Q2 was one heck of a quarter for US stock markets. But in his podcast, Peter Schiff called it a “phony rally.” The real bull run to watch is gold.
The Dow Jones just wrapped up its best quarter since 1987. The S&P 500, finished out its best three-month run since 1998 during the dot-com bubble. But as Peter pointed out, you have to put the big gains in perspective. Stocks were coming off an abysmal first quarter, and other than the NASDAQ, the major indexes remain negative on the year.
And this stock market bull run has little to no connection with economic realities. In fact, the Federal Reserve drove it all. The central bank has dropped trillions of dollars into the economy in what Peter has called a “monetary Hail Mary.” It’s monetizing all of the government debt. The central bank has even resorted to purchasing corporate bonds and lending money directly to companies.
That’s why their share prices are going up because the Federal Reserve is buying all their bonds, almost like its forgiving their debt. So, it’s backstopping all these corporations. That is the only reason that we’ve had this rally. So, it’s a phony rally. It’s air going back into a bubble.
Peter said he doesn’t think the Fed can keep inflating the bubble for the rest of the year. But even if the Fed can somehow continue to elevate US stock prices via the money printing press, it’s not going to matter.
The only way to keep the US stock market going up is to crash the dollar – to sacrifice the value of the US dollar, and in so-doing, the Fed will be rewarding the people who own gold, who own gold stocks, and who own foreign stocks to a much greater degree than anyone who owns US stocks.”
Speaking of gold, the yellow metal also had a strong second quarter. Gold futures rose above $1,800 on the last day of June, wrapping up its largest quarterly gain (13%) since 2016. And the yellow metal finished Q2 at its highest level in over eight years. A lot of people in the mainstream are starting to forecast record gold prices in the coming months. Meanwhile, the GDX index of major gold mining stocks was up 60% on the quarter.
On the year, gold is up about 16% while every US stock index except the NASDAQ is down. And if you look at the NASDAQ priced in gold, it’s entire gain is wiped out.
Peter said he expects to see another big drop in stocks at some point. But it won’t be because of liquidity. The fundamentals will catch up and it will be about valuation and recession. Meanwhile, the dollar is going to go down. And virtually nobody is ready for what’s coming down the pike.
They don’t understand the damage that the Fed has done to the economy. They don’t understand how the Fed inflated the prior bubbles, or how this one is even worse. And they don’t get how everything the Fed is doing now is making the problems they don’t even understand much worse and setting up an outcome that they haven’t even contemplated. I mean, nobody is prepared for stagflation – for a situation where the economy is weak, unemployment rises, yet we have more inflation, and we have a weak dollar; we have rising gold prices – the exact environment we’re going to have. Nobody on Wall Street is prepared for it.”
Peter also talked about bitcoin, noting that a lot of people think the cryptocurrency will be the big beneficiary of a dollar crisis. He doesn’t think so.
Bitcoin is not the new gold. Gold is the new gold.”
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