40% Market Correction is Underway (Uncut) 03-12-2025

`CHAOS Has Begun: 40% Market Correction is Underway | Michael Pento

The Fed cannot, they’re handcuffed, they cannot proactively cut interest rates at this moment. They’re frozen. So there’s no Fed put, there’s no Trump put anymore because the zeitgeist was that Donald Trump was going to come in and he’s going to measure his success on his administration by the stock market.

And he told you, no, I don’t care about the stock market. To his credit, to have the courage to say, the US has some intrinsic issues that have to be fixed. Hello, and welcome back to Soar Financially, a channel where we discuss the macro to understand the micro.

My name is Kai Hoffman. I’m the Edge AR mining guy over on X and of course, your host of this channel. And I’m really looking forward to welcoming back Michael Pento.

He’s with Pento Portfolio Strategies and we have lots to catch up on. He was on the channel about six months ago and he predicted that the market needs a 40% correction. The question now is, are we in that correction phase right now as we speak? S&P 500, Nasdaq, they’re all down quite significantly.

We’ll have to figure out if this is just a blip or is this the beginning of the end? We got to talk about that and frame it and really just put some perspective around it. And I also want to ask my guest about the Trump session. Is that even the right term? I don’t want to defend President Trump, don’t get me wrong, but I want to go into detail whether he’s actually the one who set it off, the recession calls and the Trump session.

Lots to discuss and very little time to do so. Before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously and we do appreciate it.

Now, Michael, it’s good to have you back on the program. Thanks so much for joining us. It’s always a pleasure, Kai, to be with you.

Yeah, really looking forward to the next 40 minutes here with you, Michael. Lots to go through. We had you on about six months ago and you said, well, the market needs a 40% correction.

I’m seeing bubbles in the stock market, real estate market, credit market. Are we in it now? Are we in that correction phase? So what I said was, and I love when I always read comments sometimes, sometimes I do. Self-flagellation, I like to read the comments sometimes.

And most of them are positive. But yeah, occasionally, this guy called for a 40% correction. No, what I said was, and I like all the audience members to listen carefully.

What I said was to put the stock market back into historical mean ratio as far as total market cap of equities to GDP, just to go back to an historical mean, it would need to drop 50%, 40 to 50%. Okay, that’s what I said. So does that mean that I’m calling for the corrections, the stocks to correct? No, I didn’t say that.

And as a matter of fact, I’m still not net short in my portfolio. And I haven’t been since the early part of 2023. So I got net short in 22, started 22.

And then I closed out my net short position in Q1 of 23. So I’m not a stop clock. I’m not always calling for a recession.

I’m not always calling you to short the stock market. For home prices to correct, they need to drop 40%, just to bring that historical mean metric in line, home price to income ratio. That’s what they need to go back to.

Now, what can happen is that the GDP can increase or incomes can increase and home prices can stay where they are and stock prices can stay where they are. I doubt that’s never happened before. So let’s just look at some facts here.

The fact is that I think the S&P off of its high in February, like mid-February. So the S&P is down about 6% and change. The NASDAQ is down, as of this morning, was down 15% off of its high.

So in my view, we’re starting that reconciliation process. Is it going to be linear? No. But the chaos has begun.

That’s clear. What’s given you confidence to not go net short yet? So you must be seeing something that’s giving you confidence to stay in the market or at least not short it. And curious what that is.

So it’s a great question. If you look at a lot of metrics, I have a 20 point model. A lot of them are flashing bright amber to red.

Some of them are actually in the red. Two of the most important indicators, highly stochastic, have not flashed red yet. They’re just now, recently, within the last few days, flashing yellow, is financial conditions and credit spreads.

I need to see financial conditions tighten more and I need credit spreads to widen more than they are now before I become net short in the portfolio. That’s something you don’t do willy-nilly. You have to calculate it.

You have to measure and map it carefully. But here’s the thing. The important part is, when you’re managing money, if you want to be a successful money manager, is to understand the risk-reward ratio.

