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I'm glad that someone else noticed what a joke Peter Schiff is

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January 28, 2009 – Comments (13)

I have seen tons of YouTube videos and blog posts touting how right Peter Schiff has been and how he is an all-knowing soothsayer who saw this whole financial meltdown coming.  I suppose to a certain degree he was right when he predicted the current economic storm. 

However, having read his book Crash Proof when it was first published I kept asking myself what all of the fuss about Schiff is about.  Throughout the book Schiff touted the theory of decoupling and the collapse of the U.S. dollar and pushed investment in commodities, gold, and foreign stocks.  Ahhhhh hello? Didn't those things, other than gold, get completely hammered alongside everything else this year?  Isn't the dollar much stronger and aren't foreign stock markets much lower today than they were when he advised readers to invest in them. 

It doesn't matter how right Schiff was about the whole mess we are in right now if the investment advise that he dished out based upon it was terrible.  Investing is all about making money, it doesn't matter how you got there.  And Schiff lost money, a lot of money for his clients.  Mich, who many people here on CAPS read...but I rarely do (mainly because his site used to always make my browser crash for some reason) pointed out in a recent article just how bad Schiff's investment advice has been: Peter Schiff Was Wrong .  His article even contains a supposed snapshot from a portfolio that Schiff helped set up for a client (see below).  Yuck.

I'd rather be wrong about the reasons and make money than right as heck and lose all of my money like this.

The lesson that I take away from this is if you aren't buying things with large yields with the intention of holding on to them for the long run, don't fight Mr. Market.  You can be sure as ship that your theory on what will happen is right, but you won't make a dime and will probably lose many if Mr. Market is working against you.  As the old Keynes saying goes, the market can remain irrational a lot longer than you can remain solvent.

This is one of the reasons that I have given up looking for capital gains and am instead focusing on yield in my real money portfolio.  I am focusing on trying to create a diverse mix of preferred stock, bonds, and some common stock that yield as close to 10% as possible (I generally look for lower, safer yields on the common) .  I'll gladly lock in a 10% annual return in perpetuity and take whatever capital gains come my way than rather than sitting on my thumb for a decade worried as heck about the potential inflation that would result from a collapse in the U.S. dollar that might never happen because the rest of the world is as messed up as us. 

I am still bearish on the dollar and think that interest rates will eventually be much higher.  I am long UDN and TBT in CAPS (not real life).  However, I'm not going to let the fact that there might be hyperinflation down the road prevent me from locking in double digit yields today.  The best thing about this disastrous market is that it has brought back the concept of risk and risk premiums that had nearly completely disappeared during the leverage-fuled bull run of the past decade.

Deej

13 Comments – Post Your Own

#1) On January 28, 2009 at 4:38 PM, Imperial1964 (98.28) wrote:

Yep.

You can't get married to your strategy.  You have to take the evidence as you see it.  Don't be a perma- anything.  Secular bear markets have cyclical bulls. and Secular bull markets have cyclical bears.

I'm hardly a market-timer, but you have to know which way the wind blows.

That said, I'm long only (with the exception of some SPY puts back in September), but I've been very defensive since '07.

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#2) On January 28, 2009 at 4:56 PM, anchak (99.84) wrote:

It defintely is a big failure for someone like him. Roubini is an economist and an academic - he does not manage people's money ( of course he consults and gets paid a bunch - but then again - that's arms length).

If people give you their hard-earned cash because you are like the beacon of knowledge - this is just pathetic.

One statement abit made recently on one of his posts - really resonated - it was about his stress handling one of his friends money. Abit's been right all thru - even if he didn't made a bunch for himself ( just hedged) - its still allright from him. He would have the satisfaction of being right - but when you start doing that for someone else - it brings in a different perspective and impetus to deliver

 

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#3) On January 28, 2009 at 4:58 PM, TDRH (99.65) wrote:

I was with him on housing / real estate, but I could not understand the financial vehicles he said would cause this collapse.  His gold and dollar based commodity play is one I agreed with as well.   I think my econ book in college had one page on deflation.    I did not see it coming, but then again I was not telling people where to invest. 

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#4) On January 28, 2009 at 5:13 PM, Tastylunch (29.29) wrote:

You put all your eggs in one basket and it magnifies success or failure.

It's not that he was wrong necssessarily but that he had people invest like his theory was infallible. Things don't always happen even when they should. You have to protect yourself from the unknowable.

