Skip to main content

Everything About To Be RESET? | Michael Pento

Liberty and Finance Jul 22, 2026

Summary

A money manager forecasting a coming depression warns buy-and-hold portfolios risk another lost decade, citing minus 0.8% annual returns from 2000 to 2012.

Three bubbles are inflating together — real estate, equities, and credit — while debt-to-GDP sits near 123%, leaving policymakers little room to respond.

Recession could push annual deficits toward $5-6 trillion with no new legislation, as unemployment insurance, SNAP, and WIC expand automatically.

Falling inflation does more for gold than low inflation itself, which is why he is long gold and mining stocks.

Equities trade at 235% of GDP against a long-run norm near 90%, so any reversion implies a decline of more than half.

Michael Pento's takeaways

  • Top takeaway Top point: Pento argues the next recession will quickly devolve into a depression because real estate, equities and credit are all in massive bubbles while the Treasury's balance sheet has been depleted, a combination he calls a 'triumvirate of bubbles' never seen before, with debt-to-GDP now at 123% versus roughly 60% at the last recession and a good chance the dollar collapses and long-term sovereign bond yields rise.
  • He warns buy-and-hold is disastrous for late-career investors and retirees, citing average annual returns of 0.6% over the 20 years after the Great Depression, 0.5% through the 1969 to 1984 stagflation era, and minus 0.8% from 2000 to 2012, when the S&P 500 fell 50% twice.
  • He says he has deliberately not hedged yet and is still investing carefully for clients out of fiduciary duty, but when his proprietary 12-point financial conditions model, which tracks credit spreads, the five-year breakeven spread and commodity prices, triggers he will move to cash and more T-bills, short the market, and trade the dollar temporarily.
  • He expects the next recession to push annual deficits automatically from roughly $2 trillion to $5 to $6 trillion through stabilizers such as SNAP, WIC, unemployment insurance and falling tax receipts, with the Federal Reserve then monetizing that on top of a balance sheet already near $7 trillion.
  • Over the longer term he calls gold, silver and the miners the sweet spot after that recession, and calls the AI data center buildout, about $800 billion this year and projected at $1.2 trillion next year, a massive misallocation of capital that competes with $1.2 trillion of debt interest and forces interest rates a lot higher if the money is not simply printed.

Kevin Warsh's takeaways

  • Top takeaway Top point: Pento says Warsh knows he must stop the inexorable increase of the monetary base but is not doing it, holding breakout sessions instead, and since taking the Fed helm on May 22 has added only $39 billion of base money, about $722 million a day.
  • He expects Warsh to try to drain the balance sheet from near $7 trillion toward roughly the $4.5 trillion pre-COVID level starting next year, which Pento predicts will cause a repo market and money market crisis and then unravel everything.
  • He argues Warsh's good intentions could themselves engender the coming recession or depression, describing Warsh as an Ayn Randian Austrian economist like Alan Greenspan was before Greenspan found that hard money does not work in the United States.
  • He concedes his own short-term forecasts get whipsawed, citing oil moving from about $67 to $120 and back toward $90 a barrel on Iran and presidential headlines, while noting that inflation's second derivative did fall from 4.2% to 3.5% about a month before the interview.

Dunagun Kaiser's takeaways

  • Top takeaway Top point: Kaiser presses Pento on the Fed's actual mandate, saying the official goals have always been a public-facing cover story while the real mandate is now absorbing political pressure and heading off the systemic credit and liquidity crisis that would otherwise ensue.
  • He also supplies housing-side evidence for the argument, noting that inflated home valuations drive up property tax bills, citing an estimate that 36% of homeowners could be priced out of their homes if municipalities paid off their bonds, and a record gap of 633,000 more home sellers than prospective buyers.