September 19, 2025 • 35 mins
Kerry Lutz sits down with Michael Pento to warn of a looming Cat 5 economic storm. Gold is at record highs, silver is on the move, and platinum is primed to catch up. With debt exploding past $37 trillion, housing unaffordable, and the Fed preparing to cut rates, Pento says bubbles in real estate and corporate debt are about to burst. He shares why monetary metals could be the safe haven — and the strategies he believes will help investors ride out the crash. Find Michael here: http://www.pentoport.com/ Find Kerry here: http://financialsurvivalnetwork.com/ and here: https://inflation.cafe Kerry's New Book “The World According to Martin Armstrong – Conversations with the Master Forecaster” is now a #1 Best Seller on Amazon. . Get your copy here: https://amzn.to/4kuC5p5
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
There's eleven point four trillion dollars of corporate debt out there,
and one point eight trillion about that trillion is junk
at so you think about companies have to continuously tap
the corporate bond market. This is one of those examples
I throw you to show you how big this Hymenminsky
moment has grown.
Speaker 2 (00:20):
You are listening to Carrie Let's's Financial Survival Network, where
you get valuable information you just can't find anywhere else
to thrive in today's trying times. You need the Financial
Survival Network now more than ever. Go to Financial Survivalnetwork
dot com and get your free newsletter and gift. Financial
(00:40):
Survival Network now more than.
Speaker 3 (00:44):
Ever, and welcome. You are listening to and watching the
Financial Survival Network. I'm your host, Carrie Let's. Hey, we
are halfway through September. All hill is breaking loose on
every front. We've got heard record high gold prices. Silver
(01:05):
has awoken. I mean it's it was close to forty
three dollars today. Now it's pulled back a little, but
maybe it's time for a breather. But let's get the
real truth here. From Michael Pentopentoport dot com. Michael is
always great to have you back and glad you survived
your pickleball game.
Speaker 1 (01:26):
Well, yeah, I wish I could said his name for
my golf game. That's its complete disaster, which is good
news for my clients because they know I'm not spending
a lot of time on the golf course.
Speaker 3 (01:37):
Yeah, all right, be grateful for small favors. Right, Yeah,
So breakout in the metal sector, even silver, maybe silver
will start to lead. It's kind of half leading, half
holding back. What's your take? What are the medals telling us,
especially platinum breaking out from a decade to a decade basic,
(02:02):
I guess a decade of depression for platinum.
Speaker 1 (02:07):
Yeah. So I'm a big holder of gold, and I
haven't own platinum for my entire investment history up until
about four months ago. Three or four months ago, I
saw it started breaking out. You know, platinum is more
rare or rarer, I don't know which one is correct
than gold. It's more precious too, more durable than gold,
(02:31):
and it has a lot of other uses outside of jewelry.
So I remember, I've been in this business for thirty
five years. I remember when platinum was always more expensive
than gold for decades, and then all of a sudden
that switched, and I switched in a big way. So
now platinum is not even half as valuable as gold,
and I'm looking for some kind of mean reversion here.
(02:54):
But I don't think gold's going to go down and
platinum is going to go up. I think they're both
going to go up. But platinum has a lot of
catch up to do. And you know, you you're a
big silver guy. I you know, I don't have to
own every precious metal or semi precious metal, as silver
is has a lot of industrial components to it too.
I just I'm really in love with these monetary metals,
and that's gold first and foremost served us very well
(03:16):
for years.
Speaker 3 (03:17):
And platinum.
Speaker 1 (03:18):
But what do they I mean, he asked, A more
interesting question is like what's going on these tittles? And
you know what I mean? And as you asked that question,
I don't know what your questions are before you ask
but when you were asking that question, you know, you
know what hit my mind was, like, you know, the
Fed's balance sheet, which basically is a measure of how
(03:39):
much how big is the monetary base or a big
portion of the monetary basis, how much how many assets
does the FED own Well, for many, many, many years
of our existence. I'm sixty two. In a couple of
weeks here the FED owned, you know, just a few
hundred billion dollars in treasuries that was there, that was
(04:01):
their balance sheet, and you know, since you know, I
guess you could say since nineteen eighty seven. But really,
really this madness started in the year two thousand. It
was put on steroids in two thousand and eight, and
then we had these buffoons that run our monetary regime
of post COVID as balance sheet went to nine just
(04:23):
over nine trillion with the t dollars, and we managed
to get back down to I think a six point
six trillion is what we are now. So we went
to six point six trillion, which is a lot more
than seven hundred billion dollars where it was just prior
to the global financial crisis. And then we spent most of
(04:43):
the time between two thousand and eight to twenty twenty two.
We spent almost all of that time, not all of it,
but most of that time where interest rates were near zero.
They were you know, one percent or so, and in
a real sense they were profoundly negative. So there's a
long winded way of saying that we have thirty seven
(05:04):
trillion dollar national debt. The corporate debt is enormous. Consumers
are swamped in debt as well. We have so much debt,
particularly at the state level. And I mean by state,
I mean the national level, not just the federal level,
not you know, the state, meaning the people who run
this country. That we have no choice but to continue
(05:29):
building that balance sheet to infinity, more and more lofty heights.
And Carrie, what I find you ask me why gold
is in this this primary bull market. It's just spectacular.
I think it's just beginning. So you have to ask
yourself which one of the two mandates, say is the
Federals are really like the most. So they have this
(05:51):
dual mandate, which is full employment and stable prices, well,
stable collections. That's bs because their stable prices has been
redefined as two percent inflation. Now two percent went out
the window because they can't get anywhere near two percent.
They've been above two percent for fifty two months and
they're fifty percent above two percent because the inflation is
(06:12):
running at three percent the way they measure it. Even
the way they measure it inflation is target and what
are they doing, Kerry. They're just about to slash interest rates,
going on a rate cutting regime starting September seventeenth, which
is just like you know, as in like tomorrow. Yeah,
I don't know when this interview is coming out, but
it's been recorded on the sixteenth. So that's what gold
(06:36):
is selling. They have no idea they have. They being
our government, our treasury, our central bank, has no way
of providing a sustainable level of real interest rates without
the economy falling apart. That's what they think. And they're
about to slash interest rates again to negative territory in
real term. So by yourself some precious metals if you haven't,
(06:57):
if you haven't woken up, if you haven't ascended to
that notion at wake up, all right.
Speaker 3 (07:03):
So silver, I was just thinking about this, Michael. The
majority of people on the planet don't remember when our
coinage was ninety percent silver, Yeah, because that was the
last time. Well they kept a little bit up until
the seventies, but basically monetization of silver ended in nineteen
(07:25):
sixty five, so we're looking at sixty years and the
majority of the population, you know, just say I remember
it because I was seven when My brother came into
the kitchen and he dropped old silver coins and then
he dropped the new copper clad junk slugs as they
(07:46):
call them, and the sounds I still remember it to
this day. We're only looking at sixty years ago. Michael,
I remember that sound. The silver rang it chime, and
the slugs were just they just smacked the floor.
Speaker 1 (08:05):
Yeah, so that's when we had copper. Now I think
they put in nickel and we are aluminum. I think
it's I think they're making coins out of balsa would now.
Speaker 3 (08:16):
Yeah, it could be. There could be ten.
Speaker 1 (08:21):
I don't know.
