Economic guru Peter Schiff is sounding more economic alarms. This time, without mincing words, he says that the Federal Reserve’s raising of the interest rates will cause a stock market collapse.
Euro Pacific Capital CEO Peter Schiff and Steven Quirk, the executive vice president of TD Ameritrade’s trader group discussed the Federal Reserve’s impact on the stock market and whether corporate earnings can help the market make a comeback. According to Fox News, Schiff’s assessment was none too calming. “[The Federal Reserve] should raise rates, but the market is going to collapse as a result,” he told FOX Business’ Liz Claman on Monday.
Schiff also said that investors should expect a long drawn-out bear market with the cost of living rising to dramatic levels. “This bear market is not going to end quickly,” he said.
The latest China-U.S. tariff threats have spooked the markets, driving the Dow Jones Industrial Average to a more than 900-point swing from session highs to lows today. The index clawed back some of its loses in the final hour of trading, closing 245 points lower, or nearly 1 percent, at 24,443. The S&P 500 fell to 2,641, about 0.65 percent, and the Nasdaq Composite was down 1.6 percent at 7,050.29.
The CBOE Volatility Index, Wall Street’s “fear gauge,” has jumped an estimated 87 percent since the close of the market on Sept. 28, 2018. –Fox News
Quirk says that there’s no end to October’s fear in sight, but they aren’t signaling armageddon either. “[Investors] are not optimistically saying this is going to bounce right back, but they are also not saying this is the end of the world,” he said on Countdown to the Closing Bell.
Schiff is taking on a less optimistic view, however. He said that the debt racked up by companies during the stock market boom and a hike in interest rates will cause corporate earnings to potentially collapse at a rapid pace. “There is a lot of optimism about earnings and unfortunately that’s already priced into these stocks,” he said.
And the rising doom&gloom fearporn articles will collapse this site.
While I agree with Schiff that “raising interest rates” will “collapse the market” ……… eventually, the current rate hike has accomplished exactly what it was intended to do: temper market exuberance and initiate a correction. A correction is not a collapse.
” Schiff also said that investors should expect a long drawn-out bear market with the cost of living rising to dramatic levels. ”
This is patently false.
Consumers will only bear so much inflation and they will quit buying. Price and demand are elastic. Consumers are already saturated with personal debt which is another reason that the business cycle has ended. The length of the bear market will depend upon factors not yet clarified, such as the result of the TARIFFS, and the coming elections.
It is only TRUMP’S tax cut which has stimulated the markets and the economy with increased spending by businesses on new equipment while they are flush with cash from an extended boom; and have an opportunity to write off that equipment in the first year.
While bear markets emerge at the end of the business cycle, they do not portend the doom & gloom that some would suggest because the government spends so much money on “entitlements”, social programs, and military spending the economy continues to function as the welfare class spends every dime they get, placing a “safety net” under the economy. Investor’s make money whether the markets are going up or down and they exacerbate the trend in either direction.
Rising interest rates do not mean Economic TEOTWAWKI. 🙂
schiff does have a KEEEEN sense of the obvious, don’t he….
Groundhog’s Day?
Psychological horse shit!
Nothing wrong with a healthy correction in any bubble market, you don’t have to be an economic genius to know that. People put too much importance into what number the Dow, Nasdaq and S&P are at.
If Schiff keep saying the same thing long enough, eventually he’ll be right.
So.
Now you can put you money in the bank and get a guaranteed 4 or 5%, and you handle the money and not someone else making money off of your money.
When they loose it they can’t just tell you oh well.
Sgt.
The bank makes money off of your money.
Quite a bit of it.
“A”
I know they do. But here is a time if you cleared your money up and don’t owe any body to make money off of interest rates.
Sgt.
True, interest rates are getting high enough now to start making banks an attractive safe alternative to a very volatile (and IMO way overpriced with the PE still over 29) stock market.
Sargent:
If you want to earn interest on savings, just leave a per cent of your savings in the bank. Between 10% to 25% is pretty safe. Keep cash, gold & silver, and spend the rest on preps.
Banks can make mistakes. Then what do you do? Keep cash in and out of a bank.
_
Schiff is a prognosticator of economic doom-porn, I agree. But, he is also not stupid; nor, is he necessarily wrong. Rising interest rates do slow down an economy. Any time institutions of finance rake in more profit, the consumer of loans and out in society do suffer. What needs to be looked at is that inflationary pressures on a dollar’s purchasing power is the thing that will spell the end. Like in pre-WW2 Germany when the mark by the wheel-barrow load could not buy a loaf of bread. What good is it then to be a millionaire (be it in marks, dollars, euros….)?
If many of you don’t agree with the doom and gloom why do you come here and waste your time reading it?
Rising interest rates will collapse any borrower who has too much dollar denominated debt. It is happening to whole countries that borrowed in dollars when interest was low and now cannot refinance their debt at higher rates. Defaults happen.
It is also going to happen to some borrowers on variable rate mortgages that are under water and to some companies that need to refinance debt that will roll over to a higher rate.
I often hear that there should be a jubilee or those calling for a reset on the debt. You need to remember that EVERY debt owed is also someone else’s asset on the books. Every jubilee or reset will destroy that debt and that asset at the same time. Be careful what you wish for. Could be your 401k, or granny’s pension, or any investment you may have that holds that debt as an asset on their books.
Some say buy precious. It may be helpful, but only if there is still a monetary system in place and working in order to value the PMs. If not, who’s going to set the value and in what?
“I’m telling you, this Mercury dime is worth two bucks. Now sell me two bucks worth of those potatoes.” Farmer furrows his brow and raises his shootin’ iron. “That’s a stinkin’ dime ya got. Wadda ya mean two bucks?”
Next thing you know, his hogs are crunching up your femur bone.
US Govt and all of the states will increase their annual spending by 3% to 7% each and every year until the oil runs out!!
Certainly all the US markets will double by 2030.
And double again by 2040.
And double again by 2050.
And double again by 2060.