Dire Economy Will Get 'A LOT Worse' – 30-50% Market Crash Incoming: Michael Pento
Summary
Market Outlook: Michael Pento predicts a severe economic downturn with a potential 30-50% drop in the stock market, driven by a collapse in credit markets and a frozen housing transaction market.
Economic Conditions: The US economy is experiencing stagflation, characterized by stagnant growth and persistent inflation, exacerbated by negative immigration and rising consumer debt.
Federal Reserve Critique: Pento criticizes the Federal Reserve for its role in eroding purchasing power and suggests abolishing it, advocating for a money supply tied to gold to prevent asset bubbles.
Investment Strategy: Pento recommends holding physical gold as a hedge against market downturns and suggests a portfolio allocation of 10-15% in gold, alongside investments in energy, foreign stocks, and short-term treasuries.
Precious Metals Insight: While bullish on gold, Pento is cautious about silver and platinum due to their industrial uses, which could be affected by global economic weakness.
Market Risks: Pento warns of a potential liquidity crisis where everything but dollars and short-term bonds could be sold off, and emphasizes the importance of having a robust exit strategy for investments.
Government Intervention: He criticizes the US government's potential stake in private companies like Intel as a move towards socialism, which could exacerbate stagflation by requiring continuous monetary support.
Long-term Market View: Pento anticipates a lost decade for the stock market, with nominal gains offset by real-term losses due to inflation, highlighting the need for strategic asset allocation to protect and grow wealth.
Transcript
Hello everybody and welcome into Commodity Culture where our goal is to make you a better investor in the commodity sector. My name is Jesse Day and on this episode I'm thrilled to welcome Michael Pento to the program. A veteran of the finance industry with over 30 years of experience and the president and founder of Pento Portfolio Strategies. Michael sees a multitude of crises on the horizon, starting with a collapse in credit markets and followed with a housing market meltdown and a 30 to 50% drop in the broad stock market. What are the signs he's watching to indicate the party is over and the swan song has begun? And how will gold play a role in this calamitous market environment? It's also FOMC meeting day today. So, of course, we get Michael's thoughts on the Fed potentially cutting rates in the face of rising inflation and its implications for the broader economy. All of this and so much more ahead. So, strap yourselves in for my conversation with Michael Pinto. Michael Pento, great to have you back on Commodity Culture. I want to start with your current assessment of the US economy and the broad market. Last time I had you on the show, you outlined a number of indicators that had you concerned. Where do things stand as we sit here today in your view? And what are you most focused on when it comes to the economy and financial markets? So, uh let's see. That's we could spend a half an hour on that alone, Jesse. Uh so, we have a an anemic economy. Uh that's for sure. Um, but it's one that's marred by stagflation or or inflation, I'll just say. So that that equals stagflation in my mind. And I think that condition is going to get a lot worse. Well, let's just let's just talk about why I see the economy stagnating as far as the growth component is concerned. First of all, you have um immigration which has been shut down completely. As a matter of fact, for the first time in this nation's history, we have negative immigration. So there's there's less native born Americans here this year than there were uh last year or foreignb born sorry say foreignb born. Um which by the way I everything I say is apolitical here. So I'm a libertarian and I'm for strong border control. So I'm just I'm just saying something that's I'm I'm talking about economics. So half of the input to GDP is the labor force growth. Well, the labor force isn't growing because it's actually it's actually shrinking now because you know we we have no we have negative uh flow uh of crossber flow of of working age people. Um then you add to that inflation and nobody really talks about how devastating the inflation uh postcoid really was. I mean it it wiped out the bottom four quintiles of Americans. only the top 20% of Americans are really keeping this whole uh game going. So, um and then when you add to that the housing market, the housing transaction market is frozen. So, you have the housing transaction market frozen. There's so much growth that's around housing and you have immigration which is which has been shut down and then you have inflation which has wiped out the purchasing power of the middle class of this country. Now, I'm not saying that that the household debt to income ratio is is terrible. What I'm saying is that their cash flow has been attenuated. So, can I just give you a couple of statistics here? Um, if you look at there's a record $18.4 trillion in consumer debt. Okay? Rising default rates, uh, auto default rates, student loan default rates, credit card, and in fact, student loan default rates are at 21-year high. um seriously delinquent credit card debt is at the highest level it's been in the past 14 years. Um the home price to income ratio was at a record high. So you have these asset bubbles that are also shutting down particularly in the real estate shutting down the the home transaction market. um investors now own between 20 to 30% depending on the sources you get 20 to 30% of all single family homes in this nation are now owned by investors that think about think about the supply of homes that can come on the market when the prices start to fall and I can speak anecdotally from where I'm sitting in Naples Florida home prices are already falling um there's there's now 110 billion dollars worth of seriously delinquent mortgages in the United States. So that that's why the economy is very weak. So you have a weak economy, but that is married with inflation that's equal to stagflation and that is why um my investments are geared appropriately for that um macroeconomic condition. And now a quick break to hear from our sponsor Arc Silver Gold Obium. owner Ian Everard is considered one of the most honest and levelheaded gold and silver dealers in the United States. Praised even by his competitors. So give him a call today to take advantage of the specials right now. Silver kangaroos 2023 1oz coins mint fresh only $247 over spot. Mint fresh silver maple leaves 2025 coins 1 oz $2.87 over spot. while supplies last. Reach out today at 3072649441 or by email at ianarchsggo.com and make sure to tell him that commodity culture sent you. And now back to the interview and then so do you see this current condition of stagflation accelerating moving forward? We've got the Fed looking like they're going to cut rates at the next FOMC meeting. Would you agree with that view? That's what a lot of people are saying is that they expect a rate cut ahead despite the fact that CPI is around 2.9%. Obviously that comes from Cook statistics to begin with. Um what do you make of that? Do you think that could accelerate the situation the economy is in at present? Yeah, I just find that you know again apolitically speaking I actually agree this is what everybody's g you know you can hate me for saying this from both sides of the aisle. So Trump is 100% correct that we have to fire um uh most of the FOMC if not if not abolish the Fed. I mean he just there's just a horrible institution. But he's 100% wrong as to why he wants to fire the Federal Reserve. The Federal Reserve is perpetually ever since 1987 really starting with Greenspan all the way through to uh Powell perpetually edged on the side of destroying the purchasing power of the of Americans. So for for example, if I just told you that inflation is now running around 3%. And the Fed's target is 2%. That means inflation is running 50% above the Fed's target and it's been above the Fed's target for 52 months in a row. Would you tell me that you would be more inclined to hike interest rates or start an aggressive rate cutting cycle? I mean, it it's it's just it's just mindboggling to me that they're actually going to do this. So, listen, we need to end the Federal Reserve. We need to we need to end that institution. Close the Eckles building. And not because they don't cut rates fast enough. It's because they destroyed the living standards of the average American. We can do without a Federal Reserve by just what we we used to do is we fettered money supply. Look at the base money supply, which is what the Fed controls. If you feted that base money supply to the about what the increase in the mine supply of gold is, that's why we tied money to gold in the first place. It's about 2% peranom and that's commensurate with population growth plus productivity growth which is equal to GDP. So you never have an asset bubble anymore because you fettered the money supply growth to the increase in the labor force