1 00:00:00,400 --> 00:00:06,120 But when interest rates were falsified for so long, near zero percent for most 2 00:00:06,120 --> 00:00:10,480 of the last fourteen years, borrowing courts were free, and debt levels ballooned 3 00:00:10,800 --> 00:00:14,240 and asset prices went to the moon. When you try to return to a 4 00:00:14,320 --> 00:00:17,920 normal market, chaos breaks out. You saw that in March when the FED 5 00:00:18,000 --> 00:00:21,079 had the rescue of the entire US banking system, and you're seeing it today 6 00:00:21,160 --> 00:00:25,559 as bond market fractures and implodes and Joe Biden's walk in the picket line. 7 00:00:25,640 --> 00:00:31,280 You're listening to Carrie Letz's Financial Survival Network where you get valuable information you just 8 00:00:31,359 --> 00:00:37,000 can't find anywhere else to thrive in today's trying times. You need the Financial 9 00:00:37,119 --> 00:00:43,200 Survival Network now more than ever. Go to Financial Survivalnetwork dot com and get 10 00:00:43,240 --> 00:00:53,200 your free newsletter and gift. Financial Survival Network now more than ever, and 11 00:00:53,399 --> 00:00:58,079 welcome. This is Financial Survival Network. Come your host, Carrie Letz. 12 00:00:58,280 --> 00:01:02,000 We're coming to you on the third day of October. In twenty twenty three, 13 00:01:02,560 --> 00:01:07,239 Will AI save us? It's going to take an AI based miracle. 14 00:01:07,640 --> 00:01:11,040 According to my next guest, Michael Pento, you find him at pentoport dot 15 00:01:11,079 --> 00:01:17,439 com. If you got a question for Michael myself kl Atkarrie LUTs dot com. 16 00:01:17,480 --> 00:01:22,040 Please and if you're on YouTube, please like, share, subscribe, 17 00:01:22,560 --> 00:01:26,159 all that good stuff. Leave your comments below, Michael. So we're approaching 18 00:01:26,200 --> 00:01:30,760 an existential moment here, aren't we? Good to be on with you as 19 00:01:32,040 --> 00:01:34,400 always? Kerry. You know I'm going to say this on my podcast, 20 00:01:34,439 --> 00:01:40,040 I'll say it here first. You know, Nero fiddle while Rome burns, 21 00:01:40,519 --> 00:01:42,280 and he've been to ride in throughout history for doing that, as well as 22 00:01:42,319 --> 00:01:48,239 many other things. We am a president here who went to a picket line 23 00:01:48,680 --> 00:01:53,439 while the US bond market was creating. And that's where I think the rubber 24 00:01:53,480 --> 00:01:56,319 meets the road here. I think the most salient thing you have to think 25 00:01:56,359 --> 00:02:00,680 about now as an investor is what's happening with US bond yields. We have 26 00:02:00,719 --> 00:02:09,520 a condition now where the faith in the world's reserve currency end our sovereign debt. 27 00:02:09,759 --> 00:02:15,120 It is fracturing, eroding, eroding, and cratering right before our eyes. 28 00:02:15,479 --> 00:02:20,840 All right, So give us examples of what's taking place, the carnage 29 00:02:20,960 --> 00:02:23,639 in the bond market, and what do you do about it? Well, 30 00:02:23,719 --> 00:02:27,840 I'm I'm well, I will short the bond market when I have to. 31 00:02:27,919 --> 00:02:31,039 I what I did first of all, is on August first, I sold 32 00:02:31,159 --> 00:02:36,479 all of my long duration bond exposure. We have no long duration bond exposure 33 00:02:36,479 --> 00:02:39,400 at all. We're rolling tea bills here, pentupport and very very short term 34 00:02:39,759 --> 00:02:44,680 US government debt. That's the first thing you should have done. And let 35 00:02:44,719 --> 00:02:46,879 me explain to you what the process is, what the problem is that we're 36 00:02:46,919 --> 00:02:53,680 saying here. So first of all, this inflation which I called for to 37 00:02:53,759 --> 00:02:58,439 occur in twenty twenty three, which we did indeed have where inflation went from 38 00:02:59,000 --> 00:03:02,520 nine percent CPI inflation went from nine percent to three percent, is now coming 39 00:03:04,159 --> 00:03:07,759 to something called reflation, so three percent to three point seven percent on the 40 00:03:07,800 --> 00:03:12,879 headline figure. So we no longer have a condition where inflation is the second 41 00:03:12,919 --> 00:03:16,439 derivative is falling. We just have a rate of change. Increase in inflation 42 00:03:19,479 --> 00:03:22,840 and increase you at a faster rate. So that's number one. Number two. 43 00:03:22,879 --> 00:03:25,240 If you listen to the Atlanta Fed, sometimes they do sometimes I don't. 44 00:03:25,280 --> 00:03:29,159 I mean they pull them this five percent four point nine percent to be 45 00:03:29,199 --> 00:03:37,039 exact headline figure for Q three GDP. That's an acceleration in GDP. So 46 00:03:37,080 --> 00:03:42,199 you no longer have falling GDP. You no longer have disinflation. Those were 47 00:03:42,520 --> 00:03:45,560 things that would make you want to buy the long end of the bond market. 