Speaker 3 (08:21):
Whatever is the cheapest the metallic commodity, and pretty soon
even that will be too valuable to put into a coin.
Speaker 1 (08:29):
Yeah, right, exactly exactly. So now that that's why they
have this this technology, of course, which is a bitcoin
or cryptocurrencies where you know, money doesn't even be backed
by semi precious or base metals. For you about precious metals.
It can be backed by numbers, you know, a barcode,
a glorified QR code that's you know, electronic numbers and letters.
(08:52):
Now could be it's hard money. Now, it's hard because
there's a there's a there's only twenty one million units
of bigcoin that can be printed, but there's an unlimited
number of blockchains and cryptocurrency that can be created, So
who cares? Who cares? So he take point, there are
I don't care how many. You know, there's unlimited blockchains,
unlimited cryptocurrencies. Therefore, so who cares about how many bitcoin
(09:17):
there are? I don't care. It's all electronic numbers and letters.
It's not gold, it's not a U, it's not a G.
It's just garbage, that's what it is. And you know
what else? I want to just a fully answer your question.
There's also as we continue to debase our currencies literally
(09:38):
to base our currencies, there's also this ENLiGHT this this
watershed moment, this this period of enlightenment on behalf of
foreign creditors. They are now as shoeing treasuries, and they
are is shoeing dollars because we we are we capriciously
and arbitrarily impose sanctions and confiscations on foreigners reserves. They say, okay,
(10:05):
you know, all those the dollars that you own and
all those treasures you own, what, well, you don't own
them anymore. They're hours is a salient fear that that's
that's happening, and so they might they might take it away.
In nominal terms, they might just say, okay, you we
owe you a trillion dollars, but now we only owe
(10:26):
you five hundred billion. And by the way, that fire
and billion dollars that you have, it's going to be
handed to you in a depreciating dollar. So how's that.
How's that for a morgan?
Speaker 3 (10:39):
Yeah, I'm sorry, I don't mean to laugh because it's
not really funny, but it's funny. But the way you
put it, because like you'd be crazy to keep them,
and yet we then have a gun to their head
literally that if you don't take these dollars, maybe we'll
just blow up your country.
Speaker 1 (10:57):
Well, with investors with foreign creditors are doing is they're saying, hmm,
if the US is going to cut their interest rates
back to towards zero percent and they destroy their currency,
and they might steal my currency reverse reserves for me
at at a moment's notice, maybe I'll just take my
(11:17):
surplus dollars for my great surplus and I'll just sell
them and buy gold. That's what I'll do, and I'll
hold the gold myself and you can't have it.
Speaker 3 (11:28):
The barber is relic you're talking about.
Speaker 1 (11:30):
Yes, yes, the barber is relic that central banks hate,
but they continue to accumulate at a frenetic pace. Yes,
I would think that that that gold. Yeah, that that
which is virtually indestructible, extremely precious, extremely rare. That that
that is why gold is money because it doesn't go anywhere,
(11:52):
It lasts forever and is very rare, and it's so
you know, divisible, and it's a medium exchange. All of checks,
all the boxes, and the little green pieces of paper
which probably going away in the future to be replaced
by a central bank digital currency. Who the heck wants
to store your savings in that? I mean literally, if
(12:17):
I just told you that the central bank digital currency,
let's just say we had one in two thousand and
seven and the whole be Fed's balance, he was seven
hundred billion, and a couple of you know years later,
a few years later, it was nine trillion. They stole
that much purchasing power of your base money. And that's
why you know things like well, the housing market, transaction
(12:41):
market is frozen well since twenty nineteen, a good a
good sources Nick Jurley. He did some analysis of house
hold whole prices in the last six years have gone
up ninety two percent. Would you care to guess how
much incomes caught up? That same epirs on.
Speaker 3 (13:02):
I don't know what interested that.
Speaker 1 (13:04):
Like twenty two like thatch when so people can't afford
houses anymore. And you know when the FEG gets up
and says, you know, everything we do is in the
service of our people, in our American consumer and blah
blah blah. Wait wait a second. You caused home prices, you,
being the Federal Reserve and particularly you, mister Powell, caused
(13:27):
home prices to surge ninety two percent. And guess what
you were buying mortgage backed securities when home prices were
up twenty percent back on back in this in March
of twenty and twenty two, when there was no more
COVID and there was no more crisis and the economy
was doing fine, you considered it appropriate to still buy
(13:50):
mortgage backed securities, which lowered the cost of mortgages to
send home prices even further. So you know what, so
Blackstone can buy all of the single family homes.
Speaker 3 (14:00):
That's what they're done.
Speaker 1 (14:02):
In a market now and now we see investors not
just Blackstone. Now we see the investors own between twenty
and thirty percent of the entire single family home market.
You know, like you know, there's nobody in these houses
or they're rented or they rent and you know what
home prices are now rolling over and you have you
(14:23):
have the bottom four quintiles of Americas have been destroyed,
the purchasing powers have been wiped out, and the top
quintiles keeping the thing afloat because stock prices are record
highs and I mean record like crazy record. So the
valuation of equities right now is two hundred and eighteen
percent of GDP. That's something that's never been even imagined
(14:44):
that then the mean metric there is like ninety carry,
not two or eighteen. And you know we have all
these target date funds and the four to one K plans.
Mike Green talks about these passive flows all the time.
These very right, very correct, and the passive flow are
going to go into reverse because when this when we
have a recession, you're going to have debt and deficits.
(15:06):
First of all, the annual depths is going to go
to around five trillion dollars the FED is going to
be printing trillions of dollars per annum. The deficit is
already over two trillion dollars this year, despite all the
tariff revenue that we're supposedly getting. I don't know if
if the revenue is fictitious or we're just spending more
money than we ever did before. But why are we heaving?
What are we having in in almost a record low
(15:29):
unemployment four point three percent unemployment rate and supposedly not
in a recession. How the heck do we have two
trillion dollar plus deficits carry how that's structural?
Speaker 3 (15:39):
Right?
Speaker 1 (15:41):
Yeah? And yes, it's all about demographics, sure, absolutely. And
of course what Trump really wants done is he wants
to take the money market rate down so he doesn't
have to pay over a trillion dollars an interest. And
I think that's going to happen very quickly. But I
will sell you this this caveat. This is buyer beware,
caveat dempto if he low if Powell lowers rates by
(16:02):
one hundred basis points, which I think he's going to do,
and then very near future, and then he's replaced by
a you know, obsequious sicofant in. So one who's really
really really going to cut interest rates? What if the
long end of the bond market doesn't say, uh uh,
you know, I don't really like this, this is not
this is not kosher. I am going to raise the
(16:23):
long term borrowing costs, which is where by the way,
that's where mortgages are priced there, corporate deet is float floated,
that's where auto loans. So that's that's See. I am
I manage money for a living, and I am long
the stock market. But I am long with a an
(16:45):
algorithm that tells me when the credit markets are starting
to crater and fracture. And they will and when they do,
they have to, they have to, and when they do, kerry.
When they do, we're going to have a very expedition,
expeditious and salient, trenchant decline in stock prices. It's gonna
(17:06):
happen quickly. It's gonna be very sharp and acute. And
I want no part of that. I want to I
want to be out and short the market when the
worst of that happens.
Speaker 3 (17:17):
Yeah, so we're getting to that point. How much longer
do you think it's gonna be Michael.
