THIS Is How 2026 Breaks the Markets | Michael Pento
Summary
Macro Outlook: Guest argues we are in a secular bond bear market with rising long-term yields, driven by fiscal deficits, inflation pressures, and potential yield-curve control.
Precious Metals: Bullish on gold, silver, and platinum as hedges against monetary debasement and central bank balance sheet expansion, noting strong price action and portfolio exposure.
US Dollar Weakness: Expects the dollar to decline in real terms, emphasizing measurement against hard assets rather than other fiat currencies and highlighting erosion of purchasing power.
Real Estate Risks: Warns mortgage rates tied to the long end could force a housing correction, with bubbles likely to deflate sharply before a healthier market can emerge.
Stagflation Path: Base case envisions a deflationary credit event followed by helicopter money leading to stagflation or hyper-stagflation, favoring shorts on long-duration bonds.
India Positioning: Constructive on India as an underowned market with strong growth prospects despite tariffs and currency concerns; maintains long exposure.
Portfolio Stance: Currently cautiously net long equities (~30%), holding precious metals, shorting the long end of the bond market, and using hedges and tail-risk options.
Transcript
The US economy seems to be in absolute fantastic shape. We just got quarterly uh GDP numbers. 4.4% is the growth rate in Q3, up from 3.8% in Q2 2025. And uh it seems like everything is fine. The markets are green across the board and the situation in Greenland is calming down. Perfect world, doesn't is doesn't it sound like it? But uh I think we all know there are cracks underneath uh the surface and we'll have to discuss those cuz we need to be aware of what is coming down the pipeline here in 2026 and I'm really excited to welcome back Michael Pento of Pento Portfolio Strategies. He's been on about 5 months ago and it's time to follow up with him cuz gold was trading at $3,500 at the time and we discussed a potential depression on the horizon. Is that still happening? Is that still current? Let's uh let's discuss. But before I switch over to my guest, hit that like and subscribe button. Helps us out tremendously and we just appreciate it. Now, Michael, it is great to welcome you back on the program. It's good to see you again. Thanks so much for joining us. >> Thanks for having me back on, Kai. >> Absolutely. Yeah, really looking forward to this uh really timely discussion. We just got the growth numbers out of the US this morning, just about an hour ago or so. 4.4% is the GDP growth rate quarter over quarter for Q3. What do you make of it? Well, I think it's outstanding that we have uh nominal GDP trading around, you know, 8% nominal GDP. I I I'm sure I'm quite sure that's unsustainable. I look at the 10-year note trading at, you know, like four and a half%. So, uh normally the 10-year note and the nominal GDP print kind of trade cons commensurately and right now there's like a huge disconnect there. So, um, either we're going to have a spike in long-term bond yields or we're going to have a crash in nominal GDP growth. And I think they're both going to meet in the middle, though, because if you look what's happening in Japan, people, you know, talk about what happened early this week when we had a 2 and a half% uh wipeout in the NASDAQ, over 2% in the S&P 500, and yields were spiking here in the United States. And people said, "Well, it has to do with Greenland and maybe, you know, maybe the Danish were dumping all of our treasuries." And and maybe that's true. I'm not quite sure if it's completely true, but I'm sure they're thinking about it. Um, but that's only part of the story. The real part of the story is Japan. You know, Japan is an an insolvent nation as well. They have a debt to GDP ratio of 250%. It's even greater than the United States by by a lot. Um, and then they have this new prime minister who thinks that the answer to everything is to to of course, hey, let's borrow a bunch of new money and have the the BOJ print it. Um, but the problem in Japan is that they have inflation now that's running pretty consistently where it was in the 1990s. That's how long ago you have to go back before you see inflation in Japan uh as high as it is today. Um, and their yields have spiked. In fact, the 40-year uh JGB is at a record high. The the 30-year uh JGB is at the highs not seen since the 1990s. So, their their bond market is fracturing. It's it's an earthquake and it's sending shock waves around the globe. So, you combine that insolveny and inflation problem and to a slightly lesser degree, we have the same issues here. Kai, we have not solved our inflation problem. And we certainly haven't insol solved resolved our insolveny issue. And um you know we're talking about come May having a new Fed chair who's supposed to be a sickopant of of Donald Trump and supposed to be cutting interest rates and cutting them maybe perhaps as low as 1% and doing that in in the context of the greatest economy the world has ever seen. Uh, and it's no wonder why we have at Pentaport been short the long end of the bond market because I think rates were coming down obviously since 1981 all the way to 20120 and now I think we're in a secular protracted bare market in bond prices and obviously the inverse the bull market in bond yields globally. >> Let's stay on that topic for a second. The 30-year is about to touch 5% again in terms of yield 4.88 88 as as we speak here, Michael. Um for 5% always used to be the line in the sand for the for the um for the president and the White House like what what do you make of that? Do you see yield curve control here happening then uh very soon? >> Uh I I predicted so so what's going to happen is that the Fed's going to obviously start cutting rates sometime the first meeting is June 17th of this year. So it's still a ways off. So we're not going to get a lot of interest rate cuts between then and now. But then you're probably going to see and depending on the makeup of the of the FOMC, you know, I even if you put um I think they might elevate Governor Moran uh Steven Moran >> to be the Fed chair because there's nobody wants to cut rates more than he does. He cut he wants to cut rates even more than the Kevin's Kevin Hasset >> um and Kevin Worsh. So it would make sense to me. I mean, I have no inside information here at all when it comes to to to to uh Federal Reserve hirings and firings. So, uh but it would make sense to put him in charge because he wants to slash interest rates. But if he slashes interest rates, um that that does not mean that the long-term rates will fall. In fact, the exact opposite is going to happen. So, long-term rates are going to rise. And then I think after they rise inexraably above 5% I and I I I agree with you 5 percent pretty much is a line in the sand because once you get above 5% a lot of things start