1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar
Source link: http://archive.mises.org/10126/why-the-meltdown-should-have-surprised-no-one/

Why the Meltdown Should Have Surprised No One

June 11, 2009 by

Peter Schiff speaking at the Austrian Scholars Conference, March 13, 2009

Peter Schiff at the Austrian Scholars Conference:

I just looked at the topic for my speech about thirty seconds ago before I walked in the door. But apparently I’m talking about why is it that people didn’t see this coming, or should people have known that this meltdown was coming.

I don’t know. Is there anyone in this room that was surprised by the economic meltdown? Does anybody think it’s over? Anybody? Raise your hand if you think it’s over.

And does anybody think that the government solutions are going to work or that they’re going to help? Is there anybody? One. All right. So, I guess there’s really no reason for me to speak here. I don’t know that I’m going to tell anybody anything they don’t know. But, if you want to indulge me, I guess I could talk about it a little bit anyway.

FULL ARTICLE (with audio and video)

{ 40 comments }

filc June 11, 2009 at 11:47 pm

This guy is great. Love it.

Anonymous June 12, 2009 at 3:04 am

I saw Peter Schiff talk and he is an masterful speaker. He rivals the best politicians in the oratory department. He will have a bright political career. I wouldn’t be surprised if he ran for president in 2016.

I would like to see him draw more attention to fractional reserve banking. I don’t think I’ve heard a single CNBC commentator criticize fractional reserve banking throughout this recession. The ultimate cause of this crisis was fractional reserve banking. Mr. Schiff should use his status to reveal the horrors of fractional reserve banking to the public.

flix June 12, 2009 at 3:42 am

fractional reserve is the ultimate cause of bubbles… but without the Fed as a lender of last resort it cannot be sustained… politically it is easier to attack the head of the beast. Talking theory, “system” is for people who can read.. when dealing with the TV-literate you have to use a catchy narrative… and Wizard of Oz/Emperor’s new clothes works pretty well

Stu June 12, 2009 at 7:49 am

A Return To Logic: A Critique of The Krugman Lecture Series

Stu June 12, 2009 at 7:50 am

A Return To Logic: A Critique of The Krugman Lecture Series

http://www.riskwatchdog.com/

Matt June 12, 2009 at 7:59 am

I was shocked to see him on the Daily Show with Jon Stewart and actually had to pay attention to the interview (The normal guests don’t look so highly on Free Markets) I could not believe what I was hearing. A non-left was getting praise from Stewart, and for Free Market ideas! Apparently Stewart didn’t know we have been yelling about the collapse for several years, he even played Schiff’s media reel where he is being laughed at in ’06 and ’07 that the bubble was bursting. I was impressed with a Daily Show guest for the first time in a long time.

I know its a comedy show but the show reaches a market that is important, young people, Schiff was the right man for the show. He was personable and very likable, something some of us miss when we are talking about the wrongdoings of the current economic situation.

Jake Le Master June 12, 2009 at 8:24 am

I make it a habit to search Peter on YouTube every day. I’ve been doing it for many months. Apparently he sneaked on Google Talks in April without me even knowing.
http://www.youtube.com/watch?v=tU8jCa_dKTM
I’m dumbfounded he was invited to Google.

Ryan June 12, 2009 at 9:31 am

Hopefully millions of Obama zombies viewed this.

J Cortez June 12, 2009 at 10:09 am

There’s so many good quotes and moments Schiff has had for the past few years, it’s hard to pick just one. One my favorites has to be Peter Schiff vs Mike Norman, which ended with Norman screaming at Schiff that he was “a peddler of economic disinformation” after Schiff pointed out that all of Mike’s calls for the past few years had been totally wrong.

Personally, I hope Schiff stays out of office. I think he can do more as a private citizen than a politician. Secondly, I fear he might be corrupted, not everybody will turn out be a Ron Paul.

Re: The Daily Show, all we need now is for Woods and DiLorenzo to get interviews. They might not be as well received, but it would be some interesting TV moments none the less.