48 00:03:45,719 --> 00:03:51,360 Get gets a lot worse carried. China has been a seller of our 49 00:03:51,479 --> 00:03:54,800 treasuries. Their reserves are parked in US dollars, and those dollars are parked 50 00:03:54,800 --> 00:03:58,759 in US treasuries. When you want to get out of US treasuries because you 51 00:03:58,840 --> 00:04:02,280 might be wanting to invade Taiwan, Okay, you sell your treasuries. You 52 00:04:02,319 --> 00:04:05,719 don't only want to be a victim of US dollar hedge of money. Sell 53 00:04:05,759 --> 00:04:11,400 treasury lip and all that good stuff, right exactly, Sell dollars, buy 54 00:04:11,400 --> 00:04:15,400 back your currency, get out of the US dollar grip, the grip of 55 00:04:15,439 --> 00:04:18,000 the US dollar and the US government. It's worse in Japan. They have 56 00:04:18,040 --> 00:04:21,600 two things that they're doing. One is they're selling US treasuries for the very 57 00:04:21,639 --> 00:04:26,079 same reasons, not Taiwan, but they just don't want to have be exposed 58 00:04:26,079 --> 00:04:30,560 to US dollar hedgemoney. But they have to sell their recurrency, currency reserves 59 00:04:30,040 --> 00:04:34,240 because their in is craishing. It took one hundred and fifty en to buy 60 00:04:34,279 --> 00:04:40,560 one dollar this morning. I mean their currency is absolutely crashing because they have 61 00:04:40,560 --> 00:04:45,639 this acidine yield curve control. You know, Governor Yuado over there in Japan 62 00:04:45,759 --> 00:04:49,720 saying, uh, you know, inflation is not just sustainably at our target 63 00:04:49,800 --> 00:04:55,560 level. It's been above their target for months on end, way above their 64 00:04:55,720 --> 00:04:58,959 or. But he just lies and he says, we know, I don't 65 00:04:59,000 --> 00:05:02,920 believe it'll be able to stay there, So we're going to cap yields at 66 00:05:03,079 --> 00:05:08,399 point seven percent. It was capped at a quarter percent, and now they're 67 00:05:08,560 --> 00:05:13,759 point seven percent point seven percent for a ten year Jerry. The inflation rate 68 00:05:13,800 --> 00:05:16,240 in Japan is eight percent. If you look at their food prices, booing, 69 00:05:16,319 --> 00:05:21,040 God's good Earth is going to buy a Japanese yen, a Japanese government 70 00:05:21,079 --> 00:05:27,040 bond other than the thanks your paying. Yeah, so they're buying all, 71 00:05:27,120 --> 00:05:30,879 They're buying everything to keep those yields. But those yields are rising. They 72 00:05:30,879 --> 00:05:35,079 have to rise because the end is getting destroyed. So they have to have 73 00:05:35,399 --> 00:05:40,160 some kind of comparison, you know, definitely sort of a little more amends 74 00:05:40,240 --> 00:05:44,120 for it with ten year at four point seven percent here in the United States. 75 00:05:44,199 --> 00:05:46,800 Otherwise their courrency is going to collapse. So they have an inflation problem. 76 00:05:46,839 --> 00:05:49,680 We've got a currency problem. They're sellers, I don't let me. 77 00:05:49,959 --> 00:05:54,240 Can I just finish this through the very points. Yeah, it's really very 78 00:05:54,240 --> 00:05:58,879 important port Info. Oh you got so. Now you have those those conditions 79 00:05:58,920 --> 00:06:03,240 of higher inflation, you have GDP of five percent, Corney Alanta Fed, 80 00:06:03,279 --> 00:06:09,000 You've got Japan selling, You've got China selling for Japan selling for two reasons. 81 00:06:09,120 --> 00:06:14,480 Then you have this massive issuance in supply. We are running two trillion 82 00:06:14,560 --> 00:06:23,680 dollar annual deficits in peace time and when growth is accelerating. This is incredible 83 00:06:23,720 --> 00:06:28,839 to me. The amount of supply that the US is dumping on the market 84 00:06:29,120 --> 00:06:34,279 is rising very quickly. Who's going to buy it? Who's going to buy 85 00:06:34,319 --> 00:06:38,399 it? Who's going to buy Well, here's the thing you just said it. 86 00:06:39,160 --> 00:06:43,920 Who's going to buy it? The Federal Reserve was buying eighty five billion 87 00:06:43,959 --> 00:06:49,040 dollars a month of US debt QE and they falsify the entire treasury market. 88 00:06:49,680 --> 00:06:54,800 I mean they monetize four trillion dollars of debt. Since COVID broke out, 89 00:06:55,800 --> 00:06:59,639 we had no MORTGT for treasuries. Now the FED is selling their balance sheet, 90 00:07:00,160 --> 00:07:02,879 adding to the supply from China and Japan. People ever, you know, 91 00:07:03,040 --> 00:07:09,759 boycotted and US debt and they're selling eighty five billion a month in US 92 00:07:09,759 --> 00:07:14,360 debt. So this is what is we're now discovered. This is called price 93 00:07:14,439 --> 00:07:18,720 discovery. Oh, let's have a real market's let's fight inflation. Well great, 94 00:07:18,879 --> 00:07:24,839 I lawned you. Compliments to you for trying to go down that road. 95 00:07:25,480 --> 00:07:30,199 But when interest rates were falsified for so long near zero percent for most 96 00:07:30,240 --> 00:07:34,600 of the last fourteen years, borrowing courses were free, and debt levels ballooned 97 00:07:34,879 --> 00:07:39,319 and acid prices went to the moon. When you try to return to a 98 00:07:39,399 --> 00:07:43,040 normal market, chaos breaks out. You saw that in March when the FED 99 00:07:43,120 --> 00:07:46,439 had to rescue the entire US banking system, and