Michael Pento, president and founder of Pento Portfolio Strategies (PPS), returns to The Julia La Roche for episode 368 to warn that the three asset bubbles in stocks, credit, and real estate continue growing to unprecedented levels, with total market cap now at 230% of GDP versus a 90% average. He reveals that Powell has quietly printed $170 billion since December in an undeclared QE program, calls Powell's tenure "horrific," and celebrates his departure. Pento explains he's "nervously long" the market using his five-sector inflation-deflation model, currently positioned for stagflation with commodities, precious metals, and energy. He warns that credit markets will fracture first, with private credit now at $2 trillion (bigger than the $1.3 trillion subprime market in 2008), and predicts June redemptions could trigger a death spiral. Pento believes we need a 50% market correction to return to normalcy, warns we could see 15% interest rates like the 1980s but with a far worse debt backdrop, and argues the bottom 80% of Americans are already living in depression-like conditions while crony capitalism enriches the top 20%. He sees two paths forward: voluntary asset price reconciliation or forced hyperinflation leading to currency reset.

Links:

https://pentoport.com/

https://twitter.com/michaelpento

0:00 Introduction - Michael Pento returns after 6 months

0:59 Big picture macro view - Bubbles grow bigger

2:19 Powell's "horrific tenure" - $4.5 trillion printed

3:32 QE program continues - $170 billion since December

4:39 Kevin Warsh-led Fed - What changes are coming?

5:52 Warsh will punish Wall Street, boost Main Street

7:06 Stock bubble metrics - 230% of GDP (average is 90%)

8:24 Crony capitalism vs. free market economics

9:10 Why capitalism gets a bad name

10:01 Home price to income ratio at all-time highs

11:01 Disconnect between stock market highs and consumer sentiment lows

11:35 Only top 20% doing well - The "i-shaped economy"

12:33 AI spending reminds Michael of 1999 tech bubble

13:33 Are you confident Kevin Warsh can get us back to normalcy?

14:41 What would normal market valuations look like?

15:06 Would need 50% correction to return to normal

17:05 Wouldn't printing just set us up for more problems?

18:57 Either scenario leads to higher rates

19:37 Implications of double-digit rates on everything

20:38 Are you still nervously long the market?

21:19 Michael's not a perma bear - History of market crashes

23:02 How dangerous can this bubble be when it bursts?

24:03 Michael's 5-sector inflation-deflation model

25:14 Precious metals trade - Why only 6% position

26:41 Energy thesis - After Iran war

27:30 Explaining the 5 sectors - Which is most worrisome?

28:25 Stagflation is the base case going forward

29:01 Post-recession: $6 trillion deficits, $12 trillion Fed balance sheet

29:55 Could we see 15% interest rates like 1980?

31:17 What's the end game here?

33:21 Are we past the point of no return?

34:58 Which bubble bursts first - The epicenter?

35:44 Watch credit markets first - Private credit warning

36:46 June redemptions could trigger death spiral

37:47 Is private credit too big to fail now?

38:21 Risk not getting attention - Pressure on middle class

40:00 Buy now pay later defaults surging

40:29 Bottom 80% living in depression conditions

41:18 Preventing tremors creates epic shocks

42:48 Has anyone talked about $170 billion of QE since December?

43:24 What makes Michael hopeful for the future

44:01 Closing thoughts

Warsh's arrival at the Fed actually means in practice — significant personnel changes, new models, and what Chris calls nothing short of an "earthquake at the central bank." Chris explains why there will be no rate cuts for a while, why the Fed balance sheet is growing again despite Warsh wanting to shrink it, and the one-to-one relationship between the balance sheet and public debt that most people aren't talking about. Plus: silver is in physical shortage and can't be delivered in parts of Asia, private credit is getting quiet as the bad headlines pile up, AMD is Chris's AI play of choice, and why the Iran war means "traumatic shortages by June" even if a deal were struck tomorrow. Chris also answers viewer questions on Warsh shrinking the balance sheet, gold under a tightening regime, the PennyMac LIBOR lawsuit, and Annaly Capital earnings. And Julia closes on her first house.

