Why the Meltdown Should Have Surprised No One

March 16, 2009 8:57 PM by Mises.org Updates (Archive)

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Comments (110)

Justin DuBois

Just GREAT!

Published: March 16, 2009 9:39 PM
Ryan

Try not to watch this speech by Schiff and this interview by Marc Faber back to back like I just did. (http://video.ihned.cz/c3-35695930-0V0000_d-video-cely-rozhovor-s-investorem-markem-faberem)

I wish Marc Faber received more notice here. Every time I've read his work and heard him speak his analysis seems distinctly "Austrian" and he focuses his criticism on things that most current Austrian Economists do too. Anyway, that interview of Faber is certainly worth listening to and I hope the Mises Institute could find a way to integrate Faber into the spreading of our message in the future.

Published: March 16, 2009 10:25 PM
JJ

That was an awesome speech, I listened to it on my drive today. For the most part Schiff avoided any complicated technical jargon, that a lay person like myself wouldn’t understand, and on frequent occasions went off on some humorous but enlightening tangents. This speech seemed like a logical spoken sequel to Thomas Woods book, Meltdown, in both it’s simplicity and insight.

Does anyone know if Walter Block's lecture got recorded? I missed it live because I was at work but really want to hear it. Thanks.

Published: March 16, 2009 11:22 PM
newson

notwithstanding his bearish call (all credit to him), schiff seriously erred in his strategy in recommending foreign stocks over american, in a way to avoid the disaster. he seriously underestimated the interlinking of the global financial markets.

ryan, i agree. marc faber's is an austrian-style approach (although he's eclectic on trading tactics). i used to subscribe to his newsletter.

Published: March 16, 2009 11:29 PM
Ghost

A really great speech, but I also find his emphasis on foreign stocks puzzling. It would seem increases in the money supply would cause both foreign and domestic companies to misjudge the true savings rate and invest in the development of products that will never be profitable.

His recommendation to buy gold is more understandable, but I'm not sure why gold would necessarily be immune to a bubble.

Published: March 16, 2009 11:57 PM
Tom

Newson, the point is that the disaster Schiff has in mind hasn't even happened yet.

Published: March 17, 2009 12:48 AM
HM

Fantastic speech !!!
This should be required course material for every first year economics or business school.
You may want to block access to this video to areas outside the USA. What if the Chinese watched it and they figured out they just swapped ten years of toil in sweatshops for little pieces of paper that say I.O.U. from the US government ? Paper that will soon be worthless. They might stop selling stuff to Wally World, who would have to lay off thousands, devastating the economy. Hmmm, I smell bailout.

Published: March 17, 2009 1:39 AM
newson

to tom:

Jack
I went hook line and sinker for Schiff's ' high yielding foreign equity investment strategy ' signed up and in 6 months have lost heavily (34.26%), amazingly 10 out of the 12 investments he made are substantial losers. From what I can garner my experience is not unique, yet you'd never guess from watching his pompous performances of late just how inept this self anointed guru is.
Published: August 23, 2008 7:24 PM

http://blog.mises.org/archives/008039.asp

i stand by what i said, all merit for standing up the bullish bullies on the media in the bubble era, but low marks for his investment tactics.

Published: March 17, 2009 3:22 AM
Ho Pin

I agree to Newson. I truly appreciate the big effort from Peter Schiff, he is a great Austrian. Probably, Schiff has been the one -well, perhaps second to Ron Paul- leading more people to find out what Austrian School is about. This speech is great.

Nevertheless, I find him too optimistic about some markets. I live in Europe and have strong links to some areas in Asia. The situation will be not as bad as in America, but that does not mean that it will be good. The question is to guess which investments will suffer less. Gold is the usual suspect, but it would be advisable to diversify, not as investment, but more as insurance. I strongly doubt that investing in solid Asian companies will serve as insurance. I doubt that the concept "solid business" exists at all in the current situation. I hope I am wrong.

And I don't see Europe performing better than America. Welfare state is a huge burden. And contrary to what politicians sell in here, welfare exacerbates business cycles. Yesterday, our dear Krugman –in TV prime time, amazing- simplified the situation in Spain helping the socialist Prime Minister in his crazy run to more and more “social welfare”. There is no way out. Euro is not that strong and deficits will soar.