you're seeing it today as 100 00:07:46,639 --> 00:07:49,720 bond market fractures and implodes. And Joe Biden's walk in the picket line, 101 00:07:49,800 --> 00:07:54,439 Well, it's probably the best use of his time at this point, right, 102 00:07:54,480 --> 00:07:58,519 Michael, Well, we share politic say it, listen. I am 103 00:07:58,759 --> 00:08:03,720 I'm not a rebut Atletico this is I hate both parties, but I mean, 104 00:08:03,720 --> 00:08:07,879 if any can do anything to help, I mean, what is he 105 00:08:07,959 --> 00:08:11,319 doing to bring down the price of energy? You know, he's he's walking 106 00:08:11,360 --> 00:08:18,720 the picket line in support of the United Order Workers Union to to fight for 107 00:08:18,399 --> 00:08:24,800 higher wages because of the inflation that he helped bring about, and it is 108 00:08:24,839 --> 00:08:28,600 the cause of of a great deal of the inflation that we have today. 109 00:08:28,639 --> 00:08:31,919 Of course, Donald Trump borrow a lot of money too, But the two 110 00:08:31,919 --> 00:08:37,320 of them, Biden, what was his reason for, you know, his 111 00:08:37,320 --> 00:08:45,879 his money spending fiscal madness. He borrowed money like a drunken monkey. What 112 00:08:46,080 --> 00:08:50,360 for there's no reason for it to fight it. He borrowed money and increase 113 00:08:50,399 --> 00:08:56,399 the debt to fight inflation. Give me a break. Yeah, unbelievable. 114 00:08:56,480 --> 00:09:03,440 Huh So, so you've sold out your positions in the debt. Is this 115 00:09:03,600 --> 00:09:07,919 debt inferno gonna spread to corporate bonds as well? Uh? When does it 116 00:09:09,080 --> 00:09:11,639 end? I guess that's the question. Oh, come on, I mean 117 00:09:13,080 --> 00:09:18,000 if if US debt. So, we were at zero point five percent in 118 00:09:18,080 --> 00:09:20,960 the in the immediate week of COVID, Now we're four point seven percent. 119 00:09:22,000 --> 00:09:28,120 I'm talking about the benchmark US ten year note. But the spread between treasuries 120 00:09:28,320 --> 00:09:33,919 and junk bonds has written. It's kind of around four point one percent as 121 00:09:33,960 --> 00:09:39,039 we record this video, very very tight. Gary. When when when when 122 00:09:39,039 --> 00:09:45,559 the when the market loses faith in the purchasing power of the currency and the 123 00:09:45,639 --> 00:09:50,519 sovereign bond market. There isn't any way in God's good earth that you're gonna 124 00:09:50,559 --> 00:09:54,159 tell me that high yield it isn't gonna absolutely blow up. Listen, it's 125 00:09:54,200 --> 00:10:00,320 true that consumers and businesses have turned out their debt. That that's true. 126 00:10:00,399 --> 00:10:01,399 I'm not gonna. I'm not gonna. I'm not going to say that they 127 00:10:01,399 --> 00:10:07,879 have not done that. But the fact is that there is a one point 128 00:10:07,919 --> 00:10:16,000 eight trillion dollar refinancing wall coming very soon in the corporate bond market in twenty 129 00:10:16,120 --> 00:10:18,360 twenty four, twenty twenty five. We have to start rolling over this debt, 130 00:10:18,799 --> 00:10:22,200 okay, and it's going to be rolled over at much higher interest rates. 131 00:10:22,200 --> 00:10:26,879 So here's the other side of that. There's three sides to that coin. 132 00:10:26,000 --> 00:10:30,320 So there is a maturity wall coming. So you say to me, 133 00:10:31,159 --> 00:10:35,480 the parables say, well, you know, the consumer has turned out its 134 00:10:35,480 --> 00:10:39,120 debt. It borrowed money to buy a house at three percent, and they're 135 00:10:39,159 --> 00:10:41,159 good, good, And then I say to you, I say, well, 136 00:10:41,320 --> 00:10:45,679 what you were saying to me is that nobody has to buy a house. 137 00:10:46,200 --> 00:10:50,320 No one has to move because they don't want to change their mortgage from 138 00:10:50,360 --> 00:10:52,519 a three percent loan to an eight percent loan. We're almost an eight percent 139 00:10:52,519 --> 00:10:56,480 now in mortgage rate. And then I'm gonna say to you that this does 140 00:10:56,600 --> 00:11:01,039 that mean ipso fatso that the archie bunker you used to say it that, 141 00:11:01,120 --> 00:11:09,799 by the way, that the real estate market is frozen. Oh, yes, 142 00:11:09,840 --> 00:11:11,039 the real estate arch ist frozen, mister Pentel. There's no you know, 143 00:11:11,080 --> 00:11:15,639 no one selling the existing home sales, standing homesales. Third depression, 144 00:11:16,399 --> 00:11:18,679 Well, does that mean that the economy really stinks? If no one could 145 00:11:18,679 --> 00:11:22,279 afford to buy a house, and no one could afford a new car loan, 146 00:11:24,720 --> 00:11:26,519 no one could afford their their credit card debt, which is at a 147 00:11:26,559 --> 00:11:31,440 record, as you know, defaultsecies, So how could you? You can't 148 00:11:31,440 --> 00:11:33,480 have it always. And here's the other thing, the third parts of that 149 00:11:35,480 --> 00:11:39,399 turn the consumer and businesses have turned out their debt. Well, who the 150 00:11:39,399 --> 00:11:45,240 hell owns this debt? It's financial entities. There are many financial entities carry 151 00:11:45,759 --> 00:11:52,039 that own commercial mortgage backed securities and mortgage backed securities and corporate debt that's yielding 152 00:11:52,720 --> 00:11:56,480 three percent, four percent, And if they had to sell it, it's 153 00:11:56,600 --> 00:12:01,039 really worth eight percent. That means the price is down, the yields up. 154 00:12:01,080 --> 00:12:05,519 It at eight which means you're way underwater on your on your assets right, 155 00:12:05,759 --> 00:12:11,440 specially borrowed, especially if you're borrowed to buy them right like banks. 