You should ask the question, and I know you would because you’re such a great interviewer, what made you get almost neutral in your portfolio? I’m net long 20% with hedges, with gold and with anti-beta plays and with a short in junk bonds, a small short in junk bonds. What made me do that when everybody else was banging pots on roofs about how great 2025 was going to be? It’s just a simple calculation that the risk-reward ratio was skewed way to the negative as far as any significant increase in returns on the S&P 500. We were trading at 22 times forward earnings that predicted a 13% increase in earnings.

Now, 22 times is a very rich multiple on earnings growth that just was unachievable. When you have labor force contracting and when you have tariffs, and you’re hoping to extend tax cuts at the current rate, that’s the fiscal and monetary scenario. By the way, the Fed put is on ice.

The rate of inflation, which is very sticky, it’s not gone anywhere near 2%. It’s been north of 2% for four years. The Fed cannot, they’re handcuffed.

They cannot proactively cut interest rates at this moment. They’re frozen. There’s no Fed put.

There’s no Trump put anymore because the zeitgeist was that Donald Trump was going to come in and he’s going to measure his success on his administration by the stock market. He told you, no, I don’t care about the stock market. To his credit, to have the courage to say, the US has some intrinsic issues that have to be fixed.

Number one, we can’t have massive trade deficits anymore. We can’t have a hollowed out middle class. We have to bring manufacturing back to the United States.

It’s a matter of national security. So he’s, for now, has the courage to, through the use of tariffs, and I’m not saying that’s the best method. It could have been other methods.

There could be better, the way these tariffs were issued, implementation of these tariffs could have been improved, can be improved still. But there’s just no way you were going to get nominal GDP growth anywhere near double digits or even high single digits. At best, I get nominal GDP growth around 5%.

And that means that the market should be trading around $5,100, the S&P 500 around $5,100. If you say there’s no recession, we have a moderate growth in earnings, nominal growth in GDP of around 5%. And earnings growth tends to correlate highly with nominal GDP growth.

And you slap a very rich 20 multiple on that, you get $5,100 on the S&P 500. And so I said, the risk reward ratio, if you look at price to sales, that was at three, total market cap of equities, that was 200% to GDP. If you look at risk premiums that were negative, that was the calculation, just to pull in your horns a little significantly.

And that’s exactly what I did. And it’s paying off. 100%.

We need to talk about Trump’s game plan, though. And I think he’s sticking to it. The market didn’t really trust him at first.

You mentioned tariffs, because he backed off, he gave Canada and Mexico like a month reprieve. And now he’s full on just this morning, he added another 25% on aluminum and steel for Canada, which has been a retaliation to the energy tariff that Canada added. Is there a bigger plan? Like, I’m trying to figure out like, A, who’s the puppet master? And B, is there like a PowerPoint deck somewhere that lines out the game plan? Because it seems a bit willy nilly.

And one term like I’ve been reading in various chat groups and friend chats is unhinged. And I don’t want to get negative, but I’m trying to make sense of it. Like, where’s this all going? And is there a bigger plan behind it? Well, one thing I want to dispel one rumor that I keep hearing people talk about is that Trump is trying to bring interest rates down by causing a recession.

That would be the dumbest thing that any individual has ever done. One of the dumbest things on planet Earth. I mean, I mean, what, what a call a Pyrrhic victory? Well, hey, I got rates down.

But unemployment rates are skyrocketing and the very fragile housing market is tanking, and so is the stock market. So I mean, how’s that going to be a victory lap? So that’s ridiculous. Like I said, the implementation of these tariffs is terrible.

What he should, what I think he should do, and what I was hoping he was going to do, Trump, President Trump, is just say, yeah, okay, April 2nd, we’re going to have reciprocal tariffs. And then you give yourself a month or whatever it was, maybe a little bit more to negotiate with all these countries on an individual basis. Say, here’s our trade deficit with you.

A trade deficit is not supposed to be a standard procedure here. You need to buy more of our stuff. What do we need to do? What do you promise to do to make that right? And you have tariffs on our autos or tariffs on our steel or tariffs on our crops, whatever.

