Pimco's Bill Gross generated headlines this week by admitting he'd made a mistake by shorting Treasuries earlier this year. (See: Bill Gross Learns a Hard Lesson: Even the 'Bond King' Makes Mistakes)
Euro Pacific Capital's Michael Pento also admits he was wrong to be so bearish on bonds. "I was wrong. I thought bond yields would increase," he says.
But unlike Gross, who reportedly has been buying Treasuries and told The FT it's "pretty obvious" he wish he owned more, Pento is more negative than ever on U.S. debt.
"I will never buy Treasuries," Pento says. "It is the biggest bubble the planet earth has ever seen and when it bursts, it will be a long-term secular trend — much, much higher yields, lower in price and you don't want to be a part of that cataclysm."
Somewhat less dramatically, Pento notes the best time to buy Treasuries is when real interest rates are very high and inflation is falling. "Is that the case today?," he asks rhetorically. "Inflation is rising and real interest rates are profoundly negative. This is not a good time to buy Treasuries."
Negative real interest rates — meaning the fed funds rate is below the inflation rate — is a primary reason why Pento remains bullish on gold, even after its historic rally and despite some recent volatility in the metal.
"You have to be bullish on gold," he says. "The Fed is stuck at zero for at least another two years…which guarantees real interest rates will be negative for a very long time."
Returning to the dramatic statements for which he's become famous, Pento refers to Ben Bernanke as "the Counterfeiter in Chief" and warns the Fed chairman "will do what ever it takes" to avoid a repeat of 1937, when austerity measures (fiscal an monetary) tripped the U.S. economy, which was just emerging from the Great Depression, back into a deep recession.
"He'll board his fleet of helicopters and rain dollars on the American people," Pento says of Bernanke. "I'm telling you — do not keep your money in the bank. You have to buy something the government cannot duplicate by fiat."
In addition to gold, Pento is bullish on shares of international commodity producers like Rio Tino and BHP Billiton that pay dividends, energy stocks, farmland and REITs, but the latter are only "a go until interest rates rise either via the Fed, which will never happen, or through market forces, which is bound to happen."