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Sprott’s Michael Pento Joins Us For A BOLD Prediction…

 

Michael Pento forecasts a stock market crash and beginning of a recession by the end of the year or early next year…

The inversion of the yield curve (when short-term interest rates yield more than longer-term rates) has correctly predicted the last seven recessions going back to the late 1960’s. Pento says this kind of inversion is happening now. With interest rates still extremely low, the Fed will have few options but to balloon the money supply. Inflation hear we come!

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  1. We all know the bond market is far larger and significantly more important to the health of the financial system than the stock market. The Fed has primed the ‘rising interest rate’ pump, but the Fed can only control so much. If rising interest rates on the 10yr Bond get out of control, then I expect they’ll sacrifice equities i.e. manufacture a stock market crash with the purpose of driving investors into the “safety” of bonds.

    • Spare us the predictions.  How many and over what period of time, have their been Michael?  STOP!

      Stop with factless predictions over some years now.  No one knows.  You and others certainly don’t!

    • Angus…Agreed. Timing a move is all but impossible with the constant market interventions by the CB’s et al. However, anticipating moves are not. Be right and sit tight.

    • @UglyDog

       

      “We all know the bond market is far larger and significantly more important to the health of the financial system than the stock market.”

      If we don’t, then we should.  😉

       

      “The Fed has primed the ‘rising interest rate’ pump, but the Fed can only control so much.”

      There was a time, years ago when this was an indisputable fact.  But those days are gone now and have been replaced.  Back then, the Fed controlled the short rates while the “bond vigilantes” controlled the long rates via the bidding process.  At some point in the past decade, CBs discovered that they could also control the long end of the bond market via buying up any unsold bonds.  No country wants to have unsold bonds after an offering.  This caused them to offer sufficient interest rates on their long bonds that buyers would be enticed to buy up those bonds.  BUT… once the CBs realized that they could be the buyers, not only of last resort but of any time they wished, the days of bond vigilante long bond rate control were over.  The Fed would tell the US Treasury the desired long bond rate and if bond buyers refused to buy them due to their low rates, the Fed would simply buy all of the unsold bonds.  Ergo, no unsold bonds from any offering ever.  Since that seemed to work so well (in their opinion only), they then moved on to buying stocks and bidding up their prices so as to avoid any of those uncomfortable recessions.  Can’t have them interfering with the steady permanent rise in asset prices, ya know.

       

      “If rising interest rates on the 10yr Bond get out of control, then I expect they’ll sacrifice equities…”

      It is not at all clear just how this could happen, given that the bond vigilantes power to force rates higher has become pretty much nil.  In fact, the current 10-yr bond rate is around 2.1%, which is lower than we have had in several months.

       

      “… i.e. manufacture a stock market crash with the purpose of driving investors into the “safety” of bonds.”

      Maybe this is where the Fed is well and truly painted into that corner?  They cannot allow the stock market to crash because that would be a BIG indicator of their own financial incompetence.  It would seriously impact voters who have retirement plans at work as well as retirees who have decent portfolios that include stocks, mutual funds, and ETFs.

      Those few of us who actually understand interest rates know very well that the so-called “safety of bonds” is largely manufactured by the US Gov and the Fed.  There is serious interest rate and currency risk out there these days and as rates rise, bond principal will be gutted… most especially the longer term bonds of 10 years and more.  I don’t know… maybe the Fed is banking on the knee-jerk reaction of so many financial “professionals” to have X% of all portfolios in bonds, regardless of interest rates?  Could be.  I have seen a few professional money managers on the financial news channels who seemed to be susceptible to this.  Just as there are times when one should not own stocks, so too are there times when one should not own bonds… especially in the managed / manipulated market we now have.

       

    • @Ed_B  …Agreed.  You make all solid points in rebuttal.  Think of the U.S. national debt as the world’s largest adjustable rate mortgage.  Except it’s not a 30yr mortgage.  It’s more like a 30day mortgage as all the short term debt rolls over every month.  This means new debt is increasingly competing with old debt in the same market.  Fed has control of the new debt, but not so much the old debt as that is owned mostly by others.   If the Fed needs to create more buyers for U.S. debt where will those buyers come from.  One ready source is investors holding equities.  Fed has been inflating the stock market through QE for this very reason.  Easy enough for them to burst the stock market bubble with a series of bad economic reports and scare investors out of stocks into the perceived safety of bonds.

