Tags: peter schiff | cnbc | predictions | janet yellen

Peter Schiff Defends 'Outlandish Predictions'

By    |   Friday, 17 July 2015 08:09 AM

CNBC Futures Now panelist Scott Nations took on one of this writer’s favorite commentators, Peter Schiff, of Euro Pacific Capital, over what Nations considers “outlandish predictions.”

Nations contends that if “price is truth,” futures are pricing in a 75% chance of a rate hike by December, with further increases going forward. Schiff quipped that “in 2007 the market was saying subprime mortgages were good and trading them above par,” so everybody got it wrong.

"I doubt the Federal Reserve is going to raise rates," Schiff said. "The bubble is too big to pop," Schiff said. "They are going to need QE4 to keep the air from coming out of this bubble."
Schiff, the Euro Pacific Capital CEO, did predict the housing crisis in 2007, but also said two years ago that gold would go to $5,000.

"Peter, you do a great job of making these outlandish predictions and 1,000 of them come out of your mouth, 999 of them are wrong and then you live forever on one of them," Nations said.

Meanwhile, with Federal Reserve Chair Janet Yellen testifying on interest rates, and bank earnings reports dominating the news, there was little about Greece and China to talk about on Thursday.

John Maxfield, senior banking analyst at The Motley Fool, stressed that the biggest banks “have multiple business lines, to smooth out your earnings when, say, your trading is going down. I would say the real story here is that all the big banks stepped up to the table this quarter, whereas before it was just JPMorgan (JPM) and Goldman Sachs (GS)."

Asked which bank is best positioned to deal with higher interest rates, Maxfield responded it is those with large consumer deposit bases, naming JPMorgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC), and while they’re “not totally transparent,” he estimated they will earn between $1 billion and $2 billion more each quarter.

He called this quarter “huge” for Bank of America, because it is stressing revenue growth rather than expense cuts and has succeeded in bringing expenses down. He praised JPMorgan and Wells Fargo as good long-term holds for investors.

Next, John McCaughan, CEO of Principal Global Investors, gave his view as to why stocks had risen overnight in spite of concerns over developments in Greece and China. He pointed to “terrific” innovation in the U.S. tech sector, which is also buoyed by cheap energy. An interviewer brought up the large banks and suggested there are “pockets of strength and weakness” in these stocks, “with huge legal reserves,” yet Citigroup hit a six-and-a-half-year high.

McCaughan said he is “a little more skeptical of particularly the big banks,” citing the questioning of Yellen by Sen. Elizabeth Warren (D-MA) as suggesting “tough regulation of the big banks that will make it hard for them to get back to the sort of ROEs that made them look so great before the financial crisis.” Instead he prefers tech stocks and “the better retailers.”

Asked about the Greek situation, he said “the politics are toxic on both sides.” He found the firebombs outside parliament “quite disturbing” and questioned whether the deal will be ratified by the creditor countries and those that had reformed, calling that process “extremely rocky, which could create a new buying opportunity.”

Asked about comments by Bill Ackman that China looks worse now than the U.S. did in 2007, McCaughan demurred, because he doesn’t see the defaults on subprime loans and municipal debt that occurred in the U.S. then.

CNBC’s Steve Liesman characterized Yellen’s testimony as “slowly raising the rhetoric about hiking rates,” because the labor market is normalizing in response to long-term monetary accommodation.

For his “Yellen Euphemism of the Day” he chose her assurance that a rate hike would not constitute a “tightening,” because rates would still be “accommodative.”

Brian Kelly then asked “what’s the hurry?” to raise rates after six and a half years, given soft retail numbers and events in Greece and China. Liesman responded that the Fed expects continued improvement in the economy, “so it’s hard to say that zero is the right rate.” This writer would note that Liesman evidently missed the parade of Democratic senators who urged caution in raising rates.

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CNBC Futures Now panelist Scott Nations took on one of this writer's favorite commentators, Peter Schiff, of Euro Pacific Capital, over what Nations considers "outlandish predictions."
peter schiff, cnbc, predictions, janet yellen
Friday, 17 July 2015 08:09 AM
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