Speaker 1 (17:22):
Well, I mean listen all I can tell you it's
not happening right now. If you look at credits spreads,
you look at financial conditions, they're as easy as they
can possibly be. Financial conditions, credits reds are as tight
as they can possibly be.
Speaker 3 (17:32):
And that's sign right, that's a negative indicator.
Speaker 1 (17:37):
Well it's it's well, it's it's negative long term, but
in the short term it says it's a green light.
I mean, if you know, if financial conditions have been
this tight, financial conditions have been easy now for a
very very long time, and they're up. You know, they're
very very easy, and credits breads are the tightest I've
ever seen them. So that tells you that it's like
every there's no complacency abounds. So it's a green light.
(18:00):
But you're speeding at one hundred miles an hour towards
a brick wall. So when an unraval is gonna unravel
quite quickly, and you have to be very nimble, and
you have to have somebody managing your money who's not
gonna say, well, it will always come back. Well, tell
that to Chine, Tell that to the Shanghai chottocker change,
sell that to the nick I Dao. I mean the
(18:20):
nick I Dao was down for thirty five years. Thirty
five years carry they were you know, they didn't see
an all time high. So I think that, I think
when this thing does break, there isn't a damn thing
the Federal Reserve a Treasury can do about it, because
it's when this breaks, it's gonna break because of inflation
and insolvency concerns. So if you're gonna tell me the
(18:42):
same playbook is going to be deployed that's worked in
the past, meaning well, the Treasury is gonna borrow trillions
and trillions of dollars and the Fed's gonna buy it all,
and the bond market's gonna say, oh, I'm already you know,
the bond vigilinanism already told you enough, and this is
this is your I this is how you're gonna fix it.
Speaker 3 (19:02):
Wait, I thought the bond vigilantes were an endangered species here.
Speaker 1 (19:06):
Michael, Yeah, well that listen, there are slumbering volcano like
Vesuvius and it's going to erupt and there's no way
I have no doubt in my mind that's going to happen.
Because you can't I mean, you can't tell you can't
tell bond vigilantes. You can't tell people that they should.
(19:26):
You know, like the ten year note is a bit
just over four percent terry. If inflation goes back to
where it was in COVID nine percent the way they
measure it, seventeen to twenty. In reality, are you gonna
buy how much? I mean how much? Ten? How many
ten year notes? A you're gonna buy at four percent?
I mean, you don't even have to be a vigilante.
You just have to have a You just have to
be a little smarter than a mentally challenged the MEBA.
(19:50):
You're not gonna You're not gonna lock up your money
for ten years four percent when inflation is at nine
and you're gonna be you would if you're smart, you'll
be shoring the bond market. Like me, I will shorten
the bond market too. That's one of the arrows I
have in my quipper. As a matter of fact, the
full disclosure, I shorted the bond market yesterday. Now, I'm
(20:11):
not saying the bond market is going to unravel. Now,
I'm just saying, and I think you alluded to it.
With credit spreads this type, and with financial conditions this easy,
and with a ten year note at four percent, I
shorted the long end of the bond markets just so
you know how much lower is it going to go?
I mean outside of a recession, and I'm not ruling
(20:33):
that out, and I have a I have a lot
of money in the in the belly of the curve
and the shorter end, so I'll be fine, but outside
of a recession. And let me just add this real quick.
Remember I said a recession will cause debt the deficits
to go up to five trillion dollars. That's the way
it's the math works.
Speaker 3 (20:52):
Yeah, for sure, So we're.
Speaker 1 (20:54):
Already at two it's going to go between you know,
four to six trillion dollars. There's no guarantee that the
long end is going to do anything but go higher
and yield a lower and price higher and yield. So
I'm not exactly convinced even a recession would save the
long end of the bond market, but let's just say
it does. Outside of a recession, there's nothing that makes
me think that these yields are going any lower. So
(21:16):
now's your chance to do.
Speaker 3 (21:17):
It, so limited time offer. So what's the asymmetric play
for the inevitable here it's gold and silver obviously, But
from a security standpoint, let's just say, you see it
all going to hell in a handbasket, what's your final
bet at the table.
Speaker 1 (21:39):
So right now, let me answer that question. I'm saying,
right now, we're not positioned for the four horsemen of
the economic apocalypse to break out. And generally speaking, that's
short term bonds, it's the US dollar, which is on
thin ice. It's and it's shorting the market too. You
have to you have to short the market, have some
(21:59):
cash to Those are the four horsemen. So the dollar
might not play a role in that because there might
not be a huge unwinding of that dollar carry carry trade.
So that's still a question. But you ask me what
happens if we do enter this moment where the great,
the great reconciliation of acid prices begins. You don't want
(22:22):
any any part of equities. You have to be able
to short equities. So I would short equities. I might
be shorting the bond market, and I would hold short
term treasuries. I wouldn't you know, obviously, I wouldn't go
to the money market. I wouldn't be in t bills.
But if you do, if you on between two and
seven years, you'll make a lot of money. I believe
(22:43):
your trade that's the best place to hide. Or you
could just you could just listen to your your salesperson,
your use carpet salesperson, money management will just tell you, well,
you know, don't worry, it'll it'll come back. You can't
time the market, Yeah, as as the market is in
full meltdown mount because mode. Because Gary, when you're at
when you're at two hundred and eighteen percent total market
(23:05):
cap equities to GDP, you're not going to just fall
a little bit. I mean, we're not. We're This is
not even even in two thousand and seven when the
stock market lost, the SMB lost fifty percent, the home
prices crashed thirty percent, And I'm not entirely sure they
wouldn't do that again. In some markets, they are absolutely
going to do that. They're on their way down there anyway.
But the total market cap of equities to GDP back
(23:27):
then was like one hundred and four percent. That's expensive.
The market's still crash. And even in the Nasdaq bubble,
when that's the ultimate bubble, it was one hundred and
forty percent well, when you're at two hundred and eighteen,
when this process starts, I mean, you're going to crash
(23:48):
and crash hard like we've never seen before. So you
couldn't even I think you very likely, possibly very high
probability that you'll see circuit breakers trigger, you know, down
seven percent, down thirteen percent, I mean you hold trading
on the NYSC So that's what that's what happens when
you have three concurrent bubbles that are existing concurrently. So
(24:11):
just for the record, that is equities, real estate, and credit.
Speaker 3 (24:17):
All right, So we're heading towards what they call a
Minski moment right.
Speaker 1 (24:22):
Exactly, there's one hundred and ten billion. There's one hundred
and ten billion dollars worth of mortgagees that are seriously
in delinquent right now, one hundred and ten billion dollars
seriously delinquered, seriously delinqued. Credit card debt is the highest
level in the past fourteen years, so the consume. See,
(24:43):
people don't understand. So you look at household debt to
GDP and it looks quiescent on that metric alone. But
when you have to figure, you have to figure into
that we have a record. I think it's eight is
eighteen eighteen point four trulli dollars in consumer debt household
debt until that's a record high, So it's not like
(25:05):
it's we don't have any debt anymore as consumers. Eighteen
point four trillion is a lot of debt to record high,
but as you if you look at the ratio to
GDP or too incomes, it's not so bad. But what
people have to understand when they look at that metric
in isolation is that the bottom four quintas have no cash. Well,
they're living paycheck to paycheck, hand to mouth, so they
(25:28):
don't have even though even though they don't have a
lot of debt to income, their income has been wiped
out because of inflation, so there isn't a lot of
income left over to service the debt. That's what makes
that ratio look quiescent, but in essence it's deadly. That
eighteen point four trillion, that's what you have to concentry on.
