First A Crash, Then the Mother of All Responses
This is a follow-up to my original Adam Taggart-Michael Pento confab post, a few posts ago. It covers a second video which continues the original video dialogue between Taggart and Pento which my first post introduced.
In this one, Pento outlines what he sees as our entire upcoming financial trajectory. Right or wrong, this can only make one THINK.
So, here are some INITIAL thinking points.
- Politicians will do NOTHING to prevent a crash. They will only “go big” following one. As Pento implies, they are EX POST FACTO animals. Too little, too late.
-
Traders will short the bond market once they realize that the Fed/Treasury has no choice but to continue indefinite stimulus.
-
Inflation will go MUCH, MUCH HIGHER which will CHECKMATE THE FED.
- Because in an inflationary period — particularly when there is a crisis — the Fed can’t FIX THINGS by creating MORE INFLATION.
This next section delves deeper into where we’ve just been, are and are likely headed:
- The balance sheet will NEVER BE DRAINED. We are permanently monetizing debt. We’ve handed money to people for the first time in history. It’s led to rapid inflation.
- The next crisis will have “inflation that will pop your eyes out.” We will have “an insolvent country with intractable inflation.” So, yields have to go MUCH HIGHER.
- Returning to normal now would create an UNIMAGINABLE DEPRESSION. We’ve been living in a fantasy world predicated on central bank monetizing of debt.
- The next crisis will be temporarily deflationary and then UNBEARINGLY INFLATIONARY. While hyperinflation is unlikely as the dollar is sound enough versus other currencies, inflation in multiples of 100 percentage points is possible. “LET’S SEE WHAT BOND YIELDS DO THEN.”
So what sectors does one want to be in and when? Here’s what Pento recommends:
- Today, position for disinflation. Bonds and bond proxies (utilities, REIT’S, convertibles, preferred shares, etc.)
- No high levels of cash yet.
- Don’t invest for inflation yet either as the Fed hasn’t even set a date for tapering.
- Go with gold during disinflation as it does well when real interest rates fall, but realize that it will underperform in deflation. Afterwards, with the onset of serious inflation, gold will ROCKET.
I’ll stop here as this is roughly the point where Taggart and Pento ran out of time, and, mercifully, I stopped typing.
Anyway, I’M SURE YOU GOT ALL OF THAT. But the one thing none of us got — nor will we ever — is the ACTUAL TIMING FOR ALL OF THIS TO HAPPEN — assuming it happens at all. Still, Pento has made a compelling case for DISINFLATION, DEFLATION and ROARING INFLATION.
Let’s pray for some DEUS EX MACHINA intervention to mitigate some of the very worst that could result from a scenario, such as this actually occurring.