Thank you to our partners at Goldco. Get your free 2026 Gold & Silver Kit at https://goldco.com/thewrap or call 855-573-0817

Links:

The Institutional Risk Analyst: https://www.theinstitutionalriskanalyst.com/

The Wrap: https://www.theinstitutionalriskanalyst.com/post/theira842

Inflated book (2nd edition): https://www.barnesandnoble.com/w/inflated-r-christopher-whalen/1146303673

Twitter/X: https://twitter.com/rcwhalen

Use the code TheWrap2026 for 25% off your first year of The Institutional Risk Analyst https://www.theinstitutionalriskanalyst.com/plans-pricing

Timestamps:

0:00 Welcome & intro

0:49 Fed balance sheet growing again even though Warsh wants to shrink it

1:08 The one-to-one relationship between the Fed balance sheet and public debt

3:28 Will we continue to see a more inflationary environment?

3:37 Silver on a tear — physical shortage, can't deliver the metal

4:41 Still money pouring into private credit

8:32 Too many dollars chasing too few returns — what this means for markets

11:10 Are we setting up for a longer term risk?

12:13 GameStop CEO's bid for eBay — what does Chris make of it?

14:08 Changing the models, retiring staff — "an earthquake at the central bank"

16:32 "No rate cuts for a while" — Warsh has to establish rapport first

19:25 Iran hostilities dragging on — how much longer is this a major risk?

the year

23:02 Adding to gold positions — "the selloff was a gift"

25:36 Mortgage sector — rates up, companies waiting for cuts that aren't coming

26:16 Banks not attractive right now — what would make them more attractive?

27:30 Viewer Q — How could Warsh shrink the Fed balance sheet?

27:56 Scarce reserve regime — T-bills, discount window, can he get it done?

29:02 Viewer Q — Is gold a good investment under a tightening regime?

29:52 Viewer Q — PennyMac lawsuit over LIBOR/SOFR transition

31:31 Viewer Q — Annaly Capital earnings — "good earnings, beat expectations"

32:13 What is Chris watching next week?

33:17 GoldCo sponsor — goldco.com/thewrap — 855-573-0817

Michael Green, Chief Strategist and Portfolio Manager for Simplify Asset Management, joins Julia La Roche on episode 366 to break down what he calls the most important and overlooked structural shift in financial history — the rise of passive investing. Green argues that the market isn't broken in the way most people think: it's not fraud or irrational exuberance, it's the mechanical consequence of a regulatory change in 2006 that turned 401k contributions into an automatic, valuation-blind buying machine. With passive now at 55% of the market — and rising 4% per year — Green shares new research showing that somewhere between 65% and 80%, a 1987-style crash stops being a possibility and becomes nearly inevitable. He also connects the dots between our retirement system, the housing crisis, and why both boomers and millennials are scared — just for completely different reasons.

Links:

Follow Mike on X: https://twitter.com/profplum99Read

Mike’s Substack: https://www.yesigiveafig.com/Visit Simplify: https://www.simplify.us/

Timestamps

00:00 Intro and welcome Mike Green

1:04 - What "broken markets" actually means today

2:40 - The Costanza market and how Mike's research began

6:21 - Passive went from 2% to 55% of the market since 1992

7:05 - Why passive investing is just momentum with no valuation filter

9:45 - The 2006 Pension Protection Act — the legislation nobody talks about

10:13 - Why Vanguard and Bogle aren't the ones to blame

10:19 - The book: The Greatest Story Ever Sold

10:39 - The academic paper that forced Mike to rewrite the book

13:59 - Type A vs Type B savers — and the snow cone moment

14:35 - Prices don't move because of information. They move because of flows.

15:08 - The threshold: 65–80% passive and the market becomes unstable

16:07 - Why the coming crash could be worse than 1987

19:37 - The XIV collapse — and what it taught Mike about predicting crashes

22:00 - Is there a disconnect between markets and the economy right now?

22:19 - Nvidia's margins, vendor financing, and the Cisco parallel

24:10 - The S&P could be worth less than 2,000 on a pure DCF basis

25:29 - Pushing back on the "we've never been better off" narrative

27:21 - The valley of death and the precarity line

28:36 - Why demographics are at the center of everything

29:29 - Why boomers are terrified too — and why that matters for younger people

31:14 - The housing trap: boomers won't sell, millennials can't buy

34:21 - What does all this say about the social fabric?

35:18 - "Tax wealth, not work" — the tax code we had in the 1950s

36:41 - Why a wealth tax is actually the wrong solution

38:11 - Wrap up