Latest / Financial Survival Network / A Cat 5 Economic Storm Is Ahead - Michael Pento #6328

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A Cat 5 Economic Storm Is Ahead - Michael Pento #6328 · Financial Survival Network

0:00
Speaker 1: There's eleven point four trillion dollars of corporate debt out there,
0:03
Speaker 1: and one point eight trillion about that trillion is junk
0:07
Speaker 1: at so you think about companies have to continuously tap
0:11
Speaker 1: the corporate bond market. This is one of those examples
0:14
Speaker 1: I throw you to show you how big this Hymenminsky
0:19
Speaker 1: moment has grown.
0:20
Speaker 2: You are listening to Carrie Let's's Financial Survival Network, where
0:24
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0:40
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0:44
Speaker 3: Ever, and welcome. You are listening to and watching the
0:51
Speaker 3: Financial Survival Network. I'm your host, Carrie Let's. Hey, we
0:54
Speaker 3: are halfway through September. All hill is breaking loose on
1:00
Speaker 3: every front. We've got heard record high gold prices. Silver
1:05
Speaker 3: has awoken. I mean it's it was close to forty
1:09
Speaker 3: three dollars today. Now it's pulled back a little, but
1:13
Speaker 3: maybe it's time for a breather. But let's get the
1:17
Speaker 3: real truth here. From Michael Pentopentoport dot com. Michael is
1:22
Speaker 3: always great to have you back and glad you survived
1:25
Speaker 3: your pickleball game.
1:26
Speaker 1: Well, yeah, I wish I could said his name for
1:28
Speaker 1: my golf game. That's its complete disaster, which is good
1:32
Speaker 1: news for my clients because they know I'm not spending
1:35
Speaker 1: a lot of time on the golf course.
1:37
Speaker 3: Yeah, all right, be grateful for small favors. Right, Yeah,
1:42
Speaker 3: So breakout in the metal sector, even silver, maybe silver
1:47
Speaker 3: will start to lead. It's kind of half leading, half
1:50
Speaker 3: holding back. What's your take? What are the medals telling us,
1:55
Speaker 3: especially platinum breaking out from a decade to a decade basic,
2:02
Speaker 3: I guess a decade of depression for platinum.
2:07
Speaker 1: Yeah. So I'm a big holder of gold, and I
2:11
Speaker 1: haven't own platinum for my entire investment history up until
2:14
Speaker 1: about four months ago. Three or four months ago, I
2:18
Speaker 1: saw it started breaking out. You know, platinum is more
2:21
Speaker 1: rare or rarer, I don't know which one is correct
2:24
Speaker 1: than gold. It's more precious too, more durable than gold,
2:31
Speaker 1: and it has a lot of other uses outside of jewelry.
2:36
Speaker 1: So I remember, I've been in this business for thirty
2:39
Speaker 1: five years. I remember when platinum was always more expensive
2:42
Speaker 1: than gold for decades, and then all of a sudden
2:44
Speaker 1: that switched, and I switched in a big way. So
2:47
Speaker 1: now platinum is not even half as valuable as gold,
2:50
Speaker 1: and I'm looking for some kind of mean reversion here.
2:54
Speaker 1: But I don't think gold's going to go down and
2:55
Speaker 1: platinum is going to go up. I think they're both
2:57
Speaker 1: going to go up. But platinum has a lot of
2:59
Speaker 1: catch up to do. And you know, you you're a
3:01
Speaker 1: big silver guy. I you know, I don't have to
3:04
Speaker 1: own every precious metal or semi precious metal, as silver
3:07
Speaker 1: is has a lot of industrial components to it too.
3:10
Speaker 1: I just I'm really in love with these monetary metals,
3:12
Speaker 1: and that's gold first and foremost served us very well
3:16
Speaker 1: for years.
3:17
Speaker 3: And platinum.
3:18
Speaker 1: But what do they I mean, he asked, A more
3:22
Speaker 1: interesting question is like what's going on these tittles? And
3:26
Speaker 1: you know what I mean? And as you asked that question,
3:29
Speaker 1: I don't know what your questions are before you ask
3:31
Speaker 1: but when you were asking that question, you know, you
3:33
Speaker 1: know what hit my mind was, like, you know, the
3:36
Speaker 1: Fed's balance sheet, which basically is a measure of how
3:39
Speaker 1: much how big is the monetary base or a big
3:42
Speaker 1: portion of the monetary basis, how much how many assets
3:46
Speaker 1: does the FED own Well, for many, many, many years
3:51
Speaker 1: of our existence. I'm sixty two. In a couple of
3:53
Speaker 1: weeks here the FED owned, you know, just a few
3:56
Speaker 1: hundred billion dollars in treasuries that was there, that was
4:01
Speaker 1: their balance sheet, and you know, since you know, I
4:06
Speaker 1: guess you could say since nineteen eighty seven. But really,
4:10
Speaker 1: really this madness started in the year two thousand. It
4:12
Speaker 1: was put on steroids in two thousand and eight, and
4:14
Speaker 1: then we had these buffoons that run our monetary regime
4:18
Speaker 1: of post COVID as balance sheet went to nine just
4:23
Speaker 1: over nine trillion with the t dollars, and we managed
4:29
Speaker 1: to get back down to I think a six point
4:31
Speaker 1: six trillion is what we are now. So we went
4:33
Speaker 1: to six point six trillion, which is a lot more
4:36
Speaker 1: than seven hundred billion dollars where it was just prior
4:40
Speaker 1: to the global financial crisis. And then we spent most of
4:43
Speaker 1: the time between two thousand and eight to twenty twenty two.
