Mike Gleason: It is my privilege now to welcome back Michael Pento, President and founder of Pento Portfolio Strategies. Michael’s a well-known money manager, market commentator and author of the book, The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market. He’s been a regular guest with us over the years and we always love getting his fantastic insights.
Well, we’re having a hard time seeing a big move higher in metals prices until one of two things happen. We’ll start here. The first would be a pickup and safe haven demand. In our view there is too much investor complacency given the circumstances as has been the case for a while now, equity market valuations are sky high. Now we’ve got an election coming up, and there is at least some chance our next president will be an avowed socialist. This does not seem like the time for investors to be all in on risk trades, but we suppose the only thing that really matters is the Fed. They are going to do whatever it takes to keep the party in the stock markets going.
But what are your thoughts? Are we likely to see the markets get a wakeup call anytime soon or is the Fed likely to maintain complete control for the foreseeable future? Let’s start there.
Michael Pento: What a great question. Geez, you hit me over the head with a, a big anvil. That’s the $20 trillion question. I mean, can the market continue to defy gravity – and it is defying gravity, make no mistake about it. If you look at the total market cap to GDP, I look at the Wilshire 5000, that doesn’t have 5,000 stocks anymore. I think it’s like 3,500 but it’s the widest measurement of stocks, their market cap, to the underlying economy. That ratio is now 155%. Outside of March of 2000 when it was 145 or 148 around there, it’s never been near this. The average ratio is 0.8%… 80% or 0.8 in the ratio. So 155%, 1.55% above where the underlying supporting economy is. I mean it’s never been anywhere near this outside of that epic bubble in the NASDAQ debacle where the NASDAQ lost 80% of its value.