Watch Peter Schiff, one of the most prolific speakers at the International Mining Investment Conference talk about the "Calm Before the Storm" and his prediction that interest rates are about to shoot through the roof and depress the economy to record lows.
Peter Schiff appears at Cambridge House international, where he was one of the recent keynote speakers. He talks about the dangerous financial situation the world now finds itself in and tells investors that they should not be too complacent.
We are simply in the calm before the storm and hard times are coming. Prepare now, or rue the day you didn't.
Investment guru Peter Schiff is warning investors that a perfect storm is brewing as the nation’s central bank officials are clueless about how to deal with the future of interest rates in such a volatile trading landscape.
“We are in the perfect storm, I think, of massive explosion in deficits, not just the budget deficit but the trade deficit, these tariffs or a trade war is only going to compound the problem,” Schiff said on a recent podcast.
“We've got the economy weakening. We've got the dollar teetering on the brink of collapse. We've got gold about to break out and the bond market is in the same thing," the CEO and chief global strategist of Euro Pacific Capital Inc. said.
The Federal Reserve is not going to be able to deliver the rate hikes it is predicting, he cautions. “It's the expectation of more rate hikes that is what is keeping the lid on the price of gold. But it's only a matter of time before the market blows the lid off and the price of gold goes up," he warned.
He said not to be fooled by any recent headlines proclaiming the economy is actually robust.
“Q1 had all the hype in it, all the anticipation of the tax cuts, the big build in inventories. Despite all that, we're barely getting any growth in Q1 and because I think we had to pull growth forward from Q2 in order to get a pathetic 1.9, or wherever it's going to be for Q1, then Q2 is going to be a lot lower because we've pulled that growth forward,” he said/
“And that just blows up this whole bullish scenario of 4 or 5% economic growth," he said.
To be sure, “robust” business borrowing, rising consumer spending, and tight labor markets indicate the U.S. economy remains on track for continued growth, the Federal Reserve reported on Wednesday, with the risks of a global trade war the one big outlier, Reuters reported.
In its periodic “Beige Book” summary of contacts with businesses in its 12 regional districts, the Fed said the overall outlook among businesses “remained positive,” but that many were worried about the Trump administration’s use of tariffs.
Most analysts blamed the plunge on fear of an all-out trade war between the US and China. But the Federal Reserve rate hike on Wednesday also likely played a part in the stock market decline. The markets don't like the prospect of having their easy-money punch bowl taken away.
So, could we be on the verge of a gold breakout as stocks break down?
In his latest podcast, Peter Schiff said he believes we are already in a bear market. Technically, analysts don't start talking bears until the stock market declines 20%. But as Peter pointed out, you have to drop 10% before you get to 20.
"So, if this is a bear market, if we ultimately go down by more than 20%, then this is the bear market right now. It's only a correction if it doesn't turn into a bear market. But if it becomes a bear market, it's been a bear market the entire time, and I think we are in a bear market now."
The mainstream analysts continue to assure us that everything is fine. The fundamentals haven't changed. Peter said in a sense, they're right.
"The fundamentals haven't changed. They were lousy when the market was going up, and they're lousy now that the market is going down. In fact, if they've changed, the fundamentals have actually gotten worse. But the problem is these guys don't understand the fundamentals. They didn't realize that the only thing that was propping up the market was the fact that it was a bubble and what's changed is the bubble has been pricked."
Gold prices rallied after the Fed announced its rate hike. The price approached $1350 on Friday. The trade war talk spurred safe-haven buying, and we got the post-rate hike bounce we've seen in the past as investors sell the rumor, buy the fact of rate hikes.
Before the FOMC meeting, Peter said if the Fed didn't raise rates, gold could go ballistic.
"But they did raise rates, so it just went up a little bit. We're at resistance of $1350. But we could explode at any minute."
With the US missile strike in Syria, rumblings of a trade war and a generally weak dollar, gold briefly flirted with $1,365 last week. But the anticipation of Federal Reserve rate hikes continues to create strong headwinds against the yellow metal. Last week, the Fed released its March FOMC minutes, and most analysts interpreted them as "hawkish." In fact, many people now think the Fed will nudge rates up again in June, leaving six months to get in the much-anticipated third hike of the year, and possibly even get in a fourth.
The Fed bases its hawkishness on its anticipation of continued strong economic growth and increasing inflation. Peter said it has it half right. Inflation is going to continue to increase. But the central bankers don't even really have that right. Peter says inflation is actually going to go up faster than projected. The bottom line is that the Fed isn't going to be able to push through all of these rate hikes.
The Fed is not going to be able to deliver the rate hikes the Fed is expecting, and again, it's the expectation of more rate hikes that is what is keeping the lid on the price of gold. But it's only a matter of time before the market blows the lid off and the price of gold goes up."
Peter said gold is basically trading sideways right now, in advance of a breakout. Meanwhile, the dollar is doing the same thing in the other direction. The greenback is weak but not breaking down. On the other hand, it isn't recovering any of its losses. Peter thinks it's treading water right now before it heads lower again.
The Atlanta Fed dropped its Q1 GDP estimate twice last week. It is now projecting a 1.9% growth. Peter said that's probably going to be the high-water mark for the year.
Q1 had all the hype in it, all the anticipation of the tax cuts, the big build in inventories. Despite all that, we're barely getting any growth in Q1 and because I think we had to pull growth forward from Q2 in order to get a pathetic 1.9, or wherever it's going to be for Q1, then Q2 is going to be a lot lower because we've pulled that growth forward. And that just blows up this whole bullish scenario of 4 or 5% economic growth."
