Peter Schiff

I spent a long time researching Schiff last night. The compilation on the videos around the internet are pretty amazing. He certainly seems to have been right, calling for this economy and the bubble bursting.

Having said that, I think we need to be careful here – much of that video was taken out of context. As you know, I am not a believer in anyone’s ability to do this type of forcasting well. My first experience with this was an advisor I knew who was suggesting that I move my clients out of the market back in 1995, based on the recommendations of Elaine Garzelli, a “Seer” who had correctly forcasted Black Monday in 1987, and had cashed in on that fame with a number of books. By the date you can see that she missed the best 5 years in the markets history, and subsequently called “the bottom of the tech market” in August, 2000 – ouch. I’ve said to you before that if someone claims they can successfully predict the market or the economy on the short term, then they have a book to sell – in Schiff’s case there are two books. I researched the new one. “Crash Proof” and think much of it is off-base.

To summarize, here are some places that Schiff appears to be way off:

Schiff’s Investment Thesis:

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.

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
Source: Kirk Shinkle, Senior Editor, US News & World Report

I have heard (meaning hearsay only – his firm does not release performance numbers so far as I can see. Also, it is an Austrian firm, though he is clearly an American, yes?) that his firm has not put up good numbers. Given that the first of his investment produts on his website is Canadian Energy Trusts, I can guess that is at least believable. The Canadian Energy Trusts I know are down between 50% and 90% in the trailing 12. Not surprising with commodity prices.

Snake Oil, anyone?


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7 CommentsLeave a comment

  1. First, Schiff was not alone. Secondly, Schiff’s ‘predictions’ sounded pretty much like my own some three years ago, gut feelings and a general astonishment as to what was happening at the real estate markets. Thirdly, Schiff’s predictions are nothing but slogans, catch phrases and general echoes of free-market-demagoguery … in general, more of the same …

  2. Yeah, I think everyone new there were problems – there always are. This time, is different though. I have never seen or heard of coupling like we saw in 2008 – a point Schiff was way off on. My issue with Schiff is how many influential people seemed to be fooled by the half-truths – the effort to show points this guy was clearly right on, in a promotional way so he can sell books that have all of the points that he has been wrong on……..oh, but too late – you already bought the book!

  3. No I didn’t … I tend to be naturally suspicious of laissez-faire folks … be them from the Austrian School or any other school that dares to convince me that free-markets are really free-markets …

  4. its the fundamentals folks.

    he is right about the fundamentals.

  5. No – he’s not. He’s right about a lot of fundamentals, but he’d dead wrong on a lot of fundamentals. You would not be any better off if you had taken his advice (based on his fundamentals) than if you had not. His crash-proof ideas crashed, too.

  6. the short term is the hardest to predict. its the long term thats important here.

    ya know… the larger picture?

    you describe this issue as though it’s all played out. there is a long ways to go.

    the fact of the matter is that schiff is right about the un-soundness of the policies and the disastrous collective consequences.

    nitpick about the details, but the analysis is still far better than most of the talking heads on tv today.

    i think we still have a lot to look forward to, in other words. i think you speak too soon on at least a few of the predictions.

  7. I actually agree – the short term is the hardest to predict – and the long term is what is important here. I also think that a lot of what he said is true, which is what I said in the original post. What bothers me is the follow up effort to show only what he was right about, and turn it into profits through sales of books and by misleading investors (again who invested in strategies that didn’t work). I don’t know if your old enough to remember Elaine Garzelli, but this is the same kind of shameless self-promotion that followed her accurate, allbeit less impressive, predictions. Or Harvey Dent, who is still at it by slightly changing the name of his group, but completely changing his outlook because his unrealistic bullish outlook obviously fell flat in 2000. What’s important for investors, here, is to keep short term money out of the market and long term money in the stock market, both foreign and domestic. Peter Lynch is someone we can all learn something from. After 20 years of running the most successful equity mutual fund of all time, Lynch retired and wrote a book. In it, he revealed that the average investor in his fund lost money. $10,000 invested in 1972 and held until 1992 had grown to over $1,000,000.00 – but the average investor lost money. Why? Misuse of a long term asset – buying high and selling low – by holding for an average of 40+/- days – by trying to predict the short term, even when the short term doesn’t matter, by keeping your short term assets invested in more appropriate places.

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