Perhaps Schiff is trapped in his own predictions. Or perhaps he is just assuming that a bad investment in Asia will always be better that no investment –hyperinflation risks.

Published: March 17, 2009 4:15 AM
Ivan Ivanov

"i stand by what i said, all merit for standing up the bullish bullies on the media in the bubble era, but low marks for his investment tactics."
I think you're making a mistake by judging a long term strategy based on a few months of performance.

For instance I bought some gold recently, and it's down almost 20% in my local currency since I ordered it.
Do I worry? No, because I didn't buy gold to sell it a month later. I bought gold, so I didn't feel like throwing the TV out the window every time a politician was on telling what he's going to do about the crisis.
Now I have more of a "bring it on" attitude.

Published: March 17, 2009 6:51 AM
Kerry

I like Schiff's idea on some things however, a good economist sometimes does not make a good investor. Schiff is a good at speeches and writing though. Thank You for posting this, hopefully you will post more speeches from ASC.

Published: March 17, 2009 6:56 AM
Jeremy

Newson - your outlook is very short term - sure, Peter recommended some markets when they were truly overpriced. But today, the value is exactly where he says it is.

Stocks are selling much cheaper in other countries, even if you don't take into account what will happen to the dollar and the discretionary income of US consumers in the years to come. It wasn't true a year and a half ago (in fact at the time I had been trying to dissuade many of my friends to get out of China's stock market because I live in China and it was obviously a bubble), but it is today: The value is not in America, it is in foreign stocks.

Published: March 17, 2009 9:15 AM
newson

ivan ivanov says:
"I think you're making a mistake by judging a long term strategy based on a few months of performance."

when you make public pronouncements and make a living on your investment opinions, you expose yourself to scrutiny. other bearish fund managers chose cash and bonds over foreign equities and avoided heavy losses.

Published: March 17, 2009 9:38 AM
olmedo

the dollar is bound for a crash, a massive crash, there is simply no other option, there is no other way americans can pay their debts to the rest of the world.

that is, unless you expect the world to subsidize the American consumer for the rest of their lifes.

europe is not as bad, it has a balanced current account.

asia, is a net saver therefore a net creditor.

the only problem is that the world financial system is hard wired to the dollar untangling this will take some time and will be painful but it will.

peter schiff will be proved right.

olmedo

Published: March 17, 2009 10:11 AM
Ivan Ivanov

"when you make public pronouncements and make a living on your investment opinions, you expose yourself to scrutiny. other bearish fund managers chose cash and bonds over foreign equities and avoided heavy losses."
So what?
Peter Schiff and Jim Rogers said from the get go they don't care about the short term, so how does something that happened in the short term invalidate what they said, or their strategies?

Published: March 17, 2009 10:29 AM
Mashuri

The problem with Schiff is that he has no exit strategy for unpredictable events that inevitably happen. Any good investor always has one.

Published: March 17, 2009 11:59 AM
Miraj Patel

Always great to hear from Schiff

@Mashuri First of all, atleast he saw the crisis coming- can you say the same for most of the other investors, many who were bullish on real estate forever (great exit strategy that was...)? Also, Schiff does have a strategy, but it is more for the long term and that is investing in commodities and betting against the dollar. Wait a few years and see how that plays out...

Published: March 17, 2009 1:01 PM
Bill Jones

Schiff forgot an old Wall St saying "When they pull the Paddy wagon up to the whorehouse they take the good girls along with the bad". Schiff neglected to note that you need to know not just what you own but also who else owns them and WHAT THEY OWN. The hedge funds that owned the financial services crap also owned the commodities etc. When the margin calls came they sold the things that still had some value.

Published: March 17, 2009 5:09 PM
Mitch

Peter Schiff's speech is fantastic. He really goes deep into the heart of the matter but manages to tell it in plain and compelling language.

However, I find that his optimism on the rest of the world might be excessive. If the US is turning into a socialist and hyperkeynesian nation, the rest of the world already IS socialist and hyperkeynesian. Even Switzerland got out of the gold standard in 1990 and follows a 'quantitative easing policy'. Germany has accepted the keynesian recipes and hasn't managed to keep the ECB from turning into a lackey of the Fed. I don't know any countries who have more respect of property rights than the US (low as it has got) or less union power and don't run the risk of being invaded or blacklisted as a 'fiscal haven'... So if the US goes under, we all go under. And that's, I'm afraid, what market participants believe.