4:48
Speaker 1: We spent almost all of that time, not all of it,
4:50
Speaker 1: but most of that time where interest rates were near zero.
4:54
Speaker 1: They were you know, one percent or so, and in
4:58
Speaker 1: a real sense they were profoundly negative. So there's a
5:00
Speaker 1: long winded way of saying that we have thirty seven
5:04
Speaker 1: trillion dollar national debt. The corporate debt is enormous. Consumers
5:09
Speaker 1: are swamped in debt as well. We have so much debt,
5:13
Speaker 1: particularly at the state level. And I mean by state,
5:16
Speaker 1: I mean the national level, not just the federal level,
5:19
Speaker 1: not you know, the state, meaning the people who run
5:22
Speaker 1: this country. That we have no choice but to continue
5:29
Speaker 1: building that balance sheet to infinity, more and more lofty heights.
5:33
Speaker 1: And Carrie, what I find you ask me why gold
5:38
Speaker 1: is in this this primary bull market. It's just spectacular.
5:41
Speaker 1: I think it's just beginning. So you have to ask
5:46
Speaker 1: yourself which one of the two mandates, say is the
5:48
Speaker 1: Federals are really like the most. So they have this
5:51
Speaker 1: dual mandate, which is full employment and stable prices, well,
5:54
Speaker 1: stable collections. That's bs because their stable prices has been
5:56
Speaker 1: redefined as two percent inflation. Now two percent went out
6:00
Speaker 1: the window because they can't get anywhere near two percent.
6:03
Speaker 1: They've been above two percent for fifty two months and
6:09
Speaker 1: they're fifty percent above two percent because the inflation is
6:12
Speaker 1: running at three percent the way they measure it. Even
6:14
Speaker 1: the way they measure it inflation is target and what
6:18
Speaker 1: are they doing, Kerry. They're just about to slash interest rates,
6:23
Speaker 1: going on a rate cutting regime starting September seventeenth, which
6:27
Speaker 1: is just like you know, as in like tomorrow. Yeah,
6:30
Speaker 1: I don't know when this interview is coming out, but
6:32
Speaker 1: it's been recorded on the sixteenth. So that's what gold
6:36
Speaker 1: is selling. They have no idea they have. They being
6:39
Speaker 1: our government, our treasury, our central bank, has no way
6:42
Speaker 1: of providing a sustainable level of real interest rates without
6:46
Speaker 1: the economy falling apart. That's what they think. And they're
6:51
Speaker 1: about to slash interest rates again to negative territory in
6:54
Speaker 1: real term. So by yourself some precious metals if you haven't,
6:57
Speaker 1: if you haven't woken up, if you haven't ascended to
6:59
Speaker 1: that notion at wake up, all right.
7:03
Speaker 3: So silver, I was just thinking about this, Michael. The
7:06
Speaker 3: majority of people on the planet don't remember when our
7:12
Speaker 3: coinage was ninety percent silver, Yeah, because that was the
7:17
Speaker 3: last time. Well they kept a little bit up until
7:20
Speaker 3: the seventies, but basically monetization of silver ended in nineteen
7:25
Speaker 3: sixty five, so we're looking at sixty years and the
7:29
Speaker 3: majority of the population, you know, just say I remember
7:33
Speaker 3: it because I was seven when My brother came into
7:38
Speaker 3: the kitchen and he dropped old silver coins and then
7:42
Speaker 3: he dropped the new copper clad junk slugs as they
7:46
Speaker 3: call them, and the sounds I still remember it to
7:49
Speaker 3: this day. We're only looking at sixty years ago. Michael,
7:53
Speaker 3: I remember that sound. The silver rang it chime, and
8:00
Speaker 3: the slugs were just they just smacked the floor.
8:05
Speaker 1: Yeah, so that's when we had copper. Now I think
8:08
Speaker 1: they put in nickel and we are aluminum. I think
8:12
Speaker 1: it's I think they're making coins out of balsa would now.
8:16
Speaker 3: Yeah, it could be. There could be ten.
8:21
Speaker 1: I don't know.
8:21
Speaker 3: Whatever is the cheapest the metallic commodity, and pretty soon
8:25
Speaker 3: even that will be too valuable to put into a coin.
8:29
Speaker 1: Yeah, right, exactly exactly. So now that that's why they
8:31
Speaker 1: have this this technology, of course, which is a bitcoin
8:35
Speaker 1: or cryptocurrencies where you know, money doesn't even be backed
8:38
Speaker 1: by semi precious or base metals. For you about precious metals.
8:42
Speaker 1: It can be backed by numbers, you know, a barcode,
8:47
Speaker 1: a glorified QR code that's you know, electronic numbers and letters.
8:52
Speaker 1: Now could be it's hard money. Now, it's hard because
8:56
Speaker 1: there's a there's a there's only twenty one million units
8:59
Speaker 1: of bigcoin that can be printed, but there's an unlimited
9:02
Speaker 1: number of blockchains and cryptocurrency that can be created, So
9:05
Speaker 1: who cares? Who cares? So he take point, there are
9:08
Speaker 1: I don't care how many. You know, there's unlimited blockchains,
9:12
Speaker 1: unlimited cryptocurrencies. Therefore, so who cares about how many bitcoin
9:17
Speaker 1: there are? I don't care. It's all electronic numbers and letters.
