NOW is the most dangerous time EVER to be an investor, as a giant bubble could be about to explode and derail the world’s economic system, a financial expert has warned.
Considering the financial crisis a market bubble has been produced by the world’s central banks, which have flooded stocks in the anticipation of stimulating an economic recovery, based on Michael Pento, president of Pento Portfolio Strategies (PPS).
But at this point this bubble is set to break open, which will lead to the total collapse of financial markets across the world, the Wall Street expert warned.
The predicted crash is set to be so acute that there will not be a single resource that is safe, with even the value of diamonds and sports cars totally decimated, as outlined by Mr Pento.
He stated the present financial conditions are “the most dangerous I have ever witnessed in my entire life – and I’ve been investing for over 25 years.The membrane has been stretched so wide and so tight that its about to burst.”
It comes as global central bank balance streets have gone from $6trillion in 2007 to $21trn today – and they are still being expanded at the pace of $200billion every month, reported by Mr Pento.
The Bank of England, the European Central Bank (ECB) and the Bank of Japan are among the institutions that this year have kept printing money through Quantitative Easing (QE) programmes that consists of buying the bonds – or debts – of governments and investment grade companies.
This has pushed up bond prices higher and higher, while yields – or payouts – have dropped to record lows.
It signifies some corporate bonds – or debts – are currently trading with negative yields, which indicates that investors are basically paying to lend money in the hope the debt price will keep rising.
Mr. Pento has these days warned that when policymakers signal they are set to stop buying, which will stop bond prices rising, there is going to be a devastating crash – not just in bond markets but across all investment assets.
He stated: “When the bond market breaks, when that bubble bursts, it will wipe out every asset, everything will collapse together… I mean diamonds, sports cars, mutual funds, municipal bonds, fixed income, reits, collateralised loan obligations, stocks, bonds – even commodities – will collapse in tandem along with the bond bubble burst.”
Mr. Pento believes that central banks should have permitted house prices and stock prices to take their natural course during the financial crisis.
He stated: “I think 2008 was just a preview of what’s going to happen.
“If we allowed markets to repair themselves in 2008, in other words, if we allowed home prices to fall and, stock prices to fall and interest rates to rise, and debt levels to contract, then we would have had a depression for a few years, at the most.
“But then we would be able to come out of that with stable money supply, stable interest rates, stable currency, low debt to GDP ratios, high productivity rates, massive capital expenditures, and a nice healthy growing economy.
“But none of that has been able to occur…. We are in a very bad situation..and this is not going to end very well.”
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