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Michael Pento On Gold, Inflation, and Interest Rates

CrownThomas's picture




 

One of the few sane economists out there is Michael Pento of Pento Portfolio Strategies (formerly of Peter Schiff's Euro Pacific Capital).

Here is an interesting interview he did with Bloomberg back in December where he discusses his typical range of topics: Gold, Inflation, and Interest rates

 

Notable comments:

  • Half of the DXY is against the EURO, so that's the headwind for gold, but the tailwind for gold still is the fact that we have negative real interest rates & they probably won't rise for a very long time
  • M2 is up 10% YOY
  • QE3 will come in Q2 FY'12, which will be another tailwind for gold
  • Nominal GDP is rising, you take out a legitimate rate of inflation, and we are in a recession
  • U.S. and Europe = Stagflation
  • How long can an investor accept a negative real return after interest and taxes? A buyer strike of an Auction and you'll see yields rise just as they did in Greece and Italy. It's going to happen in this country
  • People are always talking about the tremendous amount of cash on the corporate balance sheets. What about the tremendous amount of debt on corporate balance sheets? They have $7.6 Trillion dollars of debt on their balance sheets. What happens to that debt when interest rates rise & they have to roll over that debt

 

 

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Thu, 02/09/2012 - 13:35 | 2142497 Gold Dog
Gold Dog's picture

Let me get this straight. You guys think there is some sort of economic problem in the world today?

Maybe I will redouble my efforts to find my PM's at the bottom of the lake.

Thu, 02/09/2012 - 13:37 | 2142513 RichardENixon
RichardENixon's picture

You mean that gold I found when I was swimming yesterday was yours? Damn.

Thu, 02/09/2012 - 12:14 | 2141970 bigwhiffa
bigwhiffa's picture

I wonder what percentage of US mortage holders will go into foreclosure when interest rates rise 1%?

On the other hand...

I wonder what percentage of US corportations will go bankrupt when interest rates rise 1%?

Could this be a major reason why rates are artificially held so low? 

Sat, 02/11/2012 - 01:19 | 2148752 narnia
narnia's picture

The interest rate swap market is increasing at $100T per year. This $700T market explodes at some rate lower than 7%.

They will print until the $ gives way then roll out the SDR. They aren't gonna let rates rise.

Thu, 02/09/2012 - 12:29 | 2142057 Nothing To See Here
Nothing To See Here's picture

All good points, and you see the dead-end right there. But even worst than home owners and corporations are all those government bodies, from federal to state to muncipal level, whom have even worst ratios and whom will collapse when rates rise unless the Fed prints. Since nobody can afford a rate rise, the central bankers are stuck in their own mess while low interest rates only spur more borrowing. The death spiral is well underway.

Thu, 02/09/2012 - 13:47 | 2142578 SWRichmond
SWRichmond's picture

The approaching end game is evident.  There is no way out.  It is a mess made of, by, and for the banksters.  Bernanke will destroy the dollar, and then, once the old debt burden is sufficiently inflated away, we will have a new Volcker who will "save the dollar."  Sometime after the new war, which will look a lot like the old wars.  The question is: what will they replace the petro dollar with?  What will the new "deal" be? 

Thu, 02/09/2012 - 13:00 | 2142265 fonestar
fonestar's picture

Love the sight of bankers painting themselves into the corner.  As for the rest of the population?  Nobody put a gun to their head and forced them to accept FRNs.  They will be stupid enough to accept any new caligraphy adorned confetti too.  Fuck 'em!

Thu, 02/09/2012 - 11:34 | 2141761 Canadian Dirtlump
Canadian Dirtlump's picture

The only thing I'm qualified to comment on is that his eyes seem to be unusually close together..

 

In other news, I'm more of a silver tard.

Thu, 02/09/2012 - 10:58 | 2141478 ShankyS
ShankyS's picture

Thanks CT - I've missed MP since he got the boot from CNBS for tlling the truth. 

Thu, 02/09/2012 - 10:05 | 2141318 FoieGras
FoieGras's picture

Pento sounds about as clueless as his mentor Peter Schiff.

Thu, 02/09/2012 - 10:54 | 2141493 Milton William ...
Milton William Cooper's picture

clueless all the way to the bank troll

 

http://www.youtube.com/watch?v=2I0QN-FYkpw

Thu, 02/09/2012 - 10:12 | 2141346 Bastiat
Bastiat's picture

A devastating critique!