9:21
Speaker 1: It's not gold, it's not a U, it's not a G.
9:27
Speaker 1: It's just garbage, that's what it is. And you know
9:30
Speaker 1: what else? I want to just a fully answer your question.
9:34
Speaker 1: There's also as we continue to debase our currencies literally
9:38
Speaker 1: to base our currencies, there's also this ENLiGHT this this
9:44
Speaker 1: watershed moment, this this period of enlightenment on behalf of
9:49
Speaker 1: foreign creditors. They are now as shoeing treasuries, and they
9:53
Speaker 1: are is shoeing dollars because we we are we capriciously
9:57
Speaker 1: and arbitrarily impose sanctions and confiscations on foreigners reserves. They say, okay,
10:05
Speaker 1: you know, all those the dollars that you own and
10:07
Speaker 1: all those treasures you own, what, well, you don't own
10:10
Speaker 1: them anymore. They're hours is a salient fear that that's
10:15
Speaker 1: that's happening, and so they might they might take it away.
10:21
Speaker 1: In nominal terms, they might just say, okay, you we
10:24
Speaker 1: owe you a trillion dollars, but now we only owe
10:26
Speaker 1: you five hundred billion. And by the way, that fire
10:30
Speaker 1: and billion dollars that you have, it's going to be
10:33
Speaker 1: handed to you in a depreciating dollar. So how's that.
10:35
Speaker 1: How's that for a morgan?
10:39
Speaker 3: Yeah, I'm sorry, I don't mean to laugh because it's
10:41
Speaker 3: not really funny, but it's funny. But the way you
10:44
Speaker 3: put it, because like you'd be crazy to keep them,
10:47
Speaker 3: and yet we then have a gun to their head
10:50
Speaker 3: literally that if you don't take these dollars, maybe we'll
10:53
Speaker 3: just blow up your country.
10:57
Speaker 1: Well, with investors with foreign creditors are doing is they're saying, hmm,
11:02
Speaker 1: if the US is going to cut their interest rates
11:05
Speaker 1: back to towards zero percent and they destroy their currency,
11:09
Speaker 1: and they might steal my currency reverse reserves for me
11:12
Speaker 1: at at a moment's notice, maybe I'll just take my
11:17
Speaker 1: surplus dollars for my great surplus and I'll just sell
11:22
Speaker 1: them and buy gold. That's what I'll do, and I'll
11:25
Speaker 1: hold the gold myself and you can't have it.
11:28
Speaker 3: The barber is relic you're talking about.
11:30
Speaker 1: Yes, yes, the barber is relic that central banks hate,
11:33
Speaker 1: but they continue to accumulate at a frenetic pace. Yes,
11:36
Speaker 1: I would think that that that gold. Yeah, that that
11:41
Speaker 1: which is virtually indestructible, extremely precious, extremely rare. That that
11:48
Speaker 1: that is why gold is money because it doesn't go anywhere,
11:52
Speaker 1: It lasts forever and is very rare, and it's so
11:56
Speaker 1: you know, divisible, and it's a medium exchange. All of checks,
12:00
Speaker 1: all the boxes, and the little green pieces of paper
12:03
Speaker 1: which probably going away in the future to be replaced
12:06
Speaker 1: by a central bank digital currency. Who the heck wants
12:11
Speaker 1: to store your savings in that? I mean literally, if
12:17
Speaker 1: I just told you that the central bank digital currency,
12:21
Speaker 1: let's just say we had one in two thousand and
12:23
Speaker 1: seven and the whole be Fed's balance, he was seven
12:25
Speaker 1: hundred billion, and a couple of you know years later,
12:28
Speaker 1: a few years later, it was nine trillion. They stole
12:33
Speaker 1: that much purchasing power of your base money. And that's
12:37
Speaker 1: why you know things like well, the housing market, transaction
12:41
Speaker 1: market is frozen well since twenty nineteen, a good a
12:46
Speaker 1: good sources Nick Jurley. He did some analysis of house
12:52
Speaker 1: hold whole prices in the last six years have gone
12:56
Speaker 1: up ninety two percent. Would you care to guess how
12:59
Speaker 1: much incomes caught up? That same epirs on.
13:02
Speaker 3: I don't know what interested that.
13:04
Speaker 1: Like twenty two like thatch when so people can't afford
13:08
Speaker 1: houses anymore. And you know when the FEG gets up
13:11
Speaker 1: and says, you know, everything we do is in the
13:13
Speaker 1: service of our people, in our American consumer and blah
13:17
Speaker 1: blah blah. Wait wait a second. You caused home prices, you,
13:22
Speaker 1: being the Federal Reserve and particularly you, mister Powell, caused
13:27
Speaker 1: home prices to surge ninety two percent. And guess what
13:33
Speaker 1: you were buying mortgage backed securities when home prices were
13:36
Speaker 1: up twenty percent back on back in this in March
13:41
Speaker 1: of twenty and twenty two, when there was no more
13:44
Speaker 1: COVID and there was no more crisis and the economy
13:47
Speaker 1: was doing fine, you considered it appropriate to still buy
13:50
Speaker 1: mortgage backed securities, which lowered the cost of mortgages to
13:54
Speaker 1: send home prices even further. So you know what, so
13:57
Speaker 1: Blackstone can buy all of the single family homes.
