Prepare For Market Collapse | Henrik Zeberg and Jimmy Connor

[Music] Henrik thank you very much for joining us today how are things in Copenhagen oh they're great summer is here still and uh yeah enjoying life here after my return from my vacation so yes things are good so with everything that's going on in the world and with all this additional volatility that we're seeing I thought it would be good to get together with you and discuss what's happening and and determine if your views have changed at all since the last time we spoke which was in in May and it's like every day now the NASDAQ is either up 3% or down 3% even Amazon which is a multi-trillion dollar company was down 12% in one day just on the back of their numbers and it's not often you see a company lose that much uh market cap but when we last spoke in May at that time you thought the S&P would top out at 6 6100 and you also thought that we were going to see a massive rally in all other risk assets followed by a massive collapse in financial markets and also Financial assets and you went on to say that the resulting recession that we would see would be the worst thing that we've seen since 1929 now A lot's happened since May and the S&P topped out at around 5700 it's down 5% give or take from it its highs the NASDAQ 100 topped out it's down about 10% uh from its highs so what's your take is this the beginning of the end of the bull market or do you think this is just a slight pullback the Market's going to steady itself and then we're going to take off and see new highs again in the coming months so is this the beginning of the of the end um yes and no uh because if you um if you look at at what we have in us well then it's not the end as I see it if you look at the rest of the world then yes this is the beginning of of this is actually the the top we have seen in some of the indices around the world as I see it I think we see that the niik has topped out uh I think maybe also we have seen the Dax topping out uh there still you know still the jur is still out on that one still but I I think there is a risk that we' seen the top also in in the Dax and also in my own Market here I think we've seen the top there as well and in Denmark and other places in the world so and the UK for for that matter also so so I think uh things are starting to deteriorate really quickly now and and this is not just a us thing all of it it's around the world we have problems all around the world and something is breaking right now in Japan which I actually also I I kind of predicted this this level of the top here uh and and now we see you know the deterioration of the or the uh declines in the in the stock market there um so yes it is there but if you look at the uh what we look at the US markets then what happens normally in this kind of the cycle where the economy is uh actually rather fast starting to deteriorate is that you will have a lot of uh money starting to circulate or rotate from foreign markets into the US so if you take a look at the Nick you very often would see that the niik tops out three to four months before we see the top in the S&P and I think that's what we we we are at now and uh so yes my my my my target for the S&P still stands it's 6,100 6,200 in that area and uh and that's actually where we're going to see the the strongest move from where we are now it will be like from the current levels levels I think is around 15% uh and I think we have maybe a few more days of of decline uh but then I think the the the US markets are going to to Really uh soar into that final final top uh and again my timeline of around October so for the US market yes that's you can say it's a beginning because you you have the the deterioration in the economy that is now coming through and that the FED is so hopelessly late on on their uh their C is is just you know is just adding to the to the fire uh and we have that we have now a you know hopelessly late fed compared or combined with a um with with the largest bubble we have ever had and we have the the indicators that you know that is telling us that recession is coming so yes I stand by what I said also that this is going to be a really really bad recession and we are heading right into it and by at the beginning of this year it was clear to me that we will get to it by sometime in this year uh this year um I I thought it would have happened sooner um but you know that's that's how it is uh and now we start to see as you said the beginning of the end well I think one of the things that's really throwing off a lot of people is this massive fiscal spending by the Biden Administration they have spent trillions and trillions of dollars trying to keep this economy going ahead of the election and I think it's coming to the point now where they're running out of money and they can't really spend anymore and the economy can't keep going anymore right and one thing that we've seen just Rec Rec L are the nonf Farms they just came out for the month of July it came in a very uh very high number at 4.3% this is one of the things you and I have talked about in the past you said the one of the first indicators we're going to see is the unemployment rate going up and we've seen that it was below 4% for many many quarters but now last month or I believe in the month of June it was 4.1% now it's at 4.3 and it looks like the trend is up absolutely and and as I've said long before we we we I have a we have a model at that where we um simply look at the leading indicators and the coincident indicators and lacking indicators and I think uh in the leading indicators I don't think I know that in the leading indicators this has been in the cards for quite some time that they've been telling us that we're going to see a very big weakening of the what is called the coincident indicators which are the real economy this these are the uh you job numbers and the production and and so on all these things that tells us where are we with the with the real economy and they are just at this point here start to uh to really come down strongly so so yes we see we saw 114,000 for July in in in the NFP numbers here on Friday well that's not a terrible low number but it's more of the trend and also more of the of the deteriation in in other things that we can see and yes the the unemployment rate and the number of unemployed people are are moving up really really fast and another thing if you look at the average uh weeks of unemployment it actually is very high still we not gone come down to the lows that we saw you know in previous Cycles we are actually been hovering really high after the corona crisis so so I think uh people are expecting too much of what the the stimulus that that has been sent out can do uh because there's only so much you know consumption that you can pull forward or investment that you can pull forward and the thing is that when even if you put you know $ th Dollar in in somebody's hands today um they're probably not going to spend it they're probably going to save it because they say well you know we've seen uh interest rates been high we've seen and and they are killing us right now because I have a Mortgage Debt I have you know some other debts where I mean um the the interest payments are simply you know soaring and have been soaring so they will not spend this on you know a new refrigerator a new car or whatever they will they will try to save it because they they want to shore up uh their economy so so this is what we're seeing and this is a normal business cycle the only thing that is really bad this time around is that the FED has uh is so late and and also that we see um that we have a the G gigantic bubble I mean we have 200 the the the buffet indicator which I think some people now thinks is irrelevant but I don't think it is is now at 200% uh when we were in 2007 it was at was it 110% or 107% or something like that in 2000 it was at 120% and in 1929 it was 110% also here now is at 200% which means that you know the stock market is worth the double you know of the uh of the of the US economy so it tells us something about that the US market is simply overvalued completely overvalued but does that mean that we we're going to drop right here and right now no I don't think so because I think of course the the the central banks are going to react to what they see and I think there is a pending financial Cris and I I think that we're going to see a very very big financial crisis also coming to uh to first I think maybe Japan and elsewhere elsewhere but but uh but also to finally to the US uh and and when these things starts to unravel you will see that of course the the the central banks and and especially also the FED at some point will have to do you know whatever it takes and will'll push um and will you know put uh give some more stimulus out to to make sure that the markets do not decline but they will you know eventually do so but we will have one more last sore as I see it yeah so there's a lot to unpack there but the first thing I want to touch on is Buffett of course he's considered the greatest investor in the world it's interesting to see that he just announced that he sold half of his steak in Apple so it gives you kind of some indication of what he thinks about the current markets and um it would also be interesting to see what he's going to do with that cash if he does allocate it or if he's just getting ready for a massive pullback the other thing I want to touch on you brought up the FED a couple of times and as we both know they've made numerous policy errors the first one the first major one was back in 2021 when they said inflation was transitory then they woke up to the fact in March of 22 they realized oh my God we got a real problem on our hands they started lifting interest rates 11 times most aggressive interest rate hike ever in the history of uh the central bank but do you think the FED is making another policy error right now by not cutting rates oh 100% I mean they they and they should have done that long ago but the thing is and again I think I I I do really do not understand why they they do not you know observe that that they have always been late and the reason is that that they are following in my what is in my world a lacking indicator which means that you see the economy start to roll over and then the inflations comes and if you really just go back you can actually see that's the case so you have leading indicators that tells you which direction is the coincident indicator going to say which direction is the economy going and the moment when the leading indicator starts to decline and drop which they have for 20 some months 24 months I think two years now um that the FED still thinks that they it's it's you know prudent to actually you know hike rates until just you know not so long ago it was a complete you know mistake so it's not just about this one month here it's you know we are many months late and and this is what what I really cannot understand because they are actually driving the car forwards and looking out the rear window at this point with the with the inflation rate and it's going to come to haunt them and that I think we're going to see a 50 basis point you know kind of uh you know emergency uh cut here in in in September which you know will be far from enough because there is also lack from the moment that they try to do monetary stimulus to they actually get through to the to the consumer and at that point if people have been laid off and and there is a negative feedback look on that on on the on the market which which we are starting to see well then you do not want to spend that money so it's actually becoming more you know impotent with the with the stimulus coming from the fed or from the cuts the longer they go into that uh into that cycle and I do not understand why they don't see that but that but they are they are just you know notoriously late all the time they are fixated on inflation and at the same time when growth is definitely slowing down the unemployment rate is ticking up and like as you mentioned it's just not in the US where it's slowing down it's all throughout the world China the second largest economy in the world represents 20% of global GDP you never really know what's going on there but I think everybody would agree there's a massive slowdown maybe they're in recession we don't know um Germany they're in recession the UK I think they're approaching recession if they're not already in I'm in Canada we're in a definite recession here so let's talk about oil and copper because both of these Commodities are considered barometers of the global economy and oil's been trading in this very tight range 70 to 80 a barrel copper topped out around five bucks a pound it's now trading closer to $4 a pound here in the last couple of months and do you think the pullback in both of these Commodities indicates a Slowdown in the global economy yes absolutely and that's and that's you know ever since we had the inflation uh fear and we had the spike with it at $120 on oil I think it was around that level or was it 130 I can't remember here now but around that level and we saw um and we started to see oil coming down that was the moment that you actually started to see the slowing of the economy it started out slowly but then it started to do you know that you know more aggressively and the reason why the economy slows is because first of all you get inflation hike as your inflation moves up and and that means that people will not be able to you know buy as much as they've had you know and they were starting to struggle because of that and then what happens next is that then the interest rates moves up really quickly also and and you have the high the fastest spike in in in in rates you know if you've seen for the last 70 years and of course people are also getting hit by that so they have inflation and now we have interest rates up what does that create that creates an economy where the consumer are under pressure but as we've been stimulating so much people were sitting with excess cash or with excess savings at that point but you can now see that that excessive saving is now come is now you know gone away and uh so people are starting to spend less and you can see if you look at the advanced retail sales or actually you can see that it's been going sideways for a long time which is exactly what we see into recessions so it's not so you know strange that we see this now this has then been going on for some time because the consumer has not been losing their job yet but because the the the companies the corporations haven't simply you know been slashing job jobs just yet but that's because they were waiting to see if the demand comes back and it hasn't and now we start to see you know the unraveling of things and and yes the economy is slowing and has been doing that for a long time and I think oil is going to come down my my target is um around $10 at the bottom of the uh of the of the recession uh so and I think that's going to be uh next next year at some point I would love it if oil went down to $10 a barrel and save myself a lot of money so you're right let's yeah but be there'll be lot of all that things also happening in the economy so yeah absolutely but I understand what to say so let's talk about the US consumer and the health of the consumer because the consumer represents 70% of uh the US's GDP okay and you've already alluded to this but the consumers Tapped Out okay and we we saw numbers recently out of McDonald's and this is their second consecutive quarter where they missed and the reason why they missed is because people aren't going to their stores and the people that do go to the restaurants or spending less Starbucks same sort of thing the second consecutive quarter saying people are just not coming to their stores so uh the number of customers is down and once again the amount of money they're spending on products is down so once again we're seeing all sorts of signs of of the consumer being tapped out and then when you move overseas to China the same sort of thing here lvm just came out with their numbers a couple of weeks ago and they said that they're seeing the same thing in China a significant pullback in the the amount of of products people are spending yeah but I I I I it's not a surprise to me and that's that's again I I mean I it's been what we we we have in the business Cycles a model that we have that we work with is simply you know saying that when when whenever you see this kind of you know decline in the leading indicators it's because it's you know something bad is going to come to the economy at some point it might take a little while because it's going to se through all the different layers of the economy and and but by the end of the day it's about the consumer and the there are two markets that are important for the consumer it's the housing market and it's the and it's the job market and if you know something happens to the housing market it starts to feel poor because the housing prices have been declining or been under pressure or the interest rates mve up a lot and the Mortgage Debt becomes uh you know more expensive well that is taking a a hit on on the on the on the economy but where the moment then when you know the really hits the fan is the moment when the jobs are get starting to get slashed and I think we are at that point now and that's what we're going to see that's why I'm you know every week at on Thursdays I'm looking on the on the initial claims coming out because that will be the canaran in the in the coal mine to to tell us when is it that we'll start to see things unraveling but with the two-year yields coming down the mo the thing that it does right now and it resembles exactly what we saw before the financial crisis there are so many similarities to what we saw for before the financial crisis that is actually what we and coming back to Nik actually it topped in Nik topped in July of 2007 and then we had the top in October of 2007 for for the S&P and you as so so there are simply so many things that are just you know showing up to to be some some you know sort of the same thing uh so we are there and uh and it's it'll you know move much faster soon yeah you're right you raised a very good point about the wealth effect right if people you know their largest investment typically is their home and if that starts the value of their home starts pulling back and uh then you also get a significant pullback in the financial markets or the equity markets um the wealth fact or the negative wealth effect is quite significant on the rest of the the economy yeah absolutely so so that so that's it what it is and and then when people starting to tell me yeah but the FED will not allow this because they will come in with QE and well the FED does not decide the market tops and the business Cycles what the FED can do is they can try to you know add stimulus to the market to a certain degree and then it's up to the consumers actually to take that money to put that you know the Thousand doll they save or whatever to start and start spending that but if they don't then you'll actually see no effect from QE and that is where what where we gotten to also you've you've given the people so much money after the corona crisis you also said before and then you're actually not seeing an economy that's getting up and rolling it's actually only you know bounced but the stock market bounced a lot because there's a lot of speculation of course but the real economy was never really strong and that's why we also saw that the average uh length of unemployment actually has been hovering rather high so there's been nothing good to say about this but what what has happened over the last few years and I can understand a lot of you know people around the world has been suffering and I I'm I'm just you know sad to say I don't think the suffering is over so let's talk about the financial markets more specifically the S&P it to topped out around 5700 now it's around 5350 down 5% from its high where do you see it going on the downside before you see this move to the upside so I think it uh it has a randev with around 52 5050 I think it is around that level uh just a little lower than where we are now and uh not not so much I think it'll be into the first few days of the next week uh could also bottom here there are two levels actually so so this or or into next week uh and then I think it's it's up from there so whatever is going to be the trigger there will always be something that comes out and you know some some sort of Tri trigger but I think that that will be the bottom of it and then it will be more or less you know straight up in into or straight up but you know a blowoff top as I've been talking about which will be like 15 16% uh into October which is rather fast so so that would be what want to talk about but in that phase I think we're going to see a lot of as you talked about the tech stocks you talked about Amazon I think actually there's a good chance that Tech stock stocks have has um have um have topped here already uh and uh we're going to see not a straight decline from here we have to understand that also nothing moves in straight lines so of course we can see a bounce in the tech stocks also at this point or a little later here but I don't think they'll reach new highs H and uh and I think that um that can be individual you know maybe some of them will but I haven't check them all just yet but uh but but I think in in general we'll see that uh NASDAQ will move up but it'll because of the small caps in NASDAQ that will be pulling it up and I think the rotation now will go from from large caps into into small caps as people will start start to see okay where can we actually buy something which we could you know where we can get some uh return over yeah over the next period and also because I think when people people will hear whatever you know will come out from the FED at some point say okay people the FED will have our backs we will not be you know left the loan it'll be okay and you also get the rotation in from from abroad where where I think money will come flowing into the us because again I think we'll have The Narrative of oh the US will stand through this and we'll be carrying or we'll be pulling the rest of the world out of this uh you know a bad situation of the or the risk of of recession but but it will not and and us will also fall into a recession so you you just mentioned that you expect a significant pullback in some of the tech stocks I got to ask you about Nvidia that topped out around 140 I think it's down around 105 now so it's pulled back 25% give or take uh what are your thoughts on Nvidia oh it's a gigantic bubble I mean gigantic bubble I mean I I AI is is a fantastic thing and will'll change absolutely the way we work and uh but but it's not the way that you know this stock has been moving up it's just been you know fantasy uh so so it's a it's a bubble like what we saw with Cisco in in 2000 and we thought that was a bubble and then I mean this you know Nvidia has just been you know killing that kind of move that we saw there so that's a huge bubble can remember the levels and the there but I think we're going back to you know one/ tenth of that price that we saw the top at so it's it's a gigantic BBL is going to pull back really strongly uh and again not in the straight line we always see that it has you know uh bounces and and strong bounces also and we will also at one point again say see and I think that will be in October when I sit here or somewhere else and say well I think this is the top I think you know the the mind the the the sentiment at that point will be completely different than what we have right now right now we have it because there's been this pullback but if I'm writing that we're going to see you know a rather strong rally both in NASDAQ and the S&P and in crypto I you you know gigantic rallying crypto I still foresee that uh well then then I think you know we will have a lot of people that will be doubters um but we know if a lot of people are agreeing that this is the top then you know probably it's not the top so I think we will have to see you know that everybody's again in the the other side of the boat so yes a strong rally into into October is what I see for crypto Bitcoin and uh and small caps especially well I want to ask you about Bitcoin but before we do that I I just want to clarify one thing you said on Nvidia you said it's going to lose 90% of its value yeah I think it will around that I mean with the chart that I look at I think it's a it's a uh you know Eiffel Tower kind of uh you know um development we have seen and I think there is a chance that we could see 90% down 75 would be you know a good take again this is not investment advice or anything so it's not I'm telling people to go short anything but I'm just saying I you know we have all the signs of a gigantic bubble and when it's too good to be true and when we've seen it before and you know all these things are in well maybe we should just you know look at it and say what we think it is and and and I think this is a you know a bubble and um we will see it you know we'll see over the next year to two years how how fast it will come down I think uh it has started it will not be a straight line and I think there can may be a strong bounce I haven't checked the chart and I could actually even see there could be another high for NVIDIA but but I think um chances are the top of it so let's talk about Bitcoin now it's trading in the low 60s I think it got up to 72,000 um ever since this having process has been stuck in this tight range 60 to 70,000 what are your views you said that you're you're still very bullish on it 100% I mean something that corrects for uh since March which was the the high in in Bitcoin and and goes uh sideways or into a what I think is a bull flag I'm very very bullish Bitcoin and I am because I think in this uh where I still think there will be a lot of um you know fomo when when fed steps in or no no when we hear this you know whatever comes out next week and when you start to see the move up again in the in the US Stocks uh well then I think you know people say oh this was just a uh you know this was just a pullback and now actually we need to to buy there are a lot of short positions around 70 to 72,000 on on bitcoin and I think that's going to be get broken and when it does it'll be go it'll go straight up and very fast so indeed so I think uh I think we have a we need a push here we need to see a turn um and I think we could be close to that turn uh let's see what what you know how it reacts to a little more weakness in in in the S&P next week early next week but uh but I think then we will see the uh we'll see Bitcoin really moving up fast so that is my my my call for now I think of course we always have to stay you know uh know close to the charts and and be able to be flexible also but I don't think I don't think that the top is is is in here and I I still have a call of 110 to 115,000 which will be driven mostly by a lot of fomo and a lot of thinking that oh the FED is is not going to provide stimulus and we've got people not even think about recession but they will think the FED will print us out of this and this what you see all the time the FED will print us out of this hence you need to be into you know Bitcoin and and then you'll have that kind of narrative so so we we're not even close to that fomo talk as I see it and just to clarify this move that you think is going to come in Bitcoin it's because it is a risk on asset it's going to correspond with the move in the S&P and the NASDAQ so move up it's going to go from where it is right now up to 115 by October or November yeah I think I think by October H if you looked into August of uh last time we saw a top also it uh it actually spiked by 70% from from and actually reach and if you get a 70% and that was during for one month and then it pulled back during that month as well uh then you know if we get a 70% move here we would you would be at the at the number that I I talk of you know the 110 to 115,000 I don't think it's going to happen within the one month and I think there's going to be one more pullback I think we are in the one first pullback we'll have a push-up now then I think there'll be one more pullback as the dollar also first declines now and then it pulls back or or or actually bounces a bit at some point and I think Bitcoin will then also pull back one more time but I think into October timeline will be at around 10 to 115,000 and we can't talk about Bitcoin without talking about gold gold is trading at or near all-time highs 2500 100 bucks an ounce where do you see gold going in this environment well I I uh even even if you see Dixie moving lower here which I think we will I mean that's the the one thing that is Tailwind for gold at this point but it's not only correlated to that and when we start to see uh problems in the world with liquidity that is when gold actually crashes so I can still see gold could have a new high because that we have the sailwind of uh of of the dollar but I think uh I think it's going to crash you know hor tremendously in into the into the to the deflationary bus that I see and I you know if you look to Silver if you look to padium if you look to platinum and so on you look to gold miners none of these have actually been supporting the moving gold so I think gold