Let me begin with a brief assessment of his track record on the economy. As the record shows, Peter’s understanding of the economy is so superficial that he appears to have no idea what he’s talking about. If you don’t agree, you haven’t kept up with his track record.
Some brief examples include his insistence on the decoupling of china from the U.S., which did not happen. Furthermore, his continued insistence on hyperinflation in the U.S., rendering the dollar essentially worthless.
Sure, Peter, many people knew there was a real estate bubble; many people were aware the U.S. consumes too much and produces too little. But unless you’re able to get the details right, you won’t do too well when translating your economic picture into winning investment strategies (hint, hint).
As much of the details as Peter missed or got wrong about the economy before the collapse, he continues to preach his oversimplified and extremist thesis - as any good salesman would do. No Peter, we aren’t headed for hyperinflation. You and the rest of the doom club need to stop preaching this nonsense to millions of sheep out there.
I previously discussed the reasons why hyperinflation isn’t going to happen; at least not in the United States. Remember, I’m the guy who predicted a depression in America’s Financial Apocalypse. Yet, I know when to come back to reality because I’m not in the business of selling gold or securities. This unbiased perspective enables me to maintain a level head.
Of course Mr. Schiff isn’t the only one preaching these scare tactics. Many other perpetual doomers and gold bugs are as well. But they simply have no idea what hyperinflation means, they’re just mindless, or they want to manipulate the gold and currency markets.
When it comes to the details, Peter got so many things wrong while leaving others out, it’s too voluminous to list here. I know it, and sophisticated investors know it; perhaps some of his former clients know it. Meanwhile, the sheep still have no idea how wrong he has been. This is why they are sheep. This is why they get blown out so often in the stock market.
Let’s have a look at a few excerpts from Mike Shedlock’s criticisms of Schiff a few months ago….
Schiff's Overall Thesis
· US Equity Markets Will Crash. <<== how long has Schiff been saying this? Since the 1990s. If you listened back then you lost out on the greatest bull market in history (added by author)
· US Dollar Will Go To Zero (Hyperinflation).
· Decoupling (The rest of the world would be immune to a US slowdown.
· Buy foreign equities and commodities and hold them with no exit strategy.
Shedlock adds some memorable quotes by Schiff….
‘The whole idea is to get out of the US Dollar. It is on the verge of collapse. The people who don't get out of the US dollar are going to be completely broke and that is obvious.’
‘This is hyperinflation; this is Zimbabwe; this is the identical monetary policy of the Weimar Republic.’
‘I am just as convinced that people who have their money in US dollars are going to be just as broke as people who have their money with Madoff.’
(This sounds like fear-mongering to me. Only a clueless goof would take Schiff’s scare tactics seriously) – Mike Stathis
Shedlock steps in to straighten Schiff’s extremist view out….
“Schiff continually compares the US to Zimbabwe. Such comparisons are silly.”
Silly is an understatement – Mike Stathis
“I would advise Schiff to toss his hyperinflation theories out the window and listen more to his research analyst. However, Schiff cannot and will not change because he has two books calling for hyperinflation.”
Well kind of Mr. Shedlock. The real reason Schiff cannot and will not change is because this would threaten to cloud his extremist approach. And sheep like extremes because such ideas are easy to grasp.
Next, Shedlock points out how wrong Schiff has been on commodities.
“The following is from a chapter in his book called ‘Hot Stuff’ on page 105.
Schiff writes: ‘What I want you to take away from this chapter is the knowledge that there is extraordinary excitement in commodities, which are in the early stages of a historic secular bull market.’...”
$CRB Commodities Monthly Index
Schiff continues. ‘There is extraordinary excitement in commodities.’
Shedlock slaps Schiff around further…
‘The Little Book of Bull Moves in Bear Markets nailed the exact cyclical peak in the commodities boom. Ironically, the subtitle to his book is ‘How to Keep Your Portfolio Up When the Market Is Down’.
Next, Shedlock lists some of the ways Schiff was wrong:
12 Ways Schiff Was Wrong in 2008
· Wrong about hyperinflation
· Wrong about the dollar
· Wrong about commodities except for gold
· Wrong about foreign currencies except for the Yen
· Wrong about foreign equities
· Wrong in timing
· Wrong in risk management
· Wrong in buy and hold thesis
· Wrong on decoupling
· Wrong on China
· Wrong on US treasuries
· Wrong on interest rates, both foreign and domestic
“That's a lot of things to be wrong about, especially given all the ‘Peter Schiff Was Right’ videos floating around everywhere. The one thing he was right about was the collapse of US equities and no part of his investment strategy sought to make a gain from that prediction.”