14:00
Speaker 3: That's what they're done.
14:02
Speaker 1: In a market now and now we see investors not
14:05
Speaker 1: just Blackstone. Now we see the investors own between twenty
14:09
Speaker 1: and thirty percent of the entire single family home market.
14:13
Speaker 1: You know, like you know, there's nobody in these houses
14:16
Speaker 1: or they're rented or they rent and you know what
14:19
Speaker 1: home prices are now rolling over and you have you
14:23
Speaker 1: have the bottom four quintiles of Americas have been destroyed,
14:27
Speaker 1: the purchasing powers have been wiped out, and the top
14:30
Speaker 1: quintiles keeping the thing afloat because stock prices are record
14:34
Speaker 1: highs and I mean record like crazy record. So the
14:38
Speaker 1: valuation of equities right now is two hundred and eighteen
14:40
Speaker 1: percent of GDP. That's something that's never been even imagined
14:44
Speaker 1: that then the mean metric there is like ninety carry,
14:48
Speaker 1: not two or eighteen. And you know we have all
14:51
Speaker 1: these target date funds and the four to one K plans.
14:53
Speaker 1: Mike Green talks about these passive flows all the time.
14:56
Speaker 1: These very right, very correct, and the passive flow are
15:00
Speaker 1: going to go into reverse because when this when we
15:03
Speaker 1: have a recession, you're going to have debt and deficits.
15:06
Speaker 1: First of all, the annual depths is going to go
15:08
Speaker 1: to around five trillion dollars the FED is going to
15:10
Speaker 1: be printing trillions of dollars per annum. The deficit is
15:13
Speaker 1: already over two trillion dollars this year, despite all the
15:16
Speaker 1: tariff revenue that we're supposedly getting. I don't know if
15:19
Speaker 1: if the revenue is fictitious or we're just spending more
15:23
Speaker 1: money than we ever did before. But why are we heaving?
15:26
Speaker 1: What are we having in in almost a record low
15:29
Speaker 1: unemployment four point three percent unemployment rate and supposedly not
15:33
Speaker 1: in a recession. How the heck do we have two
15:35
Speaker 1: trillion dollar plus deficits carry how that's structural?
15:39
Speaker 3: Right?
15:41
Speaker 1: Yeah? And yes, it's all about demographics, sure, absolutely. And
15:45
Speaker 1: of course what Trump really wants done is he wants
15:48
Speaker 1: to take the money market rate down so he doesn't
15:51
Speaker 1: have to pay over a trillion dollars an interest. And
15:53
Speaker 1: I think that's going to happen very quickly. But I
15:56
Speaker 1: will sell you this this caveat. This is buyer beware,
15:58
Speaker 1: caveat dempto if he low if Powell lowers rates by
16:02
Speaker 1: one hundred basis points, which I think he's going to do,
16:04
Speaker 1: and then very near future, and then he's replaced by
16:06
Speaker 1: a you know, obsequious sicofant in. So one who's really
16:13
Speaker 1: really really going to cut interest rates? What if the
16:16
Speaker 1: long end of the bond market doesn't say, uh uh,
16:19
Speaker 1: you know, I don't really like this, this is not
16:21
Speaker 1: this is not kosher. I am going to raise the
16:23
Speaker 1: long term borrowing costs, which is where by the way,
16:27
Speaker 1: that's where mortgages are priced there, corporate deet is float floated,
16:32
Speaker 1: that's where auto loans. So that's that's See. I am
16:37
Speaker 1: I manage money for a living, and I am long
16:40
Speaker 1: the stock market. But I am long with a an
16:45
Speaker 1: algorithm that tells me when the credit markets are starting
16:49
Speaker 1: to crater and fracture. And they will and when they do,
16:52
Speaker 1: they have to, they have to, and when they do, kerry.
16:56
Speaker 1: When they do, we're going to have a very expedition,
17:01
Speaker 1: expeditious and salient, trenchant decline in stock prices. It's gonna
17:06
Speaker 1: happen quickly. It's gonna be very sharp and acute. And
17:11
Speaker 1: I want no part of that. I want to I
17:12
Speaker 1: want to be out and short the market when the
17:15
Speaker 1: worst of that happens.
17:17
Speaker 3: Yeah, so we're getting to that point. How much longer
17:20
Speaker 3: do you think it's gonna be Michael.
17:22
Speaker 1: Well, I mean listen all I can tell you it's
17:24
Speaker 1: not happening right now. If you look at credits spreads,
17:26
Speaker 1: you look at financial conditions, they're as easy as they
17:28
Speaker 1: can possibly be. Financial conditions, credits reds are as tight
17:31
Speaker 1: as they can possibly be.
17:32
Speaker 3: And that's sign right, that's a negative indicator.
17:37
Speaker 1: Well it's it's well, it's it's negative long term, but
17:39
Speaker 1: in the short term it says it's a green light.
17:42
Speaker 1: I mean, if you know, if financial conditions have been
17:44
Speaker 1: this tight, financial conditions have been easy now for a
17:48
Speaker 1: very very long time, and they're up. You know, they're
17:50
Speaker 1: very very easy, and credits breads are the tightest I've
17:53
Speaker 1: ever seen them. So that tells you that it's like
17:56
Speaker 1: every there's no complacency abounds. So it's a green light.
