Michael Pento's Insights on Economic Outlook and Investment Strategies: Key Takeaways from Money Metals Podcast

In a recent episode of the Money Metals podcast, host Mike Maharrey sat down with Michael Pento, the president and founder of Pento Portfolio Strategies (PPS), to discuss the current state of the economy, the precious metals market, and effective investment strategies. 

Pento, who boasts over three decades of experience in the professional investment world, offered a candid assessment of economic conditions and the financial landscape.

(Interview Begins Around 6:41 Mark)

Who is Michael Pento?

Michael Pento is the President and Founder of Pento Portfolio Strategies (PPS), a Registered Investment Advisory Firm designed to operate like an actively managed fund without the high expenses associated with hedge funds. 

With over three decades of experience in the professional investment world, Pento is a recognized expert in economic cycles, inflation, and market dynamics. Michael Pento is well-established for his ability to explain how to survive and thrive during all economic cycles. 

He is the author of the influential book, "The Coming Bond Market Collapse," and the producer of the weekly podcast, "The Mid-week Reality Check." 

Pento's proprietary Inflation/Deflation and Economic Cycle Model guides his investment strategies, focusing on profiting from macroeconomic shifts. 

Known for his candid assessments and deep understanding of financial markets, Michael Pento is a sought-after commentator and advisor in the economic and investment communities.

Silver vs. Gold

The conversation began with a focus on the divergence between gold and silver prices. Maharrey pointed out the recent profit-taking in gold, which still hovers around $2,400 an ounce, and the sharp decline in silver prices, with the gold-silver ratio ballooning to over 85:1. Pento explained the fundamental difference between the two metals:

"Silver has an industrial component to it... it only really does best or better than gold when you have inflation and a growing global economy. Gold is money. It's pure and simply money."

Economic Outlook

Pento dismissed the notion of a "soft landing" for the US economy, despite recent positive GDP prints. He highlighted the severe economic disparity, where the top quintile, especially the top 1%, are thriving while the bottom four quintiles struggle:

"The bottom fourth quintiles have been eviscerated and disemboweled by inflation and their purchasing power has been destroyed."

A Federal Reserve survey showed that 25% of Americans are cutting back on food and medical care due to unaffordable prices. Pento criticized the Federal Reserve's handling of inflation, emphasizing the need for deflation to restore purchasing power:

"Prices are rising at a fast clip... inflation has already destroyed, hollowed out the middle class of this country."

Federal Reserve Policies

Pento was particularly critical of the Federal Reserve, accusing it of prioritizing Wall Street over Main Street. He highlighted the unprecedented increase in the Fed's balance sheet, which ballooned from $700 billion before the Global Financial Crisis to $9 trillion:

"$6 trillion of helicopter money was inflicted on the American population. Four and a half trillion was printed by the Federal Reserve... that's like Zimbabwe numbers."

He also noted that despite the Fed's claims, inflation is still a significant issue:

"Core PCE inflation actually increased month-over-month at last reading... it's rising from a level that has destroyed the middle class."

National Debt and Deficits

Pento highlighted the alarming growth in national debt and deficits. The US national debt now exceeds $35 trillion, with $1 trillion in interest payments alone and annual deficits reaching $2 trillion. For context, the total deficit in 2007 was $160 billion. Pento criticized the complacency surrounding these figures:

"In 2007, the total deficit was $160 billion. The deficit now is $2 trillion with $1 trillion in interest payments."

He expressed concern about the sustainability of such high debt levels and their impact on the economy:

"The national debt is 725% of revenue, and you're adding 40% of that revenue to the debt every year in the deficit."

Investment Strategy

Pento detailed his Inflation-Deflation Economic Cycle Model, which assesses inflation trends, economic growth, and asset prices. This model helps navigate the economy's fluctuations and guides investment decisions based on the prevailing economic conditions. He emphasized the importance of understanding the broader economic context when making investment decisions:

"I have a model that tells me where the economy is... Usually in a fiat currency regime, you'll see the economy weaken during recessions and strengthen during inflations."

Conclusion

Listeners interested in Pento's analysis can follow his work on his website, pentoport.com, where he offers a midweek reality check and investment services. Pento's approach to managing portfolios reflects his deep understanding of economic cycles and his commitment to navigating the complex financial landscape.

Maharrey concluded the interview by expressing his appreciation for Pento's insights, noting the alignment in their views on the economy. The conversation provided a sobering look at the current economic challenges and underscored the importance of strategic investment in uncertain times. Mike Maharrey and Michael Pento recommend buying gold and silver as a part of a sound investment portfolio. 

Key Questions and Answers:

How do you explain the recent performance of silver and the disparity with gold prices? 

According to Michael Pento, "Silver has an industrial component to it... it only really does best or better than gold when you have inflation and a growing global economy. Gold is money. It's pure and simply money, and it's a placeholder of your wealth."

What do you think about the notion of a soft landing for the US economy, given the recent positive GDP prints? 

"I don't believe in the soft landing myth. We have incredible asset bubbles that are tenuously clinging onto the fumes of... monetary fuel that is attenuating quickly... The bottom fourth quintiles have been eviscerated and disemboweled by inflation and their purchasing power has been destroyed."

What are your thoughts on the Federal Reserve's handling of inflation and its current trajectory? 

"It's embarrassing and disgusting that anybody associated with the Federal Reserve would claim that they have a victory over inflation... Inflation has already destroyed, hollowed out the middle class of this country."

Given the national debt has now surpassed $35 trillion, how do you view the debt and deficits in the context of your investment strategy? 

"The deficit now is $2 trillion with $1 trillion in interest payments... The national debt is 725% of revenue, and you're adding 40% of that revenue to the debt every year in the deficit."

How do you play the current economic conditions as an investor? 

"I have a construct called the Inflation-Deflation Economic Cycle Model... I ask myself, 'What is the second derivative of inflation?'... 'In what context is that inflation vis-a-vis growth?'... 'What is the level of asset prices and debt?'"

Where can listeners follow your work and get in touch with you? 

"The website is pentoport.com, and I have a midweek reality check... It's a five-week free trial, and it's $50 a year if you like it... I will manage your money in the inflation, deflation, and economic cycle portfolio."

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