(25:49):
So there's a lot of deep debt and deep you
know a lot of delinquencies and defaults in the pipeline
that are coming. And I do think the labor market
also is on this fret. There's no doubt about that,
But it's mostly fracturing because we have no more immigration
in this country, so the labor supply is nil. In fact,
(26:11):
for the first time in the history of these United States,
we have immigration as the negatives. So there's a net
outflow of people who were not born in this country.
They're here, but they weren't born here. There's a net
outflow of those people for the first time history of
the United States.
Speaker 3 (26:31):
Wow. So what appears to be good on the surface
not really so good. That has to really hurt housing too.
If you get like five million people leave the country
pretty much all at once, that's going to have an
impact on housing, won't it.
Speaker 1 (26:49):
If twenty to thirty percent of all homes are owned
by investors, that's the statistic. I told you there's a
lot out of homes inventory that's going to hit the
market as soon as the home prices start falling on
a national basis. I mean, it's one thing to say,
(27:11):
you know, I own my home and I really don't
want to sell, even though I might be a little
underwater because I have to change my address and I
have to call the credit card companies, and I have
to get a moving van and I have to argue
my wife as to what thing I'm going to throw
out and what I'm going to pack. It's a big headache,
believe me. I know I've done it enough. But you
(27:31):
know it isn't a big headache. Hey, hon, we own
these four houses. We can only live in one of them.
And you know what, they're all going down in value now.
And it's just so expensive the upkeep and the insurance
and the property taxes. And we're up one hundred percent
(27:52):
on these houses. Why don't we sell? So I'll just
call the agent and put them on the market. We
don't have to do anything. That's called Layton's inventory, and
that's that is going to there's a tsunami of that coming.
Speaker 3 (28:06):
Wow. So you want to be owning one house now,
if any you or perhaps sell your house and rent right.
Speaker 1 (28:13):
You know, I'm one of those people who had a
property that was not lived in. It was an investment home,
an investment property. I took a bath on her and
it was in New Jersey, held it for three years
and I sold it for a loss. So it's just
not I mean, if you it's just not worth it. No,
(28:35):
they're worth a headache. So if home price to income
ratios have never been this high. Now. Remember in two
thousand and six, in the middle of the the they
called the odds, you know whatever that means. But two
thousand and six, seven eight, the middle of that decade,
there was really no The real estate bubble was salient,
(28:59):
but there were there's no equity bubble. We have two
gi gargantuan bubbles existing at the same time. And in addition,
we have things like that never existed before in credit
market space, like private credit, you know, loans, the businesses
that couldn't get a loan from the bank and they
couldn't tap the corporate bond market, and there's like you know,
(29:22):
I think there's like one point seven trillion dollars of
that stuff out there, and I never existed before. FHA
loans were like three billion dollars prior to the goal
of financial crisis. Now they're like forty billion dollars. Talk
about an increase of people that put three and a
half percent down on the property. There's skyrocketing defaults there too,
(29:43):
So this is this is a bubble. It's going to
burst now. Am I again I managed money for a living,
I wouldn't have a business if I was constantly saying
that and shuring the market, I'm saying that the construct
there's no debating this. The construct of the market is
one that's predicated on acid bubbles, debt, money printing, and inflation.
(30:10):
It's extremely fragile. That's the construct the that's the house
that's built on sand. Now, when that condition breaks, that's
when you have to make changes in the portfolio. But
as of right now, I'm long and I'm enjoying it.
I have plenty of precious metals. I recently bought energy,
I shortened long end of the bond market. I'm making
money for my clients. But the big money is going
(30:32):
to come when this reconciliation of acid crisis begins.
Speaker 3 (30:35):
So let's just talk about what exactly a Minski moment is,
and I'll read you the AI definition from YouTube. A
Minski moment is an economic concept describing the sudden and
often catastrophic and to a period of market optimism, whereas
speculative bubble berths due to increase debt and risky behavior.
(30:59):
It's the point where stability becomes self destructive and a
prolonged boom gives way to a free fall of plunging
asset values and market sentiment. According to the financial instability
hypothesis of Hymen Minsky. That's a seigmen to a t,
doesn't it.
Speaker 1 (31:18):
And Hymen who has had it down to a bat.
You know, there's a there's eleven point four trillion dollars
of corporate debt out there, and one point eight trillion
about that trillion is junk det So you think about
companies have to continuously tap the corporate bond market. This
is one of those examples I throw at you to
show you how big this Hyman Minsky moment has grown.
(31:42):
The bubble has grown too, and when it bursts, like
I said, it's going to be violent, not going to burst,
you know, innocuously.
Speaker 3 (31:50):
All right, Well, Michael, you're a breath of fresh air
inspiration here. But if you're ready for these things, even
if you know prof fit handsomely from it, you can
at least protect yourself so you're not destroyed by it. Right.
Speaker 1 (32:06):
You know what active management. It's been pillary, it's been
excoriated in the past, and maybe even need active management
in prior eras eras, but you need it now. You
need to be able to move quickly and adroitly between
periods of dist inflation, deflation and depression recession to what
(32:32):
I what I see happening in the in the not
too distant future, an era of acute and protracted stagflation
like we've never before seen or suffered in this country's history.
That's what I see happening. So we you know, and listen,
you know if you don't, if you don't have immigration,
And I'm all for closing the borders and knowing who's
(32:53):
in this country. So don't get I'm not a political country.
Speaker 3 (32:56):
You're not an open borders guy.
Speaker 1 (32:58):
No, I'm not an open border but I'm saying the
borders were wide open under Biden. Millions and millions per anom.
Speaker 3 (33:05):
Coming millions supposedly, but nobody knows.
Speaker 1 (33:08):
Yeah, millions of people coming into the labor force, and
then the government doing most of the hiring. And you
go from two hundred and three hundred thousand jobs a
month to you know, twenty two thousand jobs a month.
And that's a natural function of closing the border. But
that's half of your input to GDP growth, and crashing
acid prices aren't actually really good news for GDP growth either.
(33:30):
So I envisioned a period where GDP growth crashes and
acid prices absolutely plummet. So in the next ten years,
it wouldn't surprise me if we ended up flat in
nominal terms or thereabouts in ten years, with a period
of time where in nominal terms the stock market goes
down fifty percent, And if you can time that reasonably, well,
(33:53):
you know, instead of waiting a decade to get even
or more, you can actually have the capital to be
deployed at the appropriate moment when they reliquify the banking
system where you can actually enjoy that one hundred percent
ride back to even remarkable.
Speaker 3 (34:08):
All right, Well, that's something to definitely think about. You
got to take a look in the mirror, decide your
risk tolerance. Sometimes the biggest risk is not doing anything,
and I think a lot of people are going to
be stuck there. Michael. If you got any questions for
Michael myself, shoot me an email klat Kerrie Lutz dot com.
(34:29):
The link to Michael's site is in the show notes
of this interview. And we're no longer doing a website.
We're doing a substack. Honestly, websites just became too big
a pain. The thing breaks all the time gets hacked.