18:00
Speaker 1: But you're speeding at one hundred miles an hour towards
18:02
Speaker 1: a brick wall. So when an unraval is gonna unravel
18:05
Speaker 1: quite quickly, and you have to be very nimble, and
18:07
Speaker 1: you have to have somebody managing your money who's not
18:09
Speaker 1: gonna say, well, it will always come back. Well, tell
18:14
Speaker 1: that to Chine, Tell that to the Shanghai chottocker change,
18:17
Speaker 1: sell that to the nick I Dao. I mean the
18:20
Speaker 1: nick I Dao was down for thirty five years. Thirty
18:23
Speaker 1: five years carry they were you know, they didn't see
18:26
Speaker 1: an all time high. So I think that, I think
18:29
Speaker 1: when this thing does break, there isn't a damn thing
18:32
Speaker 1: the Federal Reserve a Treasury can do about it, because
18:34
Speaker 1: it's when this breaks, it's gonna break because of inflation
18:39
Speaker 1: and insolvency concerns. So if you're gonna tell me the
18:42
Speaker 1: same playbook is going to be deployed that's worked in
18:44
Speaker 1: the past, meaning well, the Treasury is gonna borrow trillions
18:49
Speaker 1: and trillions of dollars and the Fed's gonna buy it all,
18:51
Speaker 1: and the bond market's gonna say, oh, I'm already you know,
18:55
Speaker 1: the bond vigilinanism already told you enough, and this is
18:59
Speaker 1: this is your I this is how you're gonna fix it.
19:02
Speaker 3: Wait, I thought the bond vigilantes were an endangered species here.
19:06
Speaker 1: Michael, Yeah, well that listen, there are slumbering volcano like
19:12
Speaker 1: Vesuvius and it's going to erupt and there's no way
19:16
Speaker 1: I have no doubt in my mind that's going to happen.
19:20
Speaker 1: Because you can't I mean, you can't tell you can't
19:22
Speaker 1: tell bond vigilantes. You can't tell people that they should.
19:26
Speaker 1: You know, like the ten year note is a bit
19:28
Speaker 1: just over four percent terry. If inflation goes back to
19:31
Speaker 1: where it was in COVID nine percent the way they
19:34
Speaker 1: measure it, seventeen to twenty. In reality, are you gonna
19:37
Speaker 1: buy how much? I mean how much? Ten? How many
19:39
Speaker 1: ten year notes? A you're gonna buy at four percent?
19:42
Speaker 1: I mean, you don't even have to be a vigilante.
19:44
Speaker 1: You just have to have a You just have to
19:46
Speaker 1: be a little smarter than a mentally challenged the MEBA.
19:50
Speaker 1: You're not gonna You're not gonna lock up your money
19:51
Speaker 1: for ten years four percent when inflation is at nine
19:56
Speaker 1: and you're gonna be you would if you're smart, you'll
19:58
Speaker 1: be shoring the bond market. Like me, I will shorten
20:02
Speaker 1: the bond market too. That's one of the arrows I
20:04
Speaker 1: have in my quipper. As a matter of fact, the
20:08
Speaker 1: full disclosure, I shorted the bond market yesterday. Now, I'm
20:11
Speaker 1: not saying the bond market is going to unravel. Now,
20:13
Speaker 1: I'm just saying, and I think you alluded to it.
20:16
Speaker 1: With credit spreads this type, and with financial conditions this easy,
20:21
Speaker 1: and with a ten year note at four percent, I
20:24
Speaker 1: shorted the long end of the bond markets just so
20:26
Speaker 1: you know how much lower is it going to go?
20:30
Speaker 1: I mean outside of a recession, and I'm not ruling
20:33
Speaker 1: that out, and I have a I have a lot
20:35
Speaker 1: of money in the in the belly of the curve
20:37
Speaker 1: and the shorter end, so I'll be fine, but outside
20:40
Speaker 1: of a recession. And let me just add this real quick.
20:44
Speaker 1: Remember I said a recession will cause debt the deficits
20:47
Speaker 1: to go up to five trillion dollars. That's the way
20:51
Speaker 1: it's the math works.
20:52
Speaker 3: Yeah, for sure, So we're.
20:54
Speaker 1: Already at two it's going to go between you know,
20:57
Speaker 1: four to six trillion dollars. There's no guarantee that the
21:00
Speaker 1: long end is going to do anything but go higher
21:02
Speaker 1: and yield a lower and price higher and yield. So
21:06
Speaker 1: I'm not exactly convinced even a recession would save the
21:08
Speaker 1: long end of the bond market, but let's just say
21:10
Speaker 1: it does. Outside of a recession, there's nothing that makes
21:12
Speaker 1: me think that these yields are going any lower. So
21:16
Speaker 1: now's your chance to do.
21:17
Speaker 3: It, so limited time offer. So what's the asymmetric play
21:23
Speaker 3: for the inevitable here it's gold and silver obviously, But
21:29
Speaker 3: from a security standpoint, let's just say, you see it
21:33
Speaker 3: all going to hell in a handbasket, what's your final
21:37
Speaker 3: bet at the table.
