Peter Schiff: Wall Street Due for Correction

Peter leads off this week with an episode covering last Friday’s stock catastrophe, Bitcoin’s recent performance, and the start of President Trump’s so-called “hush-money” trial.

Last Friday saw the Nasdaq fall 2%, with members of the “Magnificent 7” stocks, like Nvidia and Netflix, taking 14% tumbles. Peter thinks Friday’s close is the natural consequence of Wall Street betting on rate cuts to keep the 2023 bull run going:

“To me this is the beginning of a long overdue decline in these stocks. … The reason that Wall Street assumed the Fed was going to be able to slip in all these cuts was because everybody thought that inflation was going to come down, but to me that seemed like a ridiculous assumption to make, and the evidence that was building clearly showed that inflation was in the process of bottoming, at least the way they measure it.”

This shouldn’t surprise us, since the Magnificent 7 are more reliant on low interest rates than other stocks:

“The Nasdaq was ignoring [rising bond yields] because those are the stocks that are the most sensitive to interest rates. … The companies that are profiting big numbers in the future—growth stocks—those future earnings are much more valuable today when interest rates are low. So when they’re not low—when they’re higher—those stocks should take a much bigger hit.”

Even with all the financial signs pointing to the economic crisis, Congress is still trying to spend money it doesn’t have:

“The house just passed this ninety-five billion dollar foreign aid bill. Where’s the money coming from to cover the cost of the foreign aid? Nobody’s appropriating any money to pay for this. We just voted for bigger deficits. The national debt just goes up by almost a hundred billion overnight, on top of the other gains, because we’re going to give another sixty-one billion dollars to the Ukraine. … What did that money buy us? The deaths of thousands—tens of thousands— of Ukrainians and Russians.”

During Wall Street’s turmoil and Israel’s retaliation against Iran, Bitcoin temporarily fell below $60,000:

“What’s significant is not that Bitcoin went up when other risk assets went up. What’s significant is that it went down when other risk assets went down! It didn’t behave anything like gold, so it’s not really digital gold. I mean maybe it’s a digital tech stock, except without any earnings or without any revenues. It has got more in common with your typical tech company that loses money than it does with gold.”

Bitcoin experienced a rare event last week, its halving, but Peter discounts the hype and points to the cryptocurrency’s even more expensive transaction fees as evidence it can’t function as money:

“Even if people wanted to use Bitcoin as a currency, it can’t be used that way because it’s too expensive, and it’s too slow. And just because it fails as a currency doesn’t mean it succeeds as gold, because it’s an even bigger failure at being gold than it was as a currency— because it’s not a store of value, because it has no value to store, and it’s not a safe haven. It has proved that twice in the last week; every time people are worried, they sell their Bitcoin even faster than they sell their stock.”

As the opening statements of Donald Trump’s trial start this week, Peter comments on the banana-republic-esque legal system that’s targeting the former president:

“What if Trump wasn’t Trump? What if he wasn’t running for president— he was just a regular guy who did the same thing? Would there be charges filed here? Of course not! … He’s being charged for who he is. That is illegal. There’s something called equal protection under law. He is entitled to the same legal treatment.”

The bright side of the left’s legal campaign against Trump is that it may end up working against them:

“If Trump wasn’t running for reelection, maybe they wouldn’t even have done this. Maybe their main goal is to influence the outcome of that election, which is even more ironic because they try to claim that, ‘Oh, Trump interfered with the elections.’ They’re interfering! They’re interfering with the 2024 elections. That’s what all this is about. It’s about trying to derail Donald Trump from winning, but you know the problem is their plan is backfiring because he’s getting more support.”

If the economy continues down its current path, a poorly timed recession and persistent inflation could spell electoral disaster for President Biden and the incumbent left.