Substack I could write articles, produce videos, produce audios, and
(34:50):
it manages my email list. Can't beat that. Michael, appreciate
you coming on as always and we will definitely catch
up with you next month.
Speaker 2 (34:59):
Thank you, Gery, thanks for listening to Carrie Letz's Financial
Survival Network, your solution to today's trying times. For the latest,
go to Financial Survivalnetwork dot com. Financial Survival Network
Speaker 1 (35:13):
Now more than ever,
There's eleven point four trillion dollars of corporate debt out there,
and one point eight trillion about that trillion is junk
at so you think about companies have to continuously tap
the corporate bond market. This is one of those examples
I throw you to show you how big this Hymenminsky
moment has grown.
Speaker 2 (00:20):
You are listening to Carrie Let's's Financial Survival Network, where
you get valuable information you just can't find anywhere else
to thrive in today's trying times. You need the Financial
Survival Network now more than ever. Go to Financial Survivalnetwork
dot com and get your free newsletter and gift. Financial
(00:40):
Survival Network now more than.
Speaker 3 (00:44):
Ever, and welcome. You are listening to and watching the
Financial Survival Network. I'm your host, Carrie Let's. Hey, we
are halfway through September. All hill is breaking loose on
every front. We've got heard record high gold prices. Silver
(01:05):
has awoken. I mean it's it was close to forty
three dollars today. Now it's pulled back a little, but
maybe it's time for a breather. But let's get the
real truth here. From Michael Pentopentoport dot com. Michael is
always great to have you back and glad you survived
your pickleball game.
Speaker 1 (01:26):
Well, yeah, I wish I could said his name for
my golf game. That's its complete disaster, which is good
news for my clients because they know I'm not spending
a lot of time on the golf course.
Speaker 3 (01:37):
Yeah, all right, be grateful for small favors. Right, Yeah,
So breakout in the metal sector, even silver, maybe silver
will start to lead. It's kind of half leading, half
holding back. What's your take? What are the medals telling us,
especially platinum breaking out from a decade to a decade basic,
(02:02):
I guess a decade of depression for platinum.
Speaker 1 (02:07):
Yeah. So I'm a big holder of gold, and I
haven't own platinum for my entire investment history up until
about four months ago. Three or four months ago, I
saw it started breaking out. You know, platinum is more
rare or rarer, I don't know which one is correct
than gold. It's more precious too, more durable than gold,
(02:31):
and it has a lot of other uses outside of jewelry.
So I remember, I've been in this business for thirty
five years. I remember when platinum was always more expensive
than gold for decades, and then all of a sudden
that switched, and I switched in a big way. So
now platinum is not even half as valuable as gold,
and I'm looking for some kind of mean reversion here.
(02:54):
But I don't think gold's going to go down and
platinum is going to go up. I think they're both
going to go up. But platinum has a lot of
catch up to do. And you know, you you're a
big silver guy. I you know, I don't have to
own every precious metal or semi precious metal, as silver
is has a lot of industrial components to it too.
I just I'm really in love with these monetary metals,
and that's gold first and foremost served us very well
(03:16):
for years.
Speaker 3 (03:17):
And platinum.
Speaker 1 (03:18):
But what do they I mean, he asked, A more
interesting question is like what's going on these tittles? And
you know what I mean? And as you asked that question,
I don't know what your questions are before you ask
but when you were asking that question, you know, you
know what hit my mind was, like, you know, the
Fed's balance sheet, which basically is a measure of how
(03:39):
much how big is the monetary base or a big
portion of the monetary basis, how much how many assets
does the FED own Well, for many, many, many years
of our existence. I'm sixty two. In a couple of
weeks here the FED owned, you know, just a few
hundred billion dollars in treasuries that was there, that was
(04:01):
their balance sheet, and you know, since you know, I
guess you could say since nineteen eighty seven. But really,
really this madness started in the year two thousand. It
was put on steroids in two thousand and eight, and
then we had these buffoons that run our monetary regime
of post COVID as balance sheet went to nine just
(04:23):
over nine trillion with the t dollars, and we managed
to get back down to I think a six point
six trillion is what we are now. So we went
to six point six trillion, which is a lot more
than seven hundred billion dollars where it was just prior
to the global financial crisis. And then we spent most of
(04:43):
the time between two thousand and eight to twenty twenty two.
We spent almost all of that time, not all of it,
but most of that time where interest rates were near zero.
They were you know, one percent or so, and in
a real sense they were profoundly negative. So there's a
long winded way of saying that we have thirty seven
(05:04):
trillion dollar national debt. The corporate debt is enormous. Consumers
are swamped in debt as well. We have so much debt,
particularly at the state level. And I mean by state,
I mean the national level, not just the federal level,
not you know, the state, meaning the people who run
this country. That we have no choice but to continue
(05:29):
building that balance sheet to infinity, more and more lofty heights.
And Carrie, what I find you ask me why gold
is in this this primary bull market. It's just spectacular.
I think it's just beginning. So you have to ask
yourself which one of the two mandates, say is the
Federals are really like the most. So they have this
(05:51):
dual mandate, which is full employment and stable prices, well,
stable collections. That's bs because their stable prices has been
redefined as two percent inflation. Now two percent went out
the window because they can't get anywhere near two percent.
They've been above two percent for fifty two months and
they're fifty percent above two percent because the inflation is
(06:12):
running at three percent the way they measure it. Even
the way they measure it inflation is target and what
are they doing, Kerry. They're just about to slash interest rates,
going on a rate cutting regime starting September seventeenth, which
is just like you know, as in like tomorrow. Yeah,
I don't know when this interview is coming out, but
it's been recorded on the sixteenth. So that's what gold
(06:36):
is selling. They have no idea they have. They being
our government, our treasury, our central bank, has no way
of providing a sustainable level of real interest rates without
the economy falling apart. That's what they think. And they're
about to slash interest rates again to negative territory in
real term. So by yourself some precious metals if you haven't,
(06:57):
if you haven't woken up, if you haven't ascended to
that notion at wake up, all right.
Speaker 3 (07:03):
So silver, I was just thinking about this, Michael. The
majority of people on the planet don't remember when our
coinage was ninety percent silver, Yeah, because that was the
last time. Well they kept a little bit up until
the seventies, but basically monetization of silver ended in nineteen
(07:25):
sixty five, so we're looking at sixty years and the
majority of the population, you know, just say I remember
it because I was seven when My brother came into
the kitchen and he dropped old silver coins and then
he dropped the new copper clad junk slugs as they
(07:46):
call them, and the sounds I still remember it to
this day. We're only looking at sixty years ago. Michael,
I remember that sound. The silver rang it chime, and
the slugs were just they just smacked the floor.
Speaker 1 (08:05):
Yeah, so that's when we had copper. Now I think
they put in nickel and we are aluminum. I think
it's I think they're making coins out of balsa would now.
Speaker 3 (08:16):
Yeah, it could be. There could be ten.
Speaker 1 (08:21):
I don't know.
Speaker 3 (08:21):
Whatever is the cheapest the metallic commodity, and pretty soon
even that will be too valuable to put into a coin.
Speaker 1 (08:29):
Yeah, right, exactly exactly. So now that that's why they
have this this technology, of course, which is a bitcoin
or cryptocurrencies where you know, money doesn't even be backed
by semi precious or base metals. For you about precious metals.
It can be backed by numbers, you know, a barcode,
a glorified QR code that's you know, electronic numbers and letters.