And they need to be commensurate with the tariffs that we have on you. But hopefully the tariffs will be zero. Of course, there’s other factors.

There’s subsidies that governments have. So these have to be worked out, but you have, you know, you have, you had about four or six weeks to do it. But here’s what can happen, Kai.

What’s happening is, you know, the tariffs were going on Mexico and Canada at 25%, and then 24 hours later, the stock market fell apart. And so the tariffs were postponed for three months. And then there’s carve-outs and everybody wants a carve-out for their industry.

And you just have no idea what’s going on. So I think the most important thing is businesses need some kind of confidence and surety about what these tariffs will be. And I’m hoping they’ll be as low as possible because tariffs are taxes and that creates friction in the free market.

So what we’re seeing in the free market, meaning the S&P 500, for example, is just uncertainty. The market doesn’t know what to do with it. The underlying sentiment is still strong, but there’s just uncertainty, or is there more at play here? Well, what was at play here is that the stock market had no room for error.

It was the most fully valued stock market in history. Back in the 80s and 90s, total market cap of equities of GDP was well south of 100%. It was 104% in 2007, and it was 140% in the Nasdaq bubble in March of 2000.

So it had no business being at 210% total market cap of equities of GDP. It’s just there was no room for error, and the error has arrived. I did not predict that the market was going to fall.

What I did predict and what I acted upon was that there was no or little room for upside, and you were much better off being in treasury bonds than you were in the risks associated with stocks. That has proven to be 100% correct and looks more so on a daily basis. As you so appropriately asked, if I see financial conditions tighten and if I see credit spreads, these various spreads that I look at, I look at a lot of them, dozens of them, if I see them starting to widen to a point that triggers my model to let me know when a recession is probably or the probability of a recession is increasing, I will eschew some more longs and I will take a position in more of a short posture in my portfolio.

Are we seeing a sector rotation of capital already? Bond yields is one thing, the 10-year down to 4.2% right now while the S&P is down as well. Has capital rotated into more safer assets, tier one assets out of the stock market here? If you look at what’s happening with Melania Coin and Dogecoin, the high beta plays are getting wiped out. The Teslas of the world, the NVIDIAs of the world, the Mag 7s of the world, and there’s been a rotation out of stocks, the high beta stocks into the equal weight and to low volatility sectors.

There’s no doubt about that. Finally, has been a ballast in your portfolio with owning bonds. Now, I don’t think this move is going to, especially on the long end of the curve, has a lot of room to run simply because our deficits are just incredible.

A $2 trillion deficit, that deficit is going to explode to the upside if we have and we do have an economic slowdown. If you look at the Atlanta Fed, in February of this year, I looked at my calendar, it’s only mid-March. In February of this year, the Atlanta Fed had Q1 GDP at close to 4%.

Let me bring that up on screen here. Four whole numbers, 4%. Now it’s minus 2.4%. That’s a plunge in growth.

Here’s what the main takeaway from that is. If you were of the belief that somehow you were going to get 13% earnings growth on the S&P 500 when the economy, and by the way, the Atlanta Fed is not the only, we have the US global S&P 500, US global S&P manufacturing and service composite index show a similar slowdown in the economy. It’s not just the Atlanta Fed.

The ISM also looks like it’s weakening, not as much as the US global S&P global, but it’s still in the wrong direction. A lot of these sentiment surveys in the wrong direction. National Federation of Independent Businesses showed a huge decline in consumer sentiment.

How these small businesses are hiring and what’s affecting their businesses is not good right now. You’re not going to get 13% earnings growth, especially when there’s no tax cut of any significance on the horizon. Now, the 2018 cut was from 35% to 21%.

That’s a pretty big boost to corporate America. There’s no such boost coming. You’re probably going to get the votes.

I’m very confident that you get the votes to extend the tax cuts and job act under Donald Trump that was effective in 2018, but that’s just keeping the current rate. You’re not going to get a massive tax cut. You have the closing of the border, you have deportations, you have tariffs, which are tax increases.

