"I'll tell you this, the average drop of the S&P 500 in the last six recessions has been 37 percent," said Pento. "So if this coming recession is just the average variety, then I would expect the S&P to drop 37 percent, which puts us about 1300 on the S&P 500. So that's a really big hit. But, as I wrote about in my piece that appeared on CNBC and Drudge, I don't know what the Federal Reserve is going to do to pull us out of the next recession. In the great recession of 2008, the Federal Reserve took the Fed funds rate, which is the interbank lending rate, from 5.25 down to zero by the end of 2008. And that provided consumers and corporations, and even the federal government, with a lot of debt service relief. And that helped bring the economy out of the great recession, it also boosted asset prices, it boosted the stock market, it boosted bond prices, it boosted real estate."
Pento continued, "So the point is now the Federal Reserve is leveraged 77 to 1, they have almost no capital, it's way more over-leveraged than Bear Stearns or Lehman Brothers or any of those financial institutions were before the great recession. But, more importantly, the Fed has no more room to lower the borrowing cost to the private and public sector. That is one of the main reasons why I fear this inevitable next recession. By the way, the U.S. has suffered recession for about every five years since the beginning of the Republic."
He also states that we're long overdue: "It has been seven years -- and not that we're just overdue, if you look at what's going on China, if you look at what's going as far as home prices, to income, stock prices, to market cap, to GDP, the fact is that asset prices can no longer be supported by incomes, and that is probably what is going to cause the great recession. Plus, if you look what has happened in high yield, borrowing costs have increased dramatically, outside of the Fed's recent 25 basis point rate hike."
Read more from Dawn J Bennett here: http://www.releasewire.com/press-releases/dawn-bennett-host-of-radio-show-financial-myth-busting-interviews-mike-pento-founder-and-president-of-pento-portfolio-strategies-and-author-658992.htm