Bull vs. Bear: When Will the Stock Market Capitulate? (Video)

On Fox Business, Peter Schiff debated Andy Brenner, who argued that now is the time to be bullish on the US economy and stock market. Brenner pointed to the latest 5% unemployment figure as his main proof. Peter again made the case that unemployment data is a lagging indicator of economic health at best. While Brenner thinks the current stock market volatility won’t even come close to the dot-com or 2008 bubbles, Peter insisted that this bubble will be bigger than those previous two bubbles combined:

When you hear people say, ‘Oh, it’s contained to manufacturing; it’s just an industrial recession.’ Yeah, it’s as contained as the mortgage problems were contained to subprime. Or if you remember, when the NASDAQ bubble burst – by 2001, the S&P and the Dow still hadn’t rolled over. [It wasn’t] contained to tech. It wasn’t contained then, and it’s not contained now. People are still in denial. These are enormous problems, both in the markets and the economy…”

Highlights from the conversation:

Brenner: You have the unemployment number that just came out – 300,000. You’ve got different aspects of the economy that are actually looking pretty good. You have 2.6 billion miles put on by cars. You’ve had record sales of cars. You’ve just had stimulus from the house. So I don’t think things are going to be that bad. But obviously the markets are bad right now…

Peter: First of all, we are nowhere near capitulation. I think we’re still in denial. Remember, this entire bull market was about the Fed, and the Fed finally pricked its own bubble in December. There’s a lot more air that’s going to come out. The market is going much, much lower until the Federal Reserve comes clean, admits that it’s not raising interest rates anymore. In fact, I think they’re going to have to launch QE4 to save this market. That is exactly what they’re going to do. In the meantime, the Great Recession, which was interrupted by the Fed, is about to resume unless the Fed comes back. Of course, ultimately we are going to die of the Fed’s cure, which is actually worse than the disease. Yes, this might be a buying opportunity. It all depends on how quickly the Fed comes clean, but I still think they’re going to wait a while. They’re playing a game of chicken, but this economy is in lousy shape. When you hear people say, ‘Oh, it’s contained to manufacturing; it’s just an industrial recession.’ Yeah, it’s as contained as the mortgage problems were contained to subprime. Or if you remember, when the NASDAQ bubble burst – by 2001, the S&P and the Dow still hadn’t rolled over. [It wasn’t] contained to tech. It wasn’t contained then, and it’s not contained now. People are still in denial. These are enormous problems, both in the markets and the economy…

Brenner: But Peter, you still have some of the lowest interest rates in the world. You’ve got two central banks that are still full throttle as far as easing. I don’t think you’re anywhere near the 2008 bubble or the 2007 bubble; this is not an Internet bubble. I think things are going to bounce back, and still think the economy is going to do just fine. Granted, it’s choppy, but you just got a 5% unemployment number.

Peter: This bubble is bigger than those previous two bubbles combined. Even though interest rates are still low, they’re not low enough. It’s like when you get a big heroin habit and you take back the dosage, it’s not enough…

Fox Business: Then why isn’t gold bouncing more? Silver is a mess too. I would think those are the plays you like. There is no fear trade here for the moment…

Peter: People are still in denial about the real extent of the problem. People still believe in this phony US recovery, like your other guests. You keep talking about the low unemployment rate. These are all lagging indicators. The only reason the unemployment rate is down is because so many people have left the labor force or have settled for low-paying, part-time jobs. Look, companies don’t lay people off because they anticipate a recession. The layoffs start when employers are surprised by a recession they didn’t anticipate…

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