What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing with the s p, 500 skyrocketing to 30 above the pre-pandemic levels. Many market observers are saying the market is overvalued and due for a painful correction, one of the most widely considered valuation metrics is the forward price to earnings ratio, which is the current price divided by next year's expected earnings. Currently, the s p's forward, p e is 21.5 times. This is the highest.

It has been at any point over the past 10 years. The investor who is perhaps the most outspoken about a looming crash is peter schiff, who runs the investment company euro euro-pacific asset management. Euro-Pacific asset management manages mutual funds which manage 1.2 billion dollars worth of assets. The main crux of his argument is that the government borrows too much money and the federal reserve prints too much money.

This will eventually lead to a massive collapse in the value of the dollar and a broad-based crash across financial markets. He even goes so far as to compare the current united states to greece when it collapsed into a debt crisis after the global financial crisis. Since the peak of the bubble in 2007, the greek stock market has declined 83 percent and has failed to mount any kind of recovery in this video we'll go over shift's arguments to see if they hold any merit. Shift's major claim to fame was his prediction of the great recession.

In 2008, he said that the fed kept interest rates artificially low, building up a bubble and causing people to live beyond their names. This causes imbalances in the economy, which will eventually lead to a crash. In the stock and real estate markets, why do you think that a recession is coming just how bad is it going to be? I think it's going to be pretty bad and whether it starts in 07 or 8. I think is immaterial, and i also think it's going to last, not just for quarters but for years see the basic problem with the u.s economy.

Is we have too much consumption and and borrowing and not enough production and savings? And what's going to happen, is the american consumer is basically going to stop consuming and start rebuilding a savings, especially when he sees his home equity evaporate and when you have the economy, 70 consumption? You can't address those imbalances without a recession you know, rather than the recession being resisted. It should really be embraced because the disease is all this debt finance consumption. The cure is that we stop consuming and start saving and producing again and that's a recession. And sometimes you know, medicine tastes bad, but you got ta swallow it.

When the crash did happen, schiff was vindicated. People thought that he was a market genius and rushed to invest money in his mutual funds. Given his success at calling the 2008 market crash, schiff decided to continue predicting market crashes every year. Since then, he published many books talking about market crashes such as crash proof in 2007 crash proof, 2.0 in 2009, and how the economy grows and why the economy crashes in 2010.

This culminated in 2012 when he published the real crash america's coming bankruptcy. He also runs a youtube channel with almost half a million subscribers. If you go back and look at his videos he's pretty much been saying the same thing for the past 10 years. He always sees an imminent stock market crash and recommends buying gold to benefit from inflation and a depreciation of the dollar.

If you followed his advice, you would have missed out on one of the best. Bull runs for the stock market in recent history. Over the past five years, the s p has increased in value by a little over one hundred percent, while gold has increased 32 percent, even though his predicted stock market crashes never materialized over the past decade, schiff claims that he is still correct, but just early we'll Examine his most recent market crash predictions to see if they have any merit. In my introduction, you pointed out that i was warning about the 2008 financial crisis before it happened, which which was the case.

In fact, i was warning about it very vocally at many of the money shows that i attended leading up to that crisis. Well, i can assure everybody today that the crisis that's coming is going to be far worse than anything that was experienced in 2008. While it is true, they predicted the 2008 financial crisis, he's less eager to talk about the other 10 financial crises he's predicted, but haven't materialized, we'll see what he has to say. Government debt and money printing is off the charts.

I mean we've never experienced anything like this. In fact, i think about half of the money that the government is now spending is being printed by the federal reserve, so it's not really borrow and spend anymore it's print and spend, and right now nobody seems to think that this is a problem. People seem to think that we stumbled on the equivalent of a monetary fountain of youth people like to call it modern monetary theory, which is we can have whatever we want as long as government prints the money to pay for it, that there's no limit. That government is free as long as they print money.

