Pervasive inflation is a pressing issue for both the US government and the Federal Reserve. President Biden signed the Anti-Inflation Act into law a year ago, and the Fed has raised interest rates sharply to stabilize price levels.
But according to Peter Schiff, CEO and chief global strategist at Euro Pacific Capital, these measures have not been effective.
“Bidenomics and Fed rate hikes both failed,” he said in a recent post on X, formerly known as Twitter.
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In July 2023, the consumer price index was up 3.2% from a year earlier. After reaching a peak of 9.1% in June 2022, this news report figure has been declining.
The decline in inflation could be good news for investors — it means the Fed may be reversing its hawkish stance. However, Schiff doesn’t believe rates will freeze. In fact, the opposite is true.
Markets are ‘absolutely wrong’
In an interview with Fox Digital earlier this month, Schiff explained why the Fed has not made progress in fighting inflation.
He noted that the personal savings rate in the US has fallen to 3.5%.
Consumers tend to reduce their spending and savings even if prices rise. The price hike is expected to reduce spending and increase savings. That’s how you bring down inflation. But nothing worked; Therefore, inflation will get worse,” he said.
Things are not looking good on the government side either.
“The budget deficits are now higher than when rates were at zero, so the government is spending more instead of spending less,” Schiff said. To control inflation, the government must reduce spending.
His conclusion?
“Nothing has worked and the markets are completely wrong about their positive outlook on future inflation.”
Schiff said that while the Fed has raised interest rates over the past year and a half, those have not been enough to bring down inflation.
“We really need much higher interest rates,” he said. “The problem is we can’t pay them. Therefore, a high enough interest rate to fight inflation is too high for markets. And in fact, the Fed will not only fail, it will create a financial crisis, and this financial crisis will be much worse than the one in 2008.
That’s a troubling view — especially coming from someone who successfully predicted the 2008 financial crisis.
If you share this view, you might want to know where Schiff is hiding in these situations. So here are some notable themes from Euro Pacific Asset Management’s latest 13F filing.
Gold
Gold has served as a store of value for thousands of years.
Unlike fiat money, which can be produced in unlimited quantities by central banks, the precious metal is naturally scarce, making it a valuable hedge against inflation.
Schiff has long been a fan of gold.
Earlier this year, he said, when investors realized that inflation was higher than expected, “they are going to drive gold prices up a lot.”
So it’s no surprise that gold is a prominent theme in Schiff’s portfolio.
As of June 30, Euro Pacific Asset Management owned 1,813,765 shares of Barrick Gold Corp (NYSE:GOLD) shares. At the time, the position was estimated at 30.28 million dollars, Barrick was the largest publicly traded in the portfolio.
At the same time, EuroPacific held shares of Agnico Eagle Mines Ltd (NYSE: AEM ), Osisko Gold Royalties Ltd (NYSE: OR ) and other companies that could benefit from higher gold prices.
Energy
Rising oil prices were a key driver behind last summer’s high inflation. And now, the item may be making a comeback.
In a post on X earlier this month, Schiff wrote: “Pressure on consumer prices continues, including oil, which is now above $85 and rising.
If you own stocks of oil producers, you are well positioned for oil prices to rise.
Case in point: At the end of June, EuroPacific owned 395,695 shares of BP (NYSE: BP ), 219,263 shares of Shell plc (NYSE: SHEL ), 185,252 shares of Total Energies SE (NYSE: TTE ) and 291,683 shares of Equinor. Fish (NYSE: EQNR )
To be sure, oil prices are volatile, and oil producer stocks can see wild swings.
If you don’t like that kind of volatility, you might want to consider inflation-resistant assets outside of the stock market – e.g. Investing in rental properties for as little as $100 When you stay completely hands.
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This column ‘Bidenomics and Fed Rate Hikes Both Failed’: Peter Schiff Warns Markets ‘Totally Wrong’ and Inflation Will Get Worse Here’s what he likes for defense It appeared at first Benzinga.com
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