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#5) On January 28, 2009 at 6:40 PM, rcaracaus (< 20) wrote:

Well i think he will make a better senator. Whether he gave his clients bad market advice or not, the things he says about the free market and about our currency are spot on. He is a true constitutionalist and really makes a good impression on thousands of people. Hundreds of people around connecticut have volunteered to launch his campiaign to run for senate and he hasnt even officially ran yet... We need to save the free market system or us investors will have no capital to invest with because the government will dictate the success and failure of these companies. Even if you have beef with Peter Schiff, you have to agree we need some free market principles in our SENATE! http://schiff2010.com

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#6) On January 28, 2009 at 9:42 PM, AQCon (< 20) wrote:

 

Schiff firm: Shedlock exaggerates our clients' losses

 

Andrew Schiff, Peter Schiff's brother, responds to the Shedlock piece:

 

Jay,

It is disappointing that you would choose to raise the profile on Mr. Shedlock’s attack on our firm. In particular, his posting on Market Oracle is primarily an attempt to attract business to his own firm (Sitka Capital Management), by bashing a much larger and better known firm. However, the strategies employed by the two firms are completely different and make a direct comparison useless.

While it is true, that our accounts have suffered badly in 2008, a fact that we have never disputed or ran from, his estimates for the size our of typical client losses are exaggerated and unfair. We have thousands of clients, and since all of our accounts are run individually, holding up the performance of one client is not representative of our firm as a whole. In choosing to characterize our performance he considers only that time frame which he knows was the worst period for our clients. The biggest impediment to our performance in 2008 has been the rally in the dollar, which we did not predict. However, we believe that the rally is as illogical as it is transitory. We still believe that for many fundamental reasons the dollar will fall dramatically. Shedlocks’ criticism is similar to jabs peter got in 2005 when housing market experts were ridiculing him for making gloomy predictions about home prices which at that point were still strong. It didn’t mean that he was wrong then about a housing bubble.

Also, as a broker dealer (not a Registered Investment Advisor as Mr. Shedlock’s firm), it would be illegal for us to publish or to otherwise make claims as to past or expected investment performance. Mr. Shedlock knows this, but sees a chance to gain credibility as a result of our lack of response to his challenge.

I would ask that you mention that commercial interest rather than journalistic objectivity informs Mr. Shedlock’s posting. Please feel free to contact me with any questions.

 

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#7) On January 28, 2009 at 9:58 PM, nthought (< 20) wrote:

There goes tricky Shiffy again, using his one little triumph over the clueless Faux Business News clowns as an example of his credibility.  

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#8) On January 29, 2009 at 6:18 AM, TMFDeej (99.32) wrote:

Thanks for reading sequoiatreehuggie.  Unlike many here in CAPS, I am not a fan of Mish.  As I mentioned I rarely read his blog, but this particular piece that he ran caught my attention because it highlighted something that I have been thinking for a while.  I kept asking myself why is Mr. Schiff getting so much praise in the media when most of the things that he touted in his book have done so terribly over the past year.

I don't have a problem with the fact that that the accounts that EuroPacific helped manage last year lost money.  A lot of people lost money last year.  I lost money in my personal account as well on the dollar weakness that I expected to continue, but didn't.

I admire many of the calls that Peter Schiff correctly made.  My main problem with him is that he receives an unbelievable amount of praise in the media (such as the article in this month's Fortune) and from his fans on YouTube that certain CAPS members have posted thousands of times for the correct calls that he has made, yet he has not been held accountable for the terrible investment advice that he has given.  He is an investment advisor, not an economist or a politician.  As an investment advisor he is expected to recommend investments that will increase in value.  If that doesn't happen, then he has failed at his job.

As right as he was about the current economic problems, he was wrong about the strength in foreign markets and decoupling.  His views are too ethnocentric.  The reason that the U.S. dollar has been so strong is not that the United States is in such great shape.  It obviously is not.  The dollar strength that we have been seeing exists because the rest of the world is as messed up as we are, especially Europe.  I guess in the land of the blind, the one eyed man is king.

As an investment advisor he doesn't get points for being right about some things but losing all of his clients' money.

Deej

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#9) On January 29, 2009 at 7:00 AM, whereaminow (20.23) wrote:

My main problem with him is that he receives an unbelievable amount of praise in the media (such as the article in this month's Fortune)

Look. Peter Schiff can not control the people's positive reaction to his judgments as much as he could control their negative reactions before 2008. He was among the least popular figures on major network television. That hasn't really reversed among the news networks (the last to react to any new trend), but has gone in the polar opposite direction among those who have heard him speak.

