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The Fed is Ready to Start “Helicopter Money,” Warns Sprott’s Michael Pento…


Pento says the global bond market is the biggest asset bubble in history.

By taking interest rates below 1% for 100 months, the Fed has deformed not only the bond market, but other assets such as real estate and the stock market. Many other central banks have held interest rates artificially low, sometimes taking interest rates negative. Today, the world has $14 trillion of negative yielding sovereign debt.

Pento forecasts another crisis will hit later this year or early next year.
At that time, he says the Fed will start “Helicopter Money.”

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  1. Pento seems to be one of the calmer and more rational people out there who advocate the ownership of gold and gold mining shares.  I have read and listened to his comments for years now and have found that he makes a lot of sense.  Chief among his better traits is that he doesn’t spend a lot of time predicting this or that.  In this web cast, he does mention a bond market collapse possibly occurring later in 2017 or in early 2018.  But he does not allow his thoughts on this to control the dialog.  He’s been around long enough to know that manipulated markets are inherently unpredictable.

    I have a similar view of the world debt markets, aka bond markets.  So much has been done to distort these markets that has affected other asset classes.  A very tangled web has been created, supposedly to extricate the world economy and various national economies from the depression starting in 2008 that it will be very difficult to unwind this mess in any useful manner whatever.  It may not even be possible, let alone do-able.

    My thought is that the free market, with minimal regulation necessary to establish a level playing field for all, is about as good a market as can exist.  Any further tampering with this virtually always leads to a worse market, yet some in power in the political and banking systems cannot seem to resist this sort of tinkering.

    As I’ve mentioned before, I neither own bonds nor invest in any funds or ETFs that do.  There was a time when owning bonds was a good thing to do to stabilize a portfolio consisting of cash and cash equivalents, stocks, commodities, and real estate.  But those days are past and for the same tinkering problem mentioned above.  I would not put a nickel into any sort of bond these days because almost the entire world is awash in debt.  As we all know, when something is available in vast excess, its value diminishes and it is entirely possible that many bonds will diminish in value quite severely and rapidly as interest rates rise.  Rates will rise as we see interest rate mean reversion in the bond markets.  What has been pushed down for so long WILL rise due to unstoppable economic forces.  It’s also possible that gold and silver will rise substantially at about this same time and for the very same reason as investors seek something that is of stable value.

    I also agree with Pento’s selection of investments that can be used to ride out the worst of the next financial collapse.  My only caveat is that anyone who wants to invest in the gold and silver miners will need to do a great deal of work studying those companies to see which of them are potential “gold mines” and which are complete dogs.  No doubt there are a few really good ones and a few terrible ones with the rest falling somewhere in between.  Since I do not have the time or energy to figure this all out, I would have to buy one of the better performing gold funds to get exposure of this kind.  Failing that, owning physical gold and silver seems like a very good way to protect part of one’s wealth without incurring the large losses due to mining company bankruptcies.  And there WILL be quite a few of those because the miners are linked to the banks via their need for working capital to operate and the banks are likely to get hammered in any sort of bond market collapse.  It is possible that given the huge size of the bond market, not even the US Gov or the Fed can “save” the banks from themselves this time.

     

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