March 23, 2023
Peter appeared on Fox Business Claman Countdown to talk about the recent bank failures and the ensuing government bailouts. During the interview, they discussed how to invest in the current environment. Peter said that right now, gold is undervalued, but investors will bid up the price much higher when they come to terms with the reality of inflation.
To open the interview, Peter called the government rescue of the banking system "another mistake in a long line of mistakes."
It's because of the government that Silicon Valley Bank was in the position that it was. The reason it owned so many long-term, low-yielding US Treasuries and mortgage-backed securities was because the Fed kept interest rates at zero for so long. And the reason that it chose those assets was because bank regulators kind of pushed banks into Treasuries and mortgage-backed securities because they give them favorable accounting treatment. They don't have to take any haircuts. They don't have to mark them to market. So, the government created the problem."
Peter said now they are creating an even bigger problem with the bailout.
This is going to cost Americans a lot of money, not because their taxes are going to be raised, but because the Federal Reserve is financing this massive bailout by creating even more inflation. So, Americans are going to pay for this at the supermarket, at the gas station. Their cost of living is going to go way up. If you thought inflation was bad last year, it's about to get a whole lot worse."
So, how do you invest in this environment?
Peter said it's important to look for companies that do well in an inflationary time period with rising interest rates.
We're going to be in that for the balance of this decade and maybe longer. So, you want to have companies that have real earnings, right now, not in the distant future - that pay good dividends, and importantly, sell products and services that consumers need to buy."
Peter said that most significantly, he believes the dollar is going to tank.
We're going to have a currency crisis, not just a financial crisis. And so, you'll have a much better hedge against inflation if your income streams are coming from abroad because they're being paid to you in foreign currencies, and when you translate them back into weakening US dollars, that means even higher dividends and that will help offset the rising cost of living that you're going to be experiencing here in the United States as a result of past, current, and future risk and excessive Fed money printing."
Claman pointed out that bitcoin has gone up 11% since the bank failures while gold was only up 3% (at the time of the interview). "People are choosing bitcoin over gold," she said.
Well, remember, bitcoin dropped precipitously before that rally, so it's really just gone on a round trip. It hasn't gone anywhere. But I don't like gold as an investment. I like it as money. It's an alternative to the dollar, to the euro, to the Japanese yen. It's a store of value. It preserves wealth. I like stocks to grow my wealth, but gold to preserve it."
Peter emphasized that gold is way underpriced right now"because investors don't realize how bad inflation is going to be in the future."
They've overestimated the Fed's ability to fight it. So, I think you can actually make money and preserve it right now with gold, because I think it has to be repriced higher to reflect the reality of much higher inflation. We're not going to go back to two percent, probably in my lifetime. It's going to be much higher than that, and when investors come to terms with that, they're going to bid up the price of gold much higher."
Reprinted with permission from SchiffGold.com.