156 00:12:11,440 --> 00:12:16,279 Still I'm on level. Leverage is always the is the is the is the 157 00:12:16,360 --> 00:12:20,480 killer here. So, as you pointed out, but you have many financial 158 00:12:20,519 --> 00:12:30,080 institutions that are insolvent in reality if they recognize the actual price of their commercial 159 00:12:30,080 --> 00:12:33,519 mortgage backed security, which plunged because the yield is up, they have to 160 00:12:33,559 --> 00:12:37,159 compete with the yields where they are today, there's zombies. Yeah, and 161 00:12:39,320 --> 00:12:41,559 I don't know, did have you been reading my mind? Because my next 162 00:12:41,840 --> 00:12:46,639 my next sentence was if you are well, and then then the probables will 163 00:12:46,639 --> 00:12:52,519 tell me. Well, I'm a financial institution and I sent all of my 164 00:12:52,639 --> 00:12:56,399 money, all of my assets to the said at par value. So I'm 165 00:12:56,399 --> 00:13:03,399 good for a year through the bank term fund program. Okay, wonderful, 166 00:13:03,559 --> 00:13:09,000 But I know that this is not QEI. It's a loan at a very 167 00:13:09,080 --> 00:13:13,759 high interest rate. And calm March. The FED is supposedly gonna tell me, 168 00:13:15,600 --> 00:13:18,559 uh, okay, bank, I have your corporate bonds, and I've 169 00:13:18,639 --> 00:13:24,159 got you your mortgage backed securities. I gave you par for them. You're 170 00:13:24,159 --> 00:13:28,080 gonna give me par back right hand to the dollar, and you're gonna take 171 00:13:28,120 --> 00:13:35,799 your fifty cents on the dollar asset. The banks know this, and you 172 00:13:35,840 --> 00:13:39,320 said it. These are z We have created zombie banks that you know. 173 00:13:39,679 --> 00:13:43,720 The net percentage of banks that are tightening lending standards is close to fifty one 174 00:13:43,720 --> 00:13:46,200 percent. Now. It's ource session territory and it's getting tighter and tighter every 175 00:13:46,279 --> 00:13:52,399 day because they understand that they have to take these assets back and their assets 176 00:13:52,440 --> 00:13:58,720 are underwater. So we've borrowed some time, but we have not solved the 177 00:13:58,759 --> 00:14:03,559 problem. The problem is that race went to the moon very quickly to combat 178 00:14:03,679 --> 00:14:09,080 nine percent inflation, which was really seventeen seventeen percent inflation, and the FED 179 00:14:09,120 --> 00:14:13,480 had no choice but to do that, but they ended up bankrupt, bankrupting 180 00:14:13,480 --> 00:14:18,279 the financial industry once again. So what if they start cutting tomorrow, Well, 181 00:14:18,279 --> 00:14:22,679 they could start cutting to here's the thing, another great question. If 182 00:14:22,679 --> 00:14:26,559 they start cutting tomorrow, wonderful because that's what they've done since nineteen eighty seven, 183 00:14:26,559 --> 00:14:28,279 since the crash of eighty seven. What was the Fed's playbook. I'll 184 00:14:28,279 --> 00:14:33,399 tell you you know, you can go to eighty seven long term capital. 185 00:14:33,840 --> 00:14:37,919 You can go to a two thousand, Naza collapse, two thousand and eight, 186 00:14:37,960 --> 00:14:41,759 twenty eighteen, Rebolt crisis, nineteen Rebroke crisis, and you go to 187 00:14:41,840 --> 00:14:48,320 twenty twenty the COVID crisis twenty twenty two. What the what didn't they all 188 00:14:48,360 --> 00:14:50,600 have in common? Well, the FED said, well, you know what, 189 00:14:50,879 --> 00:14:54,440 inflation is not where we needed to be anyway, and the market is 190 00:14:54,480 --> 00:14:56,759 blowing up and the economy is blowing up, so we'll just go back to 191 00:14:56,879 --> 00:15:03,919 good We'll just cut rates and buy some bonds from the best. If the 192 00:15:03,919 --> 00:15:07,840 Fed did that now they would lose well, they wouldn't lose any credibility with 193 00:15:07,919 --> 00:15:11,919 me. I already I get. I get that they have zero credibility. 