After rallying on Friday, stocks tanked on Monday, dropping over 450 points. In fact, it was the worst first day of the second quarter since the Great Depression.
Most analysts blamed the plunge on the escalating trade war, but Peter Schiff has a different take. He said it was just another bad day in a bear market. In fact, he said the market could have rallied because the Chinese response wasn’t as bad as it could have been. But when you’re in a bear market, all news is bad news.
As I expected, traders came back from the Passover-Easter break and started to sell. I mean, they came in almost out of the bell. No real news to blame the sell-off on. Now, they tried to blame it on Trump and the tariffs. While I agree the tariffs are a problem, there was nothing new over the weekend. Yeah, China came out and announced a couple of billion dollars worth of tariffs on some agricultural products and stuff like that, but this is nothing that wasn’t anticipated. This is no big deal. I mean anybody that didn’t think this was coming – I mean – come on! They could have done a lot worse than this. And in fact, the market could have just as easily rallied on the fact that this was such a small response … The markets could have bought if they were in a buying mood. But this is a bear market and all news is bad news.”
So, the tariffs are really just an excuse. The real reason people are selling is because they are in a selling mood.
Stocks are expensive. The bull market is over. It’s now a bear market. People want to get out. People are allocating out. Growth is slowing whether people want to acknowledge it or not.”
Nevertheless, pundits and talking heads remain optimistic – just like they were in ’07 and ’08 before the housing crash. They didn’t understand the problem and they missed the obvious warning signs.
That’s what’s going on now. Nobody thinks there’s a problem. Everybody is optimistic. Everybody is bullish. So, when you see these classic signs that something is going wrong, you just ignore it.”
Peter went on to offer some in-depth analysis of the bond market and the dollar. The bottom line is he thinks the economy is going to tank and the stock market is going to continue its bear run. But the Fed is not going to be able to come to the rescue this time around because of inflation. If it does try to launch more QE to bail out the stock market, it will completely tank the dollar.
When we do all that, the dollar is going to implode because everybody is going to know that the experiment failed. Everybody is going to know there is no way out of this box. There is no normalization of rates that is ever going to happen. Their balance sheet is never going to shrink. The balance sheet is going to grow permanently, which means this banana republic debt monetization. They can no longer pretend that they’re not doing the same things as South American banana republics. It’s a pure ‘we just print money to finance government spending,’ which is going to explode.”
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