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There Are No Safe Havens Left

Bestselling author, Peter Schiff, warned me that Bitcoin could experience some heavy selling to close out the year.

Well, he nailed it.

Bitcoin is down $121 since our conversation.

Today, Peter offers a few more clues to investing in 2015.

In the final installment of my three-part interview, Peter explains why “safe havens” no longer exist.

But that doesn’t speak to a lack of moneymaking opportunities. Click the video below to listen. (If you missed the first two parts of this series, go here for Part I, or click here to listen to Part II.)

Robert Williams

Founder, Wall Street Daily

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Robert Williams: Hi there. Robert Williams here, the Publisher of Wall Street Daily. I have bestselling author Peter Schiff with me today. Peter predicted the implosion of the housing market and stock market in his book, Crash Proof, but warns in his latest book, The Real Crash, that an even bigger crisis is on our front doorstep. In our first two parts of our interview, Peter described how the United States is already bankrupt and that policymakers would be well advised to take the pain of a bankruptcy now in a controlled fashion rather than risk chaos in a crash later. Now today, Peter, let’s discuss where to invest in 2015, which seems like a real challenge considering how sick the world is. Are there any safe havens left anymore?

Peter Schiff: Yeah. Well, again, from the short run, there’s no necessarily safe havens where you can put your money there and, you know, when you go to look at your account, that it’s not gonna go down because, you know, ’cause I think the safe havens are outside the U.S., which means you’re subjected – you know, vulnerable to a rally in the dollar. So the dollar goes up and, you know, your investment’s gonna go down if it’s in one of these safe haven countries. But I think you just have to understand the big picture and be – you know, be confident that you’re right and just have the courage in your convictions and ride it out.

Robert Williams: How about commodities at these beaten-down levels, Peter? Do they have appeal?

Peter Schiff: Yeah, definitely. I guess I think that, when the Fed is forced into QE4, that’s gonna be a big benefit for commodities, ’cause right now commodities are factoring in and tied with the Fed. Higher interest rates, a stronger dollar. When they don’t get that, when they get the opposite of that, you know, more QE and a weaker dollar, commodity prices are gonna rise sharply.

Robert Williams: Let’s talk about Bitcoin for a moment, Peter. I know you’ve been a vocal skeptic of the cryptocurrency. Do you still have your doubts or is it time to look at Bitcoin as a legitimate store of value?

Peter Schiff: No. I mean, I don’t really think there’s any value to store in Bitcoin, so that is its inherent flaw and, you know, so far this year my warnings on Bitcoin, you know, have proved prescient so far because Bitcoin has dropped on the year. You know, it’s down better than 50% since the beginning of the year, and we’re not even getting any kind of a big bounce. I think the fact that Bitcoin is not benefiting at all from the weakness in the ruble – let’s remember a year ago how much Bitcoin benefited from the problems in Cyprus and Cyprians, you know, buying Bitcoin to kind of protect themselves from what was going on in their banks and, you know, Russia’s certainly a much bigger economy than Cyprus, and where are all the Russians, you know, buying Bitcoin, right, to protect themselves against the drop in the ruble?

So I don’t think it’s – you know, I think this shows that the appeal of Bitcoin is already wearing and people are not seeing it as a store of value or safe haven. And so I think there’s still a lot of downside left in digital currency. In fact, all digital currencies, not just Bitcoin. In fact, I think there’s a lot of risk between now and the end of the year. We’ll see [a lot of risk] because one thing that they’ve never had in Bitcoin is tax loss selling. And I don’t know how much they might have had this year but, you know, the IRS was kinda unclear about the tax rules before, although everybody had gains in Bitcoin up until this year ’cause it had only gone up. But now, you know, a vast majority of people who own Bitcoins have losses and, you know, they might want those losses. They might want to use them, so it could be, you know, some selling coming in the Bitcoin market here in the next couple of weeks as people – you know, you have to sell them before the end of the year to use the loss this year. And the market has never had to deal with that before, you know, so, but, you know, if you get a lot of selling into that market, you know, what could that do to the price? I mean, I think if we crash below 300, I mean, who knows. We could end up – we could go sub-200, you know, so we’ll see.

Robert Williams: Peter, I’m receiving a lot of messages from our readers about oil at these levels. There’s some belief that we’re seeing a historic buying opportunity. Should my readers be excited or is this still a “buyer beware” market?

Peter Schiff: Well, you know, I don’t know for sure. I mean, if I did, you know, I suppose I could make a lot of money if I knew for sure, but I would agree with your readers in that, you know, I don’t think oil can sustain itself at these levels, so can oil go to $40 or $30 a barrel? Sure. But can it stay there for an extended period of time? No. There’s not enough production that’s economical at those levels because, you know, the cost of producing oil has gone up a lot over the past 10 years, and so, you know, most companies aren’t even close to being productive at those prices. So what would happen is you would have massive capacity coming out of the oil market. Drilling would, you know, and exploration would go away, drilling would go way down, and so the supply of oil would plunge, and so that would make the price go back up so, you know, that’s one.

And number two, is, I think the weakness in the oil price is also a precursor to global recession. I mean, oil prices collapsed in 2008 from $150 a barrel to $32 a barrel, something like that. So that was an even bigger collapse than this, and that was basically the beginning of the Great Recession. And so I think what’s happening in the oil market is also a function of global economies weakening, including the U.S. economy. I think all this optimism about the U.S. economy is unwarranted, and I think that one of the reasons that oil prices are coming down is also because the U.S. economy is gonna be slowing down, and I think it’s also because the Fed is removing the monetary combination, and I think that is not just gonna affect oil, but it’s gonna affect stocks, it’s gonna affect real estate, and so if falling oil prices are basically a harbinger of a recession, and if they’re coming down because of the general weakness in asset markets, then what is the Fed going to do?

The Fed is going to print more money. The Fed is going to call off the rate hikes, it’s going to come back with another round of quantitative easing, and that will be extremely bullish for oil prices, just like it was bullish for oil prices in 2009. And so the question is: Where is the bottom? You know, how low will it go before it turns around and then how high will it go after it does? But yeah, I’m certain that oil prices are gonna be much, much higher than $55 a barrel a year from now. I just don’t know how much lower they’re gonna go in the short run. You know, they could get a lot lower. You know, I don’t know. The market’s dropping like a stone here.

Robert Williams: And, Peter, we can’t even trust gold in this environment. I mean, in this – in the face of this coming crisis and all the debt in the system, you would think that gold would be marching higher, but it isn’t. Is that going to continue into 2015 or could we see a reversal in gold?

Peter Schiff: Gold should be going up, and it would be going up if more people understood the problems, but I think there still is a lot of speculators that are shorting gold and are so convinced that it’s gonna go down, but ultimately when they’re overwhelmed, the rally in gold is gonna be enormous, and the losses for speculators who are shorting it are gonna be even more enormous. So right now you’ve got people piling short gold, but this is gonna be a devastating trade for them, you know, once the tide turns, and it could happen [to be] a spectacular 2015 based on, you know, these forces reversing and the speculators having to throw in the towel.

Robert Williams: Well, Peter, thanks again for your time. We’ll be sure to circle back with you in the second quarter of 2015. Oh, and if any of our readers missed the first two parts of our interview where we talk about the coming crash, well, we’ve archived those interviews on the website. For Wall Street Daily, I’m Robert Williams.

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Robert Williams