growth and to the increase in GDP and to the increase in productivity. And then if you really bind the hands of the fractional reserve system of the banking system by saying listen we're looking at your your assets your loans as compared to the base money supply and that ratio can never get above a certain level and if you get and if you go out above your skis and you go out of business you are going to fail. We'll allow you to fail bank. Then you you're not going to have these asset bubbles any longer. Get rid of the Federal Reserve and let the cost of money, interest rates, be a function of the supply of savings versus the demand for money. Yay. That's all you need, Jesse. And we've solved we've solved such we've solved so many problems in this country just by doing that. Well, I think one of the problems is that the problem itself is never even admitted to. We have Trump saying there is zero inflation. I I don't know how even with CPI, which is a cook statistic, running at 2.9, the president can come out and say that's wrong. It's zero. Um during Biden's administration, we had them putting out all sorts of ridiculous data saying the economy is stronger than ever. Trump saying the economy is stronger than ever. It doesn't matter which side of the political aisle you go to, they are lying about the state of the economy. So, how do we get the average person out there to wake up? How do we fix all of these problems? abolishing the Fed, all of this when the problem isn't even admitted to. Jesse, um, if if if if Trump is correct again, and I voted for him twice, so I and I like most of the things he does, so let's just not excoriate me on the on the comment section about how much I I'm a liberal because I'm a libertarian, which I'm for the people to have the power and the government to be, you know, a system of redress and military, but, you know, not much else. So, so I'm I'm definitely for freedom. Uh but if the economy is so great, Mr. Trump, why do we need aggressive rate cuts? He's he's advocating for a 50 basis point rate cut on September 17th, next week. Uh why would we in two days? Yeah. And I'm sorry. Two Yeah, two days. Wow. How time flies when you're having fun. So, uh so why what do we why why would we do that? I mean, let's look at the So, we have record stock prices, home ownership that's unaffordable to most Americans and can't afford a first-time house. Credit spreads are very tight. Um, financial conditions are as easy as they can possibly be. The the the total market cap of equities as a percentage of GDP is at 218% which is unheard of in history. the average of the market cap of equities to the underlying economy which is usually about 90% that's fully valued equities. Now it's 218%. And the middle class has been eviscerated. Yet somehow we need to embark on a massive rate cutting cycle that starts with 50 basis points. It's insanity. And you wonder why gold is doing so well. And you wonder why platinum is doing so well. And you wonder why silver is doing so well. It's it's obvious to me for those reasons is that well not only are you you you've shown the government has shown they have no interest in living in reality and I guess the biggest reason if you want to be honest is because you know when T bills which is where the Fed is now I'm sorry where the Treasury is financing all of his debt debt if the T bill rate is four and a half% the interest on the debt is much higher than if the T- bill rate was like two or 3% which is where they want to take the the overnight interbank lending That's the reason they're trying to bring down interest payments on the debt. But let me see. Last time the Powell cut interest rates by 100 basis points was in late 2024. And the long end of the yield curve rose by 100 basis points, which by the way is where mortgage prices are are are geared towards uh where corporate borrowing is, you know, was done. So, so go and raise go and try to lower interest rates on the short end on the money market and watch what the capital market rate is and then tell me how happy you are and how great the economy is doing when when mortgage rates and corporate borrowing costs sore. Auto loan rates too are are also a function of u that longer end of the Treasury curve. So, the econ I mean that's by the way that's what I'm looking at. That's what my my model is myopically focused upon is credit conditions and financial conditions for when I need to get out of the market. See, I I want to preempt anybody saying, well, you know, sometimes I go I go I'm interviewed almost every week and every and some some body will say, well, you've been negative for so many years. Well, okay, I manage money for a living, so my returns are are available for anybody to see. Um, and we're making money this year, and we're making money. We made I made money almost every year I had managed money except I had a small loss in 22 because the bond market uh completely blew up and I had a small allocation there. But if I was perpetually negative and perpetually short then I would be out of business. I wouldn't have a business. I'm perpetually negative on the the the construct of the economy and the way the mar the the the financialization of the American economy and the asset bubbled driven nature of it negative real interest rates nominal rates that were were mostly bel nominal rates below 1% for most of the time between 200 and um 8 to 2020. 22. Okay, that's what I'm negative on. I'm negative on the fact that the middle class has been wiped out. I'm not happy about that. Now, does that mean I'm negative on the stock market? No. I'm long the stock market right now. But I have an algorithm, a robust algorithm to let me know when I need to get out because the the the great reconciliation of asset prices is going to occur. And you know, when you have a total market cap of equities that's 218% and it should be 90%, there's only two things that can happen. It could stay equities could stay here and and then GDP could slowly catch up, but it's more likely going to be like this. They're both going to go down. GDP is going to go down, but asset prices are going to crash. That's the that's what's happened every time in the past. The catalyst will be the fracturing of the credit markets. And if you don't have a plan, if you're going to sit there and say, "Oh, I own Nvidia and people are going to invest in AI." Well, the the the customers of of Google and Amazon and Nvidia and and any a AI purveyor, those customers run out of money in a recession. They don't have the capital to throw at Nvidia. So, their business is going to dry up and it's going to crash like Cisco did in in 2002. And it doesn't mean that the internet is bogus or we did or we don't need fiber optic cable and switches and routers. It just means that a recession shuts off the capital investment and these companies will crash and you want to avoid that in your buy and hold target date fund. You need to avoid that. I would like to get your thoughts on the gold market. You brought up gold. I want to talk about silver as well, but let's start with gold. Obviously, very exciting times for the metal, hitting new all-time highs after spending four months in a consolidation pattern. Is gold one of those strategies holding physical gold to protect oneself from this market downturn you see up ahead? Do you think we're overbought here at these prices at new all-time highs? What are your thoughts at present on the gold market? Well, I've always espoused owning 5% of your net worth in gold, in physical gold. So, let's start there. That hasn't changed. My portfolio, which invests in liquid paper gold, and by that I mean GLD, IAU, AAU, the gold, the the physical gold mining ETF, where they say that they have the gold backing those those uh holdings. I I don't know for sure, but I know that the holdings are liquid and the price goes up when the metal goes up. I know that for sure. And there's also mining shares which have vastly under underperformed the metal. Um, and I don't see any reason why that would change because one of the things that makes gold so valuable is it's so hard to get out of the ground. You have to, you know, spend a lot more money getting an ounce of gold out of the ground. So, that's one of the reasons why I love uh the physical. Um, not to say you can't make money at times. I have some uh royalty stocks in the portfolio now too. But you I also own platinum and and um uh and energy as well. Um so gold is essential to have right now. It's about 15 10 15% of the portfolio right now. That's in addition to the physical that you that I espouse you hold yourself. Um so you ask me what's next for gold? Um I so I see two things that could I I see two things that you should be aware of. Number one, if we indeed enter a liquidity crisis, which is a which is a very high likelihood in the future, everything gets sold. So everything everything but dollars and short-term bonds and shorts are going to those are the only things that really going to work. you know that happened in '08 where you had that you know gold ran up and then the global financial crisis hit and banks