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Michael Pento: Understanding the Stakes as Bank Term Funding Ends

Tom welcomes back Michael Pento, President and Founder of Pento Portfolio Strategies, to the show.

Michael begins by focusing on the current state of the US financial system and potential risks ahead. With the bank term funding program expiring next week, there may be stress in the banking system as banks will have to repay credit received and take back their assets. Other risks include rising unemployment rates, impacting various loan markets, and indicators such as a contraction in the manufacturing sector for 16 months, an inverted yield curve, and increasing bankruptcies. Michael suggests that the economy is unhealthy and unbalanced, favoring the wealthy while harming the middle class and lower-income individuals.

Michael feels there’s potential for another liquidity crisis in the US banking system. While the Fed could implement measures like another bank term funding program, it would be problematic amid high inflation, potentially leading to higher long-term interest rates, increased borrowing costs, and a sovereign debt crisis. He argues that options for addressing a liquidity crisis are limited and any measures taken may have unintended consequences.

Mr. Pento believes we’re in a bubble economy due to excessive money printing and low interest rates. Pento expects inflation to continue to rise, leading to a recession and potentially a serious bear market for stocks.

Pento discusses the relationship between gold and Bitcoin, suggesting that Wall Street and the general public have been more focused on Bitcoin due to its higher profile and influence of sponsors in financial media. He believes gold is a more reliable store of value and better hedge against inflation than Bitcoin. Michael advises investors to pay attention to economic cycles and consider active steps for protection, like diversifying into precious metals and actively managing your investments.

Time Stamp References:
0:00 – Introduction
0:37 – Fed & Liquidity Levels
3:39 – Bitcoin Tangent
6:14 – Fed BTFP Program End
9:38 – Unemployment & Banks
11:48 – Economy & Manufacturing
14:58 – Debt, Defaults, & Problems
19:52 – Fed Inflation & Printing
25:00 – Good Intentions & Roads
27:10 – Gold Positioning & Rates
30:20 – Hype Train & Bitcoin/Gold
32:37 – Miners Vs. Physical
34:18 – Avoid Losing Money!
36:39 – Wrap Up

Talking Points From This Episode

  • Bank term funding program expires shortly which may cause increased stress in the banking system as banks must repay credit and reclaim assetss.
  • Potential risks to financial sector include rising unemployment rates, impact on loan markets, and multiple negative indicators.
  • Limited options exist for the Fed to address a liquidity crisis, and any measures taken could have unintended consequences.

Guest Links:

Michael Pento is the President and Founder of Pento Portfolio Strategies with more than 30 years of professional investment experience. He worked on the floor of the NYSE during the mid-90s. Pento served as an economist for both Delta Global and EuroPacific Capital. He was also the portfolio creator and consultant to Delta/Claymore’s commodity portfolios, which were distributed through Claymore/Guggenheim’s sales network.

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