Earnings reports started coming in last week. It was a mixed bag, with some companies showing the negative impacts of the coronavirus-induced government shutdowns, but other companies coming in more upbeat. Peter Schiff appeared on RT Boom Bust to talk about it. He said the only thing the stock markets have going for them right now is the Federal Reserve. But one sector will truly benefit – gold.
Peter said it doesn’t surprise him that some companies are benefitting from coronavirus.
Obviously, if people aren’t going out and they’re staying in, maybe they’re spending money online that might otherwise have been spent through other vehicles. But of course, ultimately a lot of these consumers are just not going to have the money to spend. They’re going to run out of aid for the government, or the government money is going to run out of purchasing power due to inflation.”
Peter said he thinks the vast majority of companies will see substantial hits to their earnings. And it’s not just because of the pandemic. It’s also due to the recession that was going to start anyway.
Peter emphasized that government and central bank policy are at the root of the problem.
A lot of companies have been able to borrow cheap and then use the cash to buy back their own overpriced stocks. Many of these companies are now the recipient of bailout money, unfortunately. They should be allowed to fail so new management teams can step and clean house. Instead, we are perpetuating the management teams that made these reckless decisions. But of course, these decisions were made based on monetary policy that was being provided by the Fed, and the Fed is now doubling down on that failed policy.”
Peter said the only thing the market has going for it is the Fed.
Meanwhile, in order to prop up the market, the Fed has to destroy the purchasing power of the dollar, so what investors should be doing is buying gold stocks. Because gold and gold stocks will be the biggest beneficiaries of monetary policy.”
The host brought up the decline in some of the industrial metals like nickel and copper. Peter said precious metals are a totally different story.
They are a monetary alternative to fiat currencies that are being debased the world over, but particularly in the United States. So, I think when it comes to earnings, gold stocks are going to be among the few companies that see a huge boost to their earnings. In fact, they are benefitting from the reduction in energy prices because energy is a key cost when it comes to operating a gold mine. So, gold mines right now literally are gold mines, and I think investors are ignoring the potential.”
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