Paul Hickey and Peter Schiff Comment on Talk of Dow 17,000

By on February 28, 2012

Paul Hickey Peter Schiff  - Bespoke Investment Group Euro Pacific CapitalCNBC interviewed Bespoke Investment Group’s Paul Hickey and Euro Pacific Capital’s Peter Schiff regarding recent bullish comments by Warren Buffett and Jeremy Siegel.

Peter Schiff questioned whether bullish comments by Jeremy Siegel and Warren Buffett could be considered news. Schiff said he doesn’t argue that stock prices along with food and gas will be going up, but the question should be why.

Schiff said the reason prices are going up so much is because the Fed is printing so much money and causing inflation. Commenting on reports by CNBC’s Bob Pisani that the economy is strengthening, Schiff stated the stock market has nothing to do with the economy. “The economy is a disaster,” according to Schiff, and as a result, “the Fed is printing all this money and the stock prices are going up.” Everything, along with food and oil, is going to go up if you print enough money which is destroying the value of the money, Schiff reiterated.

When host Amanda Drury questioned Schiff on economic data points showing improvement, Schiff said these are the same data points when we had the housing bubble. Schiff said consumers and government are able to spend by borrowing money and debt is growing much faster than GDP. He added interest rates will rise despite the Fed trying to keep them down indefinitely. The Fed realizes when rates rise the whole phony economy they’ve inflated will come toppling down, according to Schiff.

Paul Hickey said looking back historically at bull markets where there was a 6 month correction followed by a new high (which happened in the last few days), it is a positive for the markets. Investors were waiting for the other shoe to drop last year, i.e, something negative out of Europe to happen or the economy to have another leg lower, and it didn’t happen. Hickey added earnings, while you could call them phony or not, grew 12 percent and this year could see the market playing catch-up with a better outlook. Hickey further stated the economy was certainly a disaster in 2008, but now we have improving housing numbers and unemployment claims are at the historical average over the last decade.

Schiff questioned Hickey on where the economy would be if interest rates, mortgage rates, and Treasury rates were at their historical average. Hickey rebutted by saying lets look at what we have now with interest rates at historically low levels and valuations being at historically low levels, which you don’t normally see, resulting in valuation expansion with the lower rates.

Schiff replied that interest rates are artificially low with the Fed buying 92% of government long-term bonds, which is unsustainable. Schiff said he wasn’t considering what would happen when a meteorite hits New York City, but talking about something that is going to happen. “Interest rates are going to rise, then what happens?” Schiff repeated.

3 Comments

  1. heather blackburn

    March 1, 2012 at 2:42 pm

    “Schiff replied that interest rates are artificially low with the Fed buying 92% of government long-term bonds, which is unsustainable.”

    Please advise where Peter came up with this 92% figure. I can’t find it anywhere!

    heatherblackburn19@yahoo.com

    thanks!

  2. Barron Maestro

    March 2, 2012 at 11:47 am

    I can’t find Schiff’s number quoted by anyone else. Looking back I’ve found comments (including the infamous Tyler Durden of Zero Hedge) indicating 50-70% of all treasuries being purchased by the Fed a couple of years ago.

    Barry Ritholz posted about this 6 months ago -> http://www.ritholtz.com/blog/2011/08/who-is-buying-u-s-treasuries/. He provided a Fed “flow of funds” link that brings you to Arbor Research (a subscription site).

    It appears Schiff’s data will remain a mystery for now.

  3. heather blackburn

    August 6, 2013 at 12:17 am

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