to happen especially with the real estate bubble you know mortgage rates are tied to the long end of the yield curve not the Fed funds rate right so if you look at corporate bond issuance if you look at uh auto loans student loans if you look at a lot of consumer debt and if you look at um the way we ga gauge mortgages off the long end that long end of the yield curve rate probably is going to have to be capped or at least attempted to be capped. So what does that mean? That means that the Federal Reserve is going to come out and say we will buy all interest rates, any and all long-term bonds to make sure the benchmark Treasury yield doesn't go above 5%. Well, that has massive inflation implications. So you you can't solve an inflation problem by creating more inflation. Uh so we'll we'll see if the Federal Reserve ascends to buying um does do they buy mortgage back securities too or do they buy corporate bonds? Do they buy municipal bonds? I mean what are they going to buy every single fixed in income instrument ever issued to keep them because you know let's do a thought experiment here Kai. Let's just say inflation goes back to where it was a few years ago at 9%. very easy to do with the helicopter money that they have planned and the checks supposed to going out and and the manipulation of interest rates. Let's really go to 9%. Well, in a 9% world, who is going to be buying a 5% yielding Treasury bond? Well, the answer is nobody. The the private market will be selling what they own and shorting what they don't. So, the Fed's going to have to be buying an awful lot of bonds. And that means that has ra massive implications for the Fed's balance sheet and the value of the value of the US dollar. >> So it's going to be very chaotic. Stay tuned. Don't be placated by this. Oh, oh, you know, everything's fine because we didn't invade militarily Greenland. Um, listen, and and I'm I want to just make sure everybody understands this. I am not um I'm neither a Polyiana nor am I a perma bear. So I'm I have been long this market since May of 2025. I went I went I was neutral at the start of 25 and I went short at April 2nd liberation day. Okay, net short and then I covered after the after we recanted and rescended all those those tariffs. So, I'm still net long, but I'm not ignorant to the fact that we have the situation in place where we could have a very chaotic bond market in 2026. And I have a model built to detect it and to react to it before it becomes a major issue for the stock market. And at 225% of GDP, you better be paying attent total market cap of equities is 225% of global GDP. the the average of that metric is closer to 80 or 90%. You better be paying attention to the stock bubble because if you don't it it it's to your demise. Today's sponsors, Stellar Gold, is sitting on three major Canadian projects. Tower and Colmac are among the largest undeveloped gold sites in the country. Tower alone could be worth $2.5 billion after tax at $3,200 gold according to a recent study. And if prices go higher, so does its value. Colomax spends over a thousand square kilometers of greenstone and could be Canada's next big gold camp. They also have Hollinger Tailings, a cleanup project that could deliver near-term cash flow. Across all projects, they've trled over 16 million ounces of gold, which would cost over $2 billion to replicate today. And with a seasoned team and huge upside potential, Stellar Gold is one to watch. Visit stellarold.com to learn more. This message is forformational purposes only. It's not investment advice. Please do your own due diligence before making any investment decisions. Now, let's jump back into the conversation. Let's talk stock market in a second. I want to stay on the bond market real quick. And uh a lot of US debt is maturing this year about 1/3 9.2 trillion. Um at at the current rates that that you're seeing like how concerned are you in general that refinancing might become an issue and that the Fed will have to step in here? >> Well, they already did step in. They they you know me what happened to QT time >> a bigger scale perhaps you know >> yeah well we remember we were go sailing along in quantitative tightening and then you know here's the sad truth the sad truth is there's so much debt outstanding in the United States public and private debt that without the Federal Reserve printing money buying that debt and taking it out of the public realm interest rates would sore the same situation you're seeing in Japan you know Japan had zero interest rate policy for many many years, I think from 2016 all the way to 2025. Um, so what happened when the BOJ stepped away from buying all new issuance from the Japanese government? Well, you see it, you go put up a chart, put up a chart of Japanese benchmark lending rates. It's it looks sort of like the gold chart and the platinum chart and silver chart. It's just skyrocketing. The their rates are becoming unmorted. And it's the same situation here. So if without Federal Reserve constant monetization of debt, they can never let their balance sheet shrink again without having devastating consequences for asset bubbles. That is the sad truth. So yeah, expect the Fed's balance sheet to go back to was you know it was nine trillion went down to six and a half trillion about expected to go back to nine and then much higher from there into the double digits and that has a lot of ramifications not not only for the dollar visav other flawed fiat currencies but against the purchasing power of hard assets. >> That's what we're seeing here. That's what we're seeing in the precious metals complex. >> Exactly. $4,800 an ounce gold. Um I see you're following the coverage from Davos as well behind you there on the on the Bloomberg screen. Uh lot lots of interesting discussions. I've been watching it with one eye as well. We had Howard Lutnik earlier today, but also the speech by President Trump. Um the the market reacted very positively to uh let's say the appeasement and maybe that's the wrong term, but maybe the the uh >> the pe more peaceful tone um by the by the president, meaning no like like you touched on like no um aggressive confrontation. let's talk this out. Maybe we'll find a solution here together. But the market went up and um I'm going to question you because you must have followed it as well. He also talked about the S&P or sorry NASDAQ at 50,000. Um I'm wondering if the market is confusing Greenland with his very progre very aggressive stance on that market. Um so I'm curious like if the market may or maybe we made the wrong take took the wrong takeaways here that the market reacted maybe to the wrong words. Well, I mean, the market was concerned that we could invade Greenland militarily. I mean, it is a NATO ally. And, you know, I don't know what Article 5 says when one NATO country attacks another NATO country. I mean, do what what happens? Does the rest of the