Bob Stafford June 12, 2009 at 12:42 pm

Unfortunately, Schiff’s bold predictions don’t translate well for his investors.

http://globaleconomicanalysis.blogspot.com/2009/01/peter-schiff-was-wrong.html

Matt June 12, 2009 at 2:05 pm

Thanks, Bob. Obviously you haven’t seen and/or read any of Mr. Schiff’s reactions to that piece of propaganda. Essentially what Mish does is takes a snapshot of Schiff’s investment portfolio to “back up” his claim that Schiff’s investments have performed poorly.

I loved Schiff’s appearance on the Daily Show. At one point, Stewart (sarcastically) suggested companies are too big to fail. Schiff, without missing a beat, quipped, “They’re too big to bail out!”

Bob Stafford June 12, 2009 at 2:28 pm

Propaganda? Seems liked he backed up his claims quite nicely. I’d invest with him over Schiff any day. Schiff is too arrogant to ever admit that he’s wrong.

Michael A. Clem June 12, 2009 at 2:31 pm

After hearing all those comments about Schiff being like a broken clock, I’m surprised to find out just how economically knowledgeable Schiff seems to be. Perhaps the real problem is that nobody can predict just how far government will go in their own continual interference in the economy, and that political coercion in the economy is a disruption of the natural functioning of the market. As such, such disruptions are difficult to predict on an economic basis. The best we can do is predict the results of that disruption.

Jake Le Master June 12, 2009 at 2:33 pm

Yeah, Peter was sharp as a tack on The Daily Show.

After explaining to Stewart why the market should have been setting interest rates during the boom (thus, discouraging borrowing):
Stewart: “Let me play devil’s advocate…episodes of ‘Cribs’ would have been REALLY lame”
Schiff (chortling): “I guess that’s the trade-off we have to make”

S Andrews June 12, 2009 at 2:43 pm

Bob Says…” I’d invest with him over Schiff any day. Schiff is too arrogant to ever admit that he’s wrong.”

Mish was a computer engineer until the beginning of the this decade. So I would say, in terms of number of years of experience, Schiff beats Mish hands down. In terms of strategy, Mish is a trader whereas Schiff is an investor. While Mish can tout his superior record of eking out small gains over short periods of financial distress, over the longhaul, it is much better to invest in good companies that pay dividend.

With Mish’s trading strategy, he is unlikely to face a situation where his accounts are down 50% in 3 months, but he is more likely to face a situation where his performance is few points below broader market averages, where his returns are below inflation, or loses a small percentage year after year.

I personally prefer to invest rather than try to practice voodoo of trading.

I don’t have money with either of them, nor do I plan to. However, if I am forced to make a choice between the two of them, I would pick Schiff anyday over Mish.

Luke Aitken June 12, 2009 at 7:58 pm

Mish was attacking the losses of some of Peter’s clients last year, many who were heavily invested in gold, so a few were down big but what he doesn’t talk about are the previous years where Peter’s clients did very well.

Peter’s approach is for the long haul because most of us know what direction we are headed in. Commodities have rebounded and foreign markets that his company is invested in are already up more than the US stock market.

This article is old news, most of his clients that had significant losses have made most if it back, and those who got on after the bust have been doing well, Mish can go ahead and have a short-term victory but i’ll take the long-term strategy of Schiff because the fundementals support him.

Gil June 12, 2009 at 10:56 pm

If Peter Schiff investment advice is always ‘bearish’ then his advice would be no more than that of a stopped clock. And, yes, someone who’s always ‘bullish’ is a stopped clock too. However, at least ‘bulls’ are trading on a concept of growth and betterment in society whereas ‘bears’ require loss and misfortune for profit. If Peter’s doom&gloom prognosis were really true then he’d be advising a survivalist’s portfolio (guns, ammo, canned food, water bottles, bomb shelter, etc.).

Luke Aitken June 12, 2009 at 11:44 pm

Maybe you should go to his website europac.net his motto “Because there is a Bull Market Somewhere.” He’s a bull alright but not for America because of the actions of the government that will insure financial ruin for many.The U.S. is the largest squanderer of wealth in the world why would a person want to invest here, Obama has shown with his actions that contract rights don’t matter.

