Damien: Given this phenomenon, how do you recommend middle-class investors proceed?
Michael Pento: The next great asset bubble to pop will be the US Treasury bubble. There is an almost 30-year bull market which has built to a bubble. The 10-year Treasury is yielding about 3.5%. If anyone out there thinks inflation will be 3.5% over the next 10 years, I will order them a straitjacket. This is impossible when you have a monetary base which has doubled in the last few months alone and a Federal Reserve that is going to expand its balance sheet to over $3 trillion. If and when the Fed ever decides to unwind their positions, interest rates will skyrocket.
So, I would be short Treasuries. I would keep an eye on the US Dollar. If it continues to decline, I would pick up precious metals, base metals, and energy — all of which have a history of holding value during a monetization effort by the Fed. I would also put a significant portion of money overseas. Some of the emerging markets — Singapore, Hong Kong, Brazil — will offer more opportunities to grow your money safely. Make sure you own diversified mutual funds which pay dividends. Dividends were once the primary way people made money in the stock market. That’s before we had this speculation economy.