The ticking time bomb on the US economy is dangerously close to exploding.
Long considered a harbinger of doom, he warned Congress on Friday, January 13, that the country could default on its debt as early as June.
As the US debt ceiling reached $31.4 trillion on January 19, Treasury Secretary Janet Yellen urged lawmakers to raise the debt ceiling or stop it.
His plea was hailed by renowned investor and market commentator Peter Schiff as “an official admission that the US is running the world’s largest Ponzi scheme”.
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Since Republicans regained control of the House of Representatives in the 2022 midterm elections, the political standoff over the debt ceiling has continued.
President Joe Biden has pleaded with Congress not to seize the product, saying a default could be “disastrous.”
His remarks resonated with opposing Republicans, who are using their vote as leverage to cut spending on the extension.
The Treasury could use “extraordinary measures” in the coming months to cover many of its financial obligations, including Social Security and Medicare, but those emergency funds are limited.
Ultimately, the US will have to borrow more, as it has done many times before.
Congress has set a federal debt limit since 1917, raising it over time as government spending and borrowing needs increase.
“Treasury of the United States. Sec. He admitted that the only way to avoid default on the national debt is to raise the #debt limit. can borrow from new creditors to pay off existing ones,” Schiff, CEO and chief global strategist at Euro Pacific Capital, tweeted on January 16. “This is tantamount to an official admission that the US is running the world’s largest Ponzi scheme.”
In his podcast, Schiff said that the US government is in a spiral of collapse where it can’t pay back its current creditors, so it’s borrowing again and again from new creditors.
“Why do people participate willingly? “Because they don’t understand that it’s a Ponzi scheme,” says Schiff. “They think they will get their money back. They don’t want to lend when they realize they’ll be paid back with monopoly money.
“The reality is they don’t want to hold these Treasuries and the only buyer will be the Federal Reserve. That’s when the printing press works overtime and the dollar rate drops.”
The U.S. credit rating and financial markets are at risk as Congress struggles to extend the debt ceiling, but here are three assets Schiff favors as hedges against economic volatility.
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Schiff has long been a fan of yellow metal.
“The problem with the dollar is that it has no intrinsic value,” he once said. “Gold will hold its value, and you can always buy more food with your gold.”
As always, he’s putting his money where his mouth is.
Euro Pacific Asset Management’s latest 13F filing shows that as of Sept. 30, Schiff’s company owned 1.655 million shares of Barrick Gold ( GOLD ), 431,952 shares of Agnico Eagle Mines ( AEM ) and 317,495 shares of Newmont ( NEM ).
In fact, Barrick was the firm’s top holding, accounting for 6.8% of its portfolio. Agnico and Newmont were the third and sixth largest holdings.
Gold cannot be printed out of thin air like counterfeit money, and its safe-haven status means demand increases in times of uncertainty.
Recession-proof income stocks
Dividend stocks offer investors a great way to get a passive income stream, but some can also be used as a hedge against recessions.
Example: The second largest holding in the Euro Pacific is tobacco giant British American Tobacco (BTI), accounting for 5.3% of the portfolio.
The Kent & Dunhill cigarette maker pays a quarterly dividend of 73 cents per share, giving the stock an attractive annual yield of 7.01%.
Schiff’s fund also owns 157,766 shares of another tobacco king, Philip Morris International ( PM ), with a dividend yield of 5.1%. Cigarette maker Marlboro is the seventh largest holding in the Euro Pacific, with a portfolio weight of 3.5%.
The demand for cigarettes is highly inelastic, meaning that large changes in price cause only small changes in demand, and that demand is largely immune to economic shocks.
If you’re comfortable investing in so-called guilt stocks, British America and Philip Morris are worth further investigation.
Those who want to control their investments should definitely explore online trading platforms. The best sites offer resources and tools to help investors make informed decisions when building and managing their investment portfolios.
When it comes to defense, there’s one recession-proof sector that shouldn’t be overlooked: agriculture.
It’s simple. After all, people still need to eat.
Schiff doesn’t talk about agriculture as much as precious metals, but Euro Pacific owns 124,818 shares of fertilizer maker Nutrien ( NTR ).
As one of the world’s largest providers of supplements and services, Nutrien is well positioned even as the economy begins to decline significantly. In the first nine months of 2022, the company posted a record net income of $6.6 billion.
Nutrien shares have gained 4.78% in 2022, in contrast to the S&P 500’s return of -19.44%.
Given the uncertainty facing the economy, investing in agriculture can be reassuring for risk-averse investors.
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This article is for information only and should not be considered advice. This is provided without any warranty.