Priced in Gold, Stocks Are Extremely Overvalued (Video)

Yesterday, Peter Schiff told CNBC’s Futures Now that Janet Yellen has it wrong – the stock market isn’t “a little overvalued”; it’s extremely overvalued. He went on to explain why he believes the US stock market is going to lose a substantial amount of its value relative to the price of gold.

Follow along with this transcript:

CNBC: Do you agree with Janet Yellen [that the stock market is a little overvalued], even if your reasoning is different than hers?

Peter: Well, the stock market is more than just a little over-valued. It is extremely overvalued, because you can’t look at it compared to these artificially low interest rates. You have got to say, ‘If interest rates were allowed to rise back to their normal levels, where should the stock market be?’ You can’t compare the stock market to the current rate of interest, because it’s abnormally low, artificially by the Fed. I also think that US corporations are highly levered up based on all this cheap money. They’ve done a lot of share buybacks, finance by debt. I think corporate America is highly exposed to higher interest rates, as is the entire US economy. I think if interest rates were allowed to rise to normal, not only would corporate debt surge, but corporate earnings would plunge. You’d have a stock market collapse. You’d have a real estate market collapse. You’d be right back in a huge recession and another financial crisis. So she’s wrong in that she’s underestimating the degree to which stocks are overvalued. That is why the Fed will do everything it can to keep them from going down. Why did she suggest that they’re expensive? I don’t know. Maybe she doesn’t realize the risk that she’s taking. Sometimes she misspeaks and then she has to go and correct herself.

CNBC: Where do you think the stock market should be right now? Where do you think it would be fairly valued?

Peter: Well, if the Fed was really going to raise interest rates it should be a lot lower. But because they’re not going to do that, because they’re going to create even more inflation, it’s hard to say where stocks should be priced in US dollars. But I do think that the stock market is extremely over-valued if you price it in gold. I do expect the US stock market to lose a substantial amount of its value when priced in real money, which is gold…

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