NATO nations attack the United States? It's it really was going to open up Pandora's box there. So, um, listen, Donald Trump, you know, he he's he wants to see his face on Mount Rushmore. Um, and he has he has a lot of great instincts in my opinion. I did vote for the gentleman twice. So, I'm not um I'm not anti-Trump by any means. Uh, but uh, you know, he wants his face on Mount Rushmore, as I said, and this is the anniversary of his one-year term in office. This is I think I think it's his last term in office. um and he wants to he wants to make a gigantic footprint in in history the American history books. So um he's looking and searching for ways to make that happen. He he had every intention of annexing Greenland by force in my opinion if necessary. But the only the only difference is is that um the art of the deal when it was written and it was written about uh how a businessman um interacts with other businesses and and it's it's you know he Donald Trump tends to throw a grenade into the room and say here I am look at me and and and and threatens the nuclear option and then people pay attention and they're scared and they cut deals. But he he what what Mr. Trump is is learning, I believe, is that he cannot so easily manipulate markets. And so when the market found out that we could be going into Greenland and uh and do it violently um and that Denmark would be selling all of their US treasuries uh that was a catalyst along with what happened in Japan that sent bond yields surging. And if there's one thing we know that Donald Trump does listen to, it's it's markets. He loves to brag about how well he's doing. The markets are a scorecard. And when he saw an absolute meltdown of the NASDAQ in one day and a and a melt up in yields globally, I think he said, "You know what? This is this is not going to work for me. I cannot easily bully and manipulate other countries because it has massive ramifications in markets." And so that's the fed the fettering the fettering mechan the fettering mechanism for Donald Trump and what he tries to do is the markets and the markets are very fragile because we have a triumvirate of bubbles the credit bubble the real estate bubble and the equity bubble and they just don't react very well to geopolitical chaos. No, fair enough. And uh I was just seeing what what you took away from the speech mostly here as well. Um when you when you talk about the bubbles, we have to talk about them popping as well because that's what bubbles do here, Michael. Um which one do you have your money on? Which one is going to pop first? >> Well, so that's a great great way you phrase that. So the so the the credit bubble is the only bubble that I have any money on yet as popping as of yet. So I'm fully prepared. And I know ex have a great game plan to profit when the equity bubble pops. I know exactly where I'm going to hit, where I'm going to do. Um, and that includes the real estate bubble. But the equity the uh the credit bubble is the only bubble I'm currently short. I have a small short position in long duration treasuries. I've had it I've had it since the 10-year note was 4%. It's a winning trade right now, but it's a small it's a small percentage because I I think we I think we're seeing the incipient cracks in the credit bubble. Um, but they will become more salient and more jut more jutting, I believe, this year, and that's when I'll increase my shorts. Um, listen, we're going to have we're going to have a a a breakup of these bubbles, a fracturing of these bubbles. Um, I'm not quite sure if it's going to be a stagflationary one first or it could be a deflationary depression first. I don't know which one's going to happen first. I think we could have I think we're going to get both at different times. That's that's my I I think we're going to have a fracturing of the credit markets causes a deflationary depression. Then it's going to be combed with massive helicopter money. Fed, Treasury get together and then we're going to see stagflation, hyper stagflation like we've never seen before in this country and that's gonna that's going to put us in sector five which is which is you know hyper stagflation or intractable inflation and then you really really would want to be short the long end of the bond market in in a big way. That's so that's that's my game plan. Um, of course it's, you know, I don't I don't write it in stone, but I these bubbles, like, as you very accurately said, bubbles always pop and they never pop graciously or innocuously. They're always very damaging when they when they implode. And this one's going to be no different. >> No, fully agree. I've yet to see any bubble pop in a way of when my daughter blows them. That is gracefully even. So, um, no. Um, Michael, maybe one more topic we need to talk about or one asset class is just the US dollar. You touched on it a bit earlier as well. It still seems to be the, you know, the cleanest shirt in the hamper here. Uh, the Dixie still hanging in there over 98 points. Uh, o overall it seems unfaced by what is going on globally. Dolorization doesn't seem to be a topic anymore. Um, where do you see the dollar head towards the end of the year here? Well, I I see it going down not only against other flawed fiat currencies, but I see it going down especially, you know, if you want to tell me if you want to measure what the dollar is doing, don't look at the yen. I mean, I mean, don't look at the euro. I mean, those are other fiat currencies that are, as I say, flawed fiat currencies. So, it's a race to the bottom. Look, how's the dollar doing against platinum? How's the dollar doing against gold and silver? That'll tell you what the dollar is really doing. And that that's a that's a reflection of the purchasing power of of the of Americans. I we have a we have a a trenchant wealth gap in the United States where the middle class is being eviscerated wiped out. Yeah. If you look at there's one statistic that I love to point out like in 1960 the the um there was I think 60 was it 52 or something like I want to be this is close to accurate as possible but you get the idea when I say it. 52% of 30 year olds owned a house and now it's 12% of 30 year olds own a house because they've been wiped out priced out of the of the of the real estate market. And that didn't happen by osmosis. It's not it's not some kind of random fluke. It's it's because of the practices of the Federal Reserve in combination with the Treasury monetizing government and private sector debt, mortgage back securities. So, so we've we've made, you know, Wall Street rich and we've impoverished Main Street and and I don't that I don't see that turning around. I see that condition accelerating unfortunately. >> No, it is. I don't see housing prices coming down at all yet. Maybe 5 10% but that doesn't make a difference for example to just to to cure what we've created here over the last >> they have to