Economic growth is about to slow further, says portfolio manager Michael Pento. He sees a disinflationary credit crisis first, then inflation to increase. Real interest rates will collapse, slingshotting gold to all-time highs. Find Michael online: http://pentoport.com
Related Articles:
1:21 COVID resurgence
4:46 Margin debt high
6:20 Fed policy
9:53 Disinflation
13:36 Bullish on gold
17:08 Silver update
17:54 Fake economic growth
==================================
BUY SILVER & GOLD at the best price of any listed dealer and support this channel!
CALL US: 1-888-81-LIBERTY (1-888-815-4237) or email your name and phone number to LibertyAndFinance@Protonmail.com
Donate to Support Our Mission!
https://www.Patreon.com/ReluctantPrep...
or
https://www.paypal.me/ReluctantPreppers
==================
Subscribe to Be Notified When We Post to YouTube (it's FREE!) ► http://bit.ly/Subscribe-Free
Liberty and Finance LLC receives financial compensation from its sponsors. The compensation is used is to fund both sponsor-specific activities and general report activities, website, and general and administrative costs. Sponsor-specific activities may include aggregating content and publishing that content on the Liberty and Finance website, creating and maintaining company landing pages, interviewing key management, posting a banner/billboard, and/or issuing press releases. The fees also cover the costs for Liberty and Finance to publish sector-specific information on our site, and also to create content by interviewing experts in the sector. Liberty and Finance LLC does accept stock for payment of sponsorship fees. Sponsor pages may be considered advertising for the purposes of 18 U.S.C. 1734. The Information presented in Liberty and Finance is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The Information contained in or provided from or through this forum is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information on this forum and provided from or through this forum is general in nature and is not specific to you the User or anyone else. YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED ON THIS FORUM WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A PROFESSIONAL BROKER OR COMPETENT FINANCIAL ADVISOR. You understand that you are using any and all Information available on or through this forum AT YOUR OWN RISK. All Rights Reserved.
See Full Interview Transcript Below
Elijah Johnson: Hey everyone this is Elijah K. Johnson with Liberty and Finance and back with us today one of our favorite guests Michael Pento from Pento Portfolio Strategies, Michael thank you so much for joining us today
Michael Pento: Always a pleasure to be on with you Elijah K. Johnson which what's the K stand for
Elijah Johnson: It's actually for Kaiser but what I really wanted to talk with you today about is kind of you recently wrote an article about how there's a lot of peak there's like peak everything in the economy right now the stock market the economy itself and really optimism about Covid, it seems like we're finally at least you know where I live in Arizona it seems like you know things are back to normal and everything but now there's this Delta variant that is spreading throughout the US and we're seeing an uptick in Covid cases which is getting some people concerned about are there going to be further shutdowns what's going to happen to the economy what is your perspective on the Covid situation right now
Michael Pento: Well that's the key point and I mean and I don't want to get into the weeds of people who say well you shouldn't get vaccinated or you have absolutely or un-American or a Neanderthal if you don't get vaccinated or was the virus in you know engineered in a lab or is it naturally occurring in the in the in bats the point is that the virus has mutated and most studies show it's more contagious and more virulent the Delta strain and there's a Lambda strain there are many strains in fact there's subsets to the Delta strain which are even worse than the primary Delta strain and the point here is what as a money manager I have to focus on is the consequences of this happening as far as what government's reaction to it is going to be governments will tend to fetter economic growth by putting various restrictions as this variant metastasizes around the world so that's the point of view and when you talk about peak everything well it was you know the spring of this year I was on record talking about we were going to hit the peak of everything, peak margins, peak earnings growth, peak fiscal stimulus, peak monetary stimulus, peak vaccinations, peak reopening of the economy and so why does that matter and people say well okay so what so what everything you're mentioning is true so it's peak Elijah it's all about the second derivative of things when you talk about investing so when you talk about the peak of everything guess what the market prices that in so you see peak optimism in cyclical stocks, peak optimism in financial stocks, peak optimism in basic material stocks, the fact that the rate of change is slowing and is going to slow further caused me to sell those positions in favor of bond and bond-like proxies which has benefited my clients and myself greatly because we avoided the in some cases 20%-25% percent plunged with it here's a great example typical example Free Port McMarron an international conglomerate of copper producers a cup of copper production and base metals production it's down 20% to 25% in the past month or so identify and that's not that's not at all an isolated case you see most energy stocks are down significant double digits and base material basic materials face metal stocks down down down so it's the second derivative which counts it avoids the pitfall of getting overly excited into the reopening train trade when it's about to roll over