I guess its the nature of statists to demean those who don’t cheer for government, Mr. Schiff is “un-american” for not investing here, give me a break, blind nationalism, somebody has to win and somebody has to lose in the world of invsting right?

Listen to his show on wednesday nights, he has told people countless times to stock up on non-perishible foods, buy guns and ammo, battery’s, bottled water etc…

Jeremy June 13, 2009 at 12:59 am

Bob – And how has Schiff’s strategy performed since the Mish article? It has done better than anything else you could have done.

Most of the foreign stocks he was recommended are up 100% or more off their lows. Most of the oil trusts (which he recommended many times) are up 100% or more off their lows. The gold miners and silver miners are up 250% or more off their lows.

If you had sold off some of your gold & silver (which declined somewhat) or used some dollar reserves, both of which Peter recommended, to buy into the declines, you would be sitting pretty today.

And how has Mish’s strategy of investing in ways that benefit from a strengthening dollar (deflation) performed recently? Horribly, there has been a huge selloff in the bond markets.

It’s pretty stupid to take a short snapshot of time and use that as a reason to trust one investing strategy or another, especially when you are jumping into the absolutely most stupid strategy you could have.

Right after many of Peter’s investing strategies had their worst returns was the exact time to jump in.

If Mish had this kind of perspective, ie Peter was stupid to invest in foreign stocks when they were clearly in a bubble (and living in China, it was clear the markets here and in HK and in Singapore were all bubbles), but smart NOW (after the decline) since they were selling for much less than they were worth, I might have some respect for the guy.

But no, he recommended staying in dollars when they were most overvalued. Not very smart.

Gil June 13, 2009 at 2:29 am

Instead of guns, ammo, bottled water, etc., how about plane tickets, ship tickets, locations of people smugglers when down&out former rich and middle class American refugees seek a chance of living in China perhaps?

Nathan June 13, 2009 at 3:29 am

Chiming in here to say I read an article about the failure of Schiff investments about 6 months ago, and loaded most of my money into those investments that “failed in 2008″ Since then they have seen ~50% returns.

S Andrews June 13, 2009 at 10:25 am

Nathan,

Could you tell us what specific investments you made? What exact day you made them. I want to run the numbers to see if it is -50%. You must have picked the absolute worse of all Peter’s picks. That says a lot more about you than about Schiff.

Mike June 13, 2009 at 1:00 pm

S Andrews,

Nathan actually typed “~50%” not “-50%”. I think he meant they have seen “about 50%” not “negative 50%”

Jack June 13, 2009 at 8:50 pm

“And how has Mish’s strategy of investing in ways that benefit from a strengthening dollar (deflation) performed recently? Horribly, there has been a huge selloff in the bond markets.”

Strengthening dollar does not mean deflation. You are posting a comment on mises.org and you don’t know this? Look at the period from 1980-2000. Strengthening dollar and inflation.

Often, declining dollar and deflation go together during credit stresses because the country is that much closer to ending.

Nathan June 13, 2009 at 9:24 pm

Sorry that was supposed to be around 50%. HTE, GLD, SBLK, a few more in that flavor.

Joe June 14, 2009 at 4:02 pm

It is really amusing to see people try and defend Schiff’s investment advice. He was heavily investing in higher order capital goods sectors (basic materials, mining etc), while at the same time complaining that interest rates were artificlly low all around the world. In other words, he clearly does not understand the Mises-Hayek theory of the business cycle. The whole premise of his investment strategy is to “profit from the economic collapse” or at least preserve capital, instead his bubble stocks/sectors lead the collapse! While his macro policy reccomendations are generally right, he is unable to grasp the finer subtleties of economic science, such as value theory, the true cause of rising consumer price inflation, credit expansion/contraction, business cycle theory and how the monetary system works in general. He recklessly uses the term hyperinfaltion betraying his ignorance on the economics of this phenomena. He continues to insist on foreign stocks, commodities and gold, and continues to discourage being heavily weighted in cash. This, despite the fact that the world is in the first stages of a massive credit bust, where according to the ABCT, which Schiff claims to understand, capital goods prices will fall relative to consumer prices. In my opinion, Schiff has a very superficial understanding of economic science, (as taught by Menger, Bohm-Bawek, Mises etc), was the biggest beneficiary of the credit expansion he railed against for so many years, and now, after the crisis has hit, is too arrogant to admit he was wrong. And I know all of this first hand because I have been a client of his since 2005.