You’re going to need tariffs to offset the way they score it in DC, to offset the ability for Congress to avert a $4 trillion increase in taxes because the Trump tax cuts expire, they sunset in December of this year. How do you get 13% earnings growth? It’s not going to happen. It’s just not going to happen.

The best case scenario is 5% that I can come up with. If that’s the case, then the stock market is still very overvalued and it’s not going to become even mildly interesting to me until we get 5100 on the S&P 500 or we get a trenchant change in the rhetoric around tariffs. Where is growth supposed to come from? As you said, it doesn’t seem obvious because you need GDP growth to keep up with the debt.

The spending isn’t decreasing despite Doge’s efforts. It can’t decrease right now. Interest payments alone are over a trillion dollars.

Where is growth supposed to come from, Michael? There’s only two places growth comes from. It comes from an increase in the labor force and that’s actually going in reverse. Then you have a hope of a massive spike in productivity.

That’s the other half of GDP. Maybe AI can provide that for you. The short term on the other side of the balance sheet, if AI causes a massive surge in productivity, a sudden and massive surge in productivity, it’s going to lead to layoffs in a big way.

That’s the other side of that productivity. At least short term, layoffs have to spike to have productivity rise. That’s very economically disruptive.

One term, and you’re the first guest I’m discussing this with, is UBI, universal basic income. When you talk about the rise in productivity and the rise in AI, do you see UBI come to fruition here? Do you see that being introduced? Let me put my tinfoil hat on for a second. I got to be honest with you.

I predicted the rise of UBI and I’m not a conspiracy theorist. I’m just looking at facts. It’s just a logical consequence of the layoff of a lot of people.

Universal basic income, it’s a form of helicopter money. The government just prints money and hands out checks to people to lay fallow and do nothing. Is there some kind of grand scheme? Is that where the dumbing down of Americans, the wiping out of our middle class? I don’t think Trump’s going to lay down and let that happen without a fight.

You could see that inexorable trend towards, hey, I’m just living off the government. I don’t have the skills. I don’t have the skill set to be gainfully employed.

I’m going to just wait for my check to arrive. It could be a byproduct of AI. I’m not saying it’s part of a grand scheme, but certainly the groundwork of helicopter money and digital currency, central bank digital currency, that’s all part of the universal basic income where people are just home.

Maybe they work two or three days a week. Maybe we all work at a casino or at a resort somewhere. It’s part of the end of American middle class.

It’s interesting. I don’t want to get too far away from our main topic here, but humanoids is another topic that could be feeding into this. I’m curious if you have any thoughts on that.

I don’t want to jump down too deep into that rabbit hole, but if we just spin that a little further, $500 billion investment into AI, various firms and AI infrastructure. This is just the logical evolution. Do you have any thoughts on that? Then we’ll go back to the main thesis here of the conversation.

It’s scary. I’m not going to rule it out. This is a financial program.

When it comes to occupying my mind, it takes a very little space in it because how I manage money is not predicated on humanoids. I will tell you this. There’s a lot of people who have mistakenly believed that somehow AI is going to tell investors how and where to invest.

I think that’s just a very sophomoric view because that’s not how markets work. Markets are two-sided. There’s a buyer and a seller.

If AI is going to be on one side to tell everybody what to buy and what to sell, markets are completely and 100% dysfunctional. That cannot ever happen where you have one omniscient AI machine telling investors where to go, be it a robot or not. Let’s get back to the main story here.

Let’s talk inflation here. Michael, tariff impact on inflation. I’ve heard various theories.

I’m curious where your head is at. How do you think the tariffs will impact that debate? Is it just a temporary blip at one time, jump in inflation and then it’ll peter off or do you think they’ll be persistent? Reading the NFIB, National Federation of Independent Business survey that came out this morning, the number one complaint that small businesses have is that they can’t hire the right people and the people that want to be employed by them are asking astronomical salaries. Compensation is through the roof.

That’s a big problem. Inflation is a huge problem. I mentioned earlier that four years now, it’s been above 2%.

Tariffs are a one-time tax, a one-time increase in the level of prices. It is not by definition inflation. I define inflation and I’ve been in this business 34 years and I’m 61 years old.