Elijah Johnson: I think that's so key and you talk about like the peak stock market and also the peak margin debt in your recent article you talked about how margin debt is really at an all-time high what is the significance of this
Michael Pento: It just means leverage in the system is at an all-time record high so people are borrowing money to buy shares well what happens when the market goes down and these people have to deleverage as fast as possible and it's by the way it's not a it's not a voluntary thing you get a call from your margin clerk and says hey your position is now underwater and you need to put more capital in your account well if you don't have the capital you have to sell it's forced sales and the force selling gets more and more selling that's still in the future Elijah, right now all I'm calling for is a period of disinflation which means the second derivative of inflation is going to fall say from 6% back down to where it was pre pandemic say 2% or 3% inflation that's all I'm saying that has significant ramifications as I said as to where you want to invest I am not saying we're having a deflationary collapse of the economy and stock market yet just disinflation, caveat emptor I believe we will have a cycle of deflation and perhaps a credit crisis in 2022 when the Fed gets around to tapering its asset purchases which are now as you know 120 billion dollars a month
Elijah Johnson: If we look at the fiscal and monetary cliff as you're mentioning if we look at what the Fed is doing they say that they're not going to change policy even though inflation right now is higher than they expected so your perspective kind of on where the Fed stands right now and what kind of impact this current policy is going to have in the near future
Michael Pento: So I disaggregate quantitative easing from raising interest rates the Fed is going to have an ultra loose monetary policy for many years to come I am not arguing that they're going to tighten monetary policy as far as raising interest rates goes that's probably a 2024 phenomenon if then so maybe you know maybe late 23' 24' if they get there, but disaggregating their monetary policy there's quantitative easing and there's raising interest rates they cannot continue this emergency policy they being the Fed cannot continue printing 1.44 trillion dollars per annum when the emergency has ended, the economy is reopened and they cannot maintain that policy in the context of producer price inflation at 6% at consumer price inflation at 0.05 this is many times more than they wanted they you know they tried to get to 2% for many many years couldn't get there they finally got figured out how to get it make create inflation here's the secret to trade inflation and I said this before it happened, I said to the Fed if you want to create inflation instead of just printing money and handing it to Wall Street and creating asset price inflation circumnavigate the primary dealers in the banking system and hand money directly to people consumers and businesses helicopter money well they did that to the tune of 6 trillion dollars they paid people in most cases more than if they were employed through enhanced unemployment and stimulus checks and pandemic relief these grants and loans mostly grants to businesses small businesses so these people laid fallow didn't produce anything guess what but they had all the money in the world they wanted to spend creating shortages and bottlenecks so this is what I want to say very clearly since the Fed was founded in 1913 until 2020 the Fed's balance sheet went to 4.1 trillion dollars it's a lot of years right Elijah it's a long time 1913 to 2020. in the last 5 quarters the Fed's balance sheet is up the same, it has doubled and we are now at 8.2 trillion dollar Fed balance sheet they printed just the same amount of money since 1913 to 2020 in the last 5 freaking quarters okay they cannot continue that pace and they will slow down their purchases I believe in early 2022 they will finish tapering sometime in '22 in probably summer of 22 and that's when the poop hits the fan
Elijah Johnson: Now with regard to the tapering and you're talking about disinflation it's interesting because we are seeing this ramp up of inflation and it seems like with all the money that's been printed it seems like we should see continue to see high inflation but what is it because of the tapering you see happening that we're going to see this period of disinflation Micahel Pento: You will see disinflation in consumer prices and producing prices I'm very very clear on this how you got inflation to accelerate past 2%to where it is today 5 and a half to 6 months six percent the way the Fed measures it by the way the way the government measures inflation it's probably much much higher than that all I'm saying right now is that the second derivative of that in a rate of change the growth rate is going to fall sharply and precisely because they're no longer doing what they did prior leading up to what I'm saying to this interview in the last 5 quarters 6 trillion dollars was handed out by the treasury to people and 4 trillion of that was monetized by the Federal Reserve that's done away we did 25% of GDP in fiscal stimulus in 2020 and 2021. next year and '22 it'll be 2% just a couple of hundred billion