Joe

Geir June 14, 2009 at 5:32 pm

Joe,

Always good to think in critical terms, about everything, but where can you point to investment failures caused by Peter Schiff’s advice? I am not a client of his, so I am curious to hear your point of view.

As far as I can see, I think his focus on investing in capital goods, such as raw stuffs, is a result of an understanding in the Mises-Hayek business cycle theory, and not a lack thereof.

Now we have a public demanding basic consumer goods (like always, only the portfolio changes), but no-one to finance the expansion of the harvesting of the raw stuffs needed to produce them (copper, led, etc.).

Also, because faith is lacking in the worlds paper currencies, few are willing to invest in time-consuming investments in increased supply of raw stuffs to fuel the consumer demands. Hence, prices in those will rise.

Joe, please point a finger at what you are accusing Schiff of doing/saying wrong, instead of speaking in general terms.

Joe June 14, 2009 at 8:35 pm

Geir,

…”where can you point to investment failures caused by Peter Schiff’s advice? ”

Remember Schiff’s investment thesis is that by investing in foreign stocks, commodities and gold, one would “profit” from this crisis, obviously this did not happen, in fact his clients did not even manage to protect their capital. Since Schiff has made these claims, he should be held accountable for them.

“As far as I can see, I think his focus on investing in capital goods, such as raw stuffs, is a result of an understanding in the Mises-Hayek business cycle theory, and not a lack thereof.”

Here is where I respectfully disagree, Mises-Hayek were clear that the later/higher stages of production (that is to say the relatively more capital intensive projects) were the beneficiaries, if not the result, of credit expansion and artificially low rates. The lower interest rates made the margins in these sectors seem wider than they actually were, once the money flowed to the factor owners and it was spent in accordance with their time-preference, these margins would contract back to their “natural” levels, leaving behind wasted scarce capital, labour and land. This is where Schiff erred, he correctly saw that interest rates (for private credit) were artificially low, but then managed to think that, for instance mining/metals, oil and gas, and agriculture were the right investments. This despite the fact that these sectors were prime examples of higher order capital goods stages of production. Given this understanding of the Mises-Hayek theory, how could Schiff have logically maintained that rates were artificially low, but that these early stage production stages were the correct investing strategy? The answer is that his strategy was based on an “inevitable” collapse of the U.S. dollar and not on sound business cycle theory.

“Now we have a public demanding basic consumer goods (like always, only the portfolio changes), but no-one to finance the expansion of the harvesting of the raw stuffs needed to produce them (copper, led, etc.).”

The public demand for consumer goods is the result of reasserting their time preference which is higher than market interest rates would have lead us to believe during the boom. This means that the market must now reallocate scarce resources in “shorter” production processes, or less capital intensive ones at any rate, in order to satisfy the demand for consumer good in the relatively nearer future. This cannot say anything about the level of mining activity currently underway, whether their margins are still good, or whether production needs to be curtailed. Only the market processs can discover the correct allocation of resources. However, one thing is clear: resource stocks and commodity prices were exploding during the inflationary boom of the last ten years when interest rates were artificially low. Does it make sense that these same sectors will also benefit from higher interest rates and slower credit growth? In my opinion, these were areas of clear higher stage malinvesmtents.

” Also, because faith is lacking in the worlds paper currencies, few are willing to invest in time-consuming investments in increased supply of raw stuffs to fuel the consumer demands. Hence, prices in those will rise.”

