Mike Gleason: It is my privilege now to welcome in Michael Pento, President and Founder of Pento Portfolio Strategies and author of the book The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market. Michael's a well known money manager and a terrific market commentator and it's always great to have him on with us here on the Money Metals Podcast. Michael, thanks for coming back again, and welcome.

Michael Pento: Hey, thanks for having me back on Mike.

Mike Gleason: Well Michael, the Dow rallied 600 points this week when Fed Chair Jerome Powell hinted that we are approaching the end of a tightening cycle. To many of us, the potential for a policy change comes as no surprise, especially given the recent carnage in the stocks. We live in a world addicted to cheap money, and frankly, we've been surprised to see the FOMC get away with as many hikes as it has. What did you make of Powell's comments? Did the consensus around three to four rate hikes in 2019 get blown up? Is the December rate hike still on the way? What are your thoughts?

Michael Pento: Well, I could take the entire interview and expound on what you just said. Let me give you my take. First of all, and I say this with all respect, Jerome Powell looks to me to be a little more feckless and a lackey of the Trump administration and of the stock market, after yesterday. He did move a little bit more dovish, but not as dovish as Wall Street would hope for and is praying for, and what they took his language to be.

Let me just say that on October 3rd, Jerome Powell said that the Fed is very far away, very far away from neutral. And that the Fed would have to go perhaps a half of a percentage point above neutral. So, they think neutral, right now the effective Fed funds rate is 2.2%. The range is two to two and a quarter. Let's just say that neutral for the Fed is around three. Jerome Powell said that not only are we very far away from three, obviously, 75 basis points or three hikes, or 100 basis points away, four rate hikes, in the 25 basis point range.

But also that they would have to go 50 basis points above that range. Now, he comes out yesterday in front of the Economic Club of New York and said this. "We are close to the range where the FOMC thinks that rates would be neutral." Now, let me just tell you, there is no such thing as a neutral Fed funds rate that's neither stimulative to growth or depressive to growth. That just doesn't exist. Let's just start there.

But let's also admit that saying that you're close to a range, which has a bottom to a range, a midpoint to a range, and an end point to a range, to say that you're close to a range does not mean – as Wall Street took it to mean – that the Fed is now on hold. The Fed is not on hold, by any means. I think they're going to go on hold by June of 2019, but they are not, repeat not hold now.

The Fed is raising interest rates, one time in December, in my view, they will go again in December. And they will go again probably in March, and the June hike I think will be the last one. That’s when it'll be obvious that the economy is falling off the table. Look at auto sales, and home sales. We had a reading yesterday of new home sales, they fell 12% year on year. The interest rates sectors of the economy are falling off a cliff.

And that's not known to The Fed, because they look at lagging economic data, and apply it to models that have never worked. So, the Fed did turn a little bit more dovish, but not anywhere near as what Wall Street thinks they have turned.

Full Podcast: https://goo.gl/ktHgja