sell what they can and one of the things they can sell is physical gold. So gold got hurt for a while. It was on the other end of that so like you know early '09 when all the way to 2012 or or I think it was 11 or 12 where gold just just skyrocketed in value. I I anticipate another such uh function to occur. I I can't give you a timeline. I'm monitoring it every day. But I would be, you know, I own gold. I continue to hold gold. I'm I'm leerary of that juncture in time where I see a financial, you know, a liquidity event. I probably lighten up and then I would go I mean, if you're not a trader, then I would just hold your gold. Um but I would but on the other end of that what I see a protracted intense period of stagflation I would be a very big buyer of gold even increasing it to 20 25% of the portfolio as gold has hit all-time highs. Silver is quietly outperforming gold year to date now sitting above $42 an ounce. I believe at the time of this recording we're at $42.60 could be itching up inching up to 43. So pretty exciting. We hear a lot of price targets being thrown around in the silver space. On this show, I've heard $50, $100, $500. I had a guest come on recently and say $1,300 is the true value of where silver should be if it wasn't being manipulated through paper contracts on the futures markets. You're a nononsense guy, so help us separate the signal from the noise here. What is your current view of the silver market and and what is a re more realistic price target in in your view? I'm gonna let all your audience and you down right now and tell you that um I don't own any silver right now. Um but I own platinum as a surrogate for you know as a replacement to silver. I own platinum. I know you didn't ask me about platinum but I'll ask I'll answer your question about platinum. U platinum I remember I've been in the business for 35 years. So, I remember most of the time platinum was much more expensive than gold. Um, and now it's not even half the price of gold. It's more rare than gold and it's more durable than gold. It's more rare than gold. So, I I just think that and rather than saying that gold is going to come down, um, I don't think it is outside that liquidity event. Um, I think platinum is going to have a a big run here. I've known I've thought that for several months now at least and I'm enjoying this great bull market in platinum. it has been joined by silver. I'll tell you one caveat I I so the only caveat I have about buying silver and to some degree platinum is that there they are also used in industrial per for industrial purposes. So any kind of weakness in the global economy which I think is a very real possibility globally it's it's evident here already um but it could even be go globally would depress the prices of those two metals more than gold uh more than it would gold. Uh do I have a price target on on silver? I would I would I think it is going high higher because in stagflation you know hard assets are going to sore. So I think it goes much higher. It wouldn't surprise me to, you know, for it to double in price in the in the next few years. At Pento Portfolio Strategies, you use, I'm going to quote from your website here, proprietary macroeconomic model to determine when and how to invest across an inflation, deflation, and economic cycle spectrum. What is your model telling you right now about the best places to be deploying capital and areas of the market that should be avoided? Okay, so right now, um, I'll tell you what, my recently I I so I I've had gold for a while. I've had platinum for a while. I just recently added energy to the portfolio. Uh today I shorted the long end of the bond market because I just think this I here's what here's what I didn't even mention this Jesse. So I said we have a very weak economy, but I didn't say we're now spilling over into a recession. We are not at this moment in a recession. It's a it's been a recession for a a big part of the American economy. You know, the low the lower three or four quintiles, but the top 20% are doing fantastic. They're just riding these asset bubbles higher and higher and their spending is keeping the economy going. Um so um energy I've added energy to the mix lately. U foreign stocks including I'm big into Mexico and Australia. Um I think India is a wonderful place to invest especially if we can work out this trade deficit nonsense with the you know 50% tariffs because they're buying Russian oil. Um, so, uh, I have aerospace and defense in the portfolio. I did I mentioned I shorted the long end of the bond market. Um, basically it's a it's a it's a defensive. So, I'm only 25% long stocks. So, I have I have a tremendous amount of of of debt. So, don't forget now the Fed's going to go on this rate cutting cycle. So, if you're sitting in the money market fund and earning four and a half percent going, "Woo, look at me. I'm earning four and a half percent." That's going to be 3% before you know it. Most likely around 3%. So I'm moving slightly out along the yield curve. Say around to the belly of the curve bigger two threeyear treasuries um and even out to five to sevenyear treasury. So she get you get a little bit of that juice um in principal appreciation um as people exit the money market fund. And by the way, I I don't want to go into the weeds here, but people say, "Oh, the there's trillions of dollars in the money market fund, and that's all going to go into the stock market." Well, it if it goes into the stock market, you you've bought a stock that someone else sold and that money goes into the money market fund. So, you the money market money isn't going to go anywhere unless it leaves the financial system, the brokerage system, and goes into the banking system. That's what happened. That's why we had this huge influx of money market funds because people left the banking system and I wasn't earning any money in the bank and they went into a brokerage account with for the higher interest. That's why there was a surge in money market funds at the brokerage level. Um so be beware of people tell you all this these trillions of dollars going to flow into the stock market. That that money is never going to leave the money market fund unless it disappears. In fact, money market funds never really go down in value uh go down in in the level of ownership outside of recessions. That's when the money just gets destroyed. And what about emerging market debt or other foreign debt? Do you stick to US treasuries strictly? Do you look at corporate commercial paper at all? Good. Thank you for asking. So I I did I didn't mention a significant of what I own is investment grade collateralized loan obligations. Now, now the the non-investment grade is going to get crushed in a recession and even the high investment grade CLLO that I own will not do well in a recession. But as I said, the labor market is is fracturing very quickly here. You saw this the last print was like 22,000 jobs. um uh but it's making the economy look weaker than it is because you just don't have that immigration. So yes, the labor market is very weak and the economy is weak, but we're not we're not we're not we're not firing people hand over fist yet. and the and the and as evidence my model which which relies heavily on credit spreads and financial conditions and the copper to gold ratio and the ISMs and the and the NFIB surveys um my model says that we have a weak e anemic economy but not one that's rolling off you know falling off a cliff yet. So yes, I do own some some uh bank loans too in there too because it have that's another place to hide if you want to avoid losing, you know, a lot of money uh income-wise, cash flow-wise from your money market fund. So if the scenario does eventually play out as you're kind of looking or predicting in terms of the broad market eventually falling as you mentioned, either GDP has to massively rise or the value of those assets have to decline, right? And so in that scenario where we do see a serious correction, are you predicting a potential long-term bare market? How how how much pain do you think lies ahead ultimately? Could we experience a lost decade like the Nikk did in Japan or do you see it as more of a short to medium-term bare market? The Nicki didn't have a lost decade. They had a had a lost 35 years, right? Japan. So they had lost decades. We've had a lost decade here before. Uh, I absolutely expect us to have a loss decade. I think the stock market will be lower over the next 10 years, but the here's the thing. It's not going to be, you know, minus half a percent, minus half percent. It's not going to be like that's not the way the world works. I predict a massive correction, which I hope to protect, both protect and profit from. And then I want to go long and identify when this the Federal Reserve and Treasury are successful in requefying the banking system and they'll do it through a massive influx of inflation. I mean inflation is going to go out out of control. You you'd be really stupid to short the Weimar German, you know, stock market. You would have lost money. Um in nominal terms it went up. In