Michael Pento Exclusive: Low Yields, High Inflation to Force People into Gold (Podcast)
Coming up we’ll hear from Michael Pento of Pento Portfolio Strategies and author of the book The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market. Michael explains who’s behind the latest stock market rally, the truth about the economy’s health despite what the labor and payroll reports are telling us, and how he views gold as a must-have asset in the current and future environment. Don’t miss an exclusive interview with Michael Pento – coming up after this week’s market udpate.
Precious metals markets moved lower this week ahead of Janet Yellen’s Jackson Hole speech. But metals popped after Yellen opened her mouth this morning, and gold prices are now only down 0.8% on the week to come in at $1,333 an ounce. Silver, also rallying today after falling farther than gold earlier in the week. With this morning’s rebound, the white metal now shows a weekly decline of 2.5% to bring spot prices to $18.90.
As I suggested on last week’s program, the silver market appeared to be on the verge of moving out of its sideways trading range one way or the other. This week, silver prices broke to the downside.
Well, the bad news for silver bulls is that the near-term trend has turned down. The good news is that the longer term uptrend that commenced off the January bottom remains intact. Silver may have some strong support in the $18.00 to $18.50 area, and it just bounced confidently off of that level.
Silver and gold markets tend to be thinly traded in late summer and are often more vulnerable to attacks by short sellers. And options expiration in the futures market is also playing a part in the recent correction as many traders are deciding to exit their positions. Investors are also being distracted by non-stop election coverage in the media, including the so-called financial media. That makes it hard for investors to focus on what’s actually going on in the real economy.
As the news media inundate Americans with endless and all-too-predictable partisan analysis of every word that comes out of the campaigns, interest rate analysts are applying their own obsessive scrutiny of every word that comes out of Janet Yellen’s mouth. The Fed chair just made her remarks at Federal Reserve’s annual Jackson Hole conference, and she took the opportunity to stress that the Fed will do just about whatever it takes to get positive nominal growth, even if it sparks higher inflation.
There is now virtually NO CHANCE of a rate hike before the election. But Fed watchers seem to think there is an even chance of a rate hike in December. And for analysis of what that would mean for the financial markets, stay tuned to my interview with Michael Pento coming up in just a moment.
But the truth is that it’s too early to gauge. And it’s quite possible that post-election turmoil in financial markets could mean the Fed’s next move is to CUT interest rates and even move toward NEGATIVE interest rates.
In the meantime, the Hillary Clinton campaign is hoping financial markets stay calm and elevated heading into November. Hillary is effectively running as an incumbent for a third Obama term. In the last 14 presidential elections that saw the S&P rally in the three months preceding Election Day, the incumbent political party emerged victorious 12 times, or 86% of the time. In other words, a buoyant stock market would give Hillary Clinton a huge advantage.
And it just so happens that Hillary has allies in all the institutions that could potentially help keep the market propped up. She has received tens of millions of dollars in speaking fees from big Wall Street banks that have been implicated in market rigging schemes. She has the backing of some the world’s most powerful billionaires, including Warren Buffett and George Soros. Her campaign has received more than $125 million in donations from hedge funds. Meanwhile, they have given Donald Trump less than $1 million. Of course, Hillary also has allies in the Obama White House and the Democrat-run Treasury Department.
But perhaps Hillary’s most important backer of all is the Federal Reserve. The central bank doesn’t appear on the list of official donors to her campaign. Yet by repeatedly backing off on vows to raise rates, the Fed helped push the stock market up into record territory this summer. Yellen and company seem poised to set the table for rising stock values and a positive social mood to help carry Hillary to victory.
This isn’t to say that Trump has no chance to win. He still has a potential path to victory. But Hillary has overwhelming institutional backing from the financial, political, and monetary establishments -– plus near uniform support from the mainstream media. In previous years, no opposition candidate would stand a chance against such an establishment juggernaut.
Donald Trump and even Libertarian Gary Johnson might stand a chance this year only because of the Internet and the rise of alternative media. In a campaign speech this past Thursday, Hillary Clinton even called out some of the voices in the alternative media and alternative right by name. What does she want to do, censor them? She’d seemingly like to be able to transport American politics back to the 1990s, when establishment media outlets still had a near total lock on information flow to the public and alternative voices were relegated to the medium of talk radio.
But the Internet is here to stay. And the flowering of alternative viewpoints when it comes to politics, economics, and sound money will likely continue to grow regardless of who wins this November.
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to be joined by Michael Pento, president and founder of Pento Portfolio Strategies and author of the book The Coming Bond Market Collapse: How to Survive the Demise of the US Debt Market. Michael is a money manager who ascribes to the Austrian school of economics and has been a regular guest on CNBC, Bloomberg, and Fox Business News, among others.
Michael, it’s good to talk to you again. Thanks very much for joining us today and welcome back.
Michael Pento: Thanks for having me back on.
Mike Gleason: Well to start off here, Michael, I want to get your thoughts on some of the economic data we’re seeing out there and maybe you can explain some of the market action to us because there seems to be a lot of confusion. Now as you pointed out in an article you wrote earlier this week, we have a big disconnect between what the payroll reports and the employment numbers are showing compared to the tax receipts the Treasury Department is collecting. Talk about that if you would and also let us know what conclusions you’re drawing from these numbers.