Peter Schiff believes that “staying the course” — by keeping most of your savings in stocks and bonds — is a mistake. Instead, he says that people should turn their focus to gold, claiming that gold is in a “reverse bubble”, with prices “ridiculously low given the state of the world’s financial system”. His advice: Buy gold while it’s still under the radar, and don’t wait for when the herd buys, because by then, it may be too late.
In this exclusive interview with Birch Gold Group, see why Schiff says that, as someone who buys a lot of gold, he’s glad the media isn’t covering gold just yet.
Sheldon Anderson: Ok, Peter Schiff. I talk to a lot of people that say, “My financial adviser is telling me to stay the course.”
Peter Schiff: Yes…
Sheldon Anderson: And I don’t know what to tell them because it seems like that’s a bad direction to go. HSBC says the global economy is a Titanic. What would you say to the people that are relying on bad advice right now, to stay the course?
Peter Schiff: Well, first of all, it depends on the course you’re on. I mean, I tell my clients to stay the course too. And, I think, I think it’s good advice. So, it depends on the course that you’re tacking. But, for most people, if you’ve got a traditional brokerage account, and “stay the course” means stay in U.S. stocks and bonds, then I think that’s a mistake.
But, you know, most people are wedded to a particular philosophy and, you know, a lot of these brokers from traditional firms probably actually believe in what they’re doing, and so they believe the advice they are giving their clients is sound. But if your broker is… doesn’t understand the truth and has been so brainwashed or indoctrinated by the culture at his firm or throughout his career, than that advice could end up being quite treacherous. If indeed you’re on the wrong course, right, and you’re on a collision course, and so most people, I think, need to change course, and I think the sooner they do it, the better.
Most people, I think, need to change course [on owning stocks and bonds], and I think the sooner they do it, the better.
Sheldon Anderson: I think when I talk to people they talk about stock market bubbles, but we also see bond market bubbles, and we see housing market bubbles, and we see what you’ve talked about as a dollar bubble. It could all come crashing down – what does that look like for gold prices?
Peter Schiff: Well, I think gold is the antithesis of that. I think if anything, gold is in a reverse bubble, in that the price is ridiculously low given the state of the world’s financial system. I think the price of gold should already be much higher, and the fact that it isn’t, just reflects not only the complacency, but how little most people understand the precarious situation that we’re in, and not just all the money that central banks have printed in the past, but all the money that they’re likely to print in the future as this house of cards comes tumbling down and they do everything they can to prevent that from happening.
Sheldon Anderson: When the Feds raise the interest rate a quarter of a percent, we saw the stock market lose 500 points two days in a row, and we at the firm had difficulty procuring silver for some time. It was a month, or whatever. There seems to be a very finite resource, gold and silver. So, so all these infinite dollars going to a finite resource of gold and silver, could that market explode?
Peter Schiff: Well, eventually, when you have a lot more money trying to buy gold and silver. I mean, right now there’s not that many people that are interested in buying the physical, and a lot of the demand is being syphoned into the futures markets where people are just trading paper gold, where you’re buying gold from people who have no capacity to deliver it to you, but a lot of the speculators don’t really want delivery, so they’re just betting. But when more and more people distrust these third parties and they think about the counterparty risk and they actually want to have some physical gold and silver, there’s not a lot around. And so, when only a few people want to buy, okay the price goes up a little bit. When a lot of people want to buy, the price is going to go up a lot.
And, and so my advice to, you know my clients is, “Don’t wait.” You know, don’t be part of the herd. Buy before the herd and don’t worry if somebody gets a better deal than you. It doesn’t matter if the price goes down a little bit before it skyrockets. Ultimately, the prices are going sky high, and the more gold and silver you can buy now, the better off you’re going to be when that happens.
My advice to my clients is, “Don’t wait.” You know, don’t be part of the herd. Buy before the herd and don’t worry if somebody gets a better deal than you. It doesn’t matter if the price goes down a little bit before it skyrockets. Ultimately, the prices are going sky high…
Sheldon Anderson: You talked about leveraging just a tiny bit. I’ve seen some numbers where in COMEX it’s 562 ounces for every one that is deliverable, whereas leveraging before was like 70 to 1. Why is the leveraging so high right now in the paper markets?
Peter Schiff: Well, because there’s a lot of cheap money flying around. I mean, people are gambling on a bigger scale than before because there’s more money to gamble with. Interest rates are practically zero, or negative in some respects. So it’s just a much bigger bubble and the leverage is enormous, and one of these days it’s going to blow up which is why I say, look, if you really want gold, don’t have a contract on the COMEX because the guy that’s on the other side of that contract doesn’t have the gold and can’t deliver it, and if there ever is a real short squeeze there, because if enough people that buy contracts decide to give notice that they want delivery, you know, that’s a complete crisis. I mean, although not for me because I own gold, so I’ll do well, but if all the sudden all these shorts have to buy gold to deliver to the longs, the gold’s not there. And certainly, the silver’s not there either.
Sheldon Anderson: What about silver? What are your thoughts on it? I mean, we have a lot of people that buy it. I personally like it. I hold it and buy it.
Peter Schiff: Yeah, no, I like it. It’s good to have it. It’s a little bit harder to store yourself than gold if you have a lot of it because it’s bulky. But you know people should have gold and silver, and you know, I think silver now, I think it looks like it’s bottomed out. The ratio is now improving in silver’s favor, yet it’s still very low. So, I would still suggest that there is a lot of room for silver to go up relative to the price of gold. I think silver going up relative to gold is positive for both gold and silver. Because in a bull market, that’s typically what happens. So, silver is a better performing metal in the bull market, and it does worse in the bear market which was the case, right. Silver dropped from a high of 50 down to about, what, 14 bucks. Gold went from about 1,900 to a little over 1,100. So much bigger drop in silver, but if you remember in the previous bull market, gold went from just below 300 to about 1,900. But silver went from 4 bucks to 50. Right, so, and even though silver came down, it never went anywhere near $4. So, it still held on to a lot of the gains from the last bull market, and which you know, this was just a correction, and now we’re headed I think, much higher.
I think it looks like [silver has] bottomed out. The ratio is now improving in silver’s favor, yet it’s still very low. So, I would still suggest that there is a lot of room for silver to go up relative to the price of gold.
Sheldon Anderson: So I have one final question. Which is, gold’s up about 25%, why don’t we hear about it more? Right? I mean, if the stock market was up 40%, you’d have a ticker tape parade all over Wall Street, but yet we have people calling all the time going, “How is gold and silver doing?” Why isn’t it more pervasive?
Peter Schiff: Because not as many people are invested. I mean a lot of people are in the stock market, and the media focuses their attention on the stock market. But believe me, as a gold investor, I’m happy that the media is not covering this. I like it being underneath the radar. Because generally by the time the media really starts focusing on gold, the prices are going to be substantially higher than they are now. Because a lot more people are going to be interested. It’s just like ratings. I mean, yes, if you run an article, if you’re on the news about the stock market, yes, people are going to listen. “Oh, I’m in the stock market.” But, if very few people are buying gold, they don’t care. Why do they, why do they want to report on what’s happening in the gold market? But by the time the news outlets really want to cover it is because there’s a big audience, and that means a lot more people have bought. And so that means the price is going to be a lot higher. So, for clients now, the fact that you’re not hearing about it is a good sign.
By the time the media really starts focusing on gold, the prices are going to be substantially higher than they are now.
Sheldon Anderson: That makes a lot of sense.
Peter Schiff: If, if everybody was talking about the price of gold, then it probably be a lot higher and then maybe it would be the time to sell. Just like when everybody was talking about the dot com stocks in ’99, 2000. Everybody was talking about real estate in 2005. Right, you know? So, when everybody is involved in something, it’s generally the end of the move. And so, I like the fact that this is happening beneath the radar. It’s like a stealth bull market, and I think it’s going to go on for a while before anybody in any significance in the media even bothers, you know, to talk about it or look at it.
Sheldon Anderson: Yeah, makes sense. Okay, thank you Peter Schiff.
Peter Schiff: Alright. Take care.
Sheldon Anderson: Appreciate it.