194 00:15:13,200 --> 00:15:18,320 Their models think and they're there's there's no there's no information there for me to 195 00:15:18,440 --> 00:15:24,840 gain from the Fed. But if anybody else on Wall Street believes that they 196 00:15:24,879 --> 00:15:30,679 have the ability to put interest rates up to a level that's higher than inflation, 197 00:15:31,320 --> 00:15:35,200 so to provide a real interest rate for investors, that anybody would would 198 00:15:35,240 --> 00:15:37,879 still believe that it would be dead. They would now understand, they would 199 00:15:37,919 --> 00:15:45,960 be inculcated to everybody that this is this, this entity, this institution can 200 00:15:46,080 --> 00:15:50,120 never provide investors with a real interest rate, and inflation would take off like 201 00:15:50,120 --> 00:15:52,840 a rocket ship. Which I was in New York City. I think they're 202 00:15:52,879 --> 00:15:58,440 in the midst of hyper inflation there. Everything is shooting through the roof. 203 00:15:58,960 --> 00:16:03,559 I mean, a camera that a few years ago was ten bucks is now 204 00:16:03,720 --> 00:16:08,600 thirty bucks. Michael. I mean, it's it's unbelievable. And I you 205 00:16:08,639 --> 00:16:14,279 know, my one of my friends ordered a sushi from a restaurant for me 206 00:16:14,320 --> 00:16:18,440 to pick up, and you know, it was for basically three of us. 207 00:16:18,000 --> 00:16:22,679 It was one hundred and seventy five dollars. I picked up a bag 208 00:16:22,399 --> 00:16:27,759 that it was like a court ziplog bag. There was nothing in that bag. 209 00:16:27,879 --> 00:16:33,159 Michael. It was unbelievable. And it's all going to pay debt. 210 00:16:33,919 --> 00:16:37,480 Well speaking of well, exactly correct. And that's why the Fed. The 211 00:16:37,480 --> 00:16:41,639 FED has now jumped the shark with inflation. So it's impossible for them. 212 00:16:41,720 --> 00:16:47,200 We're virtually impossible for Chairman Powell to now just suddenly say, you know what, 213 00:16:48,200 --> 00:16:55,200 we're now going to NQT and lower interest rates. He'll do that, 214 00:16:55,440 --> 00:16:57,240 I think, And that's what I where I was sort of the show with 215 00:16:57,960 --> 00:17:03,000 I think this quanti tightening program that they're having right now. It's a quantity. 216 00:17:03,079 --> 00:17:06,799 It's tantamount to selling treasuries. They used to be a big buyer of 217 00:17:06,839 --> 00:17:11,880 treasury Now they're unloading them. Because you know, if if a Treasury bill 218 00:17:11,960 --> 00:17:15,160 comes due and the FED doesn't roll them over anymore, somebody has to buy 219 00:17:15,200 --> 00:17:19,319 that debt, right and that means the public, the market has to buy 220 00:17:19,359 --> 00:17:22,319 that debt. They send it to the Treasury and surgery sends it to the 221 00:17:22,319 --> 00:17:26,359 FED, and the Fed destroys the money. That's what you need. That's 222 00:17:26,400 --> 00:17:32,680 what quantitative tightening really is. Infuation. No, it's it's it's it's the 223 00:17:32,720 --> 00:17:37,079 market accepting or determining what the price of this bond should be from the government. 224 00:17:37,440 --> 00:17:41,480 And it's a lot lower. It yields a lot higher than what it 225 00:17:41,680 --> 00:17:47,640 was. But so they can't go back to zero, and they can't go 226 00:17:47,640 --> 00:17:51,440 back to QB very quickly. But the interest on our debt we have a 227 00:17:51,559 --> 00:17:56,319 thirty three trillion dollar national debt now, the interest on our debt is now 228 00:17:56,400 --> 00:18:02,279 seven hundred billion dollars a year semilar billion dollars. That's seventeen percent of the 229 00:18:02,359 --> 00:18:07,440 total income to the Fed. Now that is going to go much higher. 230 00:18:07,440 --> 00:18:11,480 It's going to be thirty five percent because the debt rolls over at much higher 231 00:18:11,519 --> 00:18:15,960 rate. So in a few years a lot of that debt's short term too, 232 00:18:17,200 --> 00:18:22,599 but they're rolling it over at what used to be almost nothing at five 233 00:18:22,640 --> 00:18:30,160 percent, So you're going to see the interest payments go doubling in the next 234 00:18:30,160 --> 00:18:34,200 few years, thirty five percent of all income. And that means that by 235 00:18:34,200 --> 00:18:38,519 two thousand and forty, if we don't have a recession, which is I 236 00:18:38,519 --> 00:18:44,240 will say, if let's just do let's put on your put on your blinders 237 00:18:44,240 --> 00:18:49,559 and your rose color and glasses, and imagine a world where the US economy 238 00:18:49,640 --> 00:18:56,240 does not have a recession till two thousand and forty. Last time I checked, 239 00:18:56,279 --> 00:19:00,880 we're in twenty twenty three, okay, sventeen three years, seventeen more 240 00:19:00,960 --> 00:19:04,400 years of no recessions. Never never happened, but we will. If that 241 00:19:04,559 --> 00:19:10,839 happens, it'll be two thousand and forty where we spend one hundred percent of 242 00:19:10,920 --> 00:19:18,240 our entire income on entitlements and interest payments. It's in reality it'll be much 243 00:19:18,400 --> 00:19:23,039 sooner than that. We'll have no money for anything else, but in titlments 244 00:19:23,920 --> 00:19:27,920 an interest on the debt. That's how this is a bond market is rebelling 245 00:19:27,960 --> 00:19:34,839 against the global market for our bonds is imploding. And we have I'm not 246 00:19:34,880 --> 00:19:41,359 blaming just the president, but we have a president who's fiddling on a picket 247 00:19:41,359 --> 00:19:48,039 line try to get wages higher. These people don't need higher wages if they 248 00:19:48,039 --> 00:19:52,000 didn't have to battle twenty percent inflation, seventeen to twenty percent, if they 249 00:19:52,000 --> 00:19:56,039 could, if they were able to afford a house. And that all lies 250 00:19:56,079 --> 00:20:00,400 at the feet of what they did. You know, you know when COVID 251 00:20:00,440 --> 00:20:06,000 broke out, we send people more check. We actually gave them more income, 252 00:20:06,240 --> 00:20:11,799 more and then they have the chore what they had before three COVID. 