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Michael Pento: “Central Banks Have Jumped The Shark,” May Even Buy Stocks

Date: Friday, June 5, 2020 3:14 PM EDT

But here's the thing that you should think about. Janet Yellen, former Federal Reserve Chair said that she wants to change the rules on what the Fed can buy now. So it's not enough that the Fed is buying junk bonds and making primary loans to businesses. That's not enough for the Fed. Ms. Yellen wants the Fed to have congressional approval to buy stocks. And she wants that approval cleared away now because I believe she knows that what I said is going to pass.

What I said is coming to pass, that we are going to have an inflationary and insolvency implosion of the bond market, which is going to cause stocks to crater 80% on their own volition. And that is why I think she wants to clear the path right now, so it's smooth and clean so they can buy stocks when that happens.

Mike Gleason: The end of free markets as we know it if that happens, if we don't already have it. Goodness gracious. Well, turning to gold here. Talking about negative real interest rates, hard asset that performs very well in that type of environment. We've seen it consolidate now for the better part of the last month or two following the big sell off in mid-March as all assets classes were selling off hard in the midst of the first major effects of the coronavirus being felt in the U.S.

Anything surprising you when it comes to gold here, Michael and what do you think all these market and economic headwinds are going to mean for the yellow metal throughout the rest of the year?

Michael Pento: Well, starting in the beginning of this year, I increased my allocation from 10% to 20% in gold. I recently paired it back to 10% and I'll tell you why briefly. If you're an active trader like myself, you want to maximize the return in the portfolio and here's what's happening right now. We have a lot of optimism about economies opening up across the globe. And you have the Federal Reserve who has stopped buying Treasuries for the most part. They were buying $75 billion worth of treasuries to try to push down interest rates.

The interest rates exploded in March, went from like 0.3% to 1.2% in March. The Fed was buying $75 billion worth of these treasuries a day. Now they're only $4 billion of these treasuries per diem. And so if you have optimism about the economy, some better economic data coming out, and the Fed stepping away from buying Treasuries, you might see a rise in nominal rates and it might spike in the next few months.

So, the next two, two and a half months is what I'm predicting. That's what I think the gold market by the way is anticipating. The gold market's rise was capped temporarily because they're worried about that situation that I just mentioned. However, on the other side of that, I see the Fed coming out with the announcement that they're going to actively put a cap on long-term treasury yields. That is what I predict in the fall to occur.

Because they just can't step away from the market because they're stepping away from a market that's insolvent, which I just proved earlier on this podcast. So, if they come back in the fall, when we have a resurgence in the virus and the data gets worse and the Fed has to come back in and put a cap on rates, that's when I think gold has the opportunity to go to all-time record highs.

Mike Gleason: Well, finally, as we begin to close here, Michael, one of the reasons we have great guests like yourself on the podcast is because we both really respect what you have to say a great deal. And then also, because it's good to get the perspective of such a sharp and studied mind like yourself on how to navigate what is becoming an incredibly concerning time in history.

So with that said, what advice do you have for people out there right now? And feel free to take that any direction you wish, whether it's how to manage one's money, how to emotionally deal with the tumultuous nature of the world. Wherever you want to go with that.

Michael Pento: Okay. Well, first of all, I think you should start every day with a prayer that you do God's will. That's a great way to start the day. You try to do become the best person that God has enabled you to be. And that goes a long way to relieve any kind of depression that you might have. So, stay in faith. And then as far as the investing is concerned, you have to be an active manager. This is not the world of your grandfather's.

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