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November 18th, 2013
05:03 PM ET

Investor on market highs: Dow will crash below 13,000

Should people be happy that the Dow Jones industrial average hit a historic high of 16,000?

"Not if you're concerned about the economy," said CEO of Euro Pacific Capital Peter Schiff, author of "The Real Crash – America’s Coming Bankruptcy."

Schiff correctly predicted the housing market crash would overwhelm the financial system.

"The rise in the stock market, it's not because of a good economy but because of bad monetary policy. What's driving the rally is the (Federal Reserve) pouring all this cheap money into the market," said Schiff.

"The Fed is enriching the few at the expense of the many," said the investor.

"If they ever do the right thing and turn those spigots off, the market's going to come crashing back down," he said, adding if that happened, the Dow Jones would drop well below 13,000.

"What the Fed is doing to goose the stock market and the housing market is actually hurting the real economy. It's preventing it from restructuring in a positive way that would produce genuine economic growth and prosperity that would be enjoyed by everyone," said Schiff.

For those who have their life savings in the market right now, they need not worry about rumors that there will be a tapering off of the stimulus, because, as Schiff says, "I don't think the Fed's going to taper."

"The people who should be the most worried are the people who have cash in the bank. The people that own government bonds," said Schiff. "You're better off being in the stock market, even though the rally is phony, it's probably going to continue because the Fed doesn't have the integrity to do the right thing."

As for incoming Federal Chairman Janet Yellen? Schiff said she will "crank up" the stimulus.

"Remember, Janet Yellen, despite the way the media tries to redefine her, was just as clueless as everybody else. She never warned about anything with respect to the housing market or the financial crisis. In fact, she dismissed the warnings other people were making," said Schiff.

"She said there was no bubble. She thought real estate prices would keep on rising and she thought that even if they went down, which would have surprised her, it wouldn't hurt the economy," said Schiff.

"It's very dangerous to have Janet Yellen as the Fed chairman. It is going to be more of the same. That's why the economy's going to continue to get worse," said Schiff.

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