has overdone it I think it's been because it's been talked up so much uh and that is actually why it's at these levels and more than it is due to real circumstances because the thing is even if the the FED steps in now with some kind of stimulus as long as there will be a uh dollar shortage or the liquidity crisis will start to to to begin we will actually see gold decline so in 2000 March of 2008 to two September 2008 you saw gold drop by 34% uh you saw silver drop by 60% in that period And I think we're going to see the same thing again I think we're going to see actually even higher declines for for gold at this point uh because again what is Gold's finest job it is actually to provide liquidity when none no liquidity can be found because you will always sell you gold and you can get dollars uh whereas if you have any kind of risk asset you don't know if you can actually you know find a buyer to it I mean this is where gold has a has its role and that's why people are saying you need to invest in gold into a crisis but it's actually because of its liquidity ability to provide liquidity so how does it do that it does that by getting sold off in the moment that when liquidity is needed and and if we look at the situation we have now in Japan and what I think could be unfolding there there'll be a lot of people that will be selling or a lot of you know institutions what else we be selling uh gold because it's about having the green back at that point that is that is important so let's summarize everything we've discussed here in the last few minutes so first of all you think the pullback that we've seen here in the last couple of weeks that's a buying opportunity so the S&P is going to um go from its current level up to 6100 by October and during that same time you expect a massive rally in Bitcoin is going to go from the low 60s up to to 110 or $115,000 uh between now and October you're looking for and then at that time I guess you're expecting a major slowdown in the US economy the fed's going to realize that they're way behind the curve they're going to start slashing fast but they don't have much of a window between now and the end of the year but they're going to start cutting this whole uh I guess you also expect a significant significant increase in the unemployment rate we've already seen that in the last few months it's trending upwards we're already seeing a major pullback in economies throughout the world including China Germany the UK many others and um have I missed anything no I think it it sums up I mean it's this is the final phase of the of the of the bubble economics we have had so so what we're going to see here is that the the money printing is going to come to haunt us now and uh and I think that is um yeah it's coming to haunt us but you you summarized it really well here and so once again we're going to top out at 60 100 on the S&P and then it's just going to start a slow downward slide or do you think it's going to be quite rapid uh I think it's going to be the first part of is going to uh you look like what we see in in in the Nick and of course the the FED will try will react at some point they will start they'll try to cut rates first and at some point they will realize that they need to do much much more H but I think that the levels we can start to see there can get down quite dramatically before we we we see that so I think it will be more of a again an Eiffel Tower of top on the uh on the S&P and uh and but not all the way again strong bounces down you know also that uh will trick people into think oh this was just a another decline or another dip and we will go higher but but that actually will be part of the of the top and what's your ultimate downside on the S&P okay so if it gets up to 6,100 on the upside where do You See It ultimately going on the downside yeah but this is where it's uh this is where it's h it's a little tricky because I don't think it'll be just a one oneway stre just as again I mean there'll be small bounces also but I think there'll be a longer bounce also and I think that will come in at the moment when we see the FED coming in for real and and introducing QE again I think people think now you must be crazy they will not do that but I think they will and they will that in a very big Manner and I think that will create a bounce uh in the economy so where are we at here I I think into let's say mid of 25 or something like that we can see that strong decline first the FED will then react and we're going to see uh we we're going to see then a bounce for some time in the in the um in the S&P but I think it's going to un unle or unset a stationary period then because again back to what we we see we we if you do that with the monetary stimulus the fiscal stimulus and so on I think if inflation will then start to come up again after hitting new lows again I think we're going to have very very big lows here uh new lows on this on the inflation level so so I it's a little tricky here but I think by the end of the day where do we get down to after you know a couple of years I think we can take it down to 1,800 again on on the the S&P that's a significant pullback the largest recession since 1929 yeah or the largest be Market also well that was a fascinating discussion as always Henrik and I want to thank you very much for spending time with us today especially on very short notice and we're going to publish this uh as soon as possible and if somebody would like to learn more about you and your various Services where can they go where can they follow you follow me at Henrik seberg on Twitter that's the easiest way to find me and please you know avoid all the the the fake profiles there unfortunately a lot of them and trying to trick you into a lot of things uh I'm only at Henrik seberg and uh and you can find me there that's great once again thank you thank you very much for having you on [Music]