Could rising interest rates pop the renewable energy bubble?
As the Federal Reserve and other central banks try to turn off the easy money spigot, we will likely see a growing number of corporate bankruptcies in the coming years. The renewable energy sector is particularly vulnerable and exemplifies broader problems in the global economy.
In a podcast last week, Peter Schiff said rookie Federal Reserve chair Jerome Powell couldn’t be more wrong about the economy. He sees smooth sailing ahead. Peter sees a storm.
Former Reagan Office of Budget Management director David Stockman made a similar observation in a column last week.
What’s ahead is tumult, not smooth. That’s because the disconnect between a flat-lining main street economy and Wall Street’s bubble-ridden financial house of cards is blatantly unstable and unsustainable. Indeed, this fraught condition, which Powell and his Keynesian posse fail to see, will soon give rise to a thundering upheaval triggered by the Fed’s own action.”
Earlier this month, we reported that American household debt increased to a record $13 trillion in the last quarter of 2017. If you spread that out evenly, every man woman and child in America would owe about $40,000. Add to that their portion of the US government debt – $63,000 – and every American, on average, is carrying a six-figure debt load. As U.S. Global Investors CEO Frank Holmes put it, the level of debt in America is a “head-spinning sum.”
It’s easy to look at these numbers and say, “Yeah, yeah, there is a lot of debt out there. But does it really matter? We’ve been talking about debt for years now and it hasn’t really made a difference.”
But the truth is, all of this debt is a ticking time bomb. The question is will the Fed let it blow?
Ten-year Treasury yields flirted with 3% this week, hitting a four-year high of 2.95. Does the Treasury yield hold the leash of the stock market?
Peter Schiff talked about it in an interview with Liz Claman on Fox Business, saying the Fed has kept rates artificially low for years, but given current conditions, it’s inevitable that the market will lift rates toward “normal.”
Gold is going to “go ballistic.”
The dollar has shown some resilience this week. The dollar index clawed back after hitting multi-year lows last week. Meanwhile, gold saw its worst single-day decline in more than a year on Tuesday.
One thing that hasn’t changed is the upward pressure on bond yields. In his most recent podcast, Peter Schiff said he thinks this is the reason we’re still seeing some life in the dollar and downward pressure on gold.
The mainstream investment world is starting to worry about the federal debt.
Goldman Sachs sees a tidal wave of red ink — and it may drag the US economy into its undertow.”
Goldman recently released a note to clients saying virtually the same thing Peter Schiff has been saying for months. The US economy won’t likely get the promised economic growth out of GOP tax cuts – at least not over the long-haul.
Stock markets have settled down after an awful couple of weeks earlier this month. On Feb. 5, the Dow Jones suffered its largest-ever drop in terms of points. It was down 1,600 at one point and ultimately lost 1,175.21 points, a 4.6% drop that day. At one point during that week, the Dow was off 10% in correction territory. But everything is calm now and most of the mainstream is once again feeling bullish and optimistic.
Peter Schiff spoke at the Vancouver Resource Investment Conference 2018 last month before the market tanked. But his message remains relevant in the aftermath of the plunge and the subsequent recovery because the dynamics in the market remain pretty much the same. Conditions are still ripe for a 1987-style market crash.
Investors have not been this optimistic…since 1987. They are even more optimistic than they were at the height of the technology bubble, the dot-com bubble, the new era. Of course, 1987 didn’t end well, right? We had a stock market crash, and there’s a lot about what’s happening today that reminds me about what was happening in ’87.”
The US dollar dropped to its lowest level in three years Friday.
Extending losses on Thursday, the dollar index against a basket of six currencies dropped to 88.253. This marks its lowest level since December 2014.
A Reuters report noted that “Traders’ confidence in the dollar has also been eroded by mounting worries over the United States’ twin budget and current account deficits.” Interestingly, just last month Peter Schiff said these twin deficits may ultimately doom the stock market.