come down 50%. I mean in in there are pockets where h so in my area where I have a house in Naples uh I have two houses in Naples Florida um one of them is down 15% from where I bought it in the summer of 2022. So there are pockets of but glo nationally they're down incrementally if if that at all. Um so we have we have some a lot of bad news coming in the housing market in the United States but it's bad news temporarily. I mean, it's, you know, one thing about bubbles, they pop. Look, look what happened in 2007. I mean, you think it was the end of the world, but I mean, we we we actually brought home prices down to a level that can be supported by the free market and then people could afford homes again. It's a lot of it's very damaging for those who have homes on leverage. People have five homes that they that they don't live in that that they're looking to as as as using as investments and rental properties. Um, but they're they're going to get hurt the hardest, but that's okay because you know what? It it all it needs to happen for the long-term viability and health of this nation. >> It's like a wildfire. It needs to happen so things can flourish again, right? Absolutely. >> It's a cathartic it's a cathartic cleansing of of the leverage and the asset bubbles that always brings about a more healthy environment. You made a great analogy how how a fire clears the brush out so new new growth can can occur. M Michael, where do you see the biggest tail risk? You know, we've we've touched on a lot of topics, but where do you see the biggest tail risk here in 2026? Is it geopolitics? Is it credit event you talked on? Is it just a policy error? >> You know what? You know what, Kai? I think I've been doing this for 35 years now. So, um I don't think it's a tail risk when I talk about the implosion of the bond market and the and the and the reconciliation of real estate and equity prices. That's that's that's going to happen. that that I can virtually guarantee is going to occur and sooner rather than later, but the the the the fat tail would have to be geop geopolitical risk because you really don't know what we're we're talking about a very disruptive um activist administration in the United States, but we haven't talked about the reaction from China and Russia. What is their reaction going to be from our interests in Greenland or from our interests in Venezuela? Um, even our allies. But I'm most concerned about what what if China were to invade Taiwan and say, "Listen, you know, United States, you you took out the leader of Venezuela and you and usurped the company's energy. We we have Taiwan's a is is a is a territory of China and we just annexed that territory." Um, what would happen to markets if that happened? What would be the response from the United States? That has to be the fat tail. That is not part of what I'm predicting to happen as a fat I mean as a as a uh a high a high uh chance of occurring. That's a that's a fat tail event. But I I don't know even if even that how fat is it? I mean, I I we have not heard from Putin or Xi about what they feel about what's going on with the United States. I think we're going to hear from them soon. And I I I don't know if that's going to be a very favorable, you know, amen to what's happening here. >> Um I'm not asking for financial advice, Michael, but maybe going into the next six months here, what what's the ideal portfolio construction in your opinion? Like what should it look like? And again, not financial advice. Everybody's different. Yeah. So, if you were to invest $100,000, how would you split that up? >> So, all all I can speak of is how my clients who I've vetted and are are qualified for the portfolio, a long short strategy. So, we have um we're about 30% net long stocks right now. We have we have precious metals in the portfolio. We're short the long end of the bond market. We have u dividend international dividend paying stocks. Um we're still we're long India because I think that could be a really big uh uh uh that that I think is one of the most underowned sectors of the global economy right now is India because everybody you know they hate the rupee and they they they hate the fact that we have these tariffs on on India but it's still it's the fastest growing developed world country on the planet. Um and the stock market hasn't gone anywhere because of these tariffs. So we're long India as well. Um we we and we we have those buffers. Uh we have a small buffer of a tail risk uh which is an option strategy too in there. So uh we're we're cautiously net long with hedges. That's how we would play. That's how we are playing it right now. Of course and you ask me what you know a six-month portfolio. I'm an active manager. I don't know, you know, if I gonna tell you right now exactly what I'll fix six months from now, I'd have a problem because I would I would be a salesperson, not an active money manager. So, I don't know what's going to happen in six months. I know that the financial conditions that I look at, I know the credit spreads I look at right now are telling me it's okay to be net long, but the underlying foundation of this economy is is decrepit. It's fracturing and it's ready to break. Um, and it will. And so I have to be ready and I am. >> Absolutely. Yeah. No, fantastic closing words here as well, Michael. I'm I want to be mindful of your time. I know you have a hard cut off and I tremendously appreciate you coming on. Um, where can we send our audience to follow more of your work, Michael? >> So the website is pentoport.com. If you have $100,000 to invest and you're a US citizen, you're qualified for a long short strategy. I will manage your money directly in the inflation, deflation, and economic cycle model, which is based on the second derivative of inflation and growth. Um, and if you don't have $100,000 and you're not a US citizen, you can subscribe to my podcast called The Midweek Reality Check. It's $50 a year and I'll get you my views on um the most salient economic data and I'll also give you a very high level uh view of the portfolio. >> Fantastic. Awesome. Michael, thank you so much for coming on. Tremendously appreciate your time. Um, we'll talk soon. Well, let's see if we can catch up here after Easter and see where we're at here in the spring. So, tremendously appreciate your time and can't wait to do this again. And everybody else, thanks so much for watching. Lots going on in the markets right now. So, it was really timely to get Michael Pento onto the program. If you enjoyed this conversation, kindly hit that like and subscribe button. We do appreciate it. And uh leave a comment down below. How what does your portfolio look like right now? What are you seeing as the biggest risk in 2026 to your portfolio? Really looking forward to catching or hearing from you and just appreciate. So, thanks so much for tuning in. Be safe out there and uh good luck.