Again I respectfully disagree, faith in paper currencies has not been lost. For the last 50 years at least, the public has been conditioned to accept money simply as government fiat. The West’s faith in government is extremely high and people do not see anything ecept paper as money. Regarding raw materials’ prices, the fact that there is less investment in mining today does not imply anything for the future price. The price for these commodities, just like anything else will be determined by their marginal utility, and nothing else.

“Joe, please point a finger at what you are accusing Schiff of doing/saying wrong, instead of speaking in general terms”

Schiff is very good on general macro issues, such as less government and more freedom are good and conducive to greater prosperity for society. However, in order to invest successfully, he needs to have a deeper understanding of value theory (he constantly insists that gold is “real” money with inherent value, a totally unscientific position to take). Further he must uderstand that the bust during a business cycle is a time when consumer prices will rise relative to producer/asset prices, there’s a contraction in the division of labor and money has the potential to appreciate. Thus, investing in resource stocks and commodities, as a perpetual inflation play is not based on sound economic reasoning.

flix June 15, 2009 at 5:08 am

“Further he must uderstand that the bust during a business cycle is a time when consumer prices will rise relative to producer/asset prices”

Joe,
True… but it’s pretty hard to invest directly in consumer products… the closest thing is commodities (probably why I prefer Rogers to Schiff, although I like both.) and most investors are woefully ignorant and have been for 30 years in those markets… Schiff is not rich enough to just manage his own money, so he has to be mainstream enough… ie: sell something that people are familiar with but still fits into his theses… in this case that means a combination of gold, commodity and energy stocks and average-down value investing… which is actually pretty much as good as you can get while remaining mainstream enough to sell the idea to non-pros.
I can’t know for sure, as I don’t know the man personally, but my impression is that he does know better and dumbs-down his sales pitch somewhat.

flix June 15, 2009 at 5:18 am

actually… taking a look at europacific’s web… it seems that Schiff offers his clients the Rogers Commodity Index, as well as perth mint gold and canadian oil/gas energy trusts… also Merk currency funds… all in all it looks very good from a “capital goods underperform consumer goods during the bust” perspective…. but overall his strategy is clearly geared to dollar weakness… IMHO he has a very good chance of making his clients a lot of money that way…

Matt Bombais June 15, 2009 at 9:09 am

A lot of people here are in the dark on how poor Schiff portfolios have been doing. He has basically bankrupted his clients. During this collapse his stocks were down 80-90% and many of them went bankrupt. Schiff can go on and on claiming credit for calling the collapse but at the end of the day he runs a full service brokerage and his clients were beaten mercilessly. Anyone with a correct understanding of the macro picture could not have lost this much money. Check around on google, you’ll see client statements that show an ugly picture. A million dollar account reduced to sub-200k, 100k account down to 38k etc..

Rick June 15, 2009 at 10:34 am

Some of what I read here is just flat out silly. Perfect example of people not understanding long term vs. short term investments, client ignorance, and ignorance on the observer who only wants to focus on the negative while ignoring the positive.

Also, some here should realize the difference between a Financial Advisor and a Broker.

Stephen Grossman June 15, 2009 at 10:02 pm

>[Schiff] Clinton didn’t give us a good economy, we had a bubble economy. And now the bubble has burst

What exactly was the Clinton bubble?

Jeremy June 15, 2009 at 11:28 pm

“Further he must understand that the bust during a business cycle is a time when consumer prices will rise relative to producer/asset prices, there’s a contraction in the division of labor and money has the potential to appreciate. Thus, investing in resource stocks and commodities, as a perpetual inflation play is not based on sound economic reasoning.”

There’s a big difference between precious metals miners / agriculture / oil producers and other higher order goods industries. Precious metals miners produce money, which as you admit goes up in a classical ABCT bust. Agriculture produces food, which is also something that is supposed to go up in price relative to higher level producer goods. And oil is both a consumer good and a higher level good.

So precious metal miners and agriculture are one step above consumer goods. Oil producers are both toward the bottom and top of the capital goods structure, depending on whether the oil is used for production or consumption.

