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Peter Schiff: Gold Could Shine Even Brighter Under A Biden

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Peter Schiff: Gold Could Shine Even Brighter Under A Biden

Yesterday we brought you the first part of a Peter Schiff interview where he discussed his thoughts on inflation and how a potential victory by Joe Biden next month could send stock prices dramatically lower.

Here’s the second part of the interview where Schiff talks more about the stock market, the US dollar, and finally where he sees gold prices headed.

When asked about why the stock market hasn’t headed lower as the odds of a Biden victory increase, Schiff says it’s because bad news for stocks means the better the odds for more stimulus.

“The market’s not selling off because investors perceive a Biden victory as being a positive. If you look at the way the markets have been reacting to bad news, bad news is good news. Why is bad news on the economy good? Because it means we get more stimulus, we get more money printing. That’s the only thing that’s driving the stock market. So they’re looking at the bad news of a Biden win as being good for the stock market.”

Traditional Ways Become Irrelevant

He adds that in today’s stock market, every traditional way to value a company is irrelevant when the only focus is on how much money the Fed is printing and how long they will hold interest rates at zero.

“Corporate earnings are going to get crushed under Biden. What the markets care more about is the stimulus. The stimulus trumps the earnings. In other words, I don’t think earnings matter in this market anymore. Earnings are irrelevant. All that matters is how much money the Fed is printing. So the markets are looking at how awful the economy is going to be under Biden and they’re like “This is great news! The Fed is going to be at zero forever! Money is going to be dropping from helicopters. So stocks are going to go up in the horrible economy that will be the consequence of the Biden victory.”

Schiff says the downside to all the stimulus is an increase in the amount of US dollars in circulation, which he says will be the next crisis, not a financial crisis.

“We’re dramatically increasing the global supply of dollars. And so I think once the dollar starts to fall, it’s going to turn into a freefall. That is the crisis that’s coming. It’s not going to be a financial crisis. It’s going to be something so much worse than that, it’s going to be a US dollar crisis which also means it’s going to be a sovereign debt crisis. US Treasury bonds are going to be right in the crosshairs. And of course if Treasury bonds are collapsing, so are all bonds. All US dollar denominated bonds. And we’re a country that runs on debt. Everybody is borrowing. And if nobody wants to lend us money anymore, if the Fed is not lender of last resort, but the lender of only resort, then this whole house of cards economy is going to come collapsing down all around Joe Biden.”

The Plus Side for Gold

This, in turn, is great for gold, says Schiff.

“I think gold could shine even brighter under Biden. I think the initial reaction when Trump was elected, gold sold off because people thought Trump was going to reduce our trade deficit, he’s going to strengthen the dollar, we’re going to have a better economy, he’s going to pay down the national debt, none of that happened. All of the good news that was weighing down gold turned out to have been a false rumor. Now, nobody believes any of that is going to happen under Biden. Biden is clear he wants bigger government, he wants bigger deficits, he wants increased taxes on the productive people in the economy and increased subsidies on the unproductive. So the economy is going to be far weaker under Biden, everybody can see that, the deficits are going to be much bigger, the Fed’s going to be printing a lot more money, that is very bullish for gold.”

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US Housing Sales Boom Will Last Until 2021

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top view of houses at daytime photo-US Housing Sales Boom-us-featured

Redfin CEO Glenn Kelman told CNBC on Thursday that he sees the US housing sales boom will last until 2021. Total US Home sales increased 9.4% in September, surpassing estimates. Meanwhile, median prices went up 15% year over year. This is according to data provided by the National Association of Realtors.

RELATED: Biden Is Latest Dem to Support Ridiculous Free Housing Proposal

Shares of Redfin, a real estate brokerage firm, were higher by 1% Thursday to $45.60. The stock more than doubled during this year. It now has a market cap of $4.5 billion. 

Why do people buy houses during a recession? 

During this time when the economy is reeling and jobs are tight, people buy homes. Why? There are a couple of reasons.