THIS Is How 2026 Breaks the Markets | Michael Pento
Summary
Transcript
The US economy seems to be in absolute fantastic shape. We just got quarterly uh GDP numbers. 4.4% is the growth rate in Q3, up from 3.8% in Q2 2025. And uh it seems like everything is fine. The markets are green across the board and the situation in Greenland is calming down. Perfect world, doesn't is doesn't it sound like it? But uh I think we all know there are cracks underneath uh the surface and we'll have to discuss those cuz we need to be aware of what is coming down the pipeline here in 2026 and I'm really excited to welcome back Michael Pento of Pento Portfolio Strategies. He's been on about 5 months ago and it's time to follow up with him cuz gold was trading at $3,500 at the time and we discussed a potential depression on the horizon. Is that still happening? Is that still current? Let's uh let's discuss. But before I switch over to my guest, hit that like and subscribe button. Helps us out tremendously and we just appreciate it. Now, Michael, it is great to welcome you back on the program. It's good to see you again. Thanks so much for joining us. >> Thanks for having me back on, Kai. >> Absolutely. Yeah, really looking forward to this uh really timely discussion. We just got the growth numbers out of the US this morning, just about an hour ago or so. 4.4% is the GDP growth rate quarter over quarter for Q3. What do you make of it? Well, I think it's outstanding that we have uh nominal GDP trading around, you know, 8% nominal GDP. I I I'm sure I'm quite sure that's unsustainable. I look at the 10-year note trading at, you know, like four and a half%. So, uh normally the 10-year note and the nominal GDP print kind of trade cons commensurately and right now there's like a huge disconnect there. So, um, either we're going to have a spike in long-term bond yields or we're going to have a crash in nominal GDP growth. And I think they're both going to meet in the middle, though, because if you look what's happening in Japan, people, you know, talk about what happened early this week when we had a 2 and a half% uh wipeout in the NASDAQ, over 2% in the S&P 500, and yields were spiking here in the United States. And people said, "Well, it has to do with Greenland and maybe, you know, maybe the Danish were dumping all of our treasuries." And and maybe that's true. I'm not quite sure if it's completely true, but I'm sure they're thinking about it. Um, but that's only part of the story. The real part of the story is Japan. You know, Japan is an an insolvent nation as well. They have a debt to GDP ratio of 250%. It's even greater than the United States by by a lot. Um, and then they have this new prime minister who thinks that the answer to everything is to to of course, hey, let's borrow a bunch of new money and have the the BOJ print it. Um, but the problem in Japan is that they have inflation now that's running pretty consistently where it was in the 1990s. That's how long ago you have to go back before you see inflation in Japan uh as high as it is today. Um, and their yields have spiked. In fact, the 40-year uh JGB is at a record high. The the 30-year uh JGB is at the highs not seen since the 1990s. So, their their bond market is fracturing. It's it's an earthquake and it's sending shock waves around the globe. So, you combine that insolveny and inflation problem and to a slightly lesser degree, we have the same issues here. Kai, we have not solved our inflation problem. And we certainly haven't insol solved resolved our insolveny issue. And um you know we're talking about come May having a new Fed chair who's supposed to be a sickopant of of Donald Trump and supposed to be cutting interest rates and cutting them maybe perhaps as low as 1% and doing that in in the context of the greatest economy the world has ever seen. Uh, and it's no wonder why we have at Pentaport been short the long end of the bond market because I think rates were coming down obviously since 1981 all the way to 20120 and now I think we're in a secular protracted bare market in bond prices and obviously the inverse the bull market in bond yields globally. >> Let's stay on that topic for a second. The 30-year is about to touch 5% again in terms of yield 4.88 88 as as we speak here, Michael. Um for 5% always used to be the line in the sand for the for the um for the president and the White House like what what do you make of that? Do you see yield curve control here happening then uh very soon? >> Uh I I predicted so so what's going to happen is that the Fed's going to obviously start cutting rates sometime the first meeting is June 17th of this year. So it's still a ways off. So we're not going to get a lot of interest rate cuts between then and now. But then you're probably going to see and depending on the makeup of the of the FOMC, you know, I even if you put um I think they might elevate Governor Moran uh Steven Moran >> to be the Fed chair because there's nobody wants to cut rates more than he does. He cut he wants to cut rates even more than the Kevin's Kevin Hasset >> um and Kevin Worsh. So it would make sense to me. I mean, I have no inside information here at all when it comes to to to to uh Federal Reserve hirings and firings. So, uh but it would make sense to put him in charge because he wants to slash interest rates. But if he slashes interest rates, um that that does not mean that the long-term rates will fall. In fact, the exact opposite is going to happen. So, long-term rates are going to rise. And then I think after they rise inexraably above 5% I and I I I agree with you 5 percent pretty much is a line in the sand because once you get above 5% a lot of things start to happen especially with the real estate bubble you know mortgage rates are tied to the long end of the yield curve not the Fed funds rate right so if you look at corporate bond issuance if you look at uh auto loans student loans if you look at a lot of consumer debt and if you look at um the way we ga gauge mortgages off the long end that long end of the yield curve rate probably is going to have to be capped or at least attempted to be capped. So what does that mean? That means that the Federal Reserve is going to come out and say we will buy all interest rates, any and all long-term bonds to make sure the benchmark Treasury yield doesn't go above 5%. Well, that has massive inflation implications. So you you can't solve an inflation problem by creating more inflation. Uh so we'll we'll see if the Federal Reserve ascends to buying um does do they buy mortgage back securities too or do they buy corporate bonds? Do