And the three were the commodity producers Schiff recommended. He didn’t recommend steel mills, copper miners, or any other producer of what is definitely a higher order capital good, the industries that will be hit hardest by a classic ABCT bust.

Also, Peter has been recommending all along companies that are exposed to consumers abroad. Companies that should do better than higher order capital goods industries in the event of a bust.

When you combine this with his thesis that the dollar is unsound, because:

1) Foreigners hold tremendous amounts of dollars and won’t be willing to lend us ever greater amounts forever
2) The Federal Reserve is intent on inflating the base money supply
3) The US government is intent on spending well beyond our means for years into the future,

You get a pretty good idea for why Schiff recommended the investments he did.

Personally I think his biggest ‘mistakes’ were recommending oil producers, making a product that is partly a consumer good but mostly a higher order capital good, when oil was selling far above its long run ratio with gold, and his recommendation that you invest in Asia when China / Singapore / HK were obvious bubbles.

You say Peter doesn’t under the subjective theory of value, because most people consider paper to be real money. But remember there are some people who think real money is gold and silver, and this number of people is growing daily. Also, gold did better than almost any paper money besides the dollar in the late 2008 / early 2009 selloff, a testament to its being considered money by a significant amount of people.

But all of this is less important than another more important point: What matters the most when investing is price vs value. And the fact is that after the massive sell-off through March of this year, most of Peter’s recommendations were incredible bargains. Did the article by Mish address this point at all, or recommend that people buy into his recommendations now that many of them were selling for incredibly cheap prices?

People who did the exact opposite of what Mish implied was a good strategy are the ones who did incredibly well in the past half year. And while short term price movements don’t necessarily mean anything, they do when they are a reversion to intrinsic value.

S Andrews June 15, 2009 at 11:49 pm

Grossman: “What exactly was the Clinton bubble?

Is that a trick question?

Stephen Grossman June 17, 2009 at 6:52 am

S Andrews asks “Is that a trick question?”

No. Why do you think that? I’m learning economics and economic history.

Matt Bombais June 17, 2009 at 9:18 am

Invariably, Schiff’s biggest supporters have never invested with him. A lot harder to blindly support a guy when your portfolio has been decimated.

Jeremy, the above most definitely applies to you because if you were a Schiff client you would know that Schiff STRONGLY recommended base metals (copper, zinc, nickel) mining companies. More than a couple of these base metal companies are now bankrupt. You simply cannot have a sound understanding of ABCT and recommend base metals companies. Impossible.

Joe June 17, 2009 at 6:28 pm

“There’s a big difference between precious metals miners / agriculture / oil producers and other higher order goods industries. Precious metals miners produce money, which as you admit goes up in a classical ABCT bust. Agriculture produces food, which is also something that is supposed to go up in price relative to higher level producer goods. And oil is both a consumer good and a higher level good…..So precious metal miners and agriculture are one step above consumer goods.”

Jeremy, I disagree with your premise that precious metals are money. In fact they are clearly not a commonly accepted medium of exchange, which makes these miners anything but the equivalent of holding cash. Regarding agriculture, I go back to value theory, it is not a homogenous sector. Within the production of agricultural good there are both higher order and lower order stages. For example, the agricultural goods that a man produces from the garden in his own backyard are clearly a much lower order good than buying stock in a fertilizer company. I would also remind you that Schiff never justified his investments in the terms you are using. Instead, he claimed that miners/ag companies represented “real” assets.

“He didn’t recommend steel mills, copper miners, or any other producer of what is definitely a higher order capital good, the industries that will be hit hardest by a classic ABCT bust.”

In fact he did, base metals along with oil were a HUGE part of Schiff’s investment strategy. Again based on the idea that they were “real” assets.

“But remember there are some people who think real money is gold and silver, and this number of people is growing daily.”

A commodity becomes money in a natural “evolutionary” way, it originates as something that is valued for the utility it provides, and then based on its physical characteristics may become more and more marketable. It has nothing to do with what people believe to be “real” money, in some intellectual sense. This is what I mean by understanding value theory, gold does not HAVE to be money, it can and does make an excellent one, but economic science has nothing to say about what society will choose as its medium of exchange. It’s fascinating that gold bugs never argue that one should buy gold because one day maybe people will again choose it as a money for society. Rather, they insist that it’s “real money with inherent value”, that makes it sound a lot safer and a lot less speculative, as an investment.