The bigger acceptance for remote work freed many people from living in the city. The opportunity to leave cramped apartments and expensive city living. The pandemic gave enough reason for workers to pack up and head for greener pastures. Next, interest rates are going down hard. From 3.7%, 30-year mortgage rates are now 2.9%, the lowest rates ever. Despite higher prices, people know this is the best time to buy on the cheap. 

The intent is there. The pandemic allowed you to work anywhere. And interest rates allow you to pay the lowest interest rates. People are taking the plunge and buying. So what’s the problem? We’re running out of houses to buy. 

Demand coming from the rich 

Rich professionals who can work from home are the reason for the uptick in housing demand. Kelman said that many remote workers moved from major cities to distant suburbs. Kelman said these workers began “taking a permanent vacation where they’re working from those homes.”

People are taking advantage of low-interest rates to snap up homes. Kelman noted that “part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free.” The opportunity to buy homes for cheap may be too much to resist. “Of course, they’re going to use that money to buy homes,” he added.  

Meanwhile, there’s another group of people who would like to buy but can’t. Kleman said:  “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.” 

Kelman foresees demand to continue until 2021 at least. Many undecided buyers will buckle down next year and take the plunge. He said: “There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least.” Why 2021? “There are so many people now who have decided they’re not going to be able to buy a home by year-end,” he said. Kelman expects them to buy next year, “as their kids shift school districts. I do think we’re going to see this for some time.”

Shrinking inventory of houses for sale

With homes fast disappearing from the market, higher purchase prices are coming back. Based on data from the National Association of Realtors data, only 2.7 months’ supply of houses is available last month. This represents the lowest level since 1982 when the NAR began tracking data. 

Kleman expects supply to increase after the elections. Uncertainty will decrease after voters elect a new president. Listing and selling a home can take months to process. That’s why sellers have a lower risk tolerance than buyers. “Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term in the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”

Demand won’t last forever  

The Wall Street Journal’s Justin Lahart thinks not everybody can live outside the big cities. A remote job in a vacation spot may pose difficulties for some. Winter conditions may also make some remote workers rethink their strategy. He also believes that the housing boom now made people buy houses sooner than later. He thinks many of the workers who moved to the suburbs would’ve done so in a few years. When the pandemic subsides, a smaller group might follow the exodus out of big cities. 

The number of people who can afford houses will shrink as well. Many workers’ careers derailed during the year. Many millennials got burned during the financial crisis in the early 2000s. Now, a new career-threatening crisis is in full swing. The post-coronavirus landscape may depend on how well the economy rebounds. We’ll have next year to find out.

Watch this as CNBC reports on the US housing sales boom. Redfin CEO Says “people are buying vacation homes, then taking a permanent vacation:

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Are you house hunting right now, or have you already bought a house this year? Why are you doing so? Let us know why buying a home is a good idea right now. Share your thoughts in the comments section below.

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Biden Plan Could Mean 60% Tax Rates, But Here’s Who Will Get Stuck With Higher Taxes

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Biden Plan Could Mean 60% Tax Rates, But Here’s Who Will Get Stuck With Higher Taxes

New York and California may start losing high-income residents by the droves next year if Democratic nominee Joe Biden wins the election in a few weeks.

That’s because the two left-leaning states would have a combined federal and state rate over 60% under Biden tax plan.

Even New York resident and rapper 50 Cent tweeted earlier this week that despite his apparent dislike for President Trump, he said “Vote Trump” and “62% are you out of ya (expletive) mind,” when he learned about Biden’s tax plan.

According to calculations from Jared Walczak of the Tax Foundation, California residents earning more than $400,000 per year could face a combined tax rate as high as 62.6% under the Biden plan. New Jersey residents could see taxes reach 58.2% and New York would top out at just over 62%.

But somehow, it could get even worse.

Tax Rates Can Still Go Higher Under Biden

Walczak points out that if you include the contributions to the tax hikes by employers, which are often passed along to employees, the combined rates would jump to over 65% in California, 62.9% in New Jersey and 64.7% in New York City. They could still go even higher if California and New York raise taxes on high earners. This is something some legislators have proposed to try and close multibillion-dollar budget gaps.

“These rates would be the highest in about three and a half decades,” said Walzcak, “and imposed on a broader tax base than was in place previously.”