they buy municipal bonds? I mean what are they going to buy every single fixed in income instrument ever issued to keep them because you know let's do a thought experiment here Kai. Let's just say inflation goes back to where it was a few years ago at 9%. very easy to do with the helicopter money that they have planned and the checks supposed to going out and and the manipulation of interest rates. Let's really go to 9%. Well, in a 9% world, who is going to be buying a 5% yielding Treasury bond? Well, the answer is nobody. The the private market will be selling what they own and shorting what they don't. So, the Fed's going to have to be buying an awful lot of bonds. And that means that has ra massive implications for the Fed's balance sheet and the value of the value of the US dollar. >> So it's going to be very chaotic. Stay tuned. Don't be placated by this. Oh, oh, you know, everything's fine because we didn't invade militarily Greenland. Um, listen, and and I'm I want to just make sure everybody understands this. I am not um I'm neither a Polyiana nor am I a perma bear. So I'm I have been long this market since May of 2025. I went I went I was neutral at the start of 25 and I went short at April 2nd liberation day. Okay, net short and then I covered after the after we recanted and rescended all those those tariffs. So, I'm still net long, but I'm not ignorant to the fact that we have the situation in place where we could have a very chaotic bond market in 2026. And I have a model built to detect it and to react to it before it becomes a major issue for the stock market. And at 225% of GDP, you better be paying attent total market cap of equities is 225% of global GDP. the the average of that metric is closer to 80 or 90%. You better be paying attention to the stock bubble because if you don't it it it's to your demise. Today's sponsors, Stellar Gold, is sitting on three major Canadian projects. Tower and Colmac are among the largest undeveloped gold sites in the country. Tower alone could be worth $2.5 billion after tax at $3,200 gold according to a recent study. And if prices go higher, so does its value. Colomax spends over a thousand square kilometers of greenstone and could be Canada's next big gold camp. They also have Hollinger Tailings, a cleanup project that could deliver near-term cash flow. Across all projects, they've trled over 16 million ounces of gold, which would cost over $2 billion to replicate today. And with a seasoned team and huge upside potential, Stellar Gold is one to watch. Visit stellarold.com to learn more. This message is forformational purposes only. It's not investment advice. Please do your own due diligence before making any investment decisions. Now, let's jump back into the conversation. Let's talk stock market in a second. I want to stay on the bond market real quick. And uh a lot of US debt is maturing this year about 1/3 9.2 trillion. Um at at the current rates that that you're seeing like how concerned are you in general that refinancing might become an issue and that the Fed will have to step in here? >> Well, they already did step in. They they you know me what happened to QT time >> a bigger scale perhaps you know >> yeah well we remember we were go sailing along in quantitative tightening and then you know here's the sad truth the sad truth is there's so much debt outstanding in the United States public and private debt that without the Federal Reserve printing money buying that debt and taking it out of the public realm interest rates would sore the same situation you're seeing in Japan you know Japan had zero interest rate policy for many many years, I think from 2016 all the way to 2025. Um, so what happened when the BOJ stepped away from buying all new issuance from the Japanese government? Well, you see it, you go put up a chart, put up a chart of Japanese benchmark lending rates. It's it looks sort of like the gold chart and the platinum chart and silver chart. It's just skyrocketing. The their rates are becoming unmorted. And it's the same situation here. So if without Federal Reserve constant monetization of debt, they can never let their balance sheet shrink again without having devastating consequences for asset bubbles. That is the sad truth. So yeah, expect the Fed's balance sheet to go back to was you know it was nine trillion went down to six and a half trillion about expected to go back to nine and then much higher from there into the double digits and that has a lot of ramifications not not only for the dollar visav other flawed fiat currencies but against the purchasing power of hard assets. >> That's what we're seeing here. That's what we're seeing in the precious metals complex. >> Exactly. $4,800 an ounce gold. Um I see you're following the coverage from Davos as well behind you there on the on the Bloomberg screen. Uh lot lots of interesting discussions. I've been watching it with one eye as well. We had Howard Lutnik earlier today, but also the speech by President Trump. Um the the market reacted very positively to uh let's say the appeasement and maybe that's the wrong term, but maybe the the uh >> the pe more peaceful tone um by the by the president, meaning no like like you touched on like no um aggressive confrontation. let's talk this out. Maybe we'll find a solution here together. But the market went up and um I'm going to question you because you must have followed it as well. He also talked about the S&P or sorry NASDAQ at 50,000. Um I'm wondering if the market is confusing Greenland with his very progre very aggressive stance on that market. Um so I'm curious like if the market may or maybe we made the wrong take took the wrong takeaways here that the market reacted maybe to the wrong words. Well, I mean, the market was concerned that we could invade Greenland militarily. I mean, it is a NATO ally. And, you know, I don't know what Article 5 says when one NATO country attacks another NATO country. I mean, do what what happens? Does the rest of the NATO nations attack the United States? It's it really was going to open up Pandora's box there. So, um, listen, Donald Trump, you know, he he's he wants to see his face on Mount Rushmore. Um, and he has he has a lot of great instincts in my opinion. I did vote for the gentleman twice. So, I'm not um I'm not anti-Trump by any means. Uh, but uh, you know, he wants his face on Mount Rushmore, as I said, and this is the anniversary of his one-year term in office. This is I think I think it's his last term in office. um and he wants to he wants to make a gigantic footprint in in history the American history books. So