real terms it got destroyed. I expect something like that to happen. So, in nominal terms, I expect the stock market to go nowhere over the next decade with a big correction and then a big bounce back. Um, in real terms, you're going to lose a lot of money, especially if you're not in the right areas. If you're in your 6040 portfolio where I own long-term bonds and I long stock, you're going to get crushed. You're going to destroy it. Now, I'll be shorting the long end of the bond market, which I did today. Only a small piece because just because just because I think the bond I think the long end of the bond market got overbought recently, just just way overbought and yields are just too low. I think like 10 year notes around 4%. That's ridiculous. How much lower is it going to go outside of a recession? If we had if we do have a recession, then I'll be wrong on that. But I'll make a ton of money on my other, you know, much larger short duration Treasury purchase. Um so, uh that's the way I see it. And in so in that scenario, when we do see this potential long-term depressed valuations in the broad market, where is it that you would be looking for opportunity in that scenario? What would your model then be indicating is is a good place to deploy capital? I if I'm correct that the the way you're going to survive and thrive in that environment is owning short-term treasuries. You might be able to own the US dollar, but I'm not quite sure about that. I have to, you know, model that more carefully because normally the dollar surges in that in that kind of environment. It's just a repatriation of the dollar from the carry trade. I don't know how big the carry trade is by you short dollars and buy other stuff. Um, uh, I I'm not sure it's as big as it used to. I don't think it's as big as it used to be. So, the dollar is probably not going to save you this time. Um, so short-term treasuries would be wonderful. Cash, yes, but you have to be able to short the stock market adroitly. That's where that's, you know, I I if you can short the stock market and it goes down I I think it go down anywhere between, you know, 35 to 50%. That's that's about where I see it happening. Uh in nominal terms, in real terms, a lot lower. Uh you can you could really, you know, then you have not only have you saved yourself all that capital, but you have even more to reinvest when they start this massive stackflationary process. You know, Jesse, it we have a two trillion. We We already have a $2 trillion budget deficit for fiscal 2025 with month with one month left in the year. So, you have $2 trillion deficits when things are great supposedly. You know, everybody this Trump says it's the best economy we've ever seen in the world, but yet we have $2 trillion deficits and that includes all the revenue from tariffs. We still have over a $2 trillion deficit. In the next recession, deficits are going to go between four the rise between automatically because of the stabilizers that kick in between four and six trillion dollars. That's the annual deficit. And that's going to have to be bought by the Federal Reserve. We don't have the savings for that. So you're talking about helicopter money, a form of helicopter money, you know, a a de facto and maybe even a dour helicopter money regime where the where the treasury's piling into more even more debt to be, you know, sty checks will be going out to people again. And inflation's not going to stop the way they counted at 9%. It was actually closer to 20, you know, 17 to 20%. That's how high inflation was. And that's why the middle class that's why the middle class is hurting right now. I mean you incomes you say well the income some people actually say well the income has kept up with inflation. No it hasn't. Not the maybe the phony inflation figures but if you're on social security tell me how your income has kept up with inflation. I mean you're getting the average social security recipient receives less than $2,000 a month. Uh uh yeah a month. So $24,000 a year and you get an increase of a couple of percent. How does that offset the cost of owning a home or insuring it or or electricity bills that are s have soared or the price of of food. So it it doesn't ma it doesn't make sense to undergo another round of massive monetary easing. But I have no I sadly have no faith that we have learned anything from anything we've ever done wrong. I mean, the the Pavlovian response to a recession or a down tick in the stock market since 1987 is to print money, borrow money and print money. That's what they do. And from what I see now, we're we're doing it. We don't even have a crisis yet. What is the crisis? The crisis is what? That the unemployment rate is at 4.3%. That's not a crisis. That's very low historically speaking. What is the crisis? Tell me where the crisis is. There's a crisis in in the middle class of this country because they've been destroyed by inflation. But nobody's talking about that. They're talking about the need to cut interest rates to to boost asset prices higher. Is that what we're doing here? I I I just don't I don't get it, Jesse. What? No one has told me yet the reason why. Oh, the labor market is going down. No, the the supply of labor is down. That is the problem. And that the supply of labor isn't going to increase unless you have a lot of kids being born that just graduated college. That doesn't work. You know, gestation doesn't work that way. Or if you open up the the borders, not those aren't that's not going to work. So cutting interest rates is not going to increase the supply of labor. So I think we make we may have to realize we're going to suffer through especially when Powell is re replaced by some sickopant puppet of the president. We might have interest rates being slashed a series of cuts maybe 150 basis points or more. Who knows outside of a recession which is I think is very very inflationary. I think the stock market's sniff sniffing that out too. That's the that's that's the problem. leave the money market, go buy some more Nvidia because not going to make as much holding money in your money market fund. I think part of the problem politically is obviously the politicians exist to serve their donors and whoever is blackmailing them with whatever uh things that they have. There's a lot of that going on compromat as well. I wonder what you make of the US government taking a stake in Intel, a 10% stake, with White House economic adviser Kevin Hasset commenting that the US may also start to take a stake in other AI companies as well. Is this their way of trying to prop up the stock market? Is this a serious strategic decision? What are your thoughts? Well, real quickly, I'll tell you it's disgusting. Um, they even talked about buying defense stocks, which I'm long, but I think it's still disgusting. Um, why why isn't that the definition of socialism when the government controls the means of production and distribution of goods? I mean, why are we getting involved in private corporations? These these are Republicans who who know better. They know better. I I I you know, so what does that mean then? The government's going to have to now make sure that stock prices never go down because their their assets are going to go down. So it just g there's more of a reason to think that stagflation is going to run rampant because they're going to keep printing money to buy Intel and Loheed Martin. It's disgusting. It's not America. It's very unamerican. And by the way, the US government does a miserable job of anything that they they get their hands in. So have a you know intel will be run like the post office and uh everything will be everything will be great. Well, Michael, this has been a fantastic conversation as always. Tell us about Pento Portfolio Strategies. So, the website is uh pantoport.com and on it you'll see my uh midweek reality check podcast. So, for $50 a year, you can sign up and get my uh thoughts, independent and and uh objective thoughts on the salient economic data of the week. Um, and if you have $100,000 to invest and you're a US citizen and you qualify for the portfolio, I will directly manage your money in the inflation deflation and economic cycle portfolio myself. Well, I will put a link in the description below to pentoport.com. Michael, thank you so much for coming on the show once again. God bless, Jesse. Thank you for joining us today. Take advantage of sponsor arcs gold osmium specials. Silver kangaroos 2023 1oz coins just $247 over spot. Silver maple leaves 2025 1oz coins just $2.87 over spot. So reach out to owner Ian Everard today at 3072649441 or by email at ianarchsggo.com and make sure to tell him that Commodity Culture sent you. And I'll see you guys in the next episode. But before you go, be sure to pick up your Commodity Culture merch. T-shirts, hats, hoodies, and mugs, all backed by a 100% quality guarantee. Link is in the description below. Commodity Culture is a series on commodities and natural resources. If you would like to see more, be sure to subscribe and hit the bell notification so you're always up to date with the latest episodes.