21:39
Speaker 1: So right now, let me answer that question. I'm saying,
21:43
Speaker 1: right now, we're not positioned for the four horsemen of
21:45
Speaker 1: the economic apocalypse to break out. And generally speaking, that's
21:49
Speaker 1: short term bonds, it's the US dollar, which is on
21:53
Speaker 1: thin ice. It's and it's shorting the market too. You
21:58
Speaker 1: have to you have to short the market, have some
21:59
Speaker 1: cash to Those are the four horsemen. So the dollar
22:03
Speaker 1: might not play a role in that because there might
22:06
Speaker 1: not be a huge unwinding of that dollar carry carry trade.
22:10
Speaker 1: So that's still a question. But you ask me what
22:13
Speaker 1: happens if we do enter this moment where the great,
22:19
Speaker 1: the great reconciliation of acid prices begins. You don't want
22:22
Speaker 1: any any part of equities. You have to be able
22:24
Speaker 1: to short equities. So I would short equities. I might
22:28
Speaker 1: be shorting the bond market, and I would hold short
22:30
Speaker 1: term treasuries. I wouldn't you know, obviously, I wouldn't go
22:33
Speaker 1: to the money market. I wouldn't be in t bills.
22:38
Speaker 1: But if you do, if you on between two and
22:40
Speaker 1: seven years, you'll make a lot of money. I believe
22:43
Speaker 1: your trade that's the best place to hide. Or you
22:45
Speaker 1: could just you could just listen to your your salesperson,
22:49
Speaker 1: your use carpet salesperson, money management will just tell you, well,
22:53
Speaker 1: you know, don't worry, it'll it'll come back. You can't
22:56
Speaker 1: time the market, Yeah, as as the market is in
22:58
Speaker 1: full meltdown mount because mode. Because Gary, when you're at
23:02
Speaker 1: when you're at two hundred and eighteen percent total market
23:05
Speaker 1: cap equities to GDP, you're not going to just fall
23:08
Speaker 1: a little bit. I mean, we're not. We're This is
23:10
Speaker 1: not even even in two thousand and seven when the
23:14
Speaker 1: stock market lost, the SMB lost fifty percent, the home
23:17
Speaker 1: prices crashed thirty percent, And I'm not entirely sure they
23:19
Speaker 1: wouldn't do that again. In some markets, they are absolutely
23:22
Speaker 1: going to do that. They're on their way down there anyway.
23:24
Speaker 1: But the total market cap of equities to GDP back
23:27
Speaker 1: then was like one hundred and four percent. That's expensive.
23:32
Speaker 1: The market's still crash. And even in the Nasdaq bubble,
23:37
Speaker 1: when that's the ultimate bubble, it was one hundred and
23:40
Speaker 1: forty percent well, when you're at two hundred and eighteen,
23:44
Speaker 1: when this process starts, I mean, you're going to crash
23:48
Speaker 1: and crash hard like we've never seen before. So you
23:51
Speaker 1: couldn't even I think you very likely, possibly very high
23:54
Speaker 1: probability that you'll see circuit breakers trigger, you know, down
23:58
Speaker 1: seven percent, down thirteen percent, I mean you hold trading
24:02
Speaker 1: on the NYSC So that's what that's what happens when
24:06
Speaker 1: you have three concurrent bubbles that are existing concurrently. So
24:11
Speaker 1: just for the record, that is equities, real estate, and credit.
24:17
Speaker 3: All right, So we're heading towards what they call a
24:20
Speaker 3: Minski moment right.
24:22
Speaker 1: Exactly, there's one hundred and ten billion. There's one hundred
24:25
Speaker 1: and ten billion dollars worth of mortgagees that are seriously
24:28
Speaker 1: in delinquent right now, one hundred and ten billion dollars
24:34
Speaker 1: seriously delinquered, seriously delinqued. Credit card debt is the highest
24:38
Speaker 1: level in the past fourteen years, so the consume. See,
24:43
Speaker 1: people don't understand. So you look at household debt to
24:46
Speaker 1: GDP and it looks quiescent on that metric alone. But
24:51
Speaker 1: when you have to figure, you have to figure into
24:53
Speaker 1: that we have a record. I think it's eight is
24:57
Speaker 1: eighteen eighteen point four trulli dollars in consumer debt household
25:03
Speaker 1: debt until that's a record high, So it's not like
25:05
Speaker 1: it's we don't have any debt anymore as consumers. Eighteen
25:08
Speaker 1: point four trillion is a lot of debt to record high,
25:11
Speaker 1: but as you if you look at the ratio to
25:13
Speaker 1: GDP or too incomes, it's not so bad. But what
25:16
Speaker 1: people have to understand when they look at that metric
25:18
Speaker 1: in isolation is that the bottom four quintas have no cash. Well,
25:24
Speaker 1: they're living paycheck to paycheck, hand to mouth, so they
25:28
Speaker 1: don't have even though even though they don't have a
25:30
Speaker 1: lot of debt to income, their income has been wiped
25:34
Speaker 1: out because of inflation, so there isn't a lot of
25:38
Speaker 1: income left over to service the debt. That's what makes
25:41
Speaker 1: that ratio look quiescent, but in essence it's deadly. That
25:45
Speaker 1: eighteen point four trillion, that's what you have to concentry on.
