We talk a lot about bubbles in the economy.
Over the last few weeks, we’ve discussed the stock market bubble, the housing bubble, the auto bubble and the debt bubble.
Nick Giambruno simplifies things in an article he recently wrote for the International Man. He just calls it the “everything bubble.” And he says it will pop in the near future thanks to the Federal Reserve.
As Peter Schiff put it in his most recent podcast, Jerome Powell blinked.
In a surprising about-face, the Federal Reserve Chair hinted that interest rates are “just below” neutral, leading to speculation that the central bank might be close to ending its tightening cycle. Peter said the Fed has basically been playing a game of chicken with the markets.
And the way the game of chicken goes is the markets keep moving lower and the Fed keeps talking about how great the economy is and how many rate hikes are coming in the future and somebody his to flinch. Somebody has to blink. It’s like you have these two automobiles driving toward each other and there’s going to be a major crash unless somebody turns the wheel. And it seems like it was Jerome Powell that turned the wheel first and in fact was chicken.”
Stocks rallied and the price of gold got a bounce after Federal Reserve Chair Jerome Powell released a dovish trial balloon on Wednesday.
During a speech at the Economic Club of New York, Powell seemed to indicate interest rates are “just below the broad range of estimates of the level that would be neutral for the economy.” Investors and pundits widely interpreted this to mean the central bank may well be near the end of its tightening cycle.
Peter Schiff appeared on RT Boom Bust last week and reiterated he thinks we have entered a bear market. In fact, what we’re seeing now is a deflating bubble.
Yesterday was another bad Monday on Wall Street. The Dow Jones dropped nearly 400 points and the NASDAQ fell deeper into “correction territory,” dropping another 3%. All five “FAANG” stocks closed in bear territory. These are the tech stocks that have propelled the long bull market. The NASDAQ is down 12.5% this quarter.
Apple’s announcement that it plans to cut production weighed heavily on the markets, along with another sign of trouble in the housing market — a big drop in homebuilder sentiment.
Peter said homebuilder sentiment is the first sign that the confidence bubble has popped.
Wednesday was another ugly day on Wall Street.
Stocks tanked, wiping out gains for the year in both the Dow Jones and S&P 500 Index. The Dow fell 608 points and the S&P 500 shed 3%. The Nasdaq plunged 329 points and lapsed into a correction territory. It was the largest daily decline on Wall Street since 2011.
In his most recent podcast, Peter Schiff asked a key question: will the Federal Reserve swoop in and change the nature of the game?
Peter Schiff has mentioned before that about 25% of the stocks listed on the S&P 500 have already slipped into bear market status. A recent article published by ZeroHedge confirmed what Peter said, and further indicated that a big chunk of the stocks in the index appears to be in trouble.
Earlier this month, Peter Schiff wondered out loud if the twin deficits of government budget and trade could spark an October surprise. The month isn’t over yet, but it certainly hasn’t been a good one for stock markets.
The Dow is down 3.8% in October. And it’s the best performing of the stock indexes. The S&P 500 is down about 4.7% on the month. The NASDAQ has dropped 7.4%. Dow Transports have plummeted 8.3%. And the Russell 2000 has suffered a 9.2% decline. Now, if you want some good news, look at gold. It’s up about 3% this month. But all in all, there is a lot of gloomy news on Wall Street.
All of this doom and gloom led Peter to ask an important question in his latest podcast. How many canaries have to die in the coal mine before the mainstream wakes up?
The SchiffGold Friday Gold Wrap podcast combines a succinct summary of the week’s precious metals news coupled with thoughtful analysis. You can subscribe to the podcast on iTunes.
