There Is A Bubble In Sovereign Bonds

The reason people are buying European bonds at negative yields its because its a bubble.

During the real estate bubble investors were buying investment properties that had negative cash flows. Meaning that the rents collected were not enough to cover the cost of owning the property. Now, why were they doing that? Its because they believed that the price of the real estate would go up despite the fact that it had a negative cash flow. They thought that there would be a greater fool who would pay an even higher price and endure an even bigger negative cash flow. So it was the greater fool theory.

That is what is going on now with European sovereign bonds trading at negative rates of interest except the greater fool is the European Central Bank (ECB). People are buying these bonds not because they are dumb enough to hold them to maturity. Nobody going to hold a negative yielding bond to maturity, you are guaranteed to lose money.

People were buying these bonds to sell, they think they will find a greater fool willing to pay an even higher price and get an even more negative yield. That fool is the ECB with their bond buying program and they will buy these bonds regardless of price. This is a gigantic bubble!

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

Why The Fed Will Not Raise Interest Rates

The reason why the Fed will not let interest rates go up is because if they let interest rates go up, we cannot afford to pay the interest on our debt and we would have to default. To avoid the embarassment of a default they keep interest rates artificially low. But I think its better to be honest and default than going through a currency crisis that we are heading to.

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.

Markets: I Am Not Short U.S. Treasuries

I am not short U.S. Treasuries but I am short the U.S. Dollar. I am long foreign assets, I am long foreign stocks, I am long gold stocks. Look how much gold stocks are up this year. (Newmont Mining (NEM), Goldcorp (GG), Barrick Gold (ABX), NovaGold (NG), Market Vectors Gold Miners ETF (GDX), Market Vectors Junior Gold Miners ETF (GDXJ), iShares MSCI Emerging Markets Index ETF (EEM))

Peter Schiff is an American businessman, investment broker and financial commentator. Schiff is the CEO and chief global strategist of Euro Pacific Capital Inc.