253 00:20:11,880 --> 00:20:15,279 Why what was the point of that? We're so afraid of a downtick in 254 00:20:15,359 --> 00:20:19,160 the stock market. You know, it's something called creative, creative destruction Joseph 255 00:20:19,160 --> 00:20:23,279 Schumpeter, Right, so happened. We don't have price discovery, we don't 256 00:20:23,279 --> 00:20:27,920 have freedom, but we have is manipulated markets across the planet. So true 257 00:20:29,079 --> 00:20:33,759 that and they are starting to break right now. And the lynch pin to 258 00:20:33,880 --> 00:20:37,440 the grenade. They know the gray pin was inflation. They finally did it. 259 00:20:37,799 --> 00:20:41,960 Remember for many many years they said, we can't where's inflation. We 260 00:20:42,200 --> 00:20:45,559 know what we do inflation. If we don't get two percent. If inflation 261 00:20:45,640 --> 00:20:49,960 is one point seven percent, it's a disaster. It has to be two. 262 00:20:51,559 --> 00:20:55,200 They finally got two, and they made two twenty that we're paying with 263 00:20:55,240 --> 00:20:59,119 the consequences for the album. That's the truth here. Hey, what about 264 00:20:59,160 --> 00:21:03,200 the connection beach between the two year treasury and the Fed funds rate? Because 265 00:21:03,599 --> 00:21:07,160 the Fed funds rate has to stay ahead of that two year treasury, right, 266 00:21:07,559 --> 00:21:11,319 Uh, yeah, that's that's that's what I was just talking about, 267 00:21:11,440 --> 00:21:17,359 having a real Fed fund Guess what, when you have a real Fed funds 268 00:21:17,440 --> 00:21:22,119 rate, the pressure on the economy is immense, and especially that is the 269 00:21:22,160 --> 00:21:26,160 case when you have record amount of debt. Now I'm talking about nominal terms 270 00:21:26,240 --> 00:21:32,680 and as a percentage of GDP. We have record corporate debt not only in 271 00:21:32,759 --> 00:21:37,119 nominal terms but as a percentage of GDP. And that's why all these zombie 272 00:21:37,119 --> 00:21:40,759 companies are going to go Many of them are going under because they have to. 273 00:21:40,960 --> 00:21:45,240 They have to flow new debt just to pay interest on existing debt. 274 00:21:45,720 --> 00:21:49,519 And that new debt is eight percent ten percent, not four. Yeah, 275 00:21:49,559 --> 00:21:52,079 you're gonna see this. So it's all about time, man, I mean, 276 00:21:52,400 --> 00:21:56,160 where's the rubber meat the road. What did I do on August first? 277 00:21:56,240 --> 00:22:00,960 I sold all of my long duration bonds. We are seventy percent of 278 00:22:00,960 --> 00:22:07,079 our portfolio is short term treasuries, and we have very little exposure to equities 279 00:22:07,119 --> 00:22:11,680 with hedges. With hedges we are we are actually long the dollar, long 280 00:22:11,759 --> 00:22:17,720 the dollar against really we've been. We've been loan the dollar for about two 281 00:22:17,799 --> 00:22:22,920 years with a huge profit in the portfolio. Why because I love the US 282 00:22:22,920 --> 00:22:30,960 dollar. No US dollar is doomed, it will go down significantly, But 283 00:22:30,119 --> 00:22:34,039 when it's all about timing, I'm loan the US dollar against the Euro and 284 00:22:34,079 --> 00:22:40,119 the yet not against hard assets. I actually have a five ers I have 285 00:22:40,160 --> 00:22:44,279 a five percent now position in physical goal. No, I haven't had any 286 00:22:44,319 --> 00:22:48,559 minors. I actually sold some of my physical goal a little bit ago because 287 00:22:49,200 --> 00:22:53,039 I one thing goal, the one thing goal market does not like. Yeah, 288 00:22:53,079 --> 00:22:59,720 the one is rising nominal rates and rising real rates, and we have 289 00:22:59,759 --> 00:23:04,039 that right now. So but that's going to change quickly because we just talked 290 00:23:04,039 --> 00:23:07,559 about that maturity. Will I don't know the exact date, but I will 291 00:23:07,599 --> 00:23:11,960 know when real interest rates start the fall. You could just back up the 292 00:23:12,000 --> 00:23:15,920 truck on physical goal and the minors, but not uxil back. You got 293 00:23:15,960 --> 00:23:21,720 to get that's why, you know, philosophical investing and stole clock investing doesn't 294 00:23:21,759 --> 00:23:26,640 really work for me or my investors, right right? Got that you want 295 00:23:26,680 --> 00:23:29,079 to own? You want to own the sixty to forty portfolio, you know, 296 00:23:29,279 --> 00:23:34,640 Kerry, this year will mark the third year that US debt US treasury 297 00:23:34,680 --> 00:23:40,079 bonds have been in a bear market that has never happened before. Do you 298 00:23:40,240 --> 00:23:45,000 know if you