Peter Schiff: The Inflation Tax Will Decimate Many Portfolios

Last week, Peter Schiff appeared on The Claman Countdown on Fox Business along with Mark Matson, founder and CEO of Matson Money, to talk about where to invest with this overpriced stock market.

Peter said the big danger is inflation and it will decimate a lot of portfolios.

Peter called the big gains in the stock market in the wake of the election a “head fake.”

I think the market is substantially overvalued and it is headed lower.”

He also pointed out that not every segment of the market boomed during the post-election rally. The regional bank index sold off nearly 7%. And the Russell 2000 was negative.

Peter noted that it wasn’t all good news for the Democrats given that the Senate will likely stay in Republican hands.

But unfortunately, that’s not enough to save the economy from higher taxes, bigger increases in government spending, more regulation that will be issued by the president on businesses and much larger deficits. So, the Fed is going to be monetizing bigger deficits. This is bad for the economy. It’s inflationary.”

Peter said gold and silver, traditional inflation hedges and non-US investments are the way to go.

Matson said you should build your portfolio for the next 15 or 20 years, not the next 15 or 20 minutes, and he agreed with Peter on international diversification saying many investors have totally missed the boat.

Claman asked Peter which scenario in the still-unfolding election could create a stockmarket meltdown. Peter said it doesn’t really matter who ends up in the White House.

I think the US economy is a disaster and I think it’s going to become a bigger disaster in the years ahead. And the market is overpriced. It’s been propped up by Fed stimulus and the markets assume that stimulus is going to continue to prop the markets up indefinitely. It’s not going to happen. Ultimately, it’s going to destroy the dollar.”

Pete said it’s not just a loss of principle people need to be concerned about.

It’s the loss of purchasing power of their principle. So, even if you don’t lose any money, if you’re invested in bonds but the dollar loses its purchasing power, those are huge losses. And investors need to mitigate that risk. The inflation tax is going to be very, very heavy and it’s going to decimate the portfolios of many potential and current retirees. That is the real risk. And I think the people are not cognizant of that and their portfolios are not prepared to guard against that risk.”

Matson pointed out that stocks have been a hedge against inflation. If stocks go up 10% and you have 3% inflation, that’s a 7% return. But Peter countered that inflation is going to be a lot higher than 3%.