(08:52):
Now could be it's hard money. Now, it's hard because
there's a there's a there's only twenty one million units
of bigcoin that can be printed, but there's an unlimited
number of blockchains and cryptocurrency that can be created, So
who cares? Who cares? So he take point, there are
I don't care how many. You know, there's unlimited blockchains,
unlimited cryptocurrencies. Therefore, so who cares about how many bitcoin
(09:17):
there are? I don't care. It's all electronic numbers and letters.
It's not gold, it's not a U, it's not a G.
It's just garbage, that's what it is. And you know
what else? I want to just a fully answer your question.
There's also as we continue to debase our currencies literally
(09:38):
to base our currencies, there's also this ENLiGHT this this
watershed moment, this this period of enlightenment on behalf of
foreign creditors. They are now as shoeing treasuries, and they
are is shoeing dollars because we we are we capriciously
and arbitrarily impose sanctions and confiscations on foreigners reserves. They say, okay,
(10:05):
you know, all those the dollars that you own and
all those treasures you own, what, well, you don't own
them anymore. They're hours is a salient fear that that's
that's happening, and so they might they might take it away.
In nominal terms, they might just say, okay, you we
owe you a trillion dollars, but now we only owe
(10:26):
you five hundred billion. And by the way, that fire
and billion dollars that you have, it's going to be
handed to you in a depreciating dollar. So how's that.
How's that for a morgan?
Speaker 3 (10:39):
Yeah, I'm sorry, I don't mean to laugh because it's
not really funny, but it's funny. But the way you
put it, because like you'd be crazy to keep them,
and yet we then have a gun to their head
literally that if you don't take these dollars, maybe we'll
just blow up your country.
Speaker 1 (10:57):
Well, with investors with foreign creditors are doing is they're saying, hmm,
if the US is going to cut their interest rates
back to towards zero percent and they destroy their currency,
and they might steal my currency reverse reserves for me
at at a moment's notice, maybe I'll just take my
(11:17):
surplus dollars for my great surplus and I'll just sell
them and buy gold. That's what I'll do, and I'll
hold the gold myself and you can't have it.
Speaker 3 (11:28):
The barber is relic you're talking about.
Speaker 1 (11:30):
Yes, yes, the barber is relic that central banks hate,
but they continue to accumulate at a frenetic pace. Yes,
I would think that that that gold. Yeah, that that
which is virtually indestructible, extremely precious, extremely rare. That that
that is why gold is money because it doesn't go anywhere,
(11:52):
It lasts forever and is very rare, and it's so
you know, divisible, and it's a medium exchange. All of checks,
all the boxes, and the little green pieces of paper
which probably going away in the future to be replaced
by a central bank digital currency. Who the heck wants
to store your savings in that? I mean literally, if
(12:17):
I just told you that the central bank digital currency,
let's just say we had one in two thousand and
seven and the whole be Fed's balance, he was seven
hundred billion, and a couple of you know years later,
a few years later, it was nine trillion. They stole
that much purchasing power of your base money. And that's
why you know things like well, the housing market, transaction
(12:41):
market is frozen well since twenty nineteen, a good a
good sources Nick Jurley. He did some analysis of house
hold whole prices in the last six years have gone
up ninety two percent. Would you care to guess how
much incomes caught up? That same epirs on.
Speaker 3 (13:02):
I don't know what interested that.
Speaker 1 (13:04):
Like twenty two like thatch when so people can't afford
houses anymore. And you know when the FEG gets up
and says, you know, everything we do is in the
service of our people, in our American consumer and blah
blah blah. Wait wait a second. You caused home prices, you,
being the Federal Reserve and particularly you, mister Powell, caused
(13:27):
home prices to surge ninety two percent. And guess what
you were buying mortgage backed securities when home prices were
up twenty percent back on back in this in March
of twenty and twenty two, when there was no more
COVID and there was no more crisis and the economy
was doing fine, you considered it appropriate to still buy
(13:50):
mortgage backed securities, which lowered the cost of mortgages to
send home prices even further. So you know what, so
Blackstone can buy all of the single family homes.
Speaker 3 (14:00):
That's what they're done.
Speaker 1 (14:02):
In a market now and now we see investors not
just Blackstone. Now we see the investors own between twenty
and thirty percent of the entire single family home market.
You know, like you know, there's nobody in these houses
or they're rented or they rent and you know what
home prices are now rolling over and you have you
(14:23):
have the bottom four quintiles of Americas have been destroyed,
the purchasing powers have been wiped out, and the top
quintiles keeping the thing afloat because stock prices are record
highs and I mean record like crazy record. So the
valuation of equities right now is two hundred and eighteen
percent of GDP. That's something that's never been even imagined
(14:44):
that then the mean metric there is like ninety carry,
not two or eighteen. And you know we have all
these target date funds and the four to one K plans.
Mike Green talks about these passive flows all the time.
These very right, very correct, and the passive flow are
going to go into reverse because when this when we
have a recession, you're going to have debt and deficits.
(15:06):
First of all, the annual depths is going to go
to around five trillion dollars the FED is going to
be printing trillions of dollars per annum. The deficit is
already over two trillion dollars this year, despite all the
tariff revenue that we're supposedly getting. I don't know if
if the revenue is fictitious or we're just spending more
money than we ever did before. But why are we heaving?
What are we having in in almost a record low
(15:29):
unemployment four point three percent unemployment rate and supposedly not
in a recession. How the heck do we have two
trillion dollar plus deficits carry how that's structural?
Speaker 3 (15:39):
Right?
Speaker 1 (15:41):
Yeah? And yes, it's all about demographics, sure, absolutely. And
of course what Trump really wants done is he wants
to take the money market rate down so he doesn't
have to pay over a trillion dollars an interest. And
I think that's going to happen very quickly. But I
will sell you this this caveat. This is buyer beware,
caveat dempto if he low if Powell lowers rates by
(16:02):
one hundred basis points, which I think he's going to do,
and then very near future, and then he's replaced by
a you know, obsequious sicofant in. So one who's really
really really going to cut interest rates? What if the
long end of the bond market doesn't say, uh uh,
you know, I don't really like this, this is not
this is not kosher. I am going to raise the
(16:23):
long term borrowing costs, which is where by the way,
that's where mortgages are priced there, corporate deet is float floated,
that's where auto loans. So that's that's See. I am
I manage money for a living, and I am long
the stock market. But I am long with a an
(16:45):
algorithm that tells me when the credit markets are starting
to crater and fracture. And they will and when they do,
they have to, they have to, and when they do, kerry.
When they do, we're going to have a very expedition,
expeditious and salient, trenchant decline in stock prices. It's gonna
(17:06):
happen quickly. It's gonna be very sharp and acute. And
I want no part of that. I want to I
want to be out and short the market when the
worst of that happens.
Speaker 3 (17:17):
Yeah, so we're getting to that point. How much longer
do you think it's gonna be Michael.
Speaker 1 (17:22):
Well, I mean listen all I can tell you it's
not happening right now. If you look at credits spreads,
you look at financial conditions, they're as easy as they
can possibly be. Financial conditions, credits reds are as tight
as they can possibly be.
Speaker 3 (17:32):
And that's sign right, that's a negative indicator.
Speaker 1 (17:37):
Well it's it's well, it's it's negative long term, but
in the short term it says it's a green light.