Dire Economy Will Get 'A LOT Worse' – 30-50% Market Crash Incoming: Michael Pento
Summary
Transcript
Hello everybody and welcome into Commodity Culture where our goal is to make you a better investor in the commodity sector. My name is Jesse Day and on this episode I'm thrilled to welcome Michael Pento to the program. A veteran of the finance industry with over 30 years of experience and the president and founder of Pento Portfolio Strategies. Michael sees a multitude of crises on the horizon, starting with a collapse in credit markets and followed with a housing market meltdown and a 30 to 50% drop in the broad stock market. What are the signs he's watching to indicate the party is over and the swan song has begun? And how will gold play a role in this calamitous market environment? It's also FOMC meeting day today. So, of course, we get Michael's thoughts on the Fed potentially cutting rates in the face of rising inflation and its implications for the broader economy. All of this and so much more ahead. So, strap yourselves in for my conversation with Michael Pinto. Michael Pento, great to have you back on Commodity Culture. I want to start with your current assessment of the US economy and the broad market. Last time I had you on the show, you outlined a number of indicators that had you concerned. Where do things stand as we sit here today in your view? And what are you most focused on when it comes to the economy and financial markets? So, uh let's see. That's we could spend a half an hour on that alone, Jesse. Uh so, we have a an anemic economy. Uh that's for sure. Um, but it's one that's marred by stagflation or or inflation, I'll just say. So that that equals stagflation in my mind. And I think that condition is going to get a lot worse. Well, let's just let's just talk about why I see the economy stagnating as far as the growth component is concerned. First of all, you have um immigration which has been shut down completely. As a matter of fact, for the first time in this nation's history, we have negative immigration. So there's there's less native born Americans here this year than there were uh last year or foreignb born sorry say foreignb born. Um which by the way I everything I say is apolitical here. So I'm a libertarian and I'm for strong border control. So I'm just I'm just saying something that's I'm I'm talking about economics. So half of the input to GDP is the labor force growth. Well, the labor force isn't growing because it's actually it's actually shrinking now because you know we we have no we have negative uh flow uh of crossber flow of of working age people. Um then you add to that inflation and nobody really talks about how devastating the inflation uh postcoid really was. I mean it it wiped out the bottom four quintiles of Americans. only the top 20% of Americans are really keeping this whole uh game going. So, um and then when you add to that the housing market, the housing transaction market is frozen. So, you have the housing transaction market frozen. There's so much growth that's around housing and you have immigration which is which has been shut down and then you have inflation which has wiped out the purchasing power of the middle class of this country. Now, I'm not saying that that the household debt to income ratio is is terrible. What I'm saying is that their cash flow has been attenuated. So, can I just give you a couple of statistics here? Um, if you look at there's a record $18.4 trillion in consumer debt. Okay? Rising default rates, uh, auto default rates, student loan default rates, credit card, and in fact, student loan default rates are at 21-year high. um seriously delinquent credit card debt is at the highest level it's been in the past 14 years. Um the home price to income ratio was at a record high. So you have these asset bubbles that are also shutting down particularly in the real estate shutting down the the home transaction market. um investors now own between 20 to 30% depending on the sources you get 20 to 30% of all single family homes in this nation are now owned by investors that think about think about the supply of homes that can come on the market when the prices start to fall and I can speak anecdotally from where I'm sitting in Naples Florida home prices are already falling um there's there's now 110 billion dollars worth of seriously delinquent mortgages in the United States. So that that's why the economy is very weak. So you have a weak economy, but that is married with inflation that's equal to stagflation and that is why um my investments are geared appropriately for that um macroeconomic condition. And now a quick break to hear from our sponsor Arc Silver Gold Obium. owner Ian Everard is considered one of the most honest and levelheaded gold and silver dealers in the United States. Praised even by his competitors. So give him a call today to take advantage of the specials right now. Silver kangaroos 2023 1oz coins mint fresh only $247 over spot. Mint fresh silver maple leaves 2025 coins 1 oz $2.87 over spot. while supplies last. Reach out today at 3072649441 or by email at ianarchsggo.com and make sure to tell him that commodity culture sent you. And now back to the interview and then so do you see this current condition of stagflation accelerating moving forward? We've got the Fed looking like they're going to cut rates at the next FOMC meeting. Would you agree with that view? That's what a lot of people are saying is that they expect a rate cut ahead despite the fact that CPI is around 2.9%. Obviously that comes from Cook statistics to begin with. Um what do you make of that? Do you think that could accelerate the situation the economy is in at present? Yeah, I just find that you know again apolitically speaking I actually agree this is what everybody's g you know you can hate me for saying this from both sides of the aisle. So Trump is 100% correct that we have to fire um uh most of the FOMC if not if not abolish the Fed. I mean he just there's just a horrible institution. But he's 100% wrong as to why he wants to fire the Federal Reserve. The Federal Reserve is perpetually ever since 1987 really starting with Greenspan all the way through to uh Powell perpetually edged on the side of destroying the purchasing power of the of Americans. So for for example, if I just told you that inflation is now running around 3%. And the Fed's target is 2%. That means inflation is running 50% above the Fed's target and it's been above the Fed's target for 52 months in a row. Would you tell me that you would be more inclined to hike interest rates or start an aggressive rate cutting cycle? I mean, it it's it's just it's just mindboggling to me that they're actually going to do this. So, listen, we need to end the Federal Reserve. We need to we need to end that institution. Close the Eckles building. And not because they don't cut rates fast enough. It's because they destroyed the living standards of the average American. We can do without a Federal Reserve by just what we we used to do is we fettered money supply. Look at the base money supply, which is what the Fed controls. If you feted that base money supply to the about what the increase in the mine supply of gold is, that's why we tied money to gold in the first place. It's about 2% peranom and that's commensurate with population growth plus productivity growth which is equal to GDP. So you never have an asset bubble anymore because you fettered the money supply growth to the increase in the labor force growth and to the increase in GDP and to the increase in productivity. And then if you really bind the hands of the fractional reserve system of the banking system by saying listen we're looking at your your assets your loans as compared to the base money supply and that ratio can never get above a certain level and if you get and if you go out above your skis and you go out of business you are going to fail. We'll allow you to fail bank. Then you you're not going to have these asset bubbles any longer. Get rid of the Federal Reserve and let the cost of money, interest rates, be a function of the supply of savings versus the demand for money. Yay. That's all you need, Jesse. And we've solved we've solved such we've solved so many problems in this country just by doing that. Well, I think one of the problems is that the problem itself is never even admitted to. We have Trump saying there is zero inflation. I I don't know how even with CPI, which is a cook statistic, running at 2.9, the president can come out and say that's wrong. It's zero. Um during Biden's administration, we had them putting out all sorts of ridiculous data saying the economy is stronger than ever. Trump saying the economy is stronger