will if you said to yourself, you know, I'm close 299 00:23:45,039 --> 00:23:48,839 to retirement. I want to have a sixty forty portfolio, but I want 300 00:23:48,839 --> 00:23:55,279 to have sixty percent bonds and forty percent equities, not just sixty percent forty 301 00:23:55,279 --> 00:23:59,000 percent bonds. I want to overweight bond. Even those bonds are down fifty 302 00:23:59,119 --> 00:24:03,400 percent, fifty percent in the last two years. It lost half of your 303 00:24:03,440 --> 00:24:08,799 money in the world's safest asset, supposedly half of your bunny. Now, 304 00:24:08,839 --> 00:24:12,720 you could hold that thirty year bonds so maturity, and you'll break even. 305 00:24:15,480 --> 00:24:19,400 You're holding your thirty year bond that's yielding one percent thirty years. Well you 306 00:24:19,440 --> 00:24:22,359 could do that and get your principle back, but you're gonna get wiped out 307 00:24:22,359 --> 00:24:26,960 because like inflation. It will not be if Kerrie inflation will not be one 308 00:24:26,000 --> 00:24:33,319 percent for thirty years. So that I'm just trying to tell you the this 309 00:24:33,400 --> 00:24:37,599 way shows like yours are so popular, and active money managers who have a 310 00:24:37,680 --> 00:24:42,759 brain are becoming popular too, because you just can't sit here and say, 311 00:24:42,839 --> 00:24:47,880 you know it's you know, nineteen sixty or you know it's sixty to forty. 312 00:24:47,880 --> 00:24:49,920 Portfolio is wonderful. Everything always comes back, blah blah. You're going 313 00:24:51,000 --> 00:24:56,359 to have volatility, you've you've had and are going to have with increased intensity, 314 00:24:56,640 --> 00:25:02,960 volatility in the bond market and in the stock market. So what sectors 315 00:25:03,000 --> 00:25:04,559 do you want to own the stock market? Where do you want to invest 316 00:25:04,559 --> 00:25:07,880 along the yield curve? Do you want to own high yield or do you 317 00:25:07,880 --> 00:25:11,599 want to own T bills? You have to know the right answer otherwise you're 318 00:25:11,599 --> 00:25:17,240 going to get wiped out. Yeah, all right, Well it looks very 319 00:25:17,319 --> 00:25:22,720 bleak. Is there any bright spot on the horizon at all? But you 320 00:25:22,720 --> 00:25:29,480 know the bright spot on the horizon is perhaps you know this AI thing is 321 00:25:29,519 --> 00:25:34,640 going to be spectacularly good for productivity. I know it's a possibility, and 322 00:25:34,640 --> 00:25:37,960 you want to you want to hope for that. But on the other side 323 00:25:38,000 --> 00:25:41,519 of that short term, if let's just say that's true, it couldn't be 324 00:25:41,519 --> 00:25:47,319 true. You know, AI is going to boost the productivity of America. 325 00:25:47,480 --> 00:25:49,319 Let's just say that's true. Yeah, on the road to that, there's 326 00:25:49,359 --> 00:25:53,279 an awful lot of people they would be on the unemployment line. Yeah, 327 00:25:53,319 --> 00:25:56,319 it's going to replace a lot of people. And that's so that's the thing, 328 00:25:56,359 --> 00:25:59,440 you know, I keep I hate to be like, I'm not a 329 00:25:59,440 --> 00:26:03,799 conspiracy theories, but yeah, we kind of broke the model. We said 330 00:26:03,839 --> 00:26:07,920 to investors and to consumers, go to your mailbox, there'll be a check 331 00:26:07,960 --> 00:26:11,720 from the government for you, and it'll be you know, a universal basic 332 00:26:11,799 --> 00:26:17,079 income, and maybe we'll get rid of physical currency and coins so you can't 333 00:26:17,079 --> 00:26:18,519 take your money out of the bank. We'll just you know, we'll send 334 00:26:18,519 --> 00:26:21,720 you your money, we'll tell you what your interest rate is, and you 335 00:26:21,799 --> 00:26:26,000 go out and spend it, and you won't have a job because AI replaced 336 00:26:26,039 --> 00:26:33,119 it and we'll take care of you. That's reassuring. How's that for some 337 00:26:33,200 --> 00:26:38,640 good news? Uh? Well, yeah, and like you were saying, 338 00:26:38,680 --> 00:26:44,000 pre cal we might have Skynet as a result. Yeah, I said, 339 00:26:44,039 --> 00:26:47,319 bring it on. I think Skynet would be able to replace our species with 340 00:26:47,400 --> 00:26:51,160 something better. You know, maybe the cockproaches the metal in the United then 341 00:26:51,240 --> 00:26:56,319 be human nature is odious, to say the least, with the neurolinks and 342 00:26:56,920 --> 00:27:03,079 all that good stuff right to single larity. We're approaching that moment. Yeah, 343 00:27:03,119 --> 00:27:07,039 well that's why we need. We need a renaissance, a rebirth. 