25:49
Speaker 1: So there's a lot of deep debt and deep you
25:51
Speaker 1: know a lot of delinquencies and defaults in the pipeline
25:54
Speaker 1: that are coming. And I do think the labor market
25:58
Speaker 1: also is on this fret. There's no doubt about that,
26:02
Speaker 1: But it's mostly fracturing because we have no more immigration
26:05
Speaker 1: in this country, so the labor supply is nil. In fact,
26:11
Speaker 1: for the first time in the history of these United States,
26:15
Speaker 1: we have immigration as the negatives. So there's a net
26:19
Speaker 1: outflow of people who were not born in this country.
26:23
Speaker 1: They're here, but they weren't born here. There's a net
26:26
Speaker 1: outflow of those people for the first time history of
26:28
Speaker 1: the United States.
26:31
Speaker 3: Wow. So what appears to be good on the surface
26:35
Speaker 3: not really so good. That has to really hurt housing too.
26:39
Speaker 3: If you get like five million people leave the country
26:43
Speaker 3: pretty much all at once, that's going to have an
26:46
Speaker 3: impact on housing, won't it.
26:49
Speaker 1: If twenty to thirty percent of all homes are owned
26:54
Speaker 1: by investors, that's the statistic. I told you there's a
26:59
Speaker 1: lot out of homes inventory that's going to hit the
27:04
Speaker 1: market as soon as the home prices start falling on
27:06
Speaker 1: a national basis. I mean, it's one thing to say,
27:11
Speaker 1: you know, I own my home and I really don't
27:13
Speaker 1: want to sell, even though I might be a little
27:15
Speaker 1: underwater because I have to change my address and I
27:18
Speaker 1: have to call the credit card companies, and I have
27:20
Speaker 1: to get a moving van and I have to argue
27:22
Speaker 1: my wife as to what thing I'm going to throw
27:24
Speaker 1: out and what I'm going to pack. It's a big headache,
27:28
Speaker 1: believe me. I know I've done it enough. But you
27:31
Speaker 1: know it isn't a big headache. Hey, hon, we own
27:35
Speaker 1: these four houses. We can only live in one of them.
27:39
Speaker 1: And you know what, they're all going down in value now.
27:42
Speaker 1: And it's just so expensive the upkeep and the insurance
27:46
Speaker 1: and the property taxes. And we're up one hundred percent
27:52
Speaker 1: on these houses. Why don't we sell? So I'll just
27:56
Speaker 1: call the agent and put them on the market. We
27:57
Speaker 1: don't have to do anything. That's called Layton's inventory, and
28:02
Speaker 1: that's that is going to there's a tsunami of that coming.
28:06
Speaker 3: Wow. So you want to be owning one house now,
28:09
Speaker 3: if any you or perhaps sell your house and rent right.
28:13
Speaker 1: You know, I'm one of those people who had a
28:19
Speaker 1: property that was not lived in. It was an investment home,
28:22
Speaker 1: an investment property. I took a bath on her and
28:25
Speaker 1: it was in New Jersey, held it for three years
28:28
Speaker 1: and I sold it for a loss. So it's just
28:32
Speaker 1: not I mean, if you it's just not worth it. No,
28:35
Speaker 1: they're worth a headache. So if home price to income
28:38
Speaker 1: ratios have never been this high. Now. Remember in two
28:44
Speaker 1: thousand and six, in the middle of the the they
28:46
Speaker 1: called the odds, you know whatever that means. But two
28:49
Speaker 1: thousand and six, seven eight, the middle of that decade,
28:54
Speaker 1: there was really no The real estate bubble was salient,
28:59
Speaker 1: but there were there's no equity bubble. We have two
29:03
Speaker 1: gi gargantuan bubbles existing at the same time. And in addition,
29:08
Speaker 1: we have things like that never existed before in credit
29:11
Speaker 1: market space, like private credit, you know, loans, the businesses
29:16
Speaker 1: that couldn't get a loan from the bank and they
29:18
Speaker 1: couldn't tap the corporate bond market, and there's like you know,
29:22
Speaker 1: I think there's like one point seven trillion dollars of
29:24
Speaker 1: that stuff out there, and I never existed before. FHA
29:30
Speaker 1: loans were like three billion dollars prior to the goal
29:33
Speaker 1: of financial crisis. Now they're like forty billion dollars. Talk
29:36
Speaker 1: about an increase of people that put three and a
29:38
Speaker 1: half percent down on the property. There's skyrocketing defaults there too,
29:43
Speaker 1: So this is this is a bubble. It's going to
29:46
Speaker 1: burst now. Am I again I managed money for a living,
29:52
Speaker 1: I wouldn't have a business if I was constantly saying
29:54
Speaker 1: that and shuring the market, I'm saying that the construct
29:58
Speaker 1: there's no debating this. The construct of the market is
30:02
Speaker 1: one that's predicated on acid bubbles, debt, money printing, and inflation.
30:10
Speaker 1: It's extremely fragile. That's the construct the that's the house
30:14
Speaker 1: that's built on sand. Now, when that condition breaks, that's
30:19
Speaker 1: when you have to make changes in the portfolio. But
30:22
Speaker 1: as of right now, I'm long and I'm enjoying it.
30:23
Speaker 1: I have plenty of precious metals. I recently bought energy,
30:27
Speaker 1: I shortened long end of the bond market. I'm making
30:29
Speaker 1: money for my clients. But the big money is going
30:32
Speaker 1: to come when this reconciliation of acid crisis begins.
