real estate. And when there’s too much, no one in the real estate business can do anything until that supply is soaked up. The same thing happens across the entire economy.
I think we had that recent correction because investors were worried about the recent good economic news, since recession usually follows good times. I know it sounds crazy, but I believe it’s true. I also believe the next bear market will be significant. Even though the U.S. economy is growing, a large portion is built on debt: We have nearly 20 trillion dollars worth of debt. Is that real growth? I don’t know, and I think it could mean that this next bear market will be a big one. We want to make sure you have a plan to address that possibility.