Great Recession 2.0? | Michael Pento

**Michael Pento** (0:00)
I think that we're gonna have something similar to the preamble to the global financial crisis, where we had oil was shooting up at $140, $150 a barrel. And then you had just the American consumers just shut down, and prices were crashing. But the prices, that's when CNBS will say, well, look, the oil prices are down, aren't we happy?
Deflation is coming, disinflation is happening now. And no, that's because we have the meltdown of the triumvirate of bubbles. The credit cycle has ended and we're in for a recession.

**Adam Taggart** (0:41)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. In the past, today's guest expert has warned that a triumvirate of three massive asset price bubbles in credit, real estate, and stocks has threatened to take down our fragile economy and dash the retirement hopes for millions. Now, the oil price spike resulting from the war in Iran certainly can't be helping this situation. So will this triumvirate of bubbles pop in 2026? To find out, we've got the great good fortune to welcome money manager Michael Pento back to the program. Michael, thanks so much for joining us today.

**Michael Pento** (1:16)
It's always a great pleasure to be with you, Adam.

**Adam Taggart** (1:19)
Well, my friend, right back at you. The audience here has been really waiting for your return. So glad we're finally making that happen. Let's just roll up our sleeves and get right into it, Michael. There's a lot going on in the world right now. A lot of it a challenge to those bubbles that I mentioned of yours in the intro there.
I want to get real quickly to what you think how the Iran war is affecting your outlook. Real quick, we'll talk more about this later on, but your model, your proprietary 20 indicator model that you put together and manage your capital by, it has five sectors. And if I've done my notes right, sector one is sort of disinflation, deflation. Sector two is mild disinflation. Sector three is stasis. Sector four is reflation. And sector five is stagflation or intractable inflation. So basically a spectrum of on the one end, things really deflating, on the five end, things really inflating. What sector does your model have us in right now?

**Michael Pento** (2:28)
Thank you for taking such good notes, by the way. I appreciate that.

**Adam Taggart** (2:30)
No worries.

**Michael Pento** (2:32)
But here's a point, in sectors one or in sectors five, it's usually, in real terms, you're losing money. So it's not like you're booming on sector five, which is stagflation. Stagflation is good for some stocks and really bad for others. But honestly, Adam, I want to say sector five, but it depends on the president's social media account on the day that he... Just being honest with you, I mean, oil is crashing, oil is surging.
As of this recording, I believe WTI was up 11 and a half percent.

**Adam Taggart** (3:05)
Since his speech last night.

**Michael Pento** (3:07)
Yeah, since his speech last night about the war is over and we're heading home, and then we don't have to open up the Strait of Hormuz, but maybe it'll open up on its own. But now we're going to be there another month and we're going to bomb them back to the Stone Age with alacrity.
So, it depends on... But basically, I'm going to give you my allocation sometime in the program. I'm sure you'll ask where it will be. I'll be very specific. But we're kind of like in a hybrid between kind of like a very defensive side and also some stagflation hedges as well. So that's the best way I can answer that question.

**Adam Taggart** (3:44)
Okay, that's really interesting because in all my time interviewing you, Michael, I don't remember previous time where it was sort of bifurcated like this. And obviously, the longer we stay in Iran, the longer the oil prices remain elevated or even higher, the more Sector 5, it'll be, correct?

**Michael Pento** (4:07)
So, just to be, say, to nail it down even more. So, we're primarily in Sector 5 with some aspects of Sector 1 being short-term bonds, very high bonds, just because the level of uncertainty and the stochastic nature of what's happening right now, you just have to be more... I got more defensive in the portfolio starting January 28th. I've got 1,100 client accounts that can vouch for me. And I've been getting more and more defensive up until, you know, up to and including this morning.

**Adam Taggart** (4:38)
Okay.

**Michael Pento** (4:39)
More defensive. And I want to get into... I want to get into some of the reasons. But so basically, there's long-term secular trends with GDP and the economy that led me to believe that we're going to have a much more difficult time making money in the stock market in real terms than we have had since 1980 So, you know, 45 years has been a very robust bull market, and I'll give you some details on that. But basically, we are a debt-disabled... These are long-term secular headwinds. We're a debt-disabled economy. We have as much debt as a percentage of GDP today as we had entering to the global financial crisis.