30:35
Speaker 3: So let's just talk about what exactly a Minski moment is,
30:41
Speaker 3: and I'll read you the AI definition from YouTube. A
30:46
Speaker 3: Minski moment is an economic concept describing the sudden and
30:50
Speaker 3: often catastrophic and to a period of market optimism, whereas
30:55
Speaker 3: speculative bubble berths due to increase debt and risky behavior.
30:59
Speaker 3: It's the point where stability becomes self destructive and a
31:03
Speaker 3: prolonged boom gives way to a free fall of plunging
31:06
Speaker 3: asset values and market sentiment. According to the financial instability
31:13
Speaker 3: hypothesis of Hymen Minsky. That's a seigmen to a t,
31:17
Speaker 3: doesn't it.
31:18
Speaker 1: And Hymen who has had it down to a bat.
31:20
Speaker 1: You know, there's a there's eleven point four trillion dollars
31:23
Speaker 1: of corporate debt out there, and one point eight trillion
31:26
Speaker 1: about that trillion is junk det So you think about
31:30
Speaker 1: companies have to continuously tap the corporate bond market. This
31:34
Speaker 1: is one of those examples I throw at you to
31:36
Speaker 1: show you how big this Hyman Minsky moment has grown.
31:42
Speaker 1: The bubble has grown too, and when it bursts, like
31:44
Speaker 1: I said, it's going to be violent, not going to burst,
31:48
Speaker 1: you know, innocuously.
31:50
Speaker 3: All right, Well, Michael, you're a breath of fresh air
31:54
Speaker 3: inspiration here. But if you're ready for these things, even
31:59
Speaker 3: if you know prof fit handsomely from it, you can
32:02
Speaker 3: at least protect yourself so you're not destroyed by it. Right.
32:06
Speaker 1: You know what active management. It's been pillary, it's been
32:11
Speaker 1: excoriated in the past, and maybe even need active management
32:15
Speaker 1: in prior eras eras, but you need it now. You
32:22
Speaker 1: need to be able to move quickly and adroitly between
32:26
Speaker 1: periods of dist inflation, deflation and depression recession to what
32:32
Speaker 1: I what I see happening in the in the not
32:35
Speaker 1: too distant future, an era of acute and protracted stagflation
32:41
Speaker 1: like we've never before seen or suffered in this country's history.
32:44
Speaker 1: That's what I see happening. So we you know, and listen,
32:48
Speaker 1: you know if you don't, if you don't have immigration,
32:51
Speaker 1: And I'm all for closing the borders and knowing who's
32:53
Speaker 1: in this country. So don't get I'm not a political country.
32:56
Speaker 3: You're not an open borders guy.
32:58
Speaker 1: No, I'm not an open border but I'm saying the
33:00
Speaker 1: borders were wide open under Biden. Millions and millions per anom.
33:05
Speaker 3: Coming millions supposedly, but nobody knows.
33:08
Speaker 1: Yeah, millions of people coming into the labor force, and
33:11
Speaker 1: then the government doing most of the hiring. And you
33:14
Speaker 1: go from two hundred and three hundred thousand jobs a
33:16
Speaker 1: month to you know, twenty two thousand jobs a month.
33:20
Speaker 1: And that's a natural function of closing the border. But
33:23
Speaker 1: that's half of your input to GDP growth, and crashing
33:26
Speaker 1: acid prices aren't actually really good news for GDP growth either.
33:30
Speaker 1: So I envisioned a period where GDP growth crashes and
33:34
Speaker 1: acid prices absolutely plummet. So in the next ten years,
33:37
Speaker 1: it wouldn't surprise me if we ended up flat in
33:40
Speaker 1: nominal terms or thereabouts in ten years, with a period
33:45
Speaker 1: of time where in nominal terms the stock market goes
33:48
Speaker 1: down fifty percent, And if you can time that reasonably, well,
33:53
Speaker 1: you know, instead of waiting a decade to get even
33:56
Speaker 1: or more, you can actually have the capital to be
33:59
Speaker 1: deployed at the appropriate moment when they reliquify the banking
34:03
Speaker 1: system where you can actually enjoy that one hundred percent
34:06
Speaker 1: ride back to even remarkable.
34:08
Speaker 3: All right, Well, that's something to definitely think about. You
34:13
Speaker 3: got to take a look in the mirror, decide your
34:15
Speaker 3: risk tolerance. Sometimes the biggest risk is not doing anything,
34:20
Speaker 3: and I think a lot of people are going to
34:22
Speaker 3: be stuck there. Michael. If you got any questions for
34:24
Speaker 3: Michael myself, shoot me an email klat Kerrie Lutz dot com.
34:29
Speaker 3: The link to Michael's site is in the show notes
34:32
Speaker 3: of this interview. And we're no longer doing a website.
34:36
Speaker 3: We're doing a substack. Honestly, websites just became too big
34:40
Speaker 3: a pain. The thing breaks all the time gets hacked.
34:44
Speaker 3: Substack I could write articles, produce videos, produce audios, and
34:50
Speaker 3: it manages my email list. Can't beat that. Michael, appreciate
34:54
Speaker 3: you coming on as always and we will definitely catch
34:57
Speaker 3: up with you next month.
34:59
Speaker 2: Thank you, Gery, thanks for listening to Carrie Letz's Financial
35:02
Speaker 2: Survival Network, your solution to today's trying times. For the latest,
35:07
Speaker 2: go to Financial Survivalnetwork dot com. Financial Survival Network
35:13
Speaker 1: Now more than ever,