Thu, 02/09/2012 - 14:43 | 2142875 NotApplicable
NotApplicable's picture

I'm sold!

Really, how could one counter such a persuasive argument?

Thu, 02/09/2012 - 09:53 | 2141251 Shizzmoney
Shizzmoney's picture

What about the tremendous amount of debt on corporate balance sheets?

Well, when interest rates rise, then the piper will come knocking on their door to collect.  And that's when mass layoffs happen. 

Of course, we can slowly be syphoned of our wealth blood by the monetary IV that is the Federal Reserve.  But that's not sustainable, either, as it drains on wages/savings and investments/food and oil prices. 

Classic irresistable force meets immovable object.  Something has to give.

Thu, 02/09/2012 - 10:04 | 2141315 ljag
ljag's picture

Something has to give.

 

Yeah, your blood will do just fine.

Thu, 02/09/2012 - 08:12 | 2140987 MFL8240
MFL8240's picture

What about the tremendous amount of debt on corporate balance sheets?

 

Come on Mike, debt is an asset in corporate America (look at the bank’s balance sheets), wake up!  Up is down, right is left, wrong is right and well you get the picture in the new clown show masquerading as Corporate America.

Thu, 02/09/2012 - 02:28 | 2140849 Georgesblog
Georgesblog's picture


Ok, let’s see if I understand this. We’re supposed to look to the trends to understand where the economy is going. Please bear with me, while I try to get through this, without losing any vital bodily fluids. I’ll start at the beginning.  ...

http://thedailyclimb.wordpress.com/

Thu, 02/09/2012 - 01:23 | 2140740 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I respect Michael as much as anybody, but the balance sheets are spread out wide, and that is why cash and debt do not matter.  Lots of cash, lots of debt, 'nuff said, time to get a drink.

Interest rates are not rising ever, and the Fed has their bases covered.  The PDs can buy with the bailout dollars and then flip them back to the Fed.  It's an easy ponzi scheme.

His question should be more specific; what happens when an international investor no longer accepts a bond auction?  The indirect demand is what I am waiting for to fail, but they need to keep the ponzi going as long as anyone else, which is why a hyperinflationary scenario is....wait for it....

PRICED IN.

Thu, 02/09/2012 - 14:42 | 2142865 NotApplicable
NotApplicable's picture

"what happens when an international investor no longer accepts a bond auction?"

Why they create supra-national investors, duh. ;-)

Thu, 02/09/2012 - 13:35 | 2142503 RichardENixon
RichardENixon's picture

Lennon, I'm confused about your statement re balance sheets. Pento is pointing out that the cash on the balance sheet is borrowed money. You seldom hear this reported, but it is significant. What are you getting at?

Thu, 02/09/2012 - 12:35 | 2142102 LawsofPhysics
LawsofPhysics's picture

Yes, then through some supply line disruptions in there and things get interesting.

Thu, 02/09/2012 - 01:01 | 2140700 wagsthadog
wagsthadog's picture

Michael Pento is Peter Schiff with a black wig.

Thu, 02/09/2012 - 10:53 | 2141490 Milton William ...
Milton William Cooper's picture

which is still better than anyone else

Thu, 02/09/2012 - 00:54 | 2140683 Oracle of Kypseli
Oracle of Kypseli's picture

Bernanke does not give you many options to invest. Clever! But people do not necessarily react the way he wants them to. The chaos theory overwhelms the herd mentality and Bernanke is snookered waiting for something to happen. Good luck Benny. Get your glock ready to blow your brains when she blows.

Thu, 02/09/2012 - 14:39 | 2142853 NotApplicable
NotApplicable's picture

You don't understand. When she blows, Bennie gets his windfall bonuses (free loot for the taking).

To believe he is trying to manage anything other than the blow-up is to misunderstand their lack of options. Destruction is the only option they have, so they rig it all up, hoping for a controlled demolition, all while undermining any competition.

Thu, 02/09/2012 - 00:37 | 2140655 euphoria
euphoria's picture

Shhh.. Don't wake the sheeple..

Thu, 02/09/2012 - 10:54 | 2141498 Pladizow
Pladizow's picture

Pento = Anti-Ponzi Economist

Do NOT follow this link or you will be banned from the site!