344 00:27:07,799 --> 00:27:11,359 Uh. In religion, in this company, in this country. Faith in 345 00:27:11,599 --> 00:27:18,960 God and prayer can help us too. But the current course we're on is 346 00:27:19,480 --> 00:27:25,079 a disaster. It's unsustainable by all the pounts here, right, I mean, 347 00:27:25,160 --> 00:27:29,640 and it's and the one who gets hurt the ones who are going to 348 00:27:29,680 --> 00:27:33,880 get hurt the most are the people in the middle to lower classes, though 349 00:27:33,920 --> 00:27:37,839 those ones we know that they always do right. Yeah, it's the oligarchy 350 00:27:37,880 --> 00:27:42,279 and the elites, the one percenters who have their multiple houses and they're you 351 00:27:42,319 --> 00:27:48,279 know, listen, even be out of the picture. I don't want talk 352 00:27:48,279 --> 00:27:52,160 aboutes. I'm just saying, if you care about people, you got to 353 00:27:52,200 --> 00:27:56,839 care about what's happening. And the idea from the Federal Reserve and the Treasury 354 00:27:56,960 --> 00:28:03,839 and from government, the upris to believe that they're better than the market. 355 00:28:03,000 --> 00:28:07,880 They know what the interest rate is they can because we have a new technology, 356 00:28:07,920 --> 00:28:11,240 it's called the printing press. We don't have to let money to gold 357 00:28:11,279 --> 00:28:15,400 any longer. Why would we do something so stupid? We want that, 358 00:28:15,799 --> 00:28:22,720 But I mean, I hear I hear some people who who actually proclaim I 359 00:28:22,720 --> 00:28:26,240 want I want to mention names. They're saying, well, why do we 360 00:28:26,319 --> 00:28:30,119 need to fund the deficit? Yeah, money to do ourselves correct money. 361 00:28:30,200 --> 00:28:34,200 Well, if you do this is like insane. What well Krugman is a 362 00:28:34,240 --> 00:28:37,599 guy, an economist. Nobel rises when the econos said, why would you 363 00:28:37,640 --> 00:28:42,160 start a war with Martians and just fire fake missiles at them? You know, 364 00:28:42,839 --> 00:28:48,759 whole digging and filling is wonderful, but it leads to stagflation. It 365 00:28:48,839 --> 00:28:52,680 destroys your currency. It leads to a bond market collapse and the destruction of 366 00:28:52,720 --> 00:28:56,079 your country. This is not something that's never been tried before. It's tried 367 00:28:56,200 --> 00:29:02,440 over and over again. If you cannot sub supply the market with the faith 368 00:29:03,559 --> 00:29:07,079 that your debt will be repaid and that your currency that you're paying that debt 369 00:29:07,799 --> 00:29:15,680 is sound, your nation will be that that might be not someday is in 370 00:29:15,680 --> 00:29:19,240 the danger of it will be destroyed, and it's never not happened before. 371 00:29:21,200 --> 00:29:23,519 So we do have to fund our deficits. We do have to have a 372 00:29:23,599 --> 00:29:29,279 currency that means something. Maybe someday we'll get back to that at but but 373 00:29:29,400 --> 00:29:33,119 I don't know. We can only hope and pray. Michael, it's definitely 374 00:29:33,119 --> 00:29:40,079 a bleak picture. Do you think we've ever been in as bad a situation 375 00:29:40,240 --> 00:29:47,759 as we are now? I'm gonna my reflex response is no. And people 376 00:29:47,799 --> 00:29:49,000 say, well, well, you know, the banking system is much better, 377 00:29:49,119 --> 00:29:53,880 blah blah blah blah. You know, we have never had this level 378 00:29:53,920 --> 00:29:57,359 we have. We have had a triumvirate of ascid bubbles. We have never 379 00:29:57,400 --> 00:30:03,160 been a situation. We have a massive bubble in bonds. Seventeen trillion of 380 00:30:03,240 --> 00:30:10,079 negative yielding debt around the world. That's a bubble in bonds. When you 381 00:30:10,680 --> 00:30:15,519 get paid to borrow money, that's a bubble. And that bubble and bonds 382 00:30:15,559 --> 00:30:22,559 existed concurrently with a record level in home prices. This is pretty much globally 383 00:30:22,599 --> 00:30:26,039 to carry a whole price to income ridge has never been higher. And the 384 00:30:26,079 --> 00:30:30,160 stock market, so the stock market has outside of twenty twenty, if you'll 385 00:30:30,200 --> 00:30:37,960 get price to sales, if you look at total market captain GDP ratios if 386 00:30:37,960 --> 00:30:42,200 you look at earning yields as compared to treasury so that risk premium it never 387 00:30:42,240 --> 00:30:48,160 been worse. Yeah, So you have that trevert of bubbles that's bursting on 388 00:30:48,200 --> 00:30:52,559 top of a record amount of debt. It's hard to imagine a time worse 389 00:30:52,599 --> 00:30:56,640 than this coming unfortunately. All right, Well we will leave it at that. 390 00:30:57,200 --> 00:31:00,759 If you got a question for Mike or myself, shoot me an email 391 00:31:00,880 --> 00:31:08,519 kl at Carrie LUTs dot com. Find Michael's website at pentoport dot com and 392 00:31:10,160 --> 00:31:14,359 there's a link in the show notes to this interview on Financial Survival Network dot 393 00:31:14,400 --> 00:31:18,000 com. Make sure you sign up for your free newsletter. Michael, I 394 00:31:18,039 --> 00:31:22,599 know we'll be talking to you again soon and let's see what they're up to 395 00:31:22,759 --> 00:31:25,200 next. All right, Kerry, good to be with you. Take care, 396 00:31:25,720 --> 00:31:30,359 Thanks for listening to Carrie Letz's Financial Survival Network, your solution to today's 397 00:31:30,480 --> 00:31:36,920 trying times. For the latest, go to Financial Survivalnetwork dot com. Financial 398 00:31:37,039 --> 00:31:40,200 Survival Network now more than ever