than ever. It doesn't matter which side of the political aisle you go to, they are lying about the state of the economy. So, how do we get the average person out there to wake up? How do we fix all of these problems? abolishing the Fed, all of this when the problem isn't even admitted to. Jesse, um, if if if if Trump is correct again, and I voted for him twice, so I and I like most of the things he does, so let's just not excoriate me on the on the comment section about how much I I'm a liberal because I'm a libertarian, which I'm for the people to have the power and the government to be, you know, a system of redress and military, but, you know, not much else. So, so I'm I'm definitely for freedom. Uh but if the economy is so great, Mr. Trump, why do we need aggressive rate cuts? He's he's advocating for a 50 basis point rate cut on September 17th, next week. Uh why would we in two days? Yeah. And I'm sorry. Two Yeah, two days. Wow. How time flies when you're having fun. So, uh so why what do we why why would we do that? I mean, let's look at the So, we have record stock prices, home ownership that's unaffordable to most Americans and can't afford a first-time house. Credit spreads are very tight. Um, financial conditions are as easy as they can possibly be. The the the total market cap of equities as a percentage of GDP is at 218% which is unheard of in history. the average of the market cap of equities to the underlying economy which is usually about 90% that's fully valued equities. Now it's 218%. And the middle class has been eviscerated. Yet somehow we need to embark on a massive rate cutting cycle that starts with 50 basis points. It's insanity. And you wonder why gold is doing so well. And you wonder why platinum is doing so well. And you wonder why silver is doing so well. It's it's obvious to me for those reasons is that well not only are you you you've shown the government has shown they have no interest in living in reality and I guess the biggest reason if you want to be honest is because you know when T bills which is where the Fed is now I'm sorry where the Treasury is financing all of his debt debt if the T bill rate is four and a half% the interest on the debt is much higher than if the T- bill rate was like two or 3% which is where they want to take the the overnight interbank lending That's the reason they're trying to bring down interest payments on the debt. But let me see. Last time the Powell cut interest rates by 100 basis points was in late 2024. And the long end of the yield curve rose by 100 basis points, which by the way is where mortgage prices are are are geared towards uh where corporate borrowing is, you know, was done. So, so go and raise go and try to lower interest rates on the short end on the money market and watch what the capital market rate is and then tell me how happy you are and how great the economy is doing when when mortgage rates and corporate borrowing costs sore. Auto loan rates too are are also a function of u that longer end of the Treasury curve. So, the econ I mean that's by the way that's what I'm looking at. That's what my my model is myopically focused upon is credit conditions and financial conditions for when I need to get out of the market. See, I I want to preempt anybody saying, well, you know, sometimes I go I go I'm interviewed almost every week and every and some some body will say, well, you've been negative for so many years. Well, okay, I manage money for a living, so my returns are are available for anybody to see. Um, and we're making money this year, and we're making money. We made I made money almost every year I had managed money except I had a small loss in 22 because the bond market uh completely blew up and I had a small allocation there. But if I was perpetually negative and perpetually short then I would be out of business. I wouldn't have a business. I'm perpetually negative on the the the construct of the economy and the way the mar the the the financialization of the American economy and the asset bubbled driven nature of it negative real interest rates nominal rates that were were mostly bel nominal rates below 1% for most of the time between 200 and um 8 to 2020. 22. Okay, that's what I'm negative on. I'm negative on the fact that the middle class has been wiped out. I'm not happy about that. Now, does that mean I'm negative on the stock market? No. I'm long the stock market right now. But I have an algorithm, a robust algorithm to let me know when I need to get out because the the the great reconciliation of asset prices is going to occur. And you know, when you have a total market cap of equities that's 218% and it should be 90%, there's only two things that can happen. It could stay equities could stay here and and then GDP could slowly catch up, but it's more likely going to be like this. They're both going to go down. GDP is going to go down, but asset prices are going to crash. That's the that's what's happened every time in the past. The catalyst will be the fracturing of the credit markets. And if you don't have a plan, if you're going to sit there and say, "Oh, I own Nvidia and people are going to invest in AI." Well, the the the customers of of Google and Amazon and Nvidia and and any a AI purveyor, those customers run out of money in a recession. They don't have the capital to throw at Nvidia. So, their business is going to dry up and it's going to crash like Cisco did in in 2002. And it doesn't mean that the internet is bogus or we did or we don't need fiber optic cable and switches and routers. It just means that a recession shuts off the capital investment and these companies will crash and you want to avoid that in your buy and hold target date fund. You need to avoid that. I would like to get your thoughts on the gold market. You brought up gold. I want to talk about silver as well, but let's start with gold. Obviously, very exciting times for the metal, hitting new all-time highs after spending four months in a consolidation pattern. Is gold one of those strategies holding physical gold to protect oneself from this market downturn you see up ahead? Do you think we're overbought here at these prices at new all-time highs? What are your thoughts at present on the gold market? Well, I've always espoused owning 5% of your net worth in gold, in physical gold. So, let's start there. That hasn't changed. My portfolio, which invests in liquid paper gold, and by that I mean GLD, IAU, AAU, the gold, the the physical gold mining ETF, where they say that they have the gold backing those those uh holdings. I I don't know for sure, but I know that the holdings are liquid and the price goes up when the metal goes up. I know that for sure. And there's also mining shares which have vastly under underperformed the metal. Um, and I don't see any reason why that would change because one of the things that makes gold so valuable is it's so hard to get out of the ground. You have to, you know, spend a lot more money getting an ounce of gold out of the ground. So, that's one of the reasons why I love uh the physical. Um, not to say you can't make money at times. I have some uh royalty stocks in the portfolio now too. But you I also own platinum and and um uh and energy as well. Um so gold is essential to have right now. It's about 15 10 15% of the portfolio right now. That's in addition to the physical that you that I espouse you hold yourself. Um so you ask me what's next for gold? Um I so I see two things that could I I see two things that you should be aware of. Number one, if we indeed enter a liquidity crisis, which is a which is a very high likelihood in the future, everything gets sold. So everything everything but dollars and short-term bonds and shorts are going to those are the only things that really going to work. you know that happened in '08 where you had that you know gold ran up and then the global financial crisis hit and banks sell what they can and one of the things they can sell is physical gold. So gold got hurt for a while. It was on the other end of that so like you know early '09 when all the way to 2012 or or I think it was 11 or 12 where gold just just skyrocketed in value. I I anticipate another such uh function to occur. I I can't give you a timeline. I'm monitoring it every day. But I would be, you know, I own gold. I continue to hold gold. I'm I'm leerary of that juncture in time where I see a financial, you know, a liquidity event. I probably lighten up and then I would go I mean, if you're not a trader, then I would just hold your gold. Um but I would but on the other end of that what I see a protracted intense period of stagflation I would be a very big buyer of gold even increasing it to 20 25% of the portfolio