Michael Pento: 3 Massive Asset Bubbles Threaten To Take Down Our Fragile Economy

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**Michael Pento** (0:59)
So the home prices are now starting to roll over, and that's because they've been in a massive bubble. It's part of the triumvirate of bubbles. One is credit, one is real estate, and one is equities. The system is so fragile, given the level of debt and this deformation of asset prices and the formation of asset bubbles that you just can't close your eyes and go to sleep and think you're going to have a fun retirement. It's not going to happen.

**Adam Taggart** (1:36)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. When today's guest was last on his channel back in March, he warned that the stock market was at risk of a double-digit drop. Well, he was soon validated as stocks then fell 20% over the next month. Since then, markets have rocketed back to new all-time highs. So what does his model tell us is likely to happen from here? To find out, we've got the great good fortune to welcome back to the program, money manager Michael Pento. Michael, thanks so much for joining us today.

**Michael Pento** (2:08)
Adam, it's always a pleasure to be with you. I'm looking forward to a great interview.

**Adam Taggart** (2:12)
Thank you. Well, same here, my friend. I wish we had recorded some of the discussion we just had before turning the camera on here. Michael, you are a Renaissance man. And every time I talk with you, we peel back additional layers of the things that you can do. And it is so impressive. But let's focus on the skill that you're best known for, at least amongst this audience, which is your ability to peer out into the macro future and divine what's going to happen next. Let me ask you this. So I kind of set in the intro there the fact that you were nervous. The market did correct briefly. Then it's rocketed back here to new highs. Was that the correction you were worried about or was that just the opening salvo?

**Michael Pento** (2:56)
OK, so let's just go back a little bit in history so I get some context of what I have to say. So during most of 2024, I was mostly bullish. I had a rather unusual proportion of my assets were long stocks throughout most of 2024 In December of 2024, I greatly reduced my positions, my long positions. I was still long, but I greatly reduced them. It was about 10% long US assets. And the reason was because not that I knew that Liberation Day tariffs were going to knock the heck out of the stock market, I just knew based on valuation metrics that I look at, and based on the fact that the T-bill rate yielded higher than what you can get on an earnings yield, I just didn't think there was much risk, the risk reward wasn't there for me and my clients. So, I greatly reduced my position. And that's why we were making money in the first quarter when the market was heading down. And then April 2nd came along. And because we had these Liberation Day tariffs that were so onerous, the sectors in my model, I have five sectors, five inflation sectors that range from deflation, disinflation, stasis, to reflation, to hyperinflation.
Those are the five sectors. And each sector has their own stocks, bonds, commodities, currencies, that you can choose from, backtested, which works best in each condition. But they're not supposed to hop around like Mexican jumping beans. If I could say that. I don't know if I'm in trouble now for saying that.

**Adam Taggart** (4:45)
You're fine. You're fine.

**Michael Pento** (4:47)
Thank you, Adam.

**Adam Taggart** (4:47)
We have a highly tolerant audience here.