I have a right to chime in about what I think inflation is because if you listen to the Federal Reserve, inflation comes from too many people being employed and too many people being productive. That’s their definition of inflation. It’s actually the most incorrect of all of their models and philosophies that they hold on to.

Inflation is when the market loses faith in a fiat currency’s purchasing power because it’s been destroyed by monetizing government debt. That’s how inflation arises. It’s an inexorable, it’s a protracted increase in the level of prices, continuous and protracted because the market has lost faith in the purchasing power of a fiat currency.

We don’t have that yet. We’re headed down that road and tariffs are not part of that calculation. Will they increase prices? Yes, they absolutely could.

Now, there’s other ways. You mentioned tariffs. Let’s just talk about it for a second.

The exporting country that the tariff, the duties imposed on, could eat in their margins and cut their prices. The exporting country could also wreck the value of their currency, so there would be no change. You could source products, the importing country can source their products from other nations.

The importer, the importing nation, the United States in this point, can also take or eat some of those tariffs and decrease their margins. 25% tariffs on X, Y or Z product is not a 25% increase in prices automatically for the end user, for the consumer, but they are a one-time price shock. Again, when you have a inflation, the worst thing that you could do then at that moment, as far as inflation is concerned, is to have that one-time increase, but it’s not going to be something that’s continuous.

Now that makes sense. You said you shifted some of your investments into gold and we have to talk about that and how gold is influencing US dollar, US economy, even GDP forecasts. We briefly talked about that beforehand because a big part of the Atlanta GDP negative number, the negative 2.4% was gold imports from Switzerland primarily into the US, which really imploded or exploded that trade imbalance the US has with the world.

How do you look at gold and what’s your take on it and especially the massive price moves just since the beginning of the year here? First of all, I hate when people say, if you take out this or take out that, not that you said it, but that’s what the point is. When was the last time, did they ever take out for gold exports? Have you ever heard that? GDP would have been a lot worse if we didn’t. It’s C plus G plus I plus or minus net exports.

Even if you were to take out gold from the calculation, I think it fell from 4% growth predicted in February to 0.4%. Okay. So that’s still very much close to a recession and stall speed for the economy. So I increased my gold position.

First of all, let’s just talk about gold. 5% of your net worth should be in physical gold. I don’t change.

I never change that mantra from me. That is my recommendation. You always have a placeholder of your wealth that cannot go down your purchasing power cannot be ruined by a fiat currency.

If you have 5% of your assets in gold. And then I toggle the difference between zero and 20% in what I call liquid paper gold. And that is not, you don’t really own gold unless it’s in your physical possession.

But if you’re going to rely on a third party, then it becomes an investment. So if you have gold that’s in a vault somewhere or in a bank somewhere, you don’t really own your gold because there’s a third party between you and your gold. There’s also gold miners, there’s gold ETFs.

I toggle that between zero and 20% against liquid gold. In other words, it doesn’t, you don’t have to find somebody to buy it. It’s cumbersome if they mail it somewhere or take it somewhere to liquid, to make it liquid, you could just, you know, in a second.

So it’s liquid because it’s in ETFs and in stocks and it’s paper because it’s not really gold in your possession between zero and 20. And we’re close to 10% right now. And why, why is that? Because nominal rates are now falling and real interest rates are falling.

And that is the perfect time to own gold. A hundred percent, a hundred percent. So many factors are leading or pointing in that direction.

And then US dollar is another one of those that we need to talk about, which brings me a bit to your article that you published on March 3rd, I believe it’s cash is king. And why is cash king and in what form we need to discuss? Well, when I, when I say cash, I usually mean short-term treasury T-bills with no duration. That’s, that’s what I use for cash.

And the reason why is very clear as I laid out in that article, I went, I went point by point as the other alternative assets that just weren’t offering any benefit. I mean, if you can get four and a half, four and a quarter, four and a half percent on a T-bill at the time when I wrote the article, and the earnings yield on stocks is below that, right? The inverse of the VE ratio is your earnings yield. And you have all that extra risk and none of the reward.