as gold has hit all-time highs. Silver is quietly outperforming gold year to date now sitting above $42 an ounce. I believe at the time of this recording we're at $42.60 could be itching up inching up to 43. So pretty exciting. We hear a lot of price targets being thrown around in the silver space. On this show, I've heard $50, $100, $500. I had a guest come on recently and say $1,300 is the true value of where silver should be if it wasn't being manipulated through paper contracts on the futures markets. You're a nononsense guy, so help us separate the signal from the noise here. What is your current view of the silver market and and what is a re more realistic price target in in your view? I'm gonna let all your audience and you down right now and tell you that um I don't own any silver right now. Um but I own platinum as a surrogate for you know as a replacement to silver. I own platinum. I know you didn't ask me about platinum but I'll ask I'll answer your question about platinum. U platinum I remember I've been in the business for 35 years. So, I remember most of the time platinum was much more expensive than gold. Um, and now it's not even half the price of gold. It's more rare than gold and it's more durable than gold. It's more rare than gold. So, I I just think that and rather than saying that gold is going to come down, um, I don't think it is outside that liquidity event. Um, I think platinum is going to have a a big run here. I've known I've thought that for several months now at least and I'm enjoying this great bull market in platinum. it has been joined by silver. I'll tell you one caveat I I so the only caveat I have about buying silver and to some degree platinum is that there they are also used in industrial per for industrial purposes. So any kind of weakness in the global economy which I think is a very real possibility globally it's it's evident here already um but it could even be go globally would depress the prices of those two metals more than gold uh more than it would gold. Uh do I have a price target on on silver? I would I would I think it is going high higher because in stagflation you know hard assets are going to sore. So I think it goes much higher. It wouldn't surprise me to, you know, for it to double in price in the in the next few years. At Pento Portfolio Strategies, you use, I'm going to quote from your website here, proprietary macroeconomic model to determine when and how to invest across an inflation, deflation, and economic cycle spectrum. What is your model telling you right now about the best places to be deploying capital and areas of the market that should be avoided? Okay, so right now, um, I'll tell you what, my recently I I so I I've had gold for a while. I've had platinum for a while. I just recently added energy to the portfolio. Uh today I shorted the long end of the bond market because I just think this I here's what here's what I didn't even mention this Jesse. So I said we have a very weak economy, but I didn't say we're now spilling over into a recession. We are not at this moment in a recession. It's a it's been a recession for a a big part of the American economy. You know, the low the lower three or four quintiles, but the top 20% are doing fantastic. They're just riding these asset bubbles higher and higher and their spending is keeping the economy going. Um so um energy I've added energy to the mix lately. U foreign stocks including I'm big into Mexico and Australia. Um I think India is a wonderful place to invest especially if we can work out this trade deficit nonsense with the you know 50% tariffs because they're buying Russian oil. Um, so, uh, I have aerospace and defense in the portfolio. I did I mentioned I shorted the long end of the bond market. Um, basically it's a it's a it's a defensive. So, I'm only 25% long stocks. So, I have I have a tremendous amount of of of debt. So, don't forget now the Fed's going to go on this rate cutting cycle. So, if you're sitting in the money market fund and earning four and a half percent going, "Woo, look at me. I'm earning four and a half percent." That's going to be 3% before you know it. Most likely around 3%. So I'm moving slightly out along the yield curve. Say around to the belly of the curve bigger two threeyear treasuries um and even out to five to sevenyear treasury. So she get you get a little bit of that juice um in principal appreciation um as people exit the money market fund. And by the way, I I don't want to go into the weeds here, but people say, "Oh, the there's trillions of dollars in the money market fund, and that's all going to go into the stock market." Well, it if it goes into the stock market, you you've bought a stock that someone else sold and that money goes into the money market fund. So, you the money market money isn't going to go anywhere unless it leaves the financial system, the brokerage system, and goes into the banking system. That's what happened. That's why we had this huge influx of money market funds because people left the banking system and I wasn't earning any money in the bank and they went into a brokerage account with for the higher interest. That's why there was a surge in money market funds at the brokerage level. Um so be beware of people tell you all this these trillions of dollars going to flow into the stock market. That that money is never going to leave the money market fund unless it disappears. In fact, money market funds never really go down in value uh go down in in the level of ownership outside of recessions. That's when the money just gets destroyed. And what about emerging market debt or other foreign debt? Do you stick to US treasuries strictly? Do you look at corporate commercial paper at all? Good. Thank you for asking. So I I did I didn't mention a significant of what I own is investment grade collateralized loan obligations. Now, now the the non-investment grade is going to get crushed in a recession and even the high investment grade CLLO that I own will not do well in a recession. But as I said, the labor market is is fracturing very quickly here. You saw this the last print was like 22,000 jobs. um uh but it's making the economy look weaker than it is because you just don't have that immigration. So yes, the labor market is very weak and the economy is weak, but we're not we're not we're not we're not firing people hand over fist yet. and the and the and as evidence my model which which relies heavily on credit spreads and financial conditions and the copper to gold ratio and the ISMs and the and the NFIB surveys um my model says that we have a weak e anemic economy but not one that's rolling off you know falling off a cliff yet. So yes, I do own some some uh bank loans too in there too because it have that's another place to hide if you want to avoid losing, you know, a lot of money uh income-wise, cash flow-wise from your money market fund. So if the scenario does eventually play out as you're kind of looking or predicting in terms of the broad market eventually falling as you mentioned, either GDP has to massively rise or the value of those assets have to decline, right? And so in that scenario where we do see a serious correction, are you predicting a potential long-term bare market? How how how much pain do you think lies ahead ultimately? Could we experience a lost decade like the Nikk did in Japan or do you see it as more of a short to medium-term bare market? The Nicki didn't have a lost decade. They had a had a lost 35 years, right? Japan. So they had lost decades. We've had a lost decade here before. Uh, I absolutely expect us to have a loss decade. I think the stock market will be lower over the next 10 years, but the here's the thing. It's not going to be, you know, minus half a percent, minus half percent. It's not going to be like that's not the way the world works. I predict a massive correction, which I hope to protect, both protect and profit from. And then I want to go long and identify when this the Federal Reserve and Treasury are successful in requefying the banking system and they'll do it through a massive influx of inflation. I mean inflation is going to go out out of control. You you'd be really stupid to short the Weimar German, you know, stock market. You would have lost money. Um in nominal terms it went up. In real terms it got destroyed. I expect something like that to happen. So, in nominal terms, I expect the stock market to go nowhere over the next decade with a big correction and then a big bounce back. Um, in real terms, you're going to lose a lot of money, especially if you're not in the right areas. If you're in your 6040 portfolio where I own long-term bonds and I long stock, you're going to get