I mean, if you know, if financial conditions have been
this tight, financial conditions have been easy now for a
very very long time, and they're up. You know, they're
very very easy, and credits breads are the tightest I've
ever seen them. So that tells you that it's like
every there's no complacency abounds. So it's a green light.
(18:00):
But you're speeding at one hundred miles an hour towards
a brick wall. So when an unraval is gonna unravel
quite quickly, and you have to be very nimble, and
you have to have somebody managing your money who's not
gonna say, well, it will always come back. Well, tell
that to Chine, Tell that to the Shanghai chottocker change,
sell that to the nick I Dao. I mean the
(18:20):
nick I Dao was down for thirty five years. Thirty
five years carry they were you know, they didn't see
an all time high. So I think that, I think
when this thing does break, there isn't a damn thing
the Federal Reserve a Treasury can do about it, because
it's when this breaks, it's gonna break because of inflation
and insolvency concerns. So if you're gonna tell me the
(18:42):
same playbook is going to be deployed that's worked in
the past, meaning well, the Treasury is gonna borrow trillions
and trillions of dollars and the Fed's gonna buy it all,
and the bond market's gonna say, oh, I'm already you know,
the bond vigilinanism already told you enough, and this is
this is your I this is how you're gonna fix it.
Speaker 3 (19:02):
Wait, I thought the bond vigilantes were an endangered species here.
Speaker 1 (19:06):
Michael, Yeah, well that listen, there are slumbering volcano like
Vesuvius and it's going to erupt and there's no way
I have no doubt in my mind that's going to happen.
Because you can't I mean, you can't tell you can't
tell bond vigilantes. You can't tell people that they should.
(19:26):
You know, like the ten year note is a bit
just over four percent terry. If inflation goes back to
where it was in COVID nine percent the way they
measure it, seventeen to twenty. In reality, are you gonna
buy how much? I mean how much? Ten? How many
ten year notes? A you're gonna buy at four percent?
I mean, you don't even have to be a vigilante.
You just have to have a You just have to
be a little smarter than a mentally challenged the MEBA.
(19:50):
You're not gonna You're not gonna lock up your money
for ten years four percent when inflation is at nine
and you're gonna be you would if you're smart, you'll
be shoring the bond market. Like me, I will shorten
the bond market too. That's one of the arrows I
have in my quipper. As a matter of fact, the
full disclosure, I shorted the bond market yesterday. Now, I'm
(20:11):
not saying the bond market is going to unravel. Now,
I'm just saying, and I think you alluded to it.
With credit spreads this type, and with financial conditions this easy,
and with a ten year note at four percent, I
shorted the long end of the bond markets just so
you know how much lower is it going to go?
I mean outside of a recession, and I'm not ruling
(20:33):
that out, and I have a I have a lot
of money in the in the belly of the curve
and the shorter end, so I'll be fine, but outside
of a recession. And let me just add this real quick.
Remember I said a recession will cause debt the deficits
to go up to five trillion dollars. That's the way
it's the math works.
Speaker 3 (20:52):
Yeah, for sure, So we're.
Speaker 1 (20:54):
Already at two it's going to go between you know,
four to six trillion dollars. There's no guarantee that the
long end is going to do anything but go higher
and yield a lower and price higher and yield. So
I'm not exactly convinced even a recession would save the
long end of the bond market, but let's just say
it does. Outside of a recession, there's nothing that makes
me think that these yields are going any lower. So
(21:16):
now's your chance to do.
Speaker 3 (21:17):
It, so limited time offer. So what's the asymmetric play
for the inevitable here it's gold and silver obviously, But
from a security standpoint, let's just say, you see it
all going to hell in a handbasket, what's your final
bet at the table.
Speaker 1 (21:39):
So right now, let me answer that question. I'm saying,
right now, we're not positioned for the four horsemen of
the economic apocalypse to break out. And generally speaking, that's
short term bonds, it's the US dollar, which is on
thin ice. It's and it's shorting the market too. You
have to you have to short the market, have some
(21:59):
cash to Those are the four horsemen. So the dollar
might not play a role in that because there might
not be a huge unwinding of that dollar carry carry trade.
So that's still a question. But you ask me what
happens if we do enter this moment where the great,
the great reconciliation of acid prices begins. You don't want
(22:22):
any any part of equities. You have to be able
to short equities. So I would short equities. I might
be shorting the bond market, and I would hold short
term treasuries. I wouldn't you know, obviously, I wouldn't go
to the money market. I wouldn't be in t bills.
But if you do, if you on between two and
seven years, you'll make a lot of money. I believe
(22:43):
your trade that's the best place to hide. Or you
could just you could just listen to your your salesperson,
your use carpet salesperson, money management will just tell you, well,
you know, don't worry, it'll it'll come back. You can't
time the market, Yeah, as as the market is in
full meltdown mount because mode. Because Gary, when you're at
when you're at two hundred and eighteen percent total market
(23:05):
cap equities to GDP, you're not going to just fall
a little bit. I mean, we're not. We're This is
not even even in two thousand and seven when the
stock market lost, the SMB lost fifty percent, the home
prices crashed thirty percent, And I'm not entirely sure they
wouldn't do that again. In some markets, they are absolutely
going to do that. They're on their way down there anyway.
But the total market cap of equities to GDP back
(23:27):
then was like one hundred and four percent. That's expensive.
The market's still crash. And even in the Nasdaq bubble,
when that's the ultimate bubble, it was one hundred and
forty percent well, when you're at two hundred and eighteen,
when this process starts, I mean, you're going to crash
(23:48):
and crash hard like we've never seen before. So you
couldn't even I think you very likely, possibly very high
probability that you'll see circuit breakers trigger, you know, down
seven percent, down thirteen percent, I mean you hold trading
on the NYSC So that's what that's what happens when
you have three concurrent bubbles that are existing concurrently. So
(24:11):
just for the record, that is equities, real estate, and credit.
Speaker 3 (24:17):
All right, So we're heading towards what they call a
Minski moment right.
Speaker 1 (24:22):
Exactly, there's one hundred and ten billion. There's one hundred
and ten billion dollars worth of mortgagees that are seriously
in delinquent right now, one hundred and ten billion dollars
seriously delinquered, seriously delinqued. Credit card debt is the highest
level in the past fourteen years, so the consume. See,
(24:43):
people don't understand. So you look at household debt to
GDP and it looks quiescent on that metric alone. But
when you have to figure, you have to figure into
that we have a record. I think it's eight is
eighteen eighteen point four trulli dollars in consumer debt household
debt until that's a record high, So it's not like
(25:05):
it's we don't have any debt anymore as consumers. Eighteen
point four trillion is a lot of debt to record high,
but as you if you look at the ratio to
GDP or too incomes, it's not so bad. But what
people have to understand when they look at that metric
in isolation is that the bottom four quintas have no cash. Well,
they're living paycheck to paycheck, hand to mouth, so they
(25:28):
don't have even though even though they don't have a
lot of debt to income, their income has been wiped
out because of inflation, so there isn't a lot of
income left over to service the debt. That's what makes
that ratio look quiescent, but in essence it's deadly. That
eighteen point four trillion, that's what you have to concentry on.
