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Peter Schiff: If You Don't Know You're In A Bubble, You Don't See The Pins

SchiffGold
Value, contrarian, gold & precious metals, macro

By SchiffGold

Earlier this month, Peter Schiff wondered out loud if the twin deficits of government budget and trade could spark an October surprise. The month isn't over yet, but it certainly hasn't been a good one for stock markets.

The Dow is down 3.8% in October. And it's the best-performing of the stock indexes. The S&P 500 is down about 4.7% on the month. The Nasdaq has dropped 7.4%. Dow Transports have plummeted 8.3%. And the Russell 2000 has suffered a 9.2% decline. Now, if you want some good news, look at gold. It's up about 3% this month. But all in all, there is a lot of gloomy news on Wall Street.

All of this doom and gloom led Peter to ask an important question in his latest podcast. How many canaries have to die in the coal mine before the mainstream wakes up?

The dollar has gained a little ground as bond yields have increased, but Peter said the dollar is ultimately going to turn around when people realize that the US economy isn't nearly as strong as is generally believed.

The Federal Reserve released the minutes from the most recent FOMC meeting last week. The Fed continues to express extreme confidence in the US economy and maintains its stance that it will continue raising interest rates.

Of course, that is the real reason that the markets continue to fall is that the Fed is continuing to threaten the markets with higher interest rates."

The mainstream continues to come up with excuses for the falling stock market. Last week, they talked about the trade war, the situation in Italy, and the tensions with Saudi Arabia over the murdered journalist. But Peter had a different explanation. We're in a bear market.

The market probably would have fallen even if none of those things happened. You know, when you're in a bear market, and I think there's a very good chance we are in a bear market, you don't need an excuse for the market to go down. The market just goes down. It's just that when people don't know they're in a bear market, they're always looking for excuses. They can't accept reality."

Peter also took on this notion that the Fed is raising interest rates "for the right reasons." They are doing it because the economy is improving. They always think that though. That's what they do - they raise rates when they think the economy is strong. But Peter said they are about to find themselves in a position where they have to raise rates when things are tanking.

They're going to have to raise interest rates into a weak economy. In fact, they're going to have to raise interest rates into a financial crisis, into a depression. And if they don't do it, we're going to have something even worse. We're going to have hyperinflation. That is the box, unfortunately, the Fed has placed itself in based on years and years of this monetary policy."

Peter went on to break down some of the big losers in the market - primarily tech stocks like IBM Corp. (NYSE:IBM), Advanced Micro Devices (NASDAQ:AMD) and even Netflix (NASDAQ:NFLX). Of course, they are supposed to be the drivers of the new economy. Then, there are homebuilders. They got crushed even worse. Homebuilders haven't been this weak since 2007. You know what was going on then.

Peter has been warning about a collapse for a long time because it's been building for a long time.

Now all of a sudden, finally, after all of these years, things are happening, which are screaming, 'Ah-ha! Right, I've been right.' Here this stuff is now happening, that I've been forecasting - these are the sure signs that the collapse is near. Yet, the mainstream is completely oblivious because they have no idea there's a problem. If you don't know you're in a bubble, you don't see the pins. I've been calling this bubble for a long time and finally, it's pin, pin, pin, right? And nobody sees it."