       

      We know the Fed is running out of buyers and pressuring other CB’s to step up when the Cayman Islands became the world’s third largest holder of U.S. Treasury debt.  But, how many Cayman Islands are out there?  That’s what I mean that increasing interest rates can get away from them.  And if rates tick up only a 2-3 points the U.S. will not be able to make the mortgage payment without taking even more drastic measures.

    • @UglyDog
       

      “You make all solid points in rebuttal.”

       

      Thank you, sir.  You tend to do the same around here and this IS a complex issue with many facets to it.

       

      “Think of the U.S. national debt as the world’s largest adjustable rate mortgage.  Except it’s not a 30yr mortgage.  It’s more like a 30day mortgage as all the short term debt rolls over every month.  This means new debt is increasingly competing with old debt in the same market.”

       

      I almost choked on my diet soda on reading this.  It is so spot on!  But a case also could be made that we have a perpetual mortgage with all debt being continuously rolled over rather than being paid off or even just paid down.  This is how one gets to a $20+T national debt and continuous annual deficits.  We all knew that the jig was up several years ago when the US could not avoid deficit spending even in the best of years.  It was a seminal moment for me when Barack Obama came on TV in 2011 during the debt ceiling fight between the White House and Congress and declared, “If we can’t borrow any more money, we can’t pay our bills“. If he was literate in economics, he would have known that such a statement is tantamount to saying “We are bankrupt” because that pretty much is the definition of being bankrupt.  No doubt he had people on his staff at the time who were literate in economics and who just cringed when he said that.  The media was right there to ignore all this for him, however.

       

      “Fed has control of the new debt, but not so much the old debt as that is owned mostly by others.”

       

      Indeed.  They sold it.  A lot of that was at considerably higher interest rates than we have today.  It’s likely that a lot of those bonds have been sold to others to get the capital gains associated with higher rate bonds in a low rate environment.  But you are correct in that the Fed does not own many of these.

       

      “If the Fed needs to create more buyers for U.S. debt where will those buyers come from.  One ready source is investors holding equities.  Fed has been inflating the stock market through QE for this very reason.  Easy enough for them to burst the stock market bubble with a series of bad economic reports and scare investors out of stocks into the perceived safety of bonds.”

       

      I am not saying that this isn’t happening, only that there are multiple things happening in both the bond and equity markets.  It would be very bad politically to trash the US stock market and totally tick off millions of voters who will take a large hit to their savings.  Sure, it is possible, but we need to ask just how likely it is given the current political climate.  I suppose that a case could be made for doing this during Trump’s administration as a way of making the do-nothing Dims look better politically.  But a very good source of new UST paper has to be people who live in countries that are paying zero and less interest on their own sovereign bonds.  I believe that it is this source of money that is flooding into UST paper that has forced rates down on UST paper and especially those on the longer end.  Demand for this paper is high and when money floods into the bond market, prices rise and rates fall.  Above all else, the Fed desires to maintain their air of infallibility, no matter how screwy they are with their Keynesian economics.  That air will disappear along with a big chunk of the nation’s wealth if the stock market is crashed.  Not saying that they can’t or won’t do this but it is a very risky move on their part if they do it.

       
      “We know the Fed is running out of buyers and pressuring other CB’s to step up when the Cayman Islands became the world’s third largest holder of U.S. Treasury debt.”

      Does this remind anyone else of Belgium being a HUGE buyer of UST paper a couple of years ago.  I’m sure that those who came up with that stunt thought that they were very clever.  Unfortunately for that idea, it was also a VERY transparent under-the-table move on the part of the Fed to continue their QE program even after they said that it had ended.  The leftist media, of course, never called them out on it.

      “But, how many Cayman Islands are out there?”

      Not many and one COULD ask, in this context, if there is even ONE of them out there.  😉

      “That’s what I mean that increasing interest rates can get away from them.  And if rates tick up only a 2-3 points the U.S. will not be able to make the mortgage payment without taking even more drastic measures.”

      Indeed… and they will because at that point it very well may be all they can do.  In the face of humongous debt, their only solution to it will be… ever more debt!  Which is exactly why people should be stacking a reasonable amount of hard assets as the paper-based world continues to careen out of control towards its inevitable crash.
      On the other hand, notice that the pricing trends in UST paper are lower these days and not higher.  This argues in favor of more buyers coming in from other countries and most likely from the ones paying the least on their own sovereign debt paper.

  2. Even though we have heard many predictions of a major financial crisis coming while that has not happened, I am getting some indications that we may be getting closer to some kind of event. I would not rule out something happening by the end of 2017 or in early 2018.

