March 08, 2009
– Comments (14)
Oooh, here's the video blog on Friday, March 6th:
What is the alternative for the dollar?
Why doesn't Peter Schiff go public with his investments or his performance metrics?
Why trust a guy who is rumored to be down 80% in this recession because he made a bunch of stupid investments?
The alternative to the dollar is the Canadian dollar, and the alternative to you banking in the U.S. is to bank with a Canadian bank.
Canadian banks are the safest in the world.
Pure and simple.
Kdakota,President Obama's plan is different in that the money is focused on the economy, not on the Iraq war. Not only did Bush funnel millions into a "stimulus" which was overseas, he basically gave the money away to the KGBs and Blackwaters and Tritons in the form of cost + no bid contracts effectively lining the pockets of CEOs. (see Iraq For Sale or No End In Sight or other excellent videos) Of course there would be a negative economic impact for the US! Obama's plan is radically different and his policies are too. The entire way this current stimulus is structured is a 180 degree departure from Bush so Schiff saying this is "the 3rd Bush term" is completely unmarranted. It discontinues years of favorable tax treatment and subsidies for corporations and the wealthy who are far less likely to rechannel that money dollar for dollar and into local US concerns as the poor, middle and even upper middle clesses will.Bush inherited a budget surplus which he immediately squandered. Inflation dollars or no. This is a matter of (non-partisan) public record. Schiff argues in his books that the gov't mistates these figures by manipulating the data but if you simply agree to use the same "flawed" data across both administrations then Schiff is arguing apples and oranges. Schiff has a long history of predicting events which have not occurred. They are likely not going to occur. - China will not "let it's citizens spend their own money" That is a ridiculous & simplistic statement. The gov't cannot simply open it's coffers and rain billions on their citizens. They will do the same as every other country, they will direct gov't funds into projects designed to stimulate their economy. - They cannot simply withdraw their US treasury investments for the devastation it would wreak in their own economy. They may do so in small ways to extort our cooperation on issues they care about as leverage but the bottom line is that since every global economy is in the same boat China cannot replace us with other trading partners at least not for awhile. Any attempt on their part to cause a run on treasuries will be a bluff and called very quickly,causing soveraign gov't's outrage worldwide, and weakening a good bargaining chip for them-Not gonna happen! Same with Japan and their massive investment in US dollars. To open the floodgates by recirculating billions or trillions of US dollars would make it even harder for the US and many other economies to buy their exports with what is still the default currency. If they have any hope to rebuild their export model they need us and will try to work with us and the world economies to protect the US dollar. Plus we have many common political concerns and are relatively predictable unlike may other erratic or hostile nations. I predict China will keep ties strong with us, Europe and India (huge populations) while looking long term at their neighbors in order to minimize a future re-enactment of this disaster for them. They tried to put a leash on us and sort of made us carry their money around with their fiscal policy and have learned that if your "captive" falls over a cliff you fall too if you can't let go of the leash. But if you do we lose the money we are carrying. Oops! - The dollar remains strong because everyone else is worse. The euro is awful and destined to get worse IMO. And China is certainly not going to make any radical changes in raising the standard of living for it's citizens because of the threat to their own gov't that would promote. They will try everything in their power to maintain the status quo of a cheap labor market for exporting to keep their people working but isloated and under control. (Disclosure: I am betting on this with my investments in BIDU, CHL & STV)That is why Schiff is so wrong now. He predicts uncoupling because though he got many things right he failed to realize the full extent of our intwining with the world economy. Plus his political bias prevents him from understanding on a gut level how people think. He is great at the finance side but dismally poor on the people/political side. When he repeatedly harps on how countries "can't" continue to prop up the dollar he is overly focussed on a short term fiscal/accounting viewpoint and failing to really consider the political and long term realities of what his predictions would mean, In my honest opinion. Sure, if the world gov'ts were run by accountants he might be dead on. I'm certainly no expert and Schiff has much credibility in my book but I see this as his critical blindspot. Like Ron Paul he is basically a bean counter and their worldviews are overly influenced by this narrow perspective. Abolish the Fed-Sure, right. That'll happen.- His gold predictions are failing to materialize. In fact one of the curious upsides of the markets dropping last week and over the last several months is how gold has failed to hold over $1,000. he and other gold bugs may point to the failure of investors to grasp the seriousness of the fiscal disater waiting to happen but after 6 months of pretty unrelenting bad finacial news I would have thought gold would be well over a $1,000 by now. I know for a fact Schiff sure did. Yet he failed to address this any meaningful way merely reiterated his position that it will go higher wait and see. How long? As long as it took GE & GM to fail from when he himself admits he predicted they'd fail? No thnks I will definitely wait and see.- I do think Schiff by being a "constitutionalist" or "libertarian" or whatever has a nice way of dispensing fairly even handed criticism but now that he's thrown his hat in the ring I feel his political objectivity" is severely suspect.I now subscribe to his news letter in part to these posts of yours Kdakota but I have a question-How much money do you have with Euro Pacific? How is your portfolio performing with him? (I'm not hinting that you are pumping Schiff for any nefarious motives, here) I keep meaning to return a call from them to ask them this directly. I had been toying with moving some of my portfolio to them but after pretty extensive research I just don't have much confidence in his strategies.I also have been getting Misch's newsletter (who I imagine you would like) and he maintains Schiff's clients have lost 40-50% over the last 12 months or so. I would belive that. Wih Schiff's focus on dividend companies his returns will get worse too as responsible companies will be slashing these for quite some time. Something I predicted 6 weeks or more ago. And I'm a newbie! I also factor dividend history as a screen but I do not factor in capturing a continued stream in my expected near future returns. Clients he put into companies expecting to boost returns thru didvidends are going to be severely disappointed for at least the next 12-16 months, in my opinion. I believe his over emphasis on this will continue to hurt his returns and cause him to pass over better investment candidates.- His insistence on investing in non US dollar denominated currencies is really destructive as the dollar has failed to fall at anything like the rate he has predicted meaning again that his clients must be lossing even worse than if they were in many US equities. Then in video 2 he gives his surprising analysis of the failings of GE & GM. Now I ask you does Schiff suggest these companies pass up the revenues from lending on their own products to let the banks do it? What would that accomplish? In good markets passing up on fat profits is what. Every decently profitable company I deal with offers financing to customers. It is a commonly accepted practice for improving revenue and controlling your own bottom line. Sure it bites you in the butt if the whole financial system crashes but it's still a sound business strategy. Suggesting this alone made them bad companies is ridiculous. I think GM went sour primarily by failing to build products people wanted. Plus I agree with Buffet that cars are too highly competive to ensure solid profits or moats. (although I disagree with Buffet in that I own Honda-because I think it's the US car manufacturers that are bad investments not every car company).They have been losing money for years and they were ripe to be squashed by the Toyotas and Hondas who achieved better efficiency and responded to consumers desires. Period.(disclosure I drive a Highlander hybrid and also own a Honda Ridgeline. I haven't bought US cars for 20 years)GE did not make the bulk of it's money thru financing this is just inaccurate. So his analysis and the better part of this whole video segment is deeply flawed in my view. Also I would point out that had you actually had money in these companies from "2002/2003" when Schiff predicted they would go bad you would have missed plenty of upside and could have backed off in 2006-2207 when it was more apparent they were in trouble and still made yourself a tidy return. I'll look at this. I could be wrong- Next he erroneously states that the jobs report 3/5 was "worse than expected" By whom? Every article I've read say that many feared worse and in fact the jobs loss numbers were 20,0000 better than official gov't estimates. - Finally this tired and specious argument that "gov't workers are non productive and in fact cost us more than private sector jobs" is again an accounting perspective at best. This Hazlitt/Mies/Swiss School fairy tale is absurd. Yes there is waste in gov't but there is just as much waste and inefficiency in large corporations. The advantage is that gov't is not constrained by a personal profit motive. That's a main point there. The gov't can run their programs at break even and it is a success. No private company can do this. But more importantly the gov't can focus the resources of the nation (tax