um he's looking and searching for ways to make that happen. He he had every intention of annexing Greenland by force in my opinion if necessary. But the only the only difference is is that um the art of the deal when it was written and it was written about uh how a businessman um interacts with other businesses and and it's it's you know he Donald Trump tends to throw a grenade into the room and say here I am look at me and and and and threatens the nuclear option and then people pay attention and they're scared and they cut deals. But he he what what Mr. Trump is is learning, I believe, is that he cannot so easily manipulate markets. And so when the market found out that we could be going into Greenland and uh and do it violently um and that Denmark would be selling all of their US treasuries uh that was a catalyst along with what happened in Japan that sent bond yields surging. And if there's one thing we know that Donald Trump does listen to, it's it's markets. He loves to brag about how well he's doing. The markets are a scorecard. And when he saw an absolute meltdown of the NASDAQ in one day and a and a melt up in yields globally, I think he said, "You know what? This is this is not going to work for me. I cannot easily bully and manipulate other countries because it has massive ramifications in markets." And so that's the fed the fettering the fettering mechan the fettering mechanism for Donald Trump and what he tries to do is the markets and the markets are very fragile because we have a triumvirate of bubbles the credit bubble the real estate bubble and the equity bubble and they just don't react very well to geopolitical chaos. No, fair enough. And uh I was just seeing what what you took away from the speech mostly here as well. Um when you when you talk about the bubbles, we have to talk about them popping as well because that's what bubbles do here, Michael. Um which one do you have your money on? Which one is going to pop first? >> Well, so that's a great great way you phrase that. So the so the the credit bubble is the only bubble that I have any money on yet as popping as of yet. So I'm fully prepared. And I know ex have a great game plan to profit when the equity bubble pops. I know exactly where I'm going to hit, where I'm going to do. Um, and that includes the real estate bubble. But the equity the uh the credit bubble is the only bubble I'm currently short. I have a small short position in long duration treasuries. I've had it I've had it since the 10-year note was 4%. It's a winning trade right now, but it's a small it's a small percentage because I I think we I think we're seeing the incipient cracks in the credit bubble. Um, but they will become more salient and more jut more jutting, I believe, this year, and that's when I'll increase my shorts. Um, listen, we're going to have we're going to have a a a breakup of these bubbles, a fracturing of these bubbles. Um, I'm not quite sure if it's going to be a stagflationary one first or it could be a deflationary depression first. I don't know which one's going to happen first. I think we could have I think we're going to get both at different times. That's that's my I I think we're going to have a fracturing of the credit markets causes a deflationary depression. Then it's going to be combed with massive helicopter money. Fed, Treasury get together and then we're going to see stagflation, hyper stagflation like we've never seen before in this country and that's gonna that's going to put us in sector five which is which is you know hyper stagflation or intractable inflation and then you really really would want to be short the long end of the bond market in in a big way. That's so that's that's my game plan. Um, of course it's, you know, I don't I don't write it in stone, but I these bubbles, like, as you very accurately said, bubbles always pop and they never pop graciously or innocuously. They're always very damaging when they when they implode. And this one's going to be no different. >> No, fully agree. I've yet to see any bubble pop in a way of when my daughter blows them. That is gracefully even. So, um, no. Um, Michael, maybe one more topic we need to talk about or one asset class is just the US dollar. You touched on it a bit earlier as well. It still seems to be the, you know, the cleanest shirt in the hamper here. Uh, the Dixie still hanging in there over 98 points. Uh, o overall it seems unfaced by what is going on globally. Dolorization doesn't seem to be a topic anymore. Um, where do you see the dollar head towards the end of the year here? Well, I I see it going down not only against other flawed fiat currencies, but I see it going down especially, you know, if you want to tell me if you want to measure what the dollar is doing, don't look at the yen. I mean, I mean, don't look at the euro. I mean, those are other fiat currencies that are, as I say, flawed fiat currencies. So, it's a race to the bottom. Look, how's the dollar doing against platinum? How's the dollar doing against gold and silver? That'll tell you what the dollar is really doing. And that that's a that's a reflection of the purchasing power of of the of Americans. I we have a we have a a trenchant wealth gap in the United States where the middle class is being eviscerated wiped out. Yeah. If you look at there's one statistic that I love to point out like in 1960 the the um there was I think 60 was it 52 or something like I want to be this is close to accurate as possible but you get the idea when I say it. 52% of 30 year olds owned a house and now it's 12% of 30 year olds own a house because they've been wiped out priced out of the of the of the real estate market. And that didn't happen by osmosis. It's not it's not some kind of random fluke. It's it's because of the practices of the Federal Reserve in combination with the Treasury monetizing government and private sector debt, mortgage back securities. So, so we've we've made, you know, Wall Street rich and we've impoverished Main Street and and I don't that I don't see that turning around. I see that condition accelerating unfortunately. >> No, it is. I don't see housing prices coming down at all yet. Maybe 5 10% but that doesn't make a difference for example to just to to cure what we've created here over the last >> they have to come down 50%. I mean in in there are pockets where h so in my area where I have a house in Naples uh I have two houses in Naples Florida um one of them is down 15% from where I bought it in the summer of 2022. So there are pockets of but glo nationally they're down incrementally if if that at all. Um so we