crushed. You're going to destroy it. Now, I'll be shorting the long end of the bond market, which I did today. Only a small piece because just because just because I think the bond I think the long end of the bond market got overbought recently, just just way overbought and yields are just too low. I think like 10 year notes around 4%. That's ridiculous. How much lower is it going to go outside of a recession? If we had if we do have a recession, then I'll be wrong on that. But I'll make a ton of money on my other, you know, much larger short duration Treasury purchase. Um so, uh that's the way I see it. And in so in that scenario, when we do see this potential long-term depressed valuations in the broad market, where is it that you would be looking for opportunity in that scenario? What would your model then be indicating is is a good place to deploy capital? I if I'm correct that the the way you're going to survive and thrive in that environment is owning short-term treasuries. You might be able to own the US dollar, but I'm not quite sure about that. I have to, you know, model that more carefully because normally the dollar surges in that in that kind of environment. It's just a repatriation of the dollar from the carry trade. I don't know how big the carry trade is by you short dollars and buy other stuff. Um, uh, I I'm not sure it's as big as it used to. I don't think it's as big as it used to be. So, the dollar is probably not going to save you this time. Um, so short-term treasuries would be wonderful. Cash, yes, but you have to be able to short the stock market adroitly. That's where that's, you know, I I if you can short the stock market and it goes down I I think it go down anywhere between, you know, 35 to 50%. That's that's about where I see it happening. Uh in nominal terms, in real terms, a lot lower. Uh you can you could really, you know, then you have not only have you saved yourself all that capital, but you have even more to reinvest when they start this massive stackflationary process. You know, Jesse, it we have a two trillion. We We already have a $2 trillion budget deficit for fiscal 2025 with month with one month left in the year. So, you have $2 trillion deficits when things are great supposedly. You know, everybody this Trump says it's the best economy we've ever seen in the world, but yet we have $2 trillion deficits and that includes all the revenue from tariffs. We still have over a $2 trillion deficit. In the next recession, deficits are going to go between four the rise between automatically because of the stabilizers that kick in between four and six trillion dollars. That's the annual deficit. And that's going to have to be bought by the Federal Reserve. We don't have the savings for that. So you're talking about helicopter money, a form of helicopter money, you know, a a de facto and maybe even a dour helicopter money regime where the where the treasury's piling into more even more debt to be, you know, sty checks will be going out to people again. And inflation's not going to stop the way they counted at 9%. It was actually closer to 20, you know, 17 to 20%. That's how high inflation was. And that's why the middle class that's why the middle class is hurting right now. I mean you incomes you say well the income some people actually say well the income has kept up with inflation. No it hasn't. Not the maybe the phony inflation figures but if you're on social security tell me how your income has kept up with inflation. I mean you're getting the average social security recipient receives less than $2,000 a month. Uh uh yeah a month. So $24,000 a year and you get an increase of a couple of percent. How does that offset the cost of owning a home or insuring it or or electricity bills that are s have soared or the price of of food. So it it doesn't ma it doesn't make sense to undergo another round of massive monetary easing. But I have no I sadly have no faith that we have learned anything from anything we've ever done wrong. I mean, the the Pavlovian response to a recession or a down tick in the stock market since 1987 is to print money, borrow money and print money. That's what they do. And from what I see now, we're we're doing it. We don't even have a crisis yet. What is the crisis? The crisis is what? That the unemployment rate is at 4.3%. That's not a crisis. That's very low historically speaking. What is the crisis? Tell me where the crisis is. There's a crisis in in the middle class of this country because they've been destroyed by inflation. But nobody's talking about that. They're talking about the need to cut interest rates to to boost asset prices higher. Is that what we're doing here? I I I just don't I don't get it, Jesse. What? No one has told me yet the reason why. Oh, the labor market is going down. No, the the supply of labor is down. That is the problem. And that the supply of labor isn't going to increase unless you have a lot of kids being born that just graduated college. That doesn't work. You know, gestation doesn't work that way. Or if you open up the the borders, not those aren't that's not going to work. So cutting interest rates is not going to increase the supply of labor. So I think we make we may have to realize we're going to suffer through especially when Powell is re replaced by some sickopant puppet of the president. We might have interest rates being slashed a series of cuts maybe 150 basis points or more. Who knows outside of a recession which is I think is very very inflationary. I think the stock market's sniff sniffing that out too. That's the that's that's the problem. leave the money market, go buy some more Nvidia because not going to make as much holding money in your money market fund. I think part of the problem politically is obviously the politicians exist to serve their donors and whoever is blackmailing them with whatever uh things that they have. There's a lot of that going on compromat as well. I wonder what you make of the US government taking a stake in Intel, a 10% stake, with White House economic adviser Kevin Hasset commenting that the US may also start to take a stake in other AI companies as well. Is this their way of trying to prop up the stock market? Is this a serious strategic decision? What are your thoughts? Well, real quickly, I'll tell you it's disgusting. Um, they even talked about buying defense stocks, which I'm long, but I think it's still disgusting. Um, why why isn't that the definition of socialism when the government controls the means of production and distribution of goods? I mean, why are we getting involved in private corporations? These these are Republicans who who know better. They know better. I I I you know, so what does that mean then? The government's going to have to now make sure that stock prices never go down because their their assets are going to go down. So it just g there's more of a reason to think that stagflation is going to run rampant because they're going to keep printing money to buy Intel and Loheed Martin. It's disgusting. It's not America. It's very unamerican. And by the way, the US government does a miserable job of anything that they they get their hands in. So have a you know intel will be run like the post office and uh everything will be everything will be great. Well, Michael, this has been a fantastic conversation as always. Tell us about Pento Portfolio Strategies. So, the website is uh pantoport.com and on it you'll see my uh midweek reality check podcast. So, for $50 a year, you can sign up and get my uh thoughts, independent and and uh objective thoughts on the salient economic data of the week. Um, and if you have $100,000 to invest and you're a US citizen and you qualify for the portfolio, I will directly manage your money in the inflation deflation and economic cycle portfolio myself. Well, I will put a link in the description below to pentoport.com. Michael, thank you so much for coming on the show once again. God bless, Jesse. Thank you for joining us today. Take advantage of sponsor arcs gold osmium specials. Silver kangaroos 2023 1oz coins just $247 over spot. Silver maple leaves 2025 1oz coins just $2.87 over spot. So reach out to owner Ian Everard today at 3072649441 or by email at ianarchsggo.com and make sure to tell him that Commodity Culture sent you. And I'll see you guys in the next episode. But before you go, be sure to pick up your Commodity Culture merch. T-shirts, hats, hoodies, and mugs, all backed by a 100% quality guarantee. Link is in the description below. Commodity Culture is a series on commodities and natural resources. If you would like to see more, be sure to subscribe and hit the bell notification so you're always up to date with the latest episodes.