On Tuesday, the Dow Jones dropped nearly 200 points. Gold fell close to 2% and fell below the $1,300 mark. Meanwhile, bond prices dropped as yields on the 10-year pushed above the 3% level.
In his most recent podcast, Peter Schiff said we’re witnessing a bond breakdown as it gathers momentum.
In fact, the bond market had one of its worst days all year Tuesday.
As we reported earlier this month, the federal government is borrowing money at record levels. The US Treasury’s net borrowing totaled $488 billion from January through March, adding to an already enormous national debt. In fact, the entire world is drowning in debt.
When we bring this fact up, a lot of people still just shrug and say, “So what? We’ve been running up debt for years. It hasn’t really caused any problems. Why worry about it now?”
David Stockman recently appeared on the Tom Woods Show. During the interview, the former Officer of Budget and Management director under Ronald Reagan explained exactly why we should worry about it now.
The US dollar has rallied over the last few weeks. The dollar index closed above 93 on May 8. This represents about a 5% increase from the low this year of just above 88. On the year, the dollar is up about 1%, although it is still off about 6% from its highs in 2016.
In his latest podcast, Peter Schiff called this a “bear market rally.”
There hasn’t been any good economic news that would explain the strength of the dollar.”
Rising interest rates could unleash a zombie company apocalypse – if the Fed lets it happen.
Corporate bankruptcy levels in the US hit seven-year highs last month.
New Chapter 11 bankruptcies surged 63% year-over-year in March. All-told 770 companies filed for Chapter 11 protection last month. That is the highest level since April 2011.
Stock markets had another bad day Tuesday. The Dow Jones fell over 400 points as the 10-year Treasury yield broke through 3%. Several “marquee” companies warned of higher costs, including Google-parent Alphabet and Caterpillar.
In his latest podcast, Peter Schiff said he thinks the correction is over.
Not the downward move. That is not the correction. This is the bear market. The upward move was the correction. It was the first correction in this young bear market that technically is not a bear market yet because we’re not down 20%. But that’s only a matter of time before the people call the bear market what it is.”
Can the auto industry survive in a high interest rate environment? We’re about to find out.
Earlier this month, we reported that the air has started to come out of the subprime auto bubble. Nevertheless, Americans are still buying cars. Last week, we got a Commerce Department report that consumer spending was up thanks in large part to the strongest auto sales in six months. But there is a dark lining in this silver cloud and the long-term prospects for the auto industry could be dimming.
The stock market continued its yo-yo ways on Friday. After three straight days of healthy gains, the Dow Jones Industrials fell 572 points to end the week, closing below 24,000. The Nasdaq also plunged, dropping 161 points.
Peter Schiff has been saying for weeks this is a bear market. Well, now even Pres. Trump has said investors may see some short-term pain in the stock market. But the president says it will all be worth it because we will get long-term gain, referring to the benefits we’ll reap when we win the trade war. In his most recent podcast, Peter said that’s not how it’s going to play out.
We’re going to have short-term pain and then the pain is going to get worse in the long-run.”
The big problem is, nobody is really ready for any pain at all.
It looks like the subprime auto loan bubble has popped.
Last year, we reported that the auto industry’s check engine light was on. Now it looks like the thing is totally breaking down. Small subprime auto lenders are starting to go belly-up due to increasing losses and defaults. As ZeroHedge noted, “we all know what comes next: the larger companies go bust, inciting real capitulation.”