Published: March 17, 2009 5:09 PM
Mashuri

Miraj,

That's no excuse. Every good investor (BTW, the ones hyping real estate forever were not good) has an exit strategy. The fact that Peter has the fundamentals right makes it even more inexcusable for his investors to suffer such losses. Once it became clear that commodities and "Euro-Pac" were just as tied up in this mess, he would have been better off converting to cash and bonds and waiting for the right technical indicators to get back in. "Buy and hold" is a terrible strategy in this kind of turmoil. FWIW, iTulip got the deleveraging scenario right along with calling the commodities bubble before it blew up.

Published: March 17, 2009 7:05 PM
Chris

This was a fantastic speech!

Peter has a special ability in creating metaphors and analogies that any average Joe can understand.

That, by itself, is the mark of a great communicator.

Add in the fact that his economics is based on the Austrian School and you've got a powerful combination.

Published: March 17, 2009 9:34 PM
Jeremy

Mashuri - you really think a client that followed Peter's advice got hit more by the market than others? He was a big silver and gold kind of guy, in addition to foreign stocks. Silver and gold mostly held their value in 2008, if you had a big chunk of your money in it you would have done much better than most professional investors.

And where are the reports of all of the professional investors who recommended financials when Peter was recommending foreign stocks and gold? Why is he the only one singled out?

Another thing is this: If you look back

And one more question: Why do you think the dollar should strengthen as the US wants to borrow ever greater amounts of it abroad, and will be forced, eventually, to print the money it can't borrow?

Peter's main investment thesis remains intact, in fact it is much stronger now because of drops in prices of many of the things he recommended. That's the basis of value investing, buy things when they are cheap, not expensive. Sure, 2008 was a rough year for Peter's clients. It was for everyone. But what about the outperformance from all of the years before that?

More importantly, what about what happens when foreigners realize the dollar won't hold its value and begin to sell on mass?

And why not, now that foreign stocks are much cheaper on the whole by traditional valuation methods (value investing methods), buy the value stocks out there, which are by and large outside of America?

Published: March 17, 2009 10:01 PM
Mashuri

Jeremy,

I'm not condemning Schiff's long-term fundamental outlook. What I am criticizing is his lack of nimbleness, for lack of a better word. I can be right in the long term but still go bankrupt if I don't handle the short and medium term turmoil correctly. Peter completely missed the deleveraging phenomenon and he missed just how tied into this fiscal mess the Europeans are. The Eastern Bloc is going down and they will drag the rest of Europe with them, seriously jeopardizing the European Union and their currency in the process. To top it off, the U.K. is looking more and more like they're on the road to Iceland as well. I wouldn't touch Europe with any of my money until more of this mess sorts itself out. Asia, on the other hand, looks more likely to recover before any other region and "decouple" as Schiff predicted. The question is how much loss they will take before giving up on all the debt they loaned to the U.S. Japan has proven to be a glutten for punishment and might commit financial hara-kiri before coming to their senses but China likely won't do that. Regardless, I'm waiting for them to actually change course before I consider investing in them.

Published: March 18, 2009 12:23 PM
Jay

Newson -

I suppose you were planning on selling your foreign stocks within a year of buying them?

Or whenever your portfolio hit rock bottom?

And I also suppose you are donating 100% of any dividends you get to charity?

Yup, you should not have "invested" with Schiff. Nor should you be "investing" with anyone.

You should stick to speculating.

Published: March 18, 2009 2:12 PM
Jim

Why hasn't anyone ever told me before that property values are driven by rent values? That makes SO MUCH sense, but I've never heard it before.

Our public education system should have mentioned that at some point.

Published: March 18, 2009 2:44 PM
Luke

Thank you for some real common sense. Maybe there really is a God...

Published: March 18, 2009 3:06 PM
Nick E

Take a deep breath, and repeat after me: "No one can predict the future price of any asset with certainty." I agree with many elements of Schiff's approach, but expecting him to nail every prediction on the head at any point in time is a bit unrealistic.

