Unhappy New Year

Even for someone as prescient as Ravi Batra, the economics professor and author who predicted the Asian stock market crash and the fall of Communism nearly a decade before the Berlin Wall toppled, the final exam grades he's posting on his office door in Umphrey Lee Hall at Southern Methodist University are unexpected. He seems genuinely surprised that the D-minuses far outweigh the A's on the list. Batra looks perplexed as he thumbs through the tests on his desk again, as if to validate the outcome. "Economics is all based on common sense," Batra says.

Batra may not be psychic about this fresh crop of economics students, who, in his courses at least, appear to be wasting Daddy's money. Yet he is still a fearless prognosticator when it comes to U.S. economy, which in his new book, The Crash of the Millennium, Batra predicts will come toppling down sooner rather than later. If he's right, it could be a December to remember, or, he says, the crash could happen in January or anytime during 2000.

"The theory is very sound. It's based on history, logic, and facts," he says. "The timing is the thing which you cannot predict so easily because this time not only is the stock market going to crash, but the system itself is going to fall. I think it will be within months."

If his vision is correct, Batra says, the bottom will fall out of the record-breaking Dow and NASDAQ stock indices, the U.S. dollar will lose its value, and capitalism will become a thing of the past. There will be panic in the streets, more violence than currently exists, but ultimately a new age of enlightenment that doesn't hinge on the almighty dollar. If he's right, Batra's predictions will make you wonder what was so terrifying about a potential Y2K glitch here and there. "Millions of Americans are worried about the perils of the so-called millennium bug," he says. "I submit we have more to worry about from the millennium bubble, whose explosion would be heard around the world."

Batra doesn't flinch when confronted with the fact that he originally predicted the U.S. stock market would crash in 1999, which is nearly over. For the record, at press time, the Dow is well above 11,000; NASDAQ is closing in on an all-time high of 3,800. Batra says again that trying to peg the timing, not the event, is the problem. "I'm hedging a little now," he says, smiling. "I think it could be anytime in the year 2000, or maybe early 2001. It is definitely there. The crash cannot be avoided."

Batra refers concerned investors to clear-cut documentation of his theory on page 66 of his new book. "It is so easy to understand, some people have put it on their Web site. It is crystal-clear. Ever since the early 1980s, stock prices, with temporary hitches, have been sizzling in the United States, building the biggest speculative bubble in history. Some people call it the market of the millennium; others compare it with eating your cake and having it too. Whatever you call it, the bubble is about to burst."

Batra doesn't look like some kook on a downtown sidewalk, wearing sackcloth and sandals, carrying a sign that reads, "The end is near." Sitting in his office during the university's winter break, he looks a little haggard and, in his face at least, he looks his age. He seems to bear the burden of knowing something no one else knows and trying to convince anyone who'll listen. At 56, his face may be lined, but his body is trim and athletic, slouched in sweats and running shoes behind a messy desk.

Batra has held a full professorship at SMU since 1973. He left his native India in 1966 and earned a doctorate in economics from Southern Illinois University in 1969. He has espoused his international economic theories in countless articles and eight books, of which The Crash of the Millennium is only the most recent. He's philosophical about the mixed reviews his theories and predictions get from fellow economists and investment brokers. "This is very straightforward, but still no economist believes in ideas like this," Batra says.

What takes him charts and graphs and 255 pages to explain in his book, Batra attempts to reveal in a nutshell. "It's the last year of the decade, so anything unimaginable is possible," he says. "In 1929, it was the stock market crash. In 1939, the war. In 1949, the Chinese revolution. In 1959, the revolution in Cuba. In 1969, the beginning of inflation." The last year of the 1970s saw the revolution in Iran and the Soviet assault on Afghanistan, he says, and in 1989, the Berlin Wall came down.

Apart from the fact that the last year of a decade tends to fuel extraordinary events that shape the course of history, Batra believes the U.S. economy is out of balance in the basic economic principle of supply and demand. Wages are out of step with productivity, he believes, and increased consumer and corporate debt keeps profits artificially high and stock prices rising. "Share prices will keep rising as long as the system can absorb more debt," he says. "Once the system's ability to absorb more debt disappears, then profits don't rise anymore. When profits start falling, the stock market crash occurs." His intuition, he says, is that people and companies are already up to their necks in debt and cannot absorb another penny's worth.

The U.S. economy is also threatened by the trade deficit, he believes, and because foreign countries that have trade surpluses invest the U.S. dollars they receive back into the U.S. economy in government bonds, there is another artificial indicator of prosperity. Together, these factors spell disaster, Batra says.

Bill Barker isn't buying what Ravi Batra is selling. The longtime market strategist for Dain Rauscher in Dallas says Batra's accuracy keeps him skeptical. "If his track record were a little better, I'd pay a lot more attention to him," Barker says. "He's predicted a crash before. He wrote a very popular book that predicted the crash and great depression of 1990. I've never read any of his stuff because I don't read stuff that preys on people's fears."

Barker says the market looks great to him for at least the next 18 months, but he says it's not without risk and advises people to "stay the course" for the long term. Barker even finds credibility in a couple of Batra's observations. "I am also concerned that the consumer is substantially in debt, and that corporate debt has built up over the last couple of years. And the trade deficit of this country is the major long-term problem. I think this is an area of concern, and I would agree with him." Still, Barker says Batra is a "perpetual bear" on the U.S. economy and on capitalism in general. "You have to realize where he comes from," Barker says. "He comes from India, where the social system and economic system don't work."

Despite the naysayers and dire predictions, Batra isn't all gloom and doom. He's quick to offer self-defense against the coming catastrophe. "If you are involved in the stock market, I would get out now," he says. "If you don't want to get out, pay attention on a daily basis. I would watch CNBC every day and stay right on top of your investments. It will be very sudden." And he's philosophical about critical reviews of The Crash of the Millennium. He says Publisher's Weekly's made him happiest. "They said if nothing else, you will learn about economics in this book." He laughs, even as his attention goes back to the stack of finals on his desk. "Multiple choice," he says, shrugging. Perhaps his students need to read his latest book.