What’s the reason? What is the rationale for not owning T-bills over stocks? So I, I took those to over just about 50% in my portfolio. And that was done in December, late December of 2024. Now, US dollar is being obviously weakened by tariff discussions, geopolitical events, and others.

How does the US dollar itself factor into your models here, Michael? Well, it does, it does indirectly. But when I, when you look at the second derivative of inflation in the context of growth, it’s another expression of what you think the dollar is doing. And when I, when I talk about the dollar, there’s two ways of, I say to myself, what is this person asking me? Are you asking me what is the dollar doing against the yen? Or against the renminbi? Or against another fiat currency against the euro? Or what is the dollar doing against gold? Against hard assets.

Gold is another form of money. So the dollar is a form of money, and gold is the better form of money, or the real money. Dollar inferior, fiat currency, gold, real money.

So against real money, gold, it’s depreciating in value. The dollar is appreciating the value, so the price of gold is going higher. That is absolutely clear to me.

It’s been that case since really on and off, but mostly on since 2000, Kai. All right. Now, when you talk about against the flawed fiat currencies, it’s measured against, you have to go on a, you know, a country by country basis.

Right now, it looks like the dollar could be even losing ground against other currencies for the time being, because of our slower growth rate. So, so if our interest rates are coming down, and the growth rate is slowing, then that’s, that makes holding dollars less appealing. And then we could also get into the, the fact that our government is prone to sanctions and confiscation of other countries’ wealth, freezing their assets.

So foreign countries are eschewing our dollar with their trade surplus. So they no longer want to buy, to recycle their trade surplus into our bonds and in our dollar. That’s also part of the bullish gold story and the weakening of our currency.

No, I appreciate that, Michael. And we do need to be a bit forward looking here. Like, what does the rest of the year look like? And how are things developing? You brought up the Fed put, will the Fed step in and help, you know, add some liquidity into the markets, potentially, question is, if that happens, when that happens.

But it’s like, what do you expect for the rest of the year to look like? There’s so much uncertainty. How do you, how do you chart your way? Like, how do you, for lack of better to play this? First of all, you don’t, you don’t have a set, you know, I always say like 95% of people that do what I do are salespeople that just like, okay, give me your money. And then I’ll plug it into the S&P 500.

And I’ll offset it with some ballast from some bonds, some part of the yield curve, I don’t know. And then I’ll take some and maybe throw in some overseas equities and see what happens. And I’ll go on to the next person.

And then what I do is differently, I actually sit there and say, I’m not going to set it and forget it. This is not a set it and forget it time to manage money. Maybe it wasn’t in the 50s and 60s.

You know, but not not now, especially not, you know, since 2000. And really, since this new era of interest rate repression, where you saw you saw real interest rates, my at minus 8% on the real Fed funds rate was minus 8%. That is never before even close to being thought of happening.

So you have this, this is the regime of helicopter money of Zerp and QE. In fact, it’s worth mentioning that the Fed’s balance sheet was $800 billion prior to December of 2007, when the start of the Great Recession, and it went up to $9 trillion. So that’s $9 trillion from $700 billion.

Okay, well, that’s $8.3 trillion of the Fed printing credit, it’s Fed credit, Fed reserves printed, willy nilly by fiat to battle a housing bust, the banking crisis, and then COVID. That that tells you something about why gold has been doing so well lately. Try, you know, try, try increasing the money supply, a gold, the gold mine supply by, you know, 20% per annum, year after year, you just it just can’t happen.

It’s physically impossible. That’s what makes gold so so special and so beautiful. Gold is special.

So I just I just want to just to wrap up your you asked me about the end of the year, I don’t set it and forget it. So for the end, so for so I would I’m going to do is pay very close attention to my model, look at the especially the highly stochastic components, looking at looking at credit spreads, and looking at financial conditions, looking at the dollar, the copper gold ratio, looking at the five year five year forward inflation predictor. So like I said, I can see most of the model components on my website, I won’t tell you how I score them, but they’re on the website.