“Peter Schiff concludes many of his articles, books, etc. with the claim he saw this coming and ‘positioned his clients accordingly’.”
“Schiff did not invest for doom; he invested for a bull market that did not exist. He was wrong where it mattered most, protecting client assets. For this amazing feat, people think of him as a star.”
Yes Mike, you are indeed correct. Furthermore, Schiff made huge investments in PR and marketing. And these investments paid off well; but only for Schiff as he drew in investment capital of sheep. Most people have very short memories, they don’t truly examine historical track records and they don’t follow the capital markets closely enough to see how wrong Schiff has been. The only way sheep would realize how wrong Schiff has been is if they actually invested with him. But even then, many of them would probably remain in denial. This is why they are sheep. Sheep always get slaughtered.
Shedlock then Posts An Actual Schiff Portfolio
Shedlock qualifies the portfolio…
“The above statement is from a person who claims to have additional portfolios invested with Schiff over the past 2 years. In total (not just this portfolio), my contact says he invested $70,000 and is now down to $27,000. That is a loss of 61%.”
Next, he adds more data points to confirm his analysis…
“I have talked with another person who claims to be down 72%, and many others who claim 40% or more.”
Shedlock then puts Schiff’s disastrous investment strategy into perspective…
“Schiff's entire invest thesis seems to boil down to "Buy and hold foreign stocks, foreign currencies, and commodities, come hell or high water, and hold on to them." Hell has arrived for those following Peter Schiff's philosophy.”
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So what was Schiff’s response to Shedlock’s article? Rather than address the facts, Schiff chose to set the tone for his response by make unfounded assumptions regarding Shedlock’s motives, stating that Shedlock is jealous of his “celebrity” status and that he is merely looking to get investment business.
Regardless whether Shedlock was motivated to write his piece to gain business, the fact is that he made some excellent points sophisticated investors knew all along. If I had to guess, Shedlock wrote the piece to clear up the truth after being sick of hearing these delusions about Schiff being right, when the facts demonstrate that he was much more wrong than right; wrong enough to get thrashed in the market.
It appears to me that Shedlock has a better understanding of investments, trading, risk management, and economics than Schiff.
I do not claim to agree with nor am I familiar with all of Shedlock’s views. But one thing is for certain. I would read his articles any day over Schiff’s because I’ve never seen anything other than generic, repetitive, extremist, Humpty-Dumpty themes and inaccurate content from Schiff’s pieces.
The bottomline is this. During Schiff’s shining moment, when the market crashed, he apparently lost a huge amount of money for his clients. If you call that being right, than I prefer to be wrong.
But as the facts show, I was right – the commodities bubble collapsed, real estate prices declined by 30-35%, Fannie and Freddie collapsed and were bailed out, the Dow collapsed to near 6000, there would be a New Deal, gold and oil would soar but be highly volatile and should be traded – all in my 2006 book America’s Financial Apocalypse, released BEFORE Schiff’s book.
In fact, it appears as if Schiff has conceded how badly he missed the mark. Perhaps this is why he is releasing Crash Proof 2.0: How to Profit From the Economic Collapse, 2nd Edition in a couple of months. He wants another try since he failed miserably the first time.
My, my. Two books in a year along with 100s of lectures, appearances on TV, radio, 100s of articles. When does Mr. Schiff find the time to manage his firm and properly analyze the economy and markets?
It’s should be clear to anyone with an IQ of at least 100 what the situation is. Schiff is a marketer, plain and simple. His understanding of domestic and global economics is rather scant despite the fact that he actually has an economics degree and despite the fact that he serves as the global investment strategist for the brokerage firm he heads (which in itself is rather odd).
I’m still wondering why Schiff never revealed the tremendous risks of investing in emerging markets, especially China. While I have advised clients to invest in China, I have done so stressing a small and conservative position, while explaining what can go wrong. Chinese companies have no where near the transparency and regulation as in the U.S. And while I certainly like the growth prospects in China and other emerging markets, I would place a good possibility that China will face a catastrophic blow-up of its equity markets due to fraud at some point, probably within the next 10 years.
I’m wondering if Europacific Capital even has a compliance department because with what appears to be a good deal of his clients down by 50%-70% (at the time Shedlock’s article was published), I certainly wouldn’t want to be at the helm of that firm, especially if I were the guy making all of the investment calls. Perhaps that is why Schiff wants to exit the investment business and enter politics.
Those who have bothered to research Schiff’s track record understand he has been pitching the same doom lines for well over ten years now.
Anyone can be right if they predict rain in the dessert. But if you leave out or miss the details, your predictions are useless. What matters most is knowing how hard and long the storm will be, how much it will rain, how hard it will be, how much of the dessert will be covered and who will be affected.
The really amazing thing is that Schiff had numerous opportunities (almost daily) to change his mind or revise his “global investment strategies.” Instead, he took on the personality of a parrot, mimicking the same lines over and over as any good salesman would do. Apparently that was enough to satisfy the sheep whose brains remain glued to the financial media.
Today, Peter has fans clubs all over the Internet, demonstrating why individuals such as Kevin Trudeau make so much money and hit the New York Times Best Seller list.
What’s truly funny is that it is unlikely any of these Schiff fans have money invested with him. If they had, I’ll guarantee you they’d be singing to a different tune. The verdict is in; America has been transformed into a nation of brainless sheep.
So now I’d like to take the opportunity to teach Mr. Schiff and his fellow perpetual doomer colleagues (Faber, Rogers and their lackeys) a few lessons in economics, investment management, and of course healthcare. Let’s begin.
Lesson #1: Gold is not a hedge against inflation.
Having worked on Wall Street, Peter should realize this. But all you really need is some common sense. I don’t think Peter is a dumb guy. But when you’re trying to pitch a sales line in order to get more business, the results often make one seem as if they were not too bright.
As the facts show, gold is a hedge against deflation. The misinterpretation often arises when the gold bugs fail to consider that gold provides a short-term safe haven during crises. Inflation happens to be a frequent side effect of these crises. I discussed this in a recent article.
However, over long periods, gold has not held its value when adjusted for inflation. For instance, the big argument the gold bugs cling to centers upon gold’s previous high of around $900 made in 1980. They claim that since the inflation-adjusted price is now let’s say $2200, that’s the price gold will reach.
That all sounds good until you remember that gold is in no way linked to inflation since we are no longer on the gold standard. Therefore, the real value of that $800/ounce gold is only about $365.
If gold is a good hedge against inflation, I’d like to know why it peaked in early 2008 and has not reached the highs since then, despite the fact that we experienced a very intense period of inflation.
What about the 1980s and beyond? Why did gold remain lower in price than in 1980 for nearly 30 years? And if gold hedges against inflation, why hasn’t it increased steadily after the bubble burst? The reason for this is because the previous gold bubble experienced a typical post-bubble correction period. I discussed these points in the following article.
The good news for you gold bugs out there is that gold is likely to go considerably higher in the coming years. However, similar to the gold bubble in 1980, when this one bursts, you had better be in cash ahead of time because the higher it climbs the faster and harder it will fall.
Gold prices are driven by supply-demand dynamics, crises, and market manipulation; not inflation. Unless we get back on the gold standard, inflation cannot and will not drive gold prices (other than for short periods). Gold serves as a hedge for deflation and sometimes inflation (due to indirect causes and only for short periods).
Anyone who buys AND holds gold will most likely be stuck with fool’s gold. While I believe there is a real possibility that gold could reach $2200, it will not be due to inflationary pressures. It will be due to a crisis. Alternatively, it could rise due do the self-fulfilling prophecy being created by the gold bugs.
Lesson #2: Gold Provides a Hedge Against Market Declines
As any competent investment strategist should know, the real value of gold as an investment is as a defense tool since it provides a hedge against dramatic market declines. Still, that doesn’t matter to most investors because the best hedge against a market decline is to stay out of the market.
Based upon what I have seen and heard, Mr. Schiff doesn’t seem to be particularly good at forecasting market movements. As far as he’s concerned the market is going down, down, down. How many years has Mr. Schiff made these forecasts now? Fifteen?
Always remember this. Extremists are never right, and they are often dangerous. You have to know when to change channels, even if it’s for a brief period.
Any reasonably experienced investor knows that the most critical skill required to handle bear markets (or any market for that matter) is the ability to forecast major market movements; up and down.
I suppose if you lack this ability, you might want to stay invested at all times and buy some gold to mitigate potential declines in your portfolio. But let’s face it. That’s a buy-and-hold bozo approach.
Lesson #3: Gold Should Be Traded, Never Held Long-Term
Furthermore, I know this isn’t going to go over well with the gold bugs that encourage investors to buy physical gold, but the fact is that gold should only be traded due to its propensity to manifest wide swings in volatility. Doing so not only lowers the cost basis, but also reduces short-term liquidity risk.
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