    Former Group of 30 Director Robert Pringle just put out a new article on his proposal for a new global reserve currency to eventually replace the dollar. He game me some additional explanation of it here:

    http://bit.ly/2ryfbah

    He also mentioned to me that he felt like events may be coming up in the future that would allow for serious consideration of ideas like his proposed global currency. He said he would have more to say on that later so I am staying in touch to see what he means by that. Mr. Pringle knows virtually every central banker around the globe and is very well plugged in so I always value his comments when is willing to share them. He would anchor his proposed currency to an basket of global equities and explains why he thinks it could function like a more modern version of the old gold standard.

     

     

     

    • A fractional silver currency is the answer. That way when it crashes it still has value. A global currency based off of a basket of global PAPER equities is a terrible idea with socialism/monopolies/terrorism controlling the world at present.

    • I agree, in my opinion the only way that the market will crash now will be:

      • Intentionally, to fit some purpose as suggested by UD
      • Unintentionally as a result of a “failure to deliver” physical metal for a large order of silver or gold.

       

      Any logic, reasoning or market analysis is null and void at this point IMO because market fundamentals don’t count when every market is completely rigged. Based on fundamentals, the market should have crashed at least a couple of years ago and PMs should be priced at many multiples of their current price in dollars.

  3. Michael Pento is ALWAYS issuing a warning about a crash. Years ago when he started making these warnings he should have instead warned that anyone listening to him would miss one of the biggest, longest  Bulls in stockmarket history.  Even if we have a 30% crash his advice would still have sucked because the people fully invested in the market will still come out way ahead.

    Pento makes his money off of fear porn and NOT off of any skill in predicting market direction. He is a huckster.

    • You are right Vegasidler. Michael  Pento has been constantly predicting a financial disaster that never happens. Anyone listening to his advice is poorer. He is shameless & wont even admit he has been wrong.

      His famous bond market collapse is about 18 months overdue and his Gold predictions are a joke.
      But its not he fault as according to him its the fault of the Fed the market hasn’t collapsed yet.

      He isn’t getting on much TV anymore as a guest expert because after a while they don’t want experts like him who are constantly wrong. Its bad for their ratings.

  4. Something is very broken with markets. Now, no matter what the news, markets keep going higher. Even if they go down they pop right back up again, even know PE ratios are the 3rd highest ever. And with everything going on in the world the VIX is at an almost all time low??? None of this makes sense unless you superimpose central banks into the mix. ECB’s Draghi even admitted to buying everything “Except for gold”. My guess is most of the stock market is now being propped up by the ECB and BOJ. I also agree that it will only go down when they decide to make it happen. They are in complete control of all markets. There is no such thing as free market capitalism anymore. Where is the European outrage at the ECB? Draghi is out of control. Who’s going to stop these criminals?

    • Something is very broken with markets. Now, no matter what the news, markets keep going higher.

      Stocks are all the insurance company’s and pension funds have left.  If the market tanks in a meaningful way the fat lady will be singing in full throat.   Ergo they must print or die to keep the markets going ever upward.  AMZN P/E for 2016 was around 197:1 for example.  Crazy times we are living in.

    • “Even if they go down they pop right back up again, even know PE ratios are the 3rd highest ever. And with everything going on in the world the VIX is at an almost all time low??? None of this makes sense unless you superimpose central banks into the mix. ECB’s Draghi even admitted to buying everything “Except for gold”.

      An interesting observation.  Does this mean that the Western CBs have struck a deal with the Chinese/Russians/Indians that the Western CBs will only buy stocks and bonds while the Asian countries will only buy gold and silver?  Hmmm, there could be something to this.  It rather neatly explains the desire of the Western countries to force the prices of PMs lower while the stock market continues to spiral higher in spite of the fundamentals.  Look at it this way… since Feb. of 2009, stock index prices have more than tripled.  Have earnings?  My guess is that they have not and that this is a key observation that proves wide-scale manipulation of the equity markets.  Since only the CBs have the financial strength to do this, it is not too difficult to point fingers directly at the guilty parties.

       

  5. Michael Pento’s warnings have all been FAILS. He has issued numerous warnings over the last few years and anyone who listened to him is financially poorer.

    He will eventually be right, just like a broken clock is right twice a day, and then you can just see him crowing about “how right I was” and “I was just early”. Timing is everything in markets so being early is the same as being wrong. The only thing that is equal to his failed warnings is his arrogance.

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