Tom welcomes back Michael Pento, President and Founder of Pento Portfolio Strategies, to the program.

Michael discusses how the bear market is here to stay, and the next phase is coming. We’ve only experienced the opening salvo. Wall Street will soon realize that earnings are in decline. We’re in a global recession with hawkish global central bankers. The market bottom might be around 3300 on the S&P but that is optimistic. Total equity valuations remain considerably overvalued, and they need to correct to fair value.

The yield curve is more inverted than any time in the last forty years. This normally signals recession, and this time is no different. The Fed is buying all the assets, causing interest rate repression. There is no mystery as to the causes of inflation, it’s money printing. The Fed has to raise rates to four percent by March 2023. Michael says, “The fact the Fed thinks they can get to four percent and do 95 billion a month in QT is asinine.” The Fed is having a very difficult time controlling inflation, and now they don’t care what happens to the economy. They cannot pivot, they have to regain credibility. This will be one of the deepest recessions we have ever seen.

The Fed really has no clue about anything, especially the causes of inflation. There has been almost no job creation this year. We’re seeing inventories build, which is boosting Q3 GDP, but that won’t last. Inflation is a massive embarrassment to the Fed, but they will destroy the economy and markets to accomplish it.

Government is fighting inflation by giving away more money and cancelling student debt. More money isn’t going to make college more affordable. They are just creating more demand for services, which will just cause prices to rise further. Subsidies do not fight inflation. We need to increase the supply of goods and services by improving productivity. We’ve done everything we could to kill productivity through the pandemic.

Tax receipts always fall in recession, and debt service payments are increasing quickly for the government. The national debt is skyrocketing, and a fair interest rate would probably be in double-digits. There are no easy answers in the current system. The negative effects of the rate hikes have barely begun to be felt.

Inflation always peaks during recession, don’t listen to the pundits who claim we’ve peaked.

The four horseman of the economic apocalypse are cash, U.S. sovereign debt, the dollar, and shorts. If you own those four things, you will probably not lose money in this bear market. You might even make money. It’s clear we’re heading to a liquidity crisis. You want flexibility in this environment.

When rates and the dollar begin to fall sometime in 2023 you will see gold rally.

Time Stamp References:
0:00 – Introduction
0:34 – Bear Market Starting
4:39 – Bonds, Spreads, & Banks
11:40 – Targeting Inflation
15:42 – Indicators & Fed Reliance
19:20 – Government Insults
22:00 – IRS Growth & Taxes
28:33 – The Peak of Inflation
30:52 – Economic Apocalypse
33:45 – Gold & Positioning
38:10 – Wrap Up

Talking Points From This Episode:

• Outlook for the markets and why the bear isn’t going away.
  
• Why the Fed’s is cornered and it’s policies asinine.
  
• Inflation and why it always peaks during recession.
  
• The four safe havens of the economic apocalypse.
  

Guest Links:
Website: http://pentoport.com
E-Mail: mpento@pentoport.com
Twitter: https://twitter.com/michaelpento

Michael Pento is the President and Founder of Pento Portfolio Strategies, with over 27 years of investment experience. He was the portfolio creator and consultant to Delta/Claymore’s commodity portfolios that raised over $3 billion, distributed through Claymore/Guggenheim’s sales network. He is the author of the book “The Coming Bond Market Collapse” and has a weekly podcast called “The Mid-week Reality Check.”