Rampant inflation has been a pressing issue for both the U.S. government and the Federal Reserve. President Biden signed the Inflation Reduction Act into law over a year ago, while the Fed has raised interest rates aggressively to stabilize price levels.
But according to Peter Schiff, CEO and chief global strategist at Euro Pacific Capital, these measures have not been effective.
“Bidenomics and Fed rate hikes have both failed,” he said in a recent post on X, formerly known as Twitter.
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In July 2023, the consumer price index increased by 3.2% from a year ago. This headline figure has trended down after reaching a peak of 9.1% in June 2022.
A decline in inflation rate can be good news for investors — it means the Fed might change its hawkish stance. However, Schiff doesn’t believe that price levels are going to cool off. In fact, he sees quite the opposite.
Markets Are ‘Completely Wrong’
In an interview with Fox Digital earlier this month, Schiff explained why the Fed isn’t making progress in its fight against inflation.
He pointed out that the personal saving rate in the U.S. has fallen to 3.5%.
“Consumers keep spending and reducing their savings in spite of the rate hikes. The rate hikes are supposed to reduce spending and increase savings. That’s how they bring down inflation. But nothing has worked, and so inflation is going to get worse,” he said.
On the government side, things aren’t looking good, either.
“The budget deficits are higher now than they were when rates were at zero, so the government is spending more instead of less,” Schiff remarked, adding that to tame inflation, the government needs to cut spending.
His conclusion?
“Nothing has worked, and the markets are completely wrong on their benign outlook for future inflation.”
Schiff suggested that while the Fed has implemented significant interest rate hikes over the past year and a half, those weren’t sufficient to bring down inflation.
“We actually need much higher interest rates,” he said. “The problem is we can’t afford them. So any interest rate high enough to fight inflation is too high for the markets. And in fact, not only does the Fed create a recession, but it creates a financial crisis, and that financial crisis will be considerably worse than the one we had in 2008.”
That’s a troubling outlook — especially coming from a man who successfully predicted the financial crisis of 2008.
If you share this view, you probably want to know where Schiff is finding refuge in these circumstances. So here’s a look at some of the notable themes from the latest 13F filing from Euro Pacific Asset Management.
Gold
Gold has served as a store of value for thousands of years.
Unlike fiat money, which can be produced in unlimited quantities by central banks, the precious metal has an inherent scarcity, making it a valuable hedge against inflation.
Schiff has long been a proponent of gold.
Earlier this year, he said that when investors realize that inflation is much higher than expected, “they’re going to bid up the price of gold much higher.”
So it should come as no surprise that gold is a prominent theme in Schiff’s portfolio.
As of June 30, Euro Pacific Asset Management held 1,813,765 shares of Barrick Gold Corp GOLD. With the position valued at $30.28 million at the time, Barrick was the largest publicly traded holding in the portfolio.
At the same time, Euro Pacific also held shares of Agnico Eagle Mines Ltd AEM, Osisko Gold Royalties Ltd OR, and various other companies that can benefit from higher gold prices.
Energy
Soaring oil prices were a key driver behind the spiking inflation last summer. And now, the commodity could be making a comeback.
In a post on X earlier this month, Schiff wrote, “upward pressure on consumer prices continues, including oil which is now over $85 and rising.”
If you own shares of oil producers, you’d be well-positioned for an oil price boom.
Case in point: At the end of June, Euro Pacific held 395,695 shares of BP plc BP, 219,263 shares of Shell plc SHEL, 185,252 shares of TotalEnergies SE TTE and 291,683 shares of Equinor ASA EQNR.
To be sure, oil prices are volatile, and stocks of oil producers can also see wild swings.
If you don’t like such volatility, you might want to consider inflation-resistant assets outside the stock market — such as investing in rental properties with as little as $100 while staying completely hands-off.
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