Blaming Schiff for being popular is like hating the Dallas Cowboys because they have an underserved following. It's not their fault that half of their fans just like the uniforms and cheerleaders. Sure, I'm going to hate the Cowboys anyway, even though it's irrational, but when I gamble on them it's always with my wallet and not my heart.

The difference between liking Schiff's ideas and disliking them usually comes down to your economic leanings. Keynesians will disagree with him. The Austrian School will rally around him. Since The Austrian School is growing in popularity while Keynes is being discredited this is doubly irksome for anyone that has memorized General Theory.

There is still more to come on this debate. Reality will eventually decide which school of thought was ultimately right. It might not matter by then, since the government may have buried us all.

With that knowledge, the best investment is probably a gun.

David in Qatar

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#10) On January 29, 2009 at 9:48 AM, TMFDeej (99.32) wrote:

I don't dislike Schiff as a person nor many of his ideas.  However, the fact remains that he is an investment advisor who has provided lousy investment advise over the past several years.

To say that he does not welcome the publicity and praise that he has received and that he is not profiting from it is absurd.  I doubt that he was forced to pose for pictures like this one against his will.

If he wasn't truly attempting to profit from his publicity he wouldn't pose for pictures like this.  Do I blame him?  Heck no.  I'd sell out all day long if anyone was buying.  That doesn't mean that he shouldn't be held accountable for his bad calls on investing.

Until Schiff becomes a pure politician like Ron Paul or Jim Bunning, who seem to have similar ideas, or actually dishes out winning investment advice he is somewhat hypocritical.

I highly doubt that he or his firm didn't have some sort of hand in compiling the Schiff "Greatest Hits" videos out there which show him schooling buffoons like Ben Stein, Art Laffer, and some long-haired weirdo on Fox.

He may very well be right that the government's unprecedented level of spending will ultimately prove to be disastrous.  I am inclined to agree with him, but in the meantime he is making millions selling books and advising Euro Pacific clients with investment advice that has lost them huge money over the past year.

Until he becomes a pure economist or writer or politician who does not recommend losing investment advise he needs to be held accountable.

I just call 'em like I see 'em.

Deej

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#11) On January 29, 2009 at 10:59 AM, nphrn (< 20) wrote:

I read Crash Proof. Very interesting. Looked into Europacific and decided against it. Not so much because of it's performance but really because of its fees and lack of transparancy. 

Andrew Schiff is right about one thing. You can't really gage EP's perforformance because it's full service and every client is different. But that's also part of the problem. If you join up with them and then buy and then sell a stock, that spread will cost you around 4%. Now they would maintain that their picks are not meant for quick in and out trades. But the spread is what it is; pretty darn large no matter how long term your outlook is; much larger than one would pay if they bought the same equities through other chanels. What you are left with is the idea that the actual investment ideas and service is what you are paying for. But if you ask them about being allowed to read their investment reports on a given company they will give you a flat out "no" because this is "poprietary information".  So you are left paying a large fee in order to deal with a broker who talks to the analysts and recomend stock picks, the reports of which you are not allowed to read. You ae also not sure of how bad the overall performance is because the heterogeneity makes measurement imossible. But you do know that the foriegn equities direction it has taken has been disterous.

I feel like characterizing Shedlocks post as "primarily an attempt to attract business to his own firm " is unfair. Even if it were true there is a lot of opinion about direction of the world economy that challenges Schiff's vision and does not directly promote his own fund.  Andrew would do well to adress more construcyively and less defensively IMO.

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#12) On February 01, 2009 at 5:04 AM, yukmonsta (< 20) wrote:

Wow, I find it interesting that you attack the portfolio results of one of Peter Schiff's clients.  Hmmm... how's that Motley Fool Million Dollar Portfolio doing?  I cancelled my $500 subscription after the year was up.  The Gardner Brother's premium service lost a ton of money, and if I had followed their recommendations, I would have too!  Haha, Fool on!

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#13) On February 02, 2009 at 12:20 AM, tickhound (< 20) wrote:

Puh-lease.  Thanks to Peter I've been out of the market since March '08, sold a house while there was still a nice profit to be made, and gold's up what? since the week of your post?  But now he's a joke because your "hindsight" prophecy sees things so clearly now?  You're the joke.  And inflation is coming... So look busy. 

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