On Nov. 18, Peter Schiff appeared on RT Boom Bust to talk stock markets, trade war and Federal Reserve policy. He said that right now the Fed is doing a good job stimulating the bubbles, but ultimately, it’s going to end very poorly.
On the trade war front, there seems to be a lot of conflicting information and continual yo-yoing between pessimism and optimism. The Chinese seem less confident while White House economic advisor Larry Kudlow says a deal is close.
Peter said he thinks China is posturing for negotiations.
If you’re negotiating with somebody, you don’t want to admit that you’re close to a deal. You want to say that a deal is far away because that way you can try to extract more concessions from the other side and get a more favorable deal. So, I think when you hear the comments from China, that’s what the Chinese are trying to do.”
But Peter said he thinks President Trump has a different agenda.
I think Trump only cares about goosing the stock market. And he knows that every time he comes out and says that a deal is close, we have a deal, it’s going to be great, he gets another 100, 200 Dow points. That’s what he cares about. And so as long as the market is going to keep running every time he cries wolf, he’s going to keep crying wolf.”
Todd “Bubba” Horwitz was also on the show. He disagreed somewhat with Peter’s assessment. He said the reason the stock market continues to soar is because there’s no place else to go with your money today. Investors are chasing yield. He said the stock markets will come crashing down at some point, but nobody knows when. He also said Trump is right when he says the Fed could take rates even lower because interest rates in the US are higher than they are in Europe and Asia. He said we could borrow at a lot lower rate because we’re still “the best game in town.”
Peter said he disagreed with Horwitz completely and that there are lots of better places to put your money than the US stock markets.
I think the US stock market is dramatically overvalued. And the reason it is going up is because the Federal Reserve is creating money.”
Peter brought up the fact that the Fed has not only cut rates three times this year. It has also embarked on QE4. Investors expect QE4 to be like QE3, but there’s a big difference.
You see, when the Fed did QE3, investors were still foolish enough to believe that that was the last time they were going to do it. They actually bought the Fed when the Fed said they had an exit strategy, they were going to shrink their balance sheet; they were going to normalize interest rates. The markets were looking forward to that and they thought that what the Fed was doing was working. But it didn’t work. It was an abject failure. That’s why they’re doing it again. But soon the markets are going to discover that QE is permanent and that there’s never going to be a real reduction in the balance sheet. The balance sheet is going to grow into perpetuity and I think we’re going to have a dollar crisis. I think we’re going to have a sovereign debt crisis. I think this is going to end very poorly for people who have been enjoying the paper gains in this stock market bubble.”
Peter said investors should get out of the US stock market before the bubble pops.
You mentioned precious metals. Gold is a much better place than the US stock market. I know that gold has been outperformed by the stock market over the last five, 10 years, but it hasn’t been outperforming gold since the beginning of the millennium. You know, gold is doing better than the Dow if you start in 2000. But I do think over the next five to 10 years, the price of gold is going to dramatically outperform the Dow.”
The case for gold is strong. For more detailed analysis, download the SchiffGold report “Why Buy Gold Now” here.
Peter also touched on the so-called independence of the Fed, saying the central bank has never been truly independent. It has always worked hand-in-glove with Congress and presidents, including President Trump. He said that’s why the Fed has been cutting rates and doing QE.
But it’s not stimulating the economy. It’s stimulating the bubble. That’s all that’s happening. And Donald Trump was correct when he attacked Janet Yellen for pursuing these tactics when Obama was president, and now … he’s criticizing Powell for not doing it enough. He wants negative rates. He wants even bigger QE. Because he doesn’t care about the US economy. All of this is counterproductive if you care about the US economy. All he wants is to make the numbers look better. He wants to get the stock market so he can claim that that proves that he has a successful presidency.”
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