Peter Schiff’s worse bear market ever forecast, if accurate would make BTFD play a losing trading/investing strategy.
Peter Schiff is arguing that investors should fear this recent correction and rotate their portfolio towards risk-off assets (precious metals, prime sovereign bonds and hard assets not tied to credit).
Peter Schiff believes that risk-off assets are more likely to preserve what he believes will be the mother of all bear markets.
“Peter Schiff believes that risk-off assets are more likely to preserve what he believes will be the mother of all bear markets”
The crux of Peter Schiff’s worse bear market ever forecast is that the central bank’s quantitative easing (QE) and its Zero rate interest policy (ZIRP) has merely delayed the coming economic and financial crash. Moreover, QE and ZIRP have provided asset prices with a higher cliff to fall off.
Almost a decade of the central bank’s easy money policy has pumped up the asset bubble across all asset classes, argues Peter Schiff.
Wall Street and the US economy are on the verge of a recession, Peter Schiff told Fox News Business.
“This is a bubble not just in the stock market, but the entire economy” Peter Schiff said during an interview with FOX Business’.
Peter Schiff’s worse bear market ever forecast in conjunction with another economic crash that will be “Far More Painful” than the 2008 Recession makes sober reading.
“This is a bubble not just in the stock market, but the entire economy”
But is Peter Schiff’s worse bear market ever just fearmongering?
Peter Schiff’s bearish view is consistent with what he has been saying for the last decade.
The permabear investor has been an ardent critic of the central bank’s unprecedented monetary easing which was implemented through a program of QE and ZIRP.
So there a logical argument to the view that when the Fed, the world’s central bank by default, transitions from its accommodative stance to a normalization policy that is likely to have an impact on the financial markets and the economy.
Historic evidence suggests that the Fed’s balancing act of raising fund rates to put out the inflation fire without starving the economic engine of oxygen is virtually an impossible act. When you throw in policy time lag into the equations that makes setting rates even more difficult.
So Peter Schiff’s worse bear market ever is based on the fact that every Fed interest rate hike cycle has been accompanied by some kind of external or domestic recession and or financial crisis.
As we wrote in Ray-Dalios Spiraling bond yields.
“In the late 1990s, the Fed started tightening; that triggered the Asia crisis, LTCM, and the Russian collapse, and the equity bubble popped. Early 1993-4 Fed tightening caused a similar bond market turmoil and the Mexican crisis. Then in 1987 Fed Greenspan’s tightening followed Black Monday and the ‘the Greenspan put’ took off. The early 80s included the LDC/Latam debt crisis and Conti Illinois collapse.”
“next bear market will be worst in his life” – Jim Rogers
Peter Schiff’s worse bear market ever is also not a voice in the wilderness
Indeed, Jim Rogers, 75, billionaire investor and chairman of Roger holdings reckons that the “next bear market will be worst in his life”.
What’s more, Jim Rogers is not alone too, bearing in mind that this entire column could be filled with bearish calls from some of the world’s heavyweight asset managers and hedge funds.
Nevertheless, some ardent bulls argue that Peter Schiff’s worse bear market ever should not be taken too seriously. This view argues permabears are always pessimistic which means that they always miss the upside of a bullish market.
Peter Schiff is no stranger to losses, particularly in a bull market. So the longest bull market in history and a USD dollar rally means that Peter Schiff’s Euro Pacific Capital underperformed other funds that were more orientated towards US stocks and the USD.
Bearish traders have lost money shorting the major stock indices because they did not factor in the role that central banks around the world would play in keeping these markets propped up.
Who was taught in economics about quantitative easing and negative interest rate policy?
“People are a little bit more pessimistic, a little more cautious than they were” – Jeff Kleintop (chief global investment strategist, Charles Schwab)
Peter Schiff’s worse bear market forecast could be torpedoed by more actions by the central bank who will do whatever it takes to keep their system stable
Monetary policy may be exhausted and the trillion dollar tax cuts by the current Trump administration have already been factored into the market but what other unforeseen geopolitical, political event could keep the longest bull market in living memory running?
Perhaps Jeff Kleintop, chief global investment strategist for Charles Schwab sums up best the market sentiment.
“People are a little bit more pessimistic, a little more cautious than they were. Cash balances have crept back up a little bit after getting really low. Still, they’re on balance a little more optimistic than they have been in the last eight or nine years and that does suggest we’re closer to the end of this cycle than we are the beginning. But we’re certainly not at the levels of euphoria either in valuations or in individual investor sentiment that we’ve seen in the past” said Jeff Kleintop.
Then Peter Schiff’s worse bear market forecast could have its moment.
Let’s be frank, spiraling global debt, a US-China trade war and more expensive credit cannot be good for the economy and ultimately stocks.
Bull markets don’t last forever and this one could be nearing its end. Peter Schiff’s worse bear market forecast might sound drastic today but it will make sense if the Fed continues tightening, the trade war hits corporate profits and the economy starts to tinker down.