dollars so the Fed will have much less debt to monetize people will have much less money in their pockets the Fed will go from printing 1.44 trillion dollars a year to zero that's a fiscal and monetary cliff of course the rate of inflation is going to slow sharply now is that a permanent feature is that going to last forever, no, because the stock market is most likely going to collapse in 2022 the credit markets are going to freeze in 2022 and that'll bring these maniac money printers back to the table and the treasury back to the table with some kind of Universal Basic Income for life and then you're gonna get inflation store like we've never seen before that's my best guess as to what happened is gonna happen in the future of course only God knows what's gonna happen in the future but I have models and math and data and actually the knowledge of how economics really function I mean if you ask the average person who says on the FOMC Elijah what creates inflation they'll tell you that it's too many people working, let's analyze that for just 30 seconds too many people working creates a wage price spiral and people just you know are so profitable and prosperous that these you know the economy melts into hyperinflation like Zimbabwe or something well what is the last two times in America that we had inflation it was in the 70s and very early 80s and guess what right in the middle of a pandemic, why? Well let's see the unemployment rate was through the roof in the pandemic it was through the roof in the 70s yet we had highest inflation we ever had 15% CPI in the 70s because people were getting money and weren't working they were monetizing an oil crisis in the 70s and wars and they're monetizing debt given to people to stay home and not be productive that's why you have inflation and it's going to come the rate of change inflation is going to come down sharply in 2022 and if I'm wrong I'll quit my job and probably sell hot dogs outside this exchange of the NYSE how's that. If CPI is 6% or higher in 2022 I'm gonna sell hot dogs outside the exchange how's that
Elijah Johnson: I think one of the key elements is though that it's interesting because a lot of people are calling for inflation to continue right now but you're calling for disinflation but also I remember you know recently you were also saying how you had sold a lot of the gold holdings you had and that you were short-term bearish for gold so often you know it's you've been contrary to even the contrarians you know and one of the key things that you've said recently is that you had been short-term bearish on gold because of the vaccine rollout and all of that and that there was a lot of optimism there but now that's slowing and that now you're bullish for gold can you expand on why you're bullish for gold right now
Michael Pento: Okay, so it was the same reason why I was bearish on gold by the way I was correct gold mining shares went down 20% to 25% so I saved my clients a big hit from August of 2020 to to today so it's all about real interest rates Elijah so real interest rates were going to rise the reason why I knew they were going to rise because you have exploding GDP growth, booming non-farm payroll reports oh and you have inflation running way white hot so you had nominal GDP running it like you know double digits, so it was a no-brainer you know nominal rates rising real interest rates were rising you sell gold well that's all behind us for the same reasons for this whole interview I'll restart the interview all over again you can see exactly why I said what I'm going to say nominal race will be falling I'm the only person who wrote a book about the coming bond market collapse which means prices down yields up but have been long duration bonds so going out on the yield curve and a profitable trade because I'm not a stop clock I can tell you where I think things are going long term but in you know one of my clients even put it to me this way you know I see the destination I'm the captain of a ship and I see the island but the island's surrounded by icebergs so I navigate around those icebergs to get to the island, some people just drive straight to the island and they hit all these icebergs and you're gonna end up with you know like the Titanic you won't have any capital left by the time you get there so I'm now long gold I'm going to be longer of gold as we get through this year because I i think inflation is going to slow but I think growth slows even faster than inflation what does that mean? That means real interest rates will be falling and that means you want to own gold
Elijah Johnson: And this short term as you're as you're bullish for gold what kind of movements you see happening in the gold market
Michael Pento: I think the gold prices will go higher I don't you want a price you want a price target on it I think that see a price target is something like the deep state of wall street does I mean gold prices are going higher probably north of $2,000 an ounce and maybe even a lot more than that but the real bull market in gold is going to occur after the next collapse occurs so when the next deflationary credit crisis occurs which could have which I think could happen you know high odds of it happening in 2022 in response to that is going to be you know a permanent condition of where the Fed put tries to put a lid on interest rates so it keeps nominal rates capped they're going to try their best to do that but in the meantime inflation is going to soar it's even going to you know pale in comparison it will make these inflation rates pale in comparison to what is what's to come so religious rate should be plunging and now that'll make gold go to all-time highs in my opinion