Published: March 18, 2009 3:30 PM
Dan born on the 4th of July

Great speech but I wish he had addressed the issue of structure instead of focusing so much on the apllications with structure.

NEWS : We don't have a financial crisis !

We simply have a marketing challenge because I can now buy a stick of gum with allocated gold title with the click of a mourse, anywhere in the world.
Gold's historical liquidity problems have been solved. Gold money was never the problem in the past. The problem was liquidity due to a fixed peg.

Enter the age of inflormation , the new wineskin for new wine.

Published: March 18, 2009 3:47 PM
Mashuri

You guys are still missing the point. Nobody can predict everything and I don't expect Schiff to either. What I DO expect a good investor to have is an EXIT STRATEGY for when things start to turn sour. Schiff should have advised his investors to get out once certain technical landmarks got violated. Good investors pay attention to the fundamentals AND the technical indicators. For example, the commodities market 99% revealed itself as a bubble-about-to-burst once it had a parabolic spike to its high last year. Anyone with any technical knowledge knew to get out or risk getting seriously burned. For a fundamental investor like Schiff, the right thing to do is get out first and THEN try to find out what you missed in the fundamental picture.

Published: March 18, 2009 3:51 PM
Bruno T

Gotta love these investing newbies who thought stocks only went up. I guess they'll learn the hard way you can't pay someone to think for you. But let me educate some who are feeling burned.

1. Only if you invested all your money last year would you have lost that kind of money. Ever hear of dollar cost averaging? If you had been averaging in over the years in his picks you might still be up. If you had planned to average in with him over even a year you'd be ok. But you went in all the way.

2. Gold, one of the pillars of his "plan", is slightly up year over year. Few asset classes can claim that.

3. I agree foreign stocks would not have been my call. But I'm curious how you say he's "wrong" when it's been about 5 months since the wheels came off, dividends are mostly still being paid, and Schiff told you don't plan on selling anytime soon when he bought you the stocks. So what have you lost but numbers on a statement? If you need money you shouldn't have it invested in stocks anyway.

4. Schiff told you he's not a "trader" and is in for the long run. If your stocks rise 200% in the next 5 years (in real terms) will the last 5 months really matter? If he's still down then, maybe you have a point. But we don't know that yet, do we?

5. Many of the stocks he put you in will recoup 100% of your investment in 5-8 years in dividend income. The stock price is gravy after that.

6. You were unlucky and went in near a temporary top in some asset classes. Other equally clueless investors were lucky and were ready to jump in in January. They're now up considerably. Luck of the draw.

7. Schiff has been "right" since what, 2000? He's been "wrong" a whopping 2-3 months when foreign stocks fell. And since then many of them have made nice comebacks.

8. The game isn't over yet. If your time horizon for investing was 5 months you should have been in CD's with your granny. My hunch is they told you that but you may not have listened, due to the dreams of easy wealth dancing in your head. He who laughs last laughs loudest.

9. It demonstrates a profound lack of investing knowledge to think that these brokers are magicians who are never wrong about anything, and that they can predict every move the market makes. They're all wrong sometimes. Many are wrong too much. He's been wrong very little.

10. Beware of anyone who promies that he and he alone can predict the short run fluctuations in the market....for only $99/month! Schiff doesn't do this.

He's not perfect, he has his own motivations that may not be in your best interest, but wait and see how the next couple of years pan out. You might be pleasantly surprised. (if you don't bail out and go buy the US financial stocks they're pushing at many brokers)

Published: March 18, 2009 3:52 PM
MARY

Great speech. I like Schiff, he makes sense to me. He's smart, practical and funny...has anyone noticed he's really cute, too!!

Published: March 18, 2009 4:12 PM
Glen

Peter Schiff is a genius. Government just annouced (march 18th) another $750bn dollars of spending buying up bonds, just what Peter said (march 16th). Dollar fell another 3% against the Euro, just what Peter said.

He'll probably be right on hyperinflation too *unfortunately*.

Absolute genius!

Published: March 18, 2009 4:19 PM
Ed

Well, Peter Schiff certainly seemed to be surprised by the meltdown. His client portfolios have done terribly in the past year or so. As for long term strategy, not much use if you are a client of his who has lost so much of their capital.

