Peter Schiff, forecaster of wall street who predicted the financial crisis of 2008, says that the outbreak of coronavirus can lead to a “massacre” in the stock market, writes MarketWatch.
According to Schiff, the final step of the Federal reserve system -emergency lowering the interest rate half a percentage point to the range of 1-1. 25% for Federal funds — could be the pin that will eventually puncture the “bubble” in the stock market.
“The problem is not the pin, and in the bladder and once the bladder is punctured — it comes from the air,” he told the publication.
“If it hadn’t been a coronavirus, it would be something else,” added Schiff.
On 3 March, the fed made the decision associated with the growing markets for the economy, linked to the spread COVID-19, infectious diseases, which in December 2019 appeared in the Chinese city of Wuhan. In the world of coronavirus has already infected more than 94 thousand people, more than 3,200 died. Now this situation threatens the global economy.
Schiff, CEO of Euro Pacific Capital, is a longtime expert on the market and controversial figure, as his persistent crisis often forecasts did not come true. He once predicted that gold will cost up to $ 5,000 per ounce, although not designated a certain period of time.
However, he believes that this time the probability of collapse of the stock market, bond market and the U.S. dollar is higher than ever.
“We will have a collapse of the bond market and the financial crisis that will come will be much worse than the one that was in 2008,” he said.
On 3 March, the bond market was close to collapse, but the 10-year Treasury bonds set a new historical low yield below 1%, while the U.S. dollar fell 1% this week and gold is a favorite asset Schiff for the same time have increased in price by 4.4%.
It is difficult too to flout the predictions of Schiff because one of his predictions — that the collapse of the housing market in 2008 will lead to a global crisis of historic proportions has taken place. Perhaps it has strengthened its status of the investor and commentator, requires some attention on wall street.
Us stock markets seem to agree with Schiff’s skepticism regarding the recent actions of the fed.
The Dow Jones Industrial Average lost nearly 800 points, or 2.9%, falling to 25 917, while the S & P 500 lost 89 points, or 2.8% when you stay 3 003. The Nasdaq Composite was down 3% to 8 684, the loss for the stock markets increased after the press conference, which was held by the head of the Central Bank of the United States to explain the emergency measures.
Photo: a video frame YouTube/Peter Schiff
The fed is criticized by those who believe that the fed has limited options to stimulate the economy, infected with the novel coronavirus, as well as those who believe that the fed should wait for further economic data before deciding to introduce a dose of confidence to markets that were prone to strong fluctuations over the past two weeks.
The fed said the U.S. economy remains strong, and this recognition has puzzled those interested in why the fed lowers benchmark interest rates when the unemployment rate in the US is close to 50-year low of 3.5%.
Schiff says the move to reduce interest rates with a strong economy supports his theory that the fed can’t move away from historically low interest rates after trying to do it at the end of December 2015. Last year, the fed three times in a row have lowered rates because of increasing pressure as a result of a trade war between the US and China.
The head of Euro Pacific Capital says that it is a new standard for the markets, and it is not suitable for the average investor.
“The fed has never allowed the economy to recover” — he said on the monetary policy after the financial crisis of 2008.
What Schiff says those who compares it with a broken clock showing the time accurately twice a day?
“They are betting on a losing hand, and I’ll have winning. And I want to take home all the chips”, he said.
Experts in the stock market it is hoped that this time he is wrong.