Elijah Johnson: Are you also bullish on silver as gold rise
Michael Pento: So I was more bullish on silver during this time frame of which I called the vaccine dead zone but now I'm less bullish on silver than I am gold because silver is a commodity, so gold is a currency gold is money silver has some commodity it's also a you know a semi-precious metal but has a lot of commodity exposure too in other words it's half metal, half money, half commodity so it does best when global growth is accelerating quickly and I don't predict that to happen so and now I'm flipped from being more polish on silver than gold to much more bullish on gold and silver
Elijah Johnson: And with respect to that slowing economy you've recently in your article you mentioned how there's peak consumption and how really the economy has been growing not because there's actual growth but because there's consumption of products not even made in the US but made overseas so what is your perspective on on that looking out to the future
Michael Pento: Well I mean if you want we don't measure gross domestic consumption it's gross domestic product so I mean the fact that we're that the Fed printed a bunch of money and enable enabled us to buy things that were produced overseas and we have you know record current account deficits that's not really growth, that's growth in consumption that's not that's not how you grow an economy so certainly not how you measure current growth or how an economy grows in the future which is by savings and investment. In the last 5 quarters the amount of debt in total, so think of this, the total non-financial debt increased by 7.7 trillion dollars that's the le that's the, 5 quarters post pandemic 7.7 trillion dollars the five quarters leading up to the pandemic total non-financial debt increased by 2.9 trillion dollars so what we have done by the way let me make this very clear Elijah leading up to the pandemic we were an anemic economy barely growing remember the Repro Crisis of 2019 we had US Russell 2000 plunged 30% in the fall of 2018 we were barely growing at two percent leading up to the pandemic inflation was sub 2% then you get this pandemic, so coming out of the pandemic we have encumbered the economy with an additional 7.7 trillion dollars in debt which has now brought us to 80 trillion dollars in total debt so public and private debt that's 80 trillion dollars or 380% of GDP, that's an all-time record high and Elijah what is debt? It's a tax on future consumption so we've encumbered the economy greatly from where it already was prior to the pandemic which was a debt disabled condition this is more reason and more rationale why I think growth is going to really disappoint in 2022 all the Wall Street geniuses and doesn't bother me being a contrarian I relish in that because that means I'm probably right because all of Wall Street I keep hearing on CNBC and most of wall street comes on the talking heads come on and say how growth is going to be stellar in 2022 and inflation is going to be accelerating, there's very little chance it's close to zero that inflation rates could possibly accelerate if the Fed indeed undergoes a taper that the odds are astronomically close to 100% that you're going to have deflation and recession if they do indeed consummate on the taper in that time frame that I mentioned
Elijah Johnson: All right well it'll be definitely interesting to have you back on and report on everything that's going on and especially the inflation because that's something that people are keenly interested in right now before we let you go Michael where can people find you online and any last thoughts you'd like to add
Michael Pento: So you can find me at mpento@pentaport.com that's my email address the website is Pentonport.com you might be able to see the website on that plaque that I have not plaque as I call it the poster that I have behind me I have a 5 week free trial called the midweek reality check so you get all my thoughts the data that I compile and my assortations are all found every week Wednesday evening on the midweek reality check and if you have around a $100,000 to invest you can call the office or email me and I will directly invest your money according to the IDEC model the inflation deflation and the economic cycle model that I created which has the 20 points in which I analyze on a daily basis to determine the second derivative of inflation and growth that determines where you should invest your money where it's best treated now not some philosophical thing that might happen seven years from now but where is your money best treated now and in the next 3 months
Elijah Johnson: All right Michael Pento once again thank you so much for your time and God bless
Michael Pento: You too Elijah, thank you
Disclaimer:
This article is solely for informational purposes only and it should not be construed as a solicitation or offer to buy or sell on any financial securities/instruments, etc. nor anyone should take the content as an investment advise, any opinion expressed in this article are subject to change without notice, eurymanthus.wordpress.com and its author is under no obligation to keep current on the information herein and accepts no liabilities for any gains, losses of any kind arising from any of the material presented on any post/s and/or article/s published.
Trade At Your Own Risks
Archive posts
WordPress.com
No comments:
Post a Comment