‘The stock market can drop as much as 80%’: A 47-year market vet explains why we’re in the midst of a global bust — and makes a case for $10,000 gold


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David Hunter, the chief macro strategist at Contrarian Macro Advisors, thinks the global economy is in the midst of massive “bust” consisting of two distinct phases.
Phase two of the bust — which Hunter is forecasting to take place in late 2020 or early 2021 — will be “steeper and deeper” than the ongoing first phase.
When all is said and done, Hunter thinks the stock market can lose up to 80% of its value.
Due to unprecedented stimulus and inflationary pressures, Hunter thinks gold can hit $10,000 or higher in this decade.
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David Hunter, the chief macro strategist at Contrarian Macro Advisors, isn’t coy in his assessment of the prevailing economic environment.

“I think we’re in the bust now,” he said in a recent O&M Partners interview. “So, I use the term ‘bust’ to describe something that’s bigger than a recession, steeper and worse than a recession, but not as elongated as a depression.”

The way Hunter sees it, the bust will take place in two parts: (1) The initial shock and short-lived recovery (2) The “steeper and deeper” drawdown.

Right now, we’re in phase 1. After initial annihilation due to the COVID-19 pandemic, economic data — although still weak — is starting to recover from its nadir.

But according to Hunter, phase two isn’t far off. We’re not out of the woods yet.

To him, it’s only a matter of time until these measures turn south again. In his mind, the stimulus that central banks and governments are bestowing upon the economy are perpetuating an uneven recovery — one that’s not supportive of many sectors and facets of the economy that need help.

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“Probably late this year, or early next, we’ll end this bounce and start heading the other way again,” he said. “I think the second phase, you have much more insolvency issues.”

Hunter’s insolvency forecast echos that of John Hussman — the outspoken investor and former professor who’s long predicted a market collapse. In a recent note, Hussman provided the following chart from Bloomberg portraying a voracious uptick in bankruptcies.

When these insolvency issues are coupled with excessive debt and leverage — two metrics Hunter has been monitoring like a hawk — it’s a recipe for disaster.

“We have debt beyond anything we can ever manage,” Hunter said in a …read more

Source:: Business Insider

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