Published: March 18, 2009 5:22 PM
Richard

I'm a former client of Euro-Pac. Peter's foreign stock pics were poor in 2008. Given the very high commission structure at Euro-Pac, I expected better due dilligence on his buys. Not only have most of his stock selections performed poorly, but Babcock and Brown Power cut it's divident to zero and now trades for a few cents a share. So much for dividend protection.

Published: March 18, 2009 5:49 PM
Richard

I'm a former client of Euro-Pac. Peter's foreign stock pics were poor in 2008. Given the very high commission structure at Euro-Pac, I expected better due dilligence on his buys. Not only have most of his stock selections performed poorly, but Babcock and Brown Power cut it's dividend to zero and now trades for a few cents a share. So much for dividend protection.

Published: March 18, 2009 5:49 PM
bbb

i bought a bunch of gold. i made some clothes with it. then i ate what i had left over. now i have none left. that stuff is so useful.

buy food. buy canned goods. buy scotch. buy cigarettes. and maybe some guns.

911 is a cover up. continue denying this and you will eat my tinfoil hat.

peter schiff the great.

ventura 2012.

Published: March 18, 2009 5:59 PM
Tom L

I laugh at all the people saying Schiff's foreign stocks were bad picks in 2008. Sure, if you were only in it for a few months.

Schiff's strategy looks at long-term trends (that's what Austrian economics does), not month-to-month nonsense. Check back in a few years and let's see if you still think Schiff was wrong.

Published: March 18, 2009 6:01 PM
Mashuri

If someone bought into Schiff's pitch a year ago and lost 50% of their portfolio, they would need to gain 100% from here just to break even. Again, what worries me is not that Peter missed the commodities bubble and the deleveraging phenomenon. It's that he stubbornly rode them all the way down rather than get out and cut his losses. That's what all the buy & hold S&P 500 Index Fund amateurs do (I used to be one...). I'm now worried that Schiff has Europe wrong and, if the collapse of Eastern Europe bankrupts many of his euro stock picks, will he and his clients hold onto them into oblivion?

Published: March 18, 2009 6:16 PM
Rob

He is the first person I have heard who actually makes sense.

The moral hazard of what has happened will be following us for a long time. Right now, all the USA makes is smoke, mirrors, and maybe chips.

Drug industry will flee now thanks to our regulation of them.

All we have in this country is lawyers making more rules to make for more work for lawyers-by laws made by lawyers in DC -and they take a cut of everything we produce. We play with numbers in our banks.No one is stopping the proliferation of lawyers and bankers and others who make their own work in a slimey way and who produce nothing. We can print all the money we want, nothing is backing it anymore.

The market may go up and down but our real wealth is in danger.

The moral hazard that has been established could rot the USA like cancer for decades now.

Let us hope our children our smarter than us.....

Published: March 18, 2009 6:38 PM
immafreeman

How about the fact that the whole system is unconstitutional and criminal. Unless you get rid of the federal reserve and confiscate their unlawfully accrued gains you are destined to be enslaved by those elite bankers. Why have fractional reserve banking? Why have money printed from thin air and paid back with taxes fron labor and legitimate business profits. When I save money from my own labor and wish to loan it out I have to compete with a bank that creates from thin air and has NOTHING to lose when it doesn't get paid back.

Published: March 18, 2009 7:58 PM
Jeremy

Bruno - Great points.

Mashuri - I get what you're saying but there was nothing guaranteeing that foreign investors would surely flee to dollars like they did. Views of the worth of a currency can turn on a dime, and based on the fundamentals and to any sane person (not many of them out there), it would seem like the dollar is a terrible bet.

Peter wasn't exposed much to Eastern Europe, although he has somewhat reservedly recommended the Euro as another currency to be in (although well behind the Swiss and several Asian currencies)

His biggest mistakes for 2008, with the benefit of hindsight + value investing knowledge, was to recommend oil trusts and the like when oil was obviously expensive relative to gold, and also to recommend continuing to invest in Singapore / Hong Kong / China stocks when they were in a clear bubble (I live in China, it was clear as day here).

