A lot of people are turning more bullish on the economy with the possibility of an effective COVID-19 vaccine. But in his podcast, Peter Schiff argued that coronavirus isn’t the problem. COVID-19 isn’t making the economy sick. All of the Federal Reserve stimulus and money printing is making the economy ill. And coronavirus vaccine isn’t going to make it well.
Peter said he recently read an article saying that hedge funds have never been more net-long in history as they are right now.
So the guys that run the hedge funds, supposedly the smartest people in the room, have never been more optimistic and more bullish, and they are just long. So, in other words, hedge funds have never been less hedged than they are today. So, they’re really not hedge funds at all, they are risk funds. And when everybody is loaded up on one side of the trade, there’s a pretty good indication that the markets are getting ready to move in the other direction.”
What is providing the impetus for all this bullishness?
JP Morgan recently projected GDP in Q1 of 2021 would be negative. But they are predicting the economy will come roaring back in Q2 and Q3 of next year. Why?
Obviously, it’s because of massive government stimulus that they’re expecting, probably even more from the Fed than from Congress, because I don’t know how long it’s going to take the Biden administration and Congress to actually enact their initial stimulus.”
If we do have a negative GDP for the first quarter, that will put even more political pressure on Congress, in particular the Republicans in the Senate, assuming that they win the Georgia special elections, to compromise and deliver more stimulus.
So, it’s the anticipation of this stimulus which is driving the market.”
A lot of people think a COVID vaccine might ease the need for stimulus.
But the real burden is not the COVID, but all the debt the economy accumulated while the Fed was trying to fight COVID. It’s the COVID cure that is far more harmful to the economy than the disease. So, even after the disease is gone, the cure is going to linger and is going to continue to do damage because we accumulated all this extra debt, because the Fed’s balance sheet is now so much bigger, because the stock market bubble is so much bigger, because the real estate bubble has gained new strength, because everybody has more leverage than they did before. And of course, the US economy is going to be less efficient in this post-COVID world as US companies are still going to have to be covering the costs of being able to prepare for the next lockdown or the next virus that comes up. We already know what the playbook is.”
Simply put, we have a less efficient, more highly indebted, more highly leveraged economy that will need stimulus more than ever.
We don’t need the stimulus to deal with the COVID disease. We need more stimulus to deal with the COVID cure. That’s what we’re addicted to. We’re addicted to the cure. It’s not about the disease. It’s all about the cure.”
Peter pointed out that the Fed will likely start focusing QE on the longer end of the yield curve and may well eventually own the entire long end. Private investors will be wary of holding long-term bonds because of the risk of rising interest rates. Of course, eventually, the central bank could well own the entirety of the bond market. The Fed currently holds a record percentage of US debt.
Last week, Fed data showed another $67.7 billion added to the balance sheet. It now stands at $7.243 trillion. Meanwhile, the money supply increased by $172.4 billion.
This is why the US dollar is so weak. And it’s going to get a lot weaker.”
Peter said at some point prices will collapse – but not in dollars. The Fed will print enough money to keep that from happening. But they will collapse priced in gold.
The Fed will stop the nominal collapse in asset prices or goods prices. But they will cause an even bigger collapse in real terms pricing those assets and goods in gold. So, if you hide out in US Treasuries, you get wiped out. That’s not a safe haven. The real safe haven would be real money, which would be gold.”
In this podcast, Peter also talked about bitcoin and Trump’s executive order to lower the price of prescription drugs.
US Consumer Confidence Slumps In November As Hope FadesTyler DurdenTue, 11/24/2020 — 10:05
After a mixed bag in October (present situation up, future hope down), analysts expected The Conference Board to report a worsening in overall consumer confidence in November (despite soaring stocks), and in fact things were worse than expected.
Headline consumer confidence slipped to 96.1 from 100.9 (well below the 98.0 expectation) as expectations tumbled from 98.2 to 89.5 and the present situation dropped modestly from an upwardly revised 106.2 to 105.9.
If stock markets are forward-looking then this should be worrisome…
Interestingly, despite the drop in confidence, buying expectations rose for homes, cars, and major appliances, and expectations for rising incomes also rose modestly.
As Crypto soars, non-digital-gold is plunging, with futures breaking below $1800 for the first time since July. Since the election and vaccine news, gold futures have crashed from $1960 to $1798…
The big question is, will gold find support at its 200DMA, or is this a systemic breakdown that ignores the future deficit-spending collapse of credibility in the global reserve currency?
As it appears — for now — that digital gold is preferable to real gold…