Nenner: Dow To Plunge To 5,000

Nenner: Dow To Plunge To 5,000 Amid Inflation, Double Dip

By Dan Weil | 3 September 2010

U.S. stocks are likely to plunge about 50 percent during the next two to three years, says Charles Nenner, president of Charles Nenner Research. He sees the Dow Jones Industrial Average dropping to 5,000, as the U.S. economy endures a severe double-dip recession accompanied by deflation followed by severe inflation from about the latter half of 2011 on. "Things look really bad for the next 10 years," Nenner told CNBC.

The downward pattern will be similar to Japan's path since 1990, with the plummet interrupted by strong bear-market rallies, he says. Indeed, the U.S. market should enjoy several spikes of 30 percent to 40 percent, Nenner says. Like other investment gurus, such as Jim Rogers and Marc Faber, Nenner is bullish on commodities. Gold and silver are likely to resume their rallies by year-end, he says.

And investors who want to stay in stocks should focus on companies with exposure to soft commodities, including wheat, corn and soybeans, Nenner says. He's also bullish on bonds, not surprising given his forecast of deflation. And Nenner looks for the dollar to drop another 5 percent to 80 yen, near its post-World War II low of 79.75 yen.

Others are worried about the stock market too. "If people had confidence, they wouldn't be pouring money into Treasury securities yielding nothing, and paying more than $1,200 for an ounce of gold," Morris Mark, president of Mark Asset Management, told Dow Jones.

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