His biggest mistake wasn't not recommending to sell and buy dollars. There was no guarantee that the dollar would strengthen, not when foreigners already held several trillion and seemed to be losing faith in it at the same time that the Federal Reserve was printing and congress was spending like never before.

But the fundamental picture is completely different today - foreign stocks are trading at much lower multiples than American stocks AND the dollar is artificially strong versus some Asian currencies, and probably Canada/New Zealand/Australia. The future looks bright for solid companies selling at cheap prices, especially in Asia.

Short term movements are almost always impossible to predict, I've seen nothing that contradicts this (the exception being that all bubbles burst and it usually happens after a parabolic rise, but still no one can predict very well just how parabolic the rise gets before the fall). But based on the tenets of value investing and what Austrian economics can tell us, now is not the time to be in US bonds or stocks. Especially when there are cheaper deals elsewhere.

Published: March 18, 2009 8:26 PM
Lefteris Kritikakis

For the Chinese to maintain the value of their dollar holdings, they would have to exchange their dollars with houses and factories accross the United States, with lower salaries than today's salaries. That's their only option to make any profit from the loans they gave to the U.S.

I see that already in my industry.

Published: March 18, 2009 9:23 PM
michael

"other bearish fund managers chose cash and bonds over foreign equities and avoided heavy losses"
Poking: Wasn't that poor strategy as well? They could have made a killing with shorting financials, indexes and commodities in the second half of 2008.

Actually, the bigger question is if these guys get out of bonds and US cash before it's too late.

Peter Schiff always recommended to put a third of one's wealth each into nice dividend-paying foreign stocks, precious metals, and cash.
You would have fared very well with that approach, especially if you averaged-in over a few months.

I started investing with Peter on September 30th, averaged-in 'til December, and am 8% down right now. Dividends seem to be still coming in. My gold and silver is about flat, and some short ETFs since June gave me 30% realized gain on my "cash" third in 2008.

Exit strategies are for short-term speculators, longer term investors use average-in and average-out, to save on turnover costs.

Please don't talk about "high yield stocks", as the term "high yield bonds" is marketing euphemism for high risk bonds, while high dividend yield stocks are generally less risky then stocks paying low or no dividends. Thanks.

Published: March 18, 2009 9:28 PM
Aalan

Peter was really on his game for this presentation--charming, witty, and accessible. Not at all like that when he's responding to critics.

His prediction about the falling dollar is very timely indeed. But some of his ideological anti-government ranting is just incredibly blind. The FDIC is preventing consumers from examining banks properly? And private markets would provide good ratings if the SEC just got out of the way? Good grief, even Warren Buffet and other financial specialists have been flummoxed by the mess of unregulated and off-balance-sheet exposure of banks; what is an individual depositor or investor going to do? Use the mattress, that's what.

And yes, I too invested with Schiff and lost a bundle. But I'm not mad about that; the stuff I invested everywhere else lost just almost as much. He should be a teacher, perhaps, or even a politician; not a broker.

Published: March 18, 2009 10:08 PM
cscsf

He did say the FEDS ARE GOING TO START BUYING BONDS.....today, 3/18/09, Bernake announced just that and Euro went up from 1.29 to 1.34 and gold went up $50.00

Published: March 18, 2009 10:13 PM
Sqwark

Great speech and has got to be one of the best for the investment strategist trying to sort the hay from the chaff in the current environment. The market downunder seems to be reversing and the USD is stressing, gold is boiling and so the probability for increasing US inflation is high. That is my take on Peter's position and as a portfolio manager I see it now beginning to happen as it follows on from his previous accurate predictions on the US economy. My view is that investing is about probabilities and Peter Schiff gives the full story; explaining the probabilities lucidly and truthfully and following up with logical insightful strategy recommendations. Further, as a long-term value investor if you crystallise losses by bailing out in the short term of course you will lose and then you will need a scapegoat to justify your myopia.

Published: March 18, 2009 10:46 PM
sam

Mashuri,

you can't go bankrupt in the short term, unless of course all Schiff's picks go bankrupt, since there's no leverage and hence it doesn't matter if prices go down in the short term.

Yes you would have been much better off to have waited it out and bought after the prices collapsed - but what if they US dollar had devalued instead of shot up? If you buy the underlying thesis then the US dollar is toast and now seems a great time to