(25:49):
So there's a lot of deep debt and deep you
know a lot of delinquencies and defaults in the pipeline
that are coming. And I do think the labor market
also is on this fret. There's no doubt about that,
But it's mostly fracturing because we have no more immigration
in this country, so the labor supply is nil. In fact,
(26:11):
for the first time in the history of these United States,
we have immigration as the negatives. So there's a net
outflow of people who were not born in this country.
They're here, but they weren't born here. There's a net
outflow of those people for the first time history of
the United States.
Speaker 3 (26:31):
Wow. So what appears to be good on the surface
not really so good. That has to really hurt housing too.
If you get like five million people leave the country
pretty much all at once, that's going to have an
impact on housing, won't it.
Speaker 1 (26:49):
If twenty to thirty percent of all homes are owned
by investors, that's the statistic. I told you there's a
lot out of homes inventory that's going to hit the
market as soon as the home prices start falling on
a national basis. I mean, it's one thing to say,
(27:11):
you know, I own my home and I really don't
want to sell, even though I might be a little
underwater because I have to change my address and I
have to call the credit card companies, and I have
to get a moving van and I have to argue
my wife as to what thing I'm going to throw
out and what I'm going to pack. It's a big headache,
believe me. I know I've done it enough. But you
(27:31):
know it isn't a big headache. Hey, hon, we own
these four houses. We can only live in one of them.
And you know what, they're all going down in value now.
And it's just so expensive the upkeep and the insurance
and the property taxes. And we're up one hundred percent
(27:52):
on these houses. Why don't we sell? So I'll just
call the agent and put them on the market. We
don't have to do anything. That's called Layton's inventory, and
that's that is going to there's a tsunami of that coming.
Speaker 3 (28:06):
Wow. So you want to be owning one house now,
if any you or perhaps sell your house and rent right.
Speaker 1 (28:13):
You know, I'm one of those people who had a
property that was not lived in. It was an investment home,
an investment property. I took a bath on her and
it was in New Jersey, held it for three years
and I sold it for a loss. So it's just
not I mean, if you it's just not worth it. No,
(28:35):
they're worth a headache. So if home price to income
ratios have never been this high. Now. Remember in two
thousand and six, in the middle of the the they
called the odds, you know whatever that means. But two
thousand and six, seven eight, the middle of that decade,
there was really no The real estate bubble was salient,
(28:59):
but there were there's no equity bubble. We have two
gi gargantuan bubbles existing at the same time. And in addition,
we have things like that never existed before in credit
market space, like private credit, you know, loans, the businesses
that couldn't get a loan from the bank and they
couldn't tap the corporate bond market, and there's like you know,
(29:22):
I think there's like one point seven trillion dollars of
that stuff out there, and I never existed before. FHA
loans were like three billion dollars prior to the goal
of financial crisis. Now they're like forty billion dollars. Talk
about an increase of people that put three and a
half percent down on the property. There's skyrocketing defaults there too,
(29:43):
So this is this is a bubble. It's going to
burst now. Am I again I managed money for a living,
I wouldn't have a business if I was constantly saying
that and shuring the market, I'm saying that the construct
there's no debating this. The construct of the market is
one that's predicated on acid bubbles, debt, money printing, and inflation.
(30:10):
It's extremely fragile. That's the construct the that's the house
that's built on sand. Now, when that condition breaks, that's
when you have to make changes in the portfolio. But
as of right now, I'm long and I'm enjoying it.
I have plenty of precious metals. I recently bought energy,
I shortened long end of the bond market. I'm making
money for my clients. But the big money is going
(30:32):
to come when this reconciliation of acid crisis begins.
Speaker 3 (30:35):
So let's just talk about what exactly a Minski moment is,
and I'll read you the AI definition from YouTube. A
Minski moment is an economic concept describing the sudden and
often catastrophic and to a period of market optimism, whereas
speculative bubble berths due to increase debt and risky behavior.
(30:59):
It's the point where stability becomes self destructive and a
prolonged boom gives way to a free fall of plunging
asset values and market sentiment. According to the financial instability
hypothesis of Hymen Minsky. That's a seigmen to a t,
doesn't it.
Speaker 1 (31:18):
And Hymen who has had it down to a bat.
You know, there's a there's eleven point four trillion dollars
of corporate debt out there, and one point eight trillion
about that trillion is junk det So you think about
companies have to continuously tap the corporate bond market. This
is one of those examples I throw at you to
show you how big this Hyman Minsky moment has grown.
(31:42):
The bubble has grown too, and when it bursts, like
I said, it's going to be violent, not going to burst,
you know, innocuously.
Speaker 3 (31:50):
All right, Well, Michael, you're a breath of fresh air
inspiration here. But if you're ready for these things, even
if you know prof fit handsomely from it, you can
at least protect yourself so you're not destroyed by it. Right.
Speaker 1 (32:06):
You know what active management. It's been pillary, it's been
excoriated in the past, and maybe even need active management
in prior eras eras, but you need it now. You
need to be able to move quickly and adroitly between
periods of dist inflation, deflation and depression recession to what
(32:32):
I what I see happening in the in the not
too distant future, an era of acute and protracted stagflation
like we've never before seen or suffered in this country's history.
That's what I see happening. So we you know, and listen,
you know if you don't, if you don't have immigration,
And I'm all for closing the borders and knowing who's
(32:53):
in this country. So don't get I'm not a political country.
Speaker 3 (32:56):
You're not an open borders guy.
Speaker 1 (32:58):
No, I'm not an open border but I'm saying the
borders were wide open under Biden. Millions and millions per anom.
Speaker 3 (33:05):
Coming millions supposedly, but nobody knows.
Speaker 1 (33:08):
Yeah, millions of people coming into the labor force, and
then the government doing most of the hiring. And you
go from two hundred and three hundred thousand jobs a
month to you know, twenty two thousand jobs a month.
And that's a natural function of closing the border. But
that's half of your input to GDP growth, and crashing
acid prices aren't actually really good news for GDP growth either.
(33:30):
So I envisioned a period where GDP growth crashes and
acid prices absolutely plummet. So in the next ten years,
it wouldn't surprise me if we ended up flat in
nominal terms or thereabouts in ten years, with a period
of time where in nominal terms the stock market goes
down fifty percent, And if you can time that reasonably, well,
(33:53):
you know, instead of waiting a decade to get even
or more, you can actually have the capital to be
deployed at the appropriate moment when they reliquify the banking
system where you can actually enjoy that one hundred percent
ride back to even remarkable.
Speaker 3 (34:08):
All right, Well, that's something to definitely think about. You
got to take a look in the mirror, decide your
risk tolerance. Sometimes the biggest risk is not doing anything,
and I think a lot of people are going to
be stuck there. Michael. If you got any questions for
Michael myself, shoot me an email klat Kerrie Lutz dot com.
(34:29):
The link to Michael's site is in the show notes
of this interview. And we're no longer doing a website.
We're doing a substack. Honestly, websites just became too big
a pain. The thing breaks all the time gets hacked.
Substack I could write articles, produce videos, produce audios, and
(34:50):
it manages my email list. Can't beat that. Michael, appreciate
you coming on as always and we will definitely catch
up with you next month.
Speaker 2 (34:59):
Thank you, Gery, thanks for listening to Carrie Letz's Financial
Survival Network, your solution to today's trying times. For the latest,
go to Financial Survivalnetwork dot com. Financial Survival Network
Speaker 1 (35:13):
Now more than ever,
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