The Middle Class Will Suffer?

But Home Depot co-founder Ken Langone believes the wealthy won’t pay higher taxes at all – the middle class will.

“The middle class will not be exempt. Tragically, it will punish them. It isn’t going to punish us,” said Langone.

Appearing on Fox Business yesterday, Langone said due to Biden’s tax hikes, “the middle class will be in peril.”

He said that despite Biden saying the wealthy should pay more in taxes, the middle class will feel the effects of Biden’s tax plan. Langone said he is in favor of a tax code that is more progressive and equitable. This includes eliminating loopholes that favor the rich and large corporations.

“I don’t know if there’s any of us that have done well that will have a problem with paying more taxes, but it’s a ruse to think that hitting us and us alone is going to get the job done,” Langone said, adding ““It won’t and the middle class will be in peril and when you take money out of the hands of the middle class, you do a dramatic impact negatively on the economy.”
He said that increasing taxes on the middle class will lead to a recession.

“The problem is, when you go after the middle class, you begin to attack the backbone of the economy and we will have a bad recession. We will have a very bad recession,” Langone said.

“These are very precarious times and not the time to be screwing around,” he added.

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Market Volatility Rises As Election Polls Show Tightening Race

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Market Volatility Rises As Election Polls Show Tightening Race

The relatively calm markets earlier this month are giving way to more volatility as we approach the election. This is according to a team of strategists at JPMorgan.

“While it is perhaps true that during the first two weeks of October risk markets were supported by a widening of US presidential odds, which by itself implied a lower probability of a close or contested US election result, over the past week or so these odds have started narrowing again,” said a team of strategists at JPMorgan Chase, led by Nikolaos Panigirtzoglou.

According to recent polls by RealClearPolitics, in key battleground states, Democratic nominee Joe Biden leads President Trump by 3.9 percentage points, 49.1 vs. 45.2. That lead has shrunk from a 5 percentage point advantage for Biden about a week ago.

A general election nationwide poll by RCP shows a wider 8.6 percentage-point lead for Biden. However, there are many who feel those polls are not correcting for sampling bias.

Polls Inaccurate?

MarketWatch recently interviewed Phil Orlando, the chief equities strategist at Federated Hermes. There, he said he doesn’t believe the polls accurately reflect how close the race is. In relation to this, he pointed to the surprise win by Trump against Democrat Hillary Clinton in 2016.

“Our base case is that the polls are wrong, there’s an oversampling biased error that a lot of polls aren’t correcting for,” Orlando said.

With a tightening race for the White House, volatility has returned to the market. It will also likely increase in the final two weeks leading up to the election.

A report put out yesterday by SentimenTrader showed that the CBOE Volatility Index or VIX, jumped to levels last seen during the Great Financial Crisis, and tends to rise as stocks fall as it is typically used as a hedge against market downturns.

Market analysts use the ratio to measure how speculative traders are getting. A rise in the put/call ratio means that investors are expecting plenty of volatility between now and November 3.

The VIX, which measures investor bullish or bearishness on the S&P 500 for the next 30 days, is currently near 29, well above its historical average between 19 and 20. This week alone the VIX jumped 6.3%.

Source of Volatility

Jeffrey Mills, the chief investment officer at Bryn Mawr Trust, said some of the volatility likely comes from investors trying to position their portfolios based on who they perceive will win the election.  “There could be some front-loaded selling but I do feel like that’s a near-term phenomenon,” he said. But he says no matter who wins, there’s really only one place to invest, and that’s the stock market.

“There is going to be this continued pull toward equity markets — where else are you going to go when you need to earn a certain percentage to fund retirement, fund education?”

If investors are moving money today based on who they think will win the election, Daniel Clifton, head of policy research at Strategas Securities said each candidate will likely benefit different sectors.

A Biden victory will be good for stocks in the infrastructure, renewable energy and technology sectors, said Clifton.

If President Donald Trump is reelected, Clifton said there’s “huge upside” in some sectors. These include defense, financials and even the for-profits like prisons, education and student loan lenders.

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