If you look at the reverse repo facility, if you look at Treasury General Account, look at the reserves in the system, you look at the direction of the Fed’s balance sheet, you look at the level of real interest rates set by the Federal Reserve, all those things factor into the model. So what I’m telling you, I can tell you right now, the model looks at right what’s happening right now and over the foreseeable future, which is usually the next three months. Beyond that, I have no idea could and now it’s even more important to pay attention, because look what happened this morning.

There’s a great example this morning, as of the recording of this interview, which is on Tuesday, March 11. So the market was rallying after got the worst trading session in like a very, very long time. Yesterday, when you saw like the NASDAQ was down almost 5% at one point, in one day, in one day, and you think you have a huge bounce.

So the market has an anemic bounce in the morning. And then Trump says he’s going to shut off all vehicles being sold to Canada from the United States. Did you hear that? Did you hear that? No, I didn’t hear the vehicles part.

All I know is like aluminum, steel and the tariffs. So the tariffs on steel were going to go up to 50% and aluminum 50%. And then Canada said they’re going to raise the tariffs on US electricity and might shut that off.

So I mean, these tariffs are taxes, and they’re very important. So taxes can be 250%, they could be zero, right? So you have to pay attention to the macroeconomic and fiscal environment. But I’m very comfortable where I am right now.

And the model is telling me to watch out for possible digression into sector one, which is one of not disinflation, one that could be actually deflation on the second. So second derivative is inflation was at 5%. Now it’s 3%.

What if inflation actually goes negative? That’s deflation. And what if we don’t just have 13% earnings growth? What if we don’t have 5% earnings growth? What if we have minus something, earnings growth, negative growth? That would be a whole different calculation, especially for me and my investors. Is deflation in the scheme of we talk tariffs in that regard, let’s assume Canada and the US decide no more tariffs as of tomorrow.

Just as a hypothetical, that would be deflationary. But is that necessarily a bad deflationary? I don’t know if it would be certainly wouldn’t be bad. And I would say it wouldn’t be deflationary.

Again, because I said before- It’s a one term shock. So we wouldn’t get the one time shock. What we would get is less taxes and lower friction.

I think you’d have a huge rebound in equities, which I would like to participate in. And again, that’s not inflation either. Inflation is when the central bank monetizes, in other words, prints a tremendous amount of money either indirectly or directly monetizes government debt.

And that destroys the purchasing, the confidence of the market in the purchasing power of your currency. That’s what inflation is all about. It’s not about people working and it’s not about tariffs.

So if we did have a cessation of all tariffs, I think we’d be very bullish for the economy and for markets. That’s how I’d react to it. Yeah, 100%.

I fully agree there. Michael, really, really appreciate your insights. It was a wonderful conversation.

Where can we follow your work? Where can we find more of you? So the website is pentoport.com. And if you have $100,000 to invest and you are a US citizen, and if you qualify for the portfolio, you’re suitable for it. Because I actually actively manage the portfolio so I can raise a lot of cash. I could short the market using ETFs.

I don’t use margin leverage or options. And if you’re suitable for that kind of portfolio, you’re a citizen, $100,000, I’ll directly manage your money in the inflation, deflation, and economic cycle portfolio. If you don’t have $100,000, and if you’re not suitable for that kind of portfolio, you can have access to my podcast called the Midweek Reality Check.

It’s published every Wednesday. It’s usually about 10 to 15 minutes and gives you all the relevant economic data that came out in the week and an objective and honest assessment of how you should look at that data and where it fits in that dynamic between inflation, deflation in the context of the economic cycle. Fantastic.

Michael, thank you so much for your time. Really, really appreciate your insights. We’ll have to get you back in about three months and see what your indicators are telling you then and what the outlook for the summer perhaps is, and we’ll see where we’re heading.

Thank you so much, Michael, and everybody else. Thank you so much for tuning in. Hope you enjoyed this conversation with Michael Pento.

Go check out his podcast. We’ll link to it all down below. And make sure you leave a like, leave a comment down below as well.

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