dollars) on long term goals for the country with little or no profit to itself, creating opportunities for the private sector to step in which would potentially never come to fruition under a purely free market dynamic. The reason gov't is having to take abigger role is exacerbated by the progreesively degenerative myopia of the free market and capitalist companies. Witht he huge number of ordinary people glued to the quartely financial staements companies are harder and harder pressed to produce results and emore and more constrained from moving in risky directions or pusuing the types of long term projects which are on a time line too far out to justify to impatient investors. The whole sytem is rotten. The anylust companies like S&P, Moodys, Morningstar also bowing to this corprate culture reward comapanies with rating s based on extremely short horizons. Only the biotechs get the long term leeway to innovate over 10-15 years. Of course the gov't has to be a counterbalance! That is the really big picture. We as investors have caused this problem and there is no way I see to reverse it. It would take the courage of thousands of CEOs to stand up and say-were going to put some major money iinto ___ so we're going to be cutting back on profits somewhat. Maybe then we'd get the benefits of free market derived alternative energies etc. But we still don't have tax dollars for space exploration, most pure research, infrastructure and on and on. it is a cycle feeding on itself.Maybe what he says will yet come to pass but I think not. Schiff is undeniably shrewd but again, he is basically an accountant. He has been brave in his predictions and has endured inexcusable ridicule from far less talented hacks. And I believe him to have been very sincere but he has failed to accurately appreciate the true depth and breadth of this calamity. Until he admits he may have made some wrong assumptions I personally am considering him more and more of a fringe voice. Plus, he has announced himself as a candidate for office, and still is shilling products as fast as he can. Even Crash Proof is loaded front to back with plugs for his "uniquely positioned" company with the barest lip service to shopping around for like companies to Euro Pacific because he then helpfully points out nobady offers what he does.Anyway, I appreciate your posts. I think they come from a sincere belief that Schiff can help people but I'd be honestly quite surprised to learn you actually had any money with him. Best of luckAlex
Hey Alex, you definitely made a lot of good points in that essay you wrote there, but please, trim it down next time! I admit, I didn't read all of it and I think a lot of people will end up skimming over it.
If you summarize a bit, you can get your points across to more people. Just a tip ;-P
I actually read your whole comment and didn't think it was too long. That was probably one of the best counterpoints to Schiff I've ever come across aside from an entry on Mish's blog a few months ago. Most Schiff critics do not post a very compelling case beyond mentioning that gold has so far failed to skyrocket and the dollar is still doing well. That aside, I agree with you that Schiff's advice seems sincere.
How do you get Schiffs video blogs. Have a link?
Peter is one of those that are on the mark, but I don't know how to get his blogs on a regular basis.
His theory on the dollar is wrong. Other central banks are cutting rates, keeping the dollar stable. There are still no signs of decoupling, although China might make an attempt.
I have never liked Peter Schiff. Just comes across as very obnoxious.
The main reason that China will continue to buy our debt, at least in the short run, is that they need some time to buy hard assets with the large number of Dollars that they have in reserve. They need the US Dollar to remain strong to facilitate these investments. They have no love for the US and have no interest in propping up our financial system, unless it suit their needs.
China has already begun making plans to divest from the need for the US consumer. There have been several WJS articles detailing China recent investment in Russiain Oil resources - pipeline to China as well as their interest in global mining companies.
China needs the Dollar to remain strong for a least a year or two in order to complete these deals. When they have completed most of their major investment goals, they will lose interest in the US debt and Peter Schiff's predictions will come to pass.
I suspect that Mr. Schiff understands this, but he has not articulated it in the interviews I have seen.
I actually just found the link for Peter's video blogs yesterday when I was killing time at youtube.com.
Thank you. I've been dong a lot of finace, investing & political research and reading these last few months. Schiff has earned a healthy dose of investigation from me. Thanks in part to Kdakota's "Schiff Channel" here on Caps-Thanks KD.
Bottom line is that I haven't found anyone with what seems like a solid overall roadmap. But some people have what look like good pieces. Gonna have to rely on my own noodle, apparently (dagnabit!)