have we have some a lot of bad news coming in the housing market in the United States but it's bad news temporarily. I mean, it's, you know, one thing about bubbles, they pop. Look, look what happened in 2007. I mean, you think it was the end of the world, but I mean, we we we actually brought home prices down to a level that can be supported by the free market and then people could afford homes again. It's a lot of it's very damaging for those who have homes on leverage. People have five homes that they that they don't live in that that they're looking to as as as using as investments and rental properties. Um, but they're they're going to get hurt the hardest, but that's okay because you know what? It it all it needs to happen for the long-term viability and health of this nation. >> It's like a wildfire. It needs to happen so things can flourish again, right? Absolutely. >> It's a cathartic it's a cathartic cleansing of of the leverage and the asset bubbles that always brings about a more healthy environment. You made a great analogy how how a fire clears the brush out so new new growth can can occur. M Michael, where do you see the biggest tail risk? You know, we've we've touched on a lot of topics, but where do you see the biggest tail risk here in 2026? Is it geopolitics? Is it credit event you talked on? Is it just a policy error? >> You know what? You know what, Kai? I think I've been doing this for 35 years now. So, um I don't think it's a tail risk when I talk about the implosion of the bond market and the and the and the reconciliation of real estate and equity prices. That's that's that's going to happen. that that I can virtually guarantee is going to occur and sooner rather than later, but the the the the fat tail would have to be geop geopolitical risk because you really don't know what we're we're talking about a very disruptive um activist administration in the United States, but we haven't talked about the reaction from China and Russia. What is their reaction going to be from our interests in Greenland or from our interests in Venezuela? Um, even our allies. But I'm most concerned about what what if China were to invade Taiwan and say, "Listen, you know, United States, you you took out the leader of Venezuela and you and usurped the company's energy. We we have Taiwan's a is is a is a territory of China and we just annexed that territory." Um, what would happen to markets if that happened? What would be the response from the United States? That has to be the fat tail. That is not part of what I'm predicting to happen as a fat I mean as a as a uh a high a high uh chance of occurring. That's a that's a fat tail event. But I I don't know even if even that how fat is it? I mean, I I we have not heard from Putin or Xi about what they feel about what's going on with the United States. I think we're going to hear from them soon. And I I I don't know if that's going to be a very favorable, you know, amen to what's happening here. >> Um I'm not asking for financial advice, Michael, but maybe going into the next six months here, what what's the ideal portfolio construction in your opinion? Like what should it look like? And again, not financial advice. Everybody's different. Yeah. So, if you were to invest $100,000, how would you split that up? >> So, all all I can speak of is how my clients who I've vetted and are are qualified for the portfolio, a long short strategy. So, we have um we're about 30% net long stocks right now. We have we have precious metals in the portfolio. We're short the long end of the bond market. We have u dividend international dividend paying stocks. Um we're still we're long India because I think that could be a really big uh uh uh that that I think is one of the most underowned sectors of the global economy right now is India because everybody you know they hate the rupee and they they they hate the fact that we have these tariffs on on India but it's still it's the fastest growing developed world country on the planet. Um and the stock market hasn't gone anywhere because of these tariffs. So we're long India as well. Um we we and we we have those buffers. Uh we have a small buffer of a tail risk uh which is an option strategy too in there. So uh we're we're cautiously net long with hedges. That's how we would play. That's how we are playing it right now. Of course and you ask me what you know a six-month portfolio. I'm an active manager. I don't know, you know, if I gonna tell you right now exactly what I'll fix six months from now, I'd have a problem because I would I would be a salesperson, not an active money manager. So, I don't know what's going to happen in six months. I know that the financial conditions that I look at, I know the credit spreads I look at right now are telling me it's okay to be net long, but the underlying foundation of this economy is is decrepit. It's fracturing and it's ready to break. Um, and it will. And so I have to be ready and I am. >> Absolutely. Yeah. No, fantastic closing words here as well, Michael. I'm I want to be mindful of your time. I know you have a hard cut off and I tremendously appreciate you coming on. Um, where can we send our audience to follow more of your work, Michael? >> So the website is pentoport.com. If you have $100,000 to invest and you're a US citizen, you're qualified for a long short strategy. I will manage your money directly in the inflation, deflation, and economic cycle model, which is based on the second derivative of inflation and growth. Um, and if you don't have $100,000 and you're not a US citizen, you can subscribe to my podcast called The Midweek Reality Check. It's $50 a year and I'll get you my views on um the most salient economic data and I'll also give you a very high level uh view of the portfolio. >> Fantastic. Awesome. Michael, thank you so much for coming on. Tremendously appreciate your time. Um, we'll talk soon. Well, let's see if we can catch up here after Easter and see where we're at here in the spring. So, tremendously appreciate your time and can't wait to do this again. And everybody else, thanks so much for watching. Lots going on in the markets right now. So, it was really timely to get Michael Pento onto the program. If you enjoyed this conversation, kindly hit that like and subscribe button. We do appreciate it. And uh leave a comment down below. How what does your portfolio look like right now? What are you seeing as the biggest risk in 2026 to your portfolio? Really looking forward to catching or hearing from you and just appreciate. So, thanks so much for tuning in. Be safe out there and uh good luck.