Now, of course, why didn't we realize this? In the past i mean why have we been paying taxes all these years, if all we had to do is print money? After all, the printing press has been around for hundreds of years, and so if we could have whatever we want by the magic of government printing money, what's the point of all of us having to pay taxes, the reality is: is this is a fantasy that is Going to end in disaster, when the government just prints money and gives it to you right when you have all these unemployed people who are sitting at home, just getting a check from the government, they produced nothing, they added no goods or services to the economy. Yet they can consume goods and services in the same proportions as if somebody had actually done work and actually been uh. You know a productive member of society. So what does this do right? All this does is drive up prices, because if your work adds to the goods and services and now your help you're consuming the goods and services, you help create that's fine, but if now you start consuming goods and services, yet you didn't help create any of those Goods and services - you just have more money chasing a diminished supply of goods and services, and prices are going to go up and they're going to go up like never before, and the irony of all of this is that the federal reserve has been promising americans more Inflation: well, that's one promise that they're going to deliver on in fact they're going to deliver on it beyond their wildest expectations.

The federal government spent trillions of dollars throughout the pandemic to support small businesses and unemployed people. At the same time, tax revenue tanked as people lost their jobs and businesses started posting net losses to fund the budget shortfall. The government borrowed trillions of dollars in the fiscal year of 2021. The federal budget deficit is expected to be 3 trillion or more than 13 percent of gdp.

When a normal person borrows money to buy a house or a car, they plan on paying back the loan with interest at a later date, but with the current national debt sitting at 27 trillion dollars, the only way they can ever pay. This off is to print more money and decrease the value of the dollar, so they'll pay it off, but the dollars that they use will have greatly diminished purchasing power. This is already happening today. Over half of the money the government is, borrowing is printed by the federal reserve.

If the government borrows money from a private lender, the government has more purchasing power and the lender has less, but when they borrow from the fed the fed prints the money increasing the total money supply. This new money pushes up asset prices and eventually seeps into the real economy, pushing up consumer prices and thus diminishing the purchasing power of individuals beneath the surface, consumer prices have been rising. For all this talk about deflation, we haven't had any for all the talk about an inadequate increase in the cpi. Consumer prices have been going up, despite the government's best effort to hide that uh through the cpi.

I mean, if you think the cpi uh is giving you an accurate read on inflation. That'd be like assuming the mafia is going to give you an accurate report on crime. I mean clearly, if you hired the mafia to study crime, you wouldn't be surprised to find that they said that there wasn't any and therefore there's no need for more police because there's no crime. The last thing the government wants is for the public to realize how much inflation there is.

They certainly don't want bond investors to realize that the key to sustaining the bubble economy, the key to sustaining massive and unsustainable government deficits in the short run, is artificially low interest rates and the feds only justification for keeping interest rates artificially low is the preposterous idea That there's not enough inflation schiff says that the government is rigging. The consumer price index readings to make inflation look lower than it actually is. This is a conspiracy to justify the fed's low interest rates and the government's deficit spending. This seems like a bit of a preposterous claim: the bureau of labor statistics publishes cpi figures monthly, and the latest reading shows an increase to 5.4 percent for the month of june.

This is the highest reading since 2008.. Since the start of the pandemic, the m2 money supply has increased by more than 25 percent. This might lead you to believe that consumer prices should rise by the same amount, but most of this cash is held by banks as reserves and is not circulating in the real economy. After the great financial crisis of 2008, the federal reserve pioneered quantitative easing under the leadership of ben bernanke.

They printed trillions of dollars of new money to buy long-duration government bonds and mortgage-backed securities. At the time, people like schiff predicted a massive hyperinflation in collapse of the dollar for consumer inflation. To increase significantly requires two things. Firstly, there has to be an increase in the money supply.

This was certainly the case after 2008, but, secondly, the money has to find its way into the pockets of consumers. Most of the money stayed in bank vaults, doing nothing. This caused a disconnect between the money supply and consumer price inflation, where cpi growth averaged roughly 2. During the post-recession recovery, there are many factors that can influence inflation and it can be very difficult to predict.

For example, japan had negative interest rates and a quantitative easing program, far more aggressive than that of the us for more than a decade. Despite this, their inflation has been stubbornly low at less than one percent. In most years. The coveted recession was different from 2008, because there are significant stimulus directly to the people, both in the form of stimulus checks and enhanced unemployment benefits.

Schiff argues that this will cause consumer inflation to rise much more violently this time and he is correct to some extent with the cpi reaching near record levels in recent months. But 24 states already ended the enhanced unemployment benefits early and they will end nationally in september of this year, when this happens, people will go back to work and much of the inflationary pressure in the economy will abate, while inflation will likely be higher than normal. For the rest of the year, the dollar collapse scenario that shift preaches is rather unlikely. That's how broke we are today compared to 1980 1980, we were still the world's biggest creditor nation.

Now we're the world's biggest debtor back in 1980. We still had trade surpluses. Now we have massive trade deficits, so this is going to be a massive change. I think the dollar is going to not just decline but collapse.

I think the next crisis is not just a financial crisis, but a dollar crisis, and so the most important thing that you could do now is to completely divest of us dollar assets. You got to get out of u.s bonds in particular. Uh bondholders are going to be the biggest losers uh as the dollar collapses, because all bonds are are promises to be paid dollars in the future and as little as dollars buy now they're going to buy a lot less in the future. U.S stocks are way overpriced.

Uh and their earnings are predominantly in dollars sure you have multinationals that are earning foreign currencies uh, but a lot of their earnings come from the u.s and those earnings are a going to decline and be worth are going to be worth less. But, of course, taxes are going up, so whatever american companies end up earning there'll be less of it available for their american shareholders because of higher corporate taxes. It's going to be foreign markets, emerging markets in particular that are going to benefit dramatically from the declining dollar, because a lot of their debts are in dollars and basically, their debts get wiped out as the dollar declines, and that is rocket fuel for their economies. The first part of schiff's advice is actually really good bonds promise to give fixed interest and principal payments.

Many years in the future, inflation will greatly diminish the purchasing power of these fixed payments in the future. The current yield on the 10-year treasury bond is 1.2 percent. With inflation currently running at 5, the real value of the bond will diminish rapidly. Long-Term bonds are likely the worst investment that you can make right now.

The next part of his advice is a lot more shaky. He says that the u.s stock market will crash since u.s companies, earnings are denominated in dollars and their real earnings will decline as a dollar collapses, as inflation rises. By definition, the companies are charging higher prices for their products. If they can sell the same number of products, this will make the revenue increase.

While some of these revenues will be eaten up by higher expenses, many companies will see their real earnings increase as inflation rises. For example, many commodity companies have huge debt burdens, as prices rise, they'll generate more revenue in nominal terms, while their debt payments remain fixed. This will boost their net profit margins and increase their real earnings. Stocks are real assets as long as most companies continue making products that people like they will be able to pass on price increases to the consumer and maintain their real earnings.

Some companies will benefit from inflation and some companies will be hurt, but it is not a net negative for the overall u.s market shift is bullish on emerging market countries that export commodities inflation will increase commodity prices, giving these countries a huge boost. Many companies in emerging markets borrow debt which is denominated in u.s dollars. If inflation causes the value of the dollar to decrease, they'll enjoy a real reduction in their interest expense. Over the past 10 years, emerging markets have massively underperformed the s: p 500, as commodity price, inflation was low and the dollar was strong, but recently they've made something of a comeback increasing to 20.

Above the pre-pandemic level, peter schiff's company, euro-pacific asset management runs a mutual fund that focuses on small cap emerging market stocks. To his credit, the fund has outperformed the index and increased almost 40 from the pre-pandemic level. Mutual funds are required to disclose their positions every quarter. So we can see what he's investing in.

He is heavily invested in asia, with his top country allocations being china, india, taiwan and south korea. His top holding is a taiwanese company called voltronic power. Tech voltronic makes uninterruptible power supplies which provide power to data centers and other operations where disruption in the power supply would be very costly. The product that they make is something of a commodity, so they'll benefit from price inflation, also because their earnings and share price are denominated in the taiwanese dollar, they would benefit if the us dollar depreciates, while schiff's apocalyptic predictions, are over exaggerated.

His investment strategy actually appears pretty reasonable. It is true that the fed's money printing will likely weaken the dollar relative to foreign currencies and ship is picking stocks that will benefit from this. Alright guys that wraps it up for this video. What do you think about peter schiff's predictions? Do you think that the dollar will collapse and cause a financial crisis? Let us know in the comments section below, as always.

Thank you so much for watching and we'll see in the next one wall, street millennial signing out.