Sunday, September 8, 2013

Peter Schiff : I think the Dollar is going to Collapse before the Market does

Tekowa DaSilva : Peter, in terms of the equity market itself, what are you telling your clients in terms of maybe them not wanting to miss the move? Are you recommending people step out of the way before it collapses? Peter Schiff : I think the dollar is going to collapse before the market does. The Fed is propping up asset prices by debasing the dollar--the currency with which those asset prices are denominated.So if you’re going to destroy your currency, then asset prices are not going to collapse. But what I’m concerned about is not the nominal asset price but [rather] adjusted for inflation. Another way you can look at it is expressed in gold.I think that stock and real estate prices expressed in gold are going to go down significantly over time. I know we’ve had a rally in asset prices in terms of gold recently (with the selloff in gold), but I think that’s very temporary.In fact, we are launching the Euro Pacific Gold Fund which is my first ever gold mining mutual fund and that’s going to open to the public this week. I’m timing that to coincide with what I believe to be the greatest buying opportunity that I’ve seen during the entire bull market in gold stocks.Even though gold prices are substantially off their lows, gold prices are still three times higher than they were a decade ago. [But] many gold stocks are actually priced even lower than they were a decade ago.So you got the opportunity to roll back the clock to the time where gold was under $300 and buy the gold stocks. I think they’re giving these stocks away. In fact…the sentiment has probably never been this bad. We’ve had a big collapse in price. Nobody wants to buy these stocks and so this is when I’m launching my fund.Gold stocks ironically are the victims of inflation because inflation has dramatically increased the cost of mining but the price of what they’re mining, gold, has not gone up as fast as the cost of mining it because everybody is convinced there is no inflation. They believed the propaganda from the central banks and governments and so gold has not even gone up to reflect the increased cost of mining it. So I think it is really undervalued right now. That makes it difficult for the gold mining sector but I think eventually these difficulties are going to lead to tremendous opportunities because a lot of gold mining companies are going to go out of business. A lot of companies are going to dramatically reduce their capacity, their CAPEX, their R&D and that means when gold demand really comes back in the future (I think gold demand is going to explode), there’s not going to be a lot of gold supply. So I think the price of gold is going to skyrocket and then the miners are going to literally be gold mines. Right now they’re not but I think eventually they will be.

Peter Schiff is an investment broker, author and CEO of Euro Pacific Capital Inc. Schiff is known for his bearish views on the US economy and US dollar, and his bullish views on commodities, foreign stocks and foreign currencies