“But all of this is less important than another more important point: What matters the most when investing is price vs value.”

Agreed!

“And the fact is that after the massive sell-off through March of this year, most of Peter’s recommendations were incredible bargains.”

Yes some of them were, and then again some of them went bankrupt. If you put new money to work at the lows, you have spectacular gains. My guess, however, is that most of these people are too busy congratulating themselves to sell into this rally and realize those gains.

“Did the article by Mish address this point at all, or recommend that people buy into his recommendations now that many of them were selling for incredibly cheap prices?”

This is not about who’s better or worse between Schiff or Mish. My only contention is that Peter Schiff is not an “austrian”, and apart from dropping the names of Mises and Rothbard occasionaly, he has never displayed any association with the “austrian” school, or demonstrated any understanding of its basic ideas. Schiff is in favour of free markets and liberty, which is great, but this does not make him a Misesian or an “austrian” in anyway, where it concerns economic science. For 10 years he benefited from the massive credit expansion worldwide, and after years of gains were wiped out in 3 months, he refuses to acknowledge that there were any bubbles in his investments. He is still claiming there was no oil bubble!! The reason for this is because he views commodities as “real” assets that provide a direct reflection of the Fed’s monetary policy. A very supply-side/monetarist view of inflation if you ask me. That’s the truth about why Schiff was so “right” about the economy, yet so disasterously wrong with his investment strategy, failing to protect his clients, let alone profit from the collapse.

Jeremy June 18, 2009 at 11:10 pm

Matt & Joe – I was wrong about Peter avoiding the higher order stages of production if he was recommending base metal producers all along. In watching his TV appearances and reading his books I don’t recall such recommendations, perhaps it is just selective memory working, though.

Since this seems to be the case, I’m sorry for blindly defending him and saying that he didn’t recommend companies in the higher stages of production.

I already did agree that Schiff was blind to other stock market bubbles – those in China / Singapore / HK – that have since popped.

“Jeremy, I disagree with your premise that precious metals are money. In fact they are clearly not a commonly accepted medium of exchange, which makes these miners anything but the equivalent of holding cash.”

I disagree with your premise that precious metals are not being valued as money by an ever growing amount of people. Of course, they won’t become a generally accepted medium of exchange unless we have a crack up boom. But more people are considering them a store of value these days, and I don’t think that trend is going to reverse anytime soon.

“Yes some of them were, and then again some of them went bankrupt. If you put new money to work at the lows, you have spectacular gains. My guess, however, is that most of these people are too busy congratulating themselves to sell into this rally and realize those gains.”

Some oil producers and many foreign stocks are still selling at prices that seem to be well beneath their ‘intrinsic value’. I think base metal producers are again quite overvalued.

Precious metals miners are where I get confused, because they are obviously very expensive relative to earnings at their current levels (and many of them have no earnings whatsoever thanks to hedging), but they have also tended to do extraordinarily well during highly inflationary periods in the past.

While Peter Schiff might not have an in-depth understanding of ABCT, he does constantly emphasize two ideas that are mainly confined to Austrian economics these days: Savings and production are the keys to growth, not consumption and borrowing. Also, he has driven a lot of people toward Ron Paul & Austrian economics as they look for the real reasons why we are having today’s problems.

You shouldn’t blindly listen to his (or anyone’s) recommendations, but I think he’s right that there are better values abroad today than here in the States (as is often the case), and moreover that the dollar will lose much of its value in the coming years.

hadi June 20, 2009 at 8:08 pm

so Schiff talked about the stock bubble,, the housing bubble,, but i dont see him talking about the next coming bubble? only what happened in history? does any one know what is the next one is about? it is hyperinflation? or the fall of the dollar? or hunger or what?

Comments on this entry are closed.

Previous post:

Next post: