Peter Schiff & Grant Cardone Debate Housing Crash Vs. Economic Boom

Bitcoin

Across the shows: 12 speakers in other episodes, 4 bullish and 7 bearish calls, past 30 days

• Grant Cardone · Cardone CapitalBullish

  Adding Bitcoin to real estate gives a liquid asset that could be used for capex and debt.

  Cardone says his fund holds Bitcoin alongside real estate. The real estate is stable and cash-flowing, while Bitcoin is volatile, and pairing the two gives a liquid asset to cover capex and debt. He says the fund has four loans maturing now and wishes it had Bitcoin on that platform. He expects Bitcoin to go up over time, and the strategy depends on that. He says the hybrid is a new product that people who doubt it cannot yet fully understand.

  “Because what I'm doing is taking a very volatile product, Bitcoin, and adding it to a very stable asset, one that cash flows.”at 7:52

• Peter Schiff · Euro Pacific Asset ManagementBearish

  Bitcoin is too volatile to serve as a stable asset and its rally was driven by Trump.

  Schiff argues Bitcoin is a volatile asset, not a stable one, so it is a poor reserve for real estate capex or emergencies. If an owner needs cash while Bitcoin is down, they would have to sell at a loss. He says the main reason for Bitcoin's big rally was Trump, and after the midterm elections Republicans will likely lose, creating a hostile environment for crypto on Capitol Hill. He says Bitcoin has no real value, unlike gold, which he says people held for twenty years without making money.

  “And the main reason that Bitcoin had that big rally was Trump.”at 19:12

• Grant Cardone · Cardone CapitalBullish

  Bitcoin is a meaningful bet: about 20% of Grant's portfolio.

  Cardone says extra money has gone into real estate and now Bitcoin, and that about 20% of his portfolio is Bitcoin while 80% is real estate. He argues for big concentrated bets, saying there would be nothing wrong with putting all of $10 into SpaceX or Bitcoin. He sees Bitcoin as a bet worth holding alongside real estate.

  “Overlay money, extra money has gone into real estate and now Bitcoin. Probably 20% of my portfolio is Bitcoin now. 80% is real estate.”at 47:53

• Peter Schiff · Euro Pacific Asset ManagementBearish

  Bitcoin is a pyramid scheme that has not delivered on its promise and will be clobbered.

  Schiff argues Bitcoin has made early buyers profits but has never delivered on its original promise. It has not replaced the dollar and is never used as a medium of exchange, so he calls it a digital pyramid scheme. He says it is not money and expects Bitcoin to be clobbered, while gold has a better chance of big gains.

  “No. It hasn't delivered. It's delivered profits for the people who bought it early, but it's never delivered on the promise that it made. It's not money. ... It's never used as a medium exchange.”at 55:42

Cardone Capital

• Peter Schiff · Euro Pacific Asset ManagementBearish

  Cardone's real estate-Bitcoin fund charges fees investors could avoid by buying Bitcoin directly.

  Schiff says the fund charges a 1% management fee and takes 50% of profits above an 8% hurdle. Investors who are bullish on Bitcoin would give up half their upside, and they could buy Bitcoin directly with no fee. He argues the hybrid is not a real innovation, since investors could build the same mix themselves, and REITs already deduct maintenance and capex costs before distributing income, so they do not need Bitcoin to fund repairs.

  “if I think Bitcoin's going to a million dollars, if I'm really bullish on Bitcoin, do I wanna give you 50% of my upside?”at 13:32

Space Exploration Technologies

Across the shows: 10 speakers in other episodes, 14 bullish and 5 bearish calls, past 30 days

• Peter Schiff · Euro Pacific Asset ManagementBearish

  SpaceX is pretty expensive, with no ground-floor bargain left.

  Responding to Cardone's suggestion of putting money on SpaceX, Schiff says SpaceX is pretty expensive. Buying into it is not discovering some unknown thing, so the ground floor is gone and it is not a cheap bet.

  “But try to find great cheap. I mean, SpaceX is pretty expensive. Not like it's not like you're discovering some unknown thing buying into SpaceX.”at 44:55

US housing

• Peter Schiff · Euro Pacific Asset Management

  Home prices could fall substantially as mortgage rates rise to around 9%.

  Schiff argues the cash-out refinancing lifeline that supported homeowners for 40 years is gone, while insurance, maintenance and utility costs keep rising. He says mortgage rates could reach 9% by Q1 next year. At that rate, a house would have to fall about 50% in price for the monthly payment to match a 3% mortgage. Once a few distressed owners sell, comparable sales would reset prices lower, and underwater owners will hand back their keys, as happened after 2006. He cites his 2006 subprime short as proof that housing prices can fall.

  “Real estate prices are not really rising, and they could fall substantially, actually.”at 24:30

• Grant Cardone · Cardone Capital

  US home prices will not fall 50%; expect only small pullbacks as rate-locked owners stay put.

  Cardone says about half of US mortgages are below 4%, with about 27 years left on the term, so owners will not sell. He expects small pullbacks where secondary-market sellers must move, not a 50% crash. He argues housing is short: average homes cost about $440,000 to replace, and about $1.1 million in California, so new supply cannot easily be built. He says roughly $35 trillion of equity sits in homes. He notes that prices fell only six times in 100 years when rates rose, and four of those were in the 2008 cycle, which he says is not the current situation.

  “50% of all the loans in this country are below four percent... You're not gonna see a 50% drop in any single family homes in this country.”at 28:56

• Grant Cardone · Cardone Capital

  A multifamily rental shortage will develop within 36 months as builders shift to data centers.

  Cardone argues that labor, including plumbers, roofers and gutter installers, is moving to data centers, so builders will stop building apartments, offices, hotels and single-family homes. Institutions are chasing data centers too, so capital is also flowing away from housing. He expects a shortage of multifamily housing within 36 months, which will make rentals explode in the US.

  “They're gonna be building data centers. They won't build apartments... There'll be a shortage in the next thirty six months of multifamily. Rentals will explode in this country because of shortage of housing.”at 36:17

• Peter Schiff · Euro Pacific Asset Management

  Homes are less affordable than before 2008 and prices must fall without buyers.

  Schiff argues homes are already the most unaffordable they have ever been, less affordable than in 2005-2007 before the collapse, and getting less affordable as mortgage rates rise. Half of Americans have adjustable mortgages, so many with five-year ARMs will be exposed to higher rates and may not be able to pay. He says prices are set by buyers, not sellers, so if buyers stay away prices must come down. He also calls real estate a poor investment while rates keep rising.

  “The problem is homes are already the most unaffordable they've ever been. They're less affordable now than they were in two thousand five, six, seven before the collapse, and they're getting even less affordable”at 36:57

• Grant Cardone · Cardone Capital

  Multifamily buys below replacement cost; rents will rise as new construction stops.

  Cardone's firm is buying $600 million of apartment real estate from Blackstone, paying cash and crowdfunding the deal for his audience. He says the assets are bought below replacement cost, and at 9-12% builder costs no new construction will happen. He expects to wait three to five years until rates normalize lower, while cash flow and rents rise because there will be no new building.

  “We're buying $600,000,000 of real estate from Blackstone right now. We're paying cash... We're buying below replacement costs, and we'll wait for the next three, four, five years, until rates get normalized below where they are today, and our rents start to tweak up, and they will because there's not gonna be any new building.”at 40:03

US growth & recession risk

• Grant Cardone · Cardone Capital

  The US is entering its greatest economic expansion since the Industrial Revolution, and it will be deflationary.

  Cardone pushes back on Schiff's doom, saying the US is about to enter its greatest economic expansion since the Industrial Revolution. He expects that expansion to be deflationary rather than inflationary. He argues that people with homes where people want to live and work will keep gaining value, as they have for the last 100 years, even when rates rose. He also argues there is about $120 trillion of equity to pass to the next generation as boomers retire.

  “We're we're about to move into the greatest... Well, the greatest economic expansion since the industrial revolution. It's it's gonna be deflationary, not inflationary.”at 34:41

• Grant Cardone · Cardone Capital

  The US economy is a B-plus heading to A-plus, with historic opportunity.

  Cardone grades the US economy B-plus and says it is heading to A-plus. He argues opportunity is historic for people without education, with about half a million new millionaires created this year and young people using AI to build games that generate billions in revenue. He concedes that cost of living and interest rates are inflationary but says opportunity is going straight up.

  “I would say it's b plus, and it's going to an a plus. It's gonna go to a place where we can't grade it.”at 50:58

• Peter Schiff · Euro Pacific Asset Management

  The US economy is weak and nothing like Grant describes, given rising debt.

  Schiff argues that if opportunity were as great as Cardone says, the public would be more optimistic and Republicans would not be about to be clobbered in the midterms. He says the economy is weak and the country has taken on a lot more debt over the last couple of years, so there has been no real progress. He grades the economy very low.

  “But the overall economy is nothing like what you've described... Instead, they're getting blamed for the lousy economy because it is not a good economy, and we've taken on a lot more debt”at 52:49

US inflation

• Peter Schiff · Euro Pacific Asset Management

  Inflation is rising faster than interest rates and will keep doing so.

  Schiff says that although nominal rates are rising, inflation is rising faster, so real rates are not really higher. He expects this gap to persist, with nominal rates rising but by less than inflation.

  “I actually think inflation is rising faster than rates, and I think that's gonna continue.”at 22:51

• Peter Schiff · Euro Pacific Asset Management

  Consumer prices will rise about 10% a year, so stockpile durable goods.

  Schiff advises a 25-year-old with $10,000 to stock up on consumer goods that do not go bad. He says this gives a guaranteed return of about 10% a year, because that is how much prices are going to rise. He is describing the inflation rate he expects for everyday goods.

  “That gives you a guaranteed 10% probably return a year because that's how much the prices are gonna go up.”at 41:47

Gold & precious metals

• Peter Schiff · Euro Pacific Asset Management

  Rising rates are bullish for gold because inflation is outpacing nominal rates, so real rates are falling.

  Schiff argues that investors see rising rates as a headwind for gold, but he disagrees. He believes inflation is rising faster than nominal rates, so real rates are not actually higher. He expects inflation to keep outrunning rates, which makes gold a tailwind rather than a headwind.

  “So I actually think this is quite bullish for gold even though investors have perceived it as a headwind. It's really a tailwind.”at 22:57

• Peter Schiff · Euro Pacific Asset Management

  Gold has a better chance than Bitcoin to rise tenfold in five years.

  Asked which would more likely go up tenfold in five years, Schiff picks gold over Bitcoin. He hedges that he does not think either will reach that target, but he says Bitcoin is going to get clobbered while gold has the better chance. He also says he likes the precious metal sector and his firm has a gold fund.

  “Gold. Even though I don't think it will. ... I think that gold has a better chance.”at 1:01:20

US rates & the Fed

• Peter Schiff · Euro Pacific Asset Management

  The Fed will eventually step in and buy debt, pushing toward runaway inflation or hyperinflation.

  Schiff argues that rates can go high enough to make everything collapse. At that breaking point, he expects the Fed to step in, crank up the printing presses and buy debt, including Treasuries, mortgage-backed securities and corporate debt. That would lead to runaway inflation or hyperinflation. He adds that mortgage rates would still rise in that case, because inflation expectations would keep climbing. He frames this as a possibility, not a certainty.

  “There may be a breaking point where the Fed steps in and says, you know what? We can't let rates go any higher, and then they crank up the printing presses, and they start buying all the debt.”at 26:18

• Peter Schiff · Euro Pacific Asset Management

  Rates are normalizing and will go much higher given heavy US debt and inflation.

  Schiff says the abnormally low rates after the 2008 crisis are now normalizing upward, but rates are still below a market-clearing level given the country's debt load. With a lot of debt and a lot of inflation, rates should go higher. He does not give a specific level, saying mortgage rates could reach 8%, 9%, 10% or 11%.

  “Now we're normalizing. We're still not at a level that I think is, you know, would be a market level given all the debt that we have. So rates are gonna normalize much higher.”at 41:14

Stablecoins & crypto policy

• Peter Schiff · Euro Pacific Asset Management

  Republican losses in the midterms will make Capitol Hill hostile to crypto and Bitcoin.

  Schiff says Republicans are expected to lose badly in the midterm elections. He argues that this will make Capitol Hill a very hostile environment for crypto and Bitcoin, which he links to the earlier rally being driven by Trump. The argument rests on the expected election outcome and its effect on crypto policy.

  “especially after this midterm election and the republicans are gonna get smoked, it's gonna be a very hostile environment on Capitol Hill for crypto and Bitcoin.”at 19:01

US consumer

• Peter Schiff · Euro Pacific Asset Management

  US consumer finances are in worse shape than in any recent crisis, per record-low sentiment.

  Schiff cites the University of Michigan survey, released the same day, where the current conditions index is the lowest since the survey began in 1951. He says Americans are more worried about their finances now than during the Korean War, the Vietnam War, multiple recessions, the Great Recession, the dot-com bust and COVID. He argues the sense that the economy is fine is a fiction, and the data reflects real financial stress.

  “the current conditions index is the lowest in the history of the survey that goes back to 1951.”at 19:39

Commercial real estate

• Grant Cardone · Cardone Capital

  Cardone is buying institutional assets below replacement cost, expecting strong returns over 3-5 years.

  Cardone says his firm is actively buying large institutional-quality assets. Rising rates push prices down, so the entry point is cheap, even though cash flows will be squeezed. He expects that over the next three to five years, the purchases will prove to be a great investment. He admits hotels and offices are seeing a correction now, tied to adjustable-rate financing and heavy capex needs, while his purchases are in better locations.

  “We've been very active buying big institutional quality assets... Our entry level, we believe, over the next three to five years, we'll look back and it'll be proven to be a great investment.”at 21:13

US Treasuries & yields

• Peter Schiff · Euro Pacific Asset Management

  Bond yields and mortgage rates are headed much higher; the rate peak is not in yet.

  Schiff says rates are headed much higher, and this is not the top. He points to the 40-year bond bull market from 1981 to 2021, when the 10-year Treasury yield fell from about 16% to 0.6% and the 30-year mortgage fell from 18% to about 2.6%. That decline in rates drove the rise in real estate prices, and the reverse is now happening. He also says the country has moved into an era of high debt and high interest rates.

  “I do think that rates are headed a lot higher from here. This is not the top, and it's gonna create a lot of problems in the real estate market and in the overall economy.”at 23:18

Banks

• Peter Schiff · Euro Pacific Asset Management

  Banks and insurers face huge losses on low-rate mortgages, creating an insolvency problem.

  Schiff says many Americans hold fixed-rate mortgages with 20 to 30 years left, locked in at very low rates. Lenders who own that paper are stuck with the assets as rates rise, so banks and insurance companies take large losses, which he calls an insolvency problem. He says he warned about this long ago. He concedes that low-rate borrowers will stay in their homes longer, but he argues the losses on the lenders' side remain.

  “That means the lenders have huge losses because they're stuck owning this asset, banks, insurance companies. You have an insolvency problem with all the people who own this lousy paper.”at 30:07

AI infrastructure & data centers

• Grant Cardone · Cardone Capital

  Institutional capital is flowing heavily into data centers, drawing money away from other real estate.

  In a discussion of real estate versus other assets, Cardone says money is going to flush over to data centers and all the institutions are chasing data centers now. He offers no detailed evidence beyond this observation.

  “and all the money is gonna flush over to the data centers. All the institutions are chasing data centers now.”at 36:32

International equities

• Peter Schiff · Euro Pacific Asset Management

  Emerging market stocks are really cheap and under-owned relative to US tech.

  Schiff argues there is a lot of value around the world where money is not flowing, since capital is concentrated in US AI and tech stocks. He singles out emerging markets as really cheap and says his firm runs an emerging market fund for this reason.

  “I think the emerging markets are really cheap.”at 41:47

US stock market outlook

• Peter Schiff · Euro Pacific Asset Management

  Most stocks are in a bear market; value lies outside concentrated AI and tech names.

  Schiff notes that money in the stock market is concentrated in AI-related and tech stocks, while the majority of stocks are in a bear market. That gap in breadth is why he sees value in the rest of the market.

  “You know, all the money right now in the stock market is concentrated in the AI related stocks and tech stocks. But the majority of stocks are in bear market, so there's value.”at 42:18

US deficit & government debt

• Peter Schiff · Euro Pacific Asset Management

  US debt, government spending and money printing are all rising sharply.

  Schiff argues that over the last couple of years the country has taken on a lot more debt and increased the size of government. Government is spending and borrowing more and printing more money, which he cites as the reason the economy is not as good as described.

  “We've increased the size of government. Government is spending more. It's borrowing more. We're printing more.”at 53:24

AI: overall outlook

• Peter Schiff · Euro Pacific Asset Management

  AI will change many businesses, making some non-viable.

  Schiff says AI is going to change a lot of businesses, so business owners should consider where they are in the economic cycle and which businesses will do well. Cardone adds that some businesses will no longer be viable in a world of AI.

  “And I do think that artificial intelligence is gonna change a lot of businesses.”at 1:00:27