In a podcast early last week, Peter Schiff called the surging stock market “the biggest bubble ever” and talked about some of the absurdities in the market, particularly in the Nasdaq. Then on Thursday, that bubble may have popped. Peter talked about it in his podcast Friday.
The day after Peter called the market the biggest bubble ever, the Nasdaq broke 12,000 for the first time ever and the Dow Jones pushed back above 29,000. That prompted Donald Trump to tweet about how lucky we are that he’s president. Peter said President Trump has nothing to do with it.
It isn’t so much that we’re lucky to have Trump as president. We’re unlucky to have Powell as Fed chairman because it’s the Fed that is the reason that the Dow and the Nasdaq and the S&P were so high on Wednesday. It’s not because of Trump or his policies. Unless you want to claim that Trump’s policies are why the economy is so weak, and it’s because the economy is so weak that monetary policy is having such a strong impact on the markets because the Fed is printing all this money and keeping interest rates artificially low to compensate for the underlying weakness in the economy.”
That’s not to say Trump caused the economic weakness. He inherited the structural problems from the Obama years. But he didn’t do anything to correct them because a correction would have been too painful.
He turned to the same monetary magicians he had criticized so correctly when he was a candidate.”
The magic may have run out.
Last Thursday, the Nasdaq fell by the most ever percentage-wise off an all-time high. The Nasdaq got as high as 12,074 on Wednesday and then dropped to a low of 10,875 on Friday. It rallied a bit into the close Friday, but still lost 6% in two days. Stock futures in the Nasdaq were still looking bearish Tuesday morning following the Labor Day holiday. Peter said we could be setting up for another October crash, but it’s hard to tell.
Again, this is the biggest bubble ever and so it’s not going to die easy. And so it’s certainly possible that the bulls can get this under control with the help of the Fed.”
Even as the stock market as tanking, Federal Reserve Bank of Chicago President Charles Evans called for more government fiscal stimulus and said more quantitative easing is in the pipeline.
I don’t think it’s a coincidence that the Fed is coming out with more QE when the market is getting killed. And so the Fed is trying to rescue the market by dangling the prospect of more QE.”
A lot of the “stay at home” stocks such as Zoom were hit hard by the decline along with bubble stocks such as Tesla.
So, could this be the end of the bubble? Peter said it’s hard to say.
As I said, this is the biggest bubble. It is completely irrational. And it’s going to end badly. And it may have already ended. But the bad part is yet to come.”
Peter also talked about the bond market and the Chinese selling US Treasuries, and he touched on bitcoin as well in this podcast.