Peter Schiff has just criticized the US debt ceiling drama. Here Are 3 Assets You Are Confident Amid Great Market Anxiety
A time bomb in the US economy is dangerously close to detonation.
Long considered a bad luck omen, Friday January 13 came with a warning to Congress that the country could default on its debt starting in June.
With the United States reaching its debt limit of $31.4 trillion on January 19, Treasury Secretary Janet Yellen urged lawmakers to raise or suspend the debt limit.
Peter Schiff, famed investor and market commentator, took his statement as an “official admission that the United States is running the world’s largest Ponzi scheme.”
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A political showdown over the debt ceiling has raged since Republicans regained control of the House of Representatives in the 2022 midterm elections.
President Joe Biden pleaded with Congress not to hold the article hostage, suggesting that a breach could be “calamitous.”
His warnings turned a deaf ear to opposition Republicans, who are using their votes in an extension as leverage to seek spending cuts.
The Treasury may use “extraordinary measures” in the coming months to cover its many financial obligations, including Social Security and Medicare outlays, but these emergency funds are limited.
At the end of the day, the United States simply must borrow more money, as it has done many times before.
Congress has set the federal borrowing limit since 1917, raising it over time as government spending and borrowing needs increase.
“The United States Treasury. Second. has admitted that the only way to avoid a default on the National Debt is to raise the #Ceiling of the Debt for the Government. you can borrow from new lenders to repay existing lenders,” Schiff, CEO and chief global strategist at Euro Pacific Capital, tweeted on Jan. 16. “This amounts to an official admission that the US is running the largest Ponzi scheme in the world.”
In his podcast, Schiff claimed that the US government is in a fatal spiral where it cannot repay its current lenders, so it borrows from new lenders over and over again.
“Why do people participate voluntarily? It’s because they don’t realize it’s a Ponzi scheme,” says Schiff. “They think they are going to pay them back. When they realize that they are going to receive the money from the monopoly, they will not want to lend.
“In fact, they won’t want to hold on to these Treasuries and the only buyer will be the Federal Reserve. And that’s when the printing press is going to go into overdrive and the dollar is going to hit rock bottom.”
As Congress fights to extend the debt ceiling, the US credit rating and financial markets are at risk, but here are three assets Schiff likes as a hedge against economic volatility.
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Prayed
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 store 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 September 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 main holding company, representing 6.8% of its portfolio. Agnico and Newmont were the third and sixth largest holdings, respectively.
Gold cannot be printed out of thin air like fiat money, and its safe-haven status means that demand often increases in times of uncertainty.
Recession Proof Income Stocks
Dividend stocks offer investors a great way to earn a stream of passive income, but some can also be used as a hedge against recessions.
Case in point: The second-largest holding in Euro Pacific is cigarette giant British American Tobacco (BTI), which accounts for 5.3% of the portfolio.
Cigarette maker Kent and Dunhill pays quarterly dividends of 73 cents per share, giving the stock an attractive 7.01% annual return.
Schiff’s fund also owns more than 157,766 shares of Philip Morris International (PM), another tobacco king with a dividend yield of 5.1%. Cigarette maker Marlboro is Euro Pacific’s seventh-largest holding company with a portfolio weight of 3.5%.
The demand for cigarettes is highly inelastic, meaning that large price changes induce only small changes in demand, and that demand is largely immune to economic shocks.
If you’re comfortable investing in so-called sin stocks, it might be worth looking into British American and Philip Morris further.
Those looking to take control of their investments should certainly explore online trading platforms. The best sites offer resources and tools to help investors make informed decisions as they build and manage their investment portfolios.
Agriculture
When it comes to playing defense, there’s one recession-proof sector that shouldn’t be overlooked: agriculture.
It’s simple. No matter what, people still need to eat.
Schiff isn’t talking about agriculture so much as precious metals, but Euro Pacific owns 124,818 shares in fertilizer producer Nutrien (NTR).
As one of the world’s largest providers of crop inputs and services, Nutrien is strongly positioned even if the economy enters a major recession. In the first nine months of 2022, the company generated record net earnings of $6.6 billion.
Nutrien shares are up about 4.78% in 2022, in stark contrast to the S&P 500’s return of -19.44%.
Given the uncertainties facing the economy, investing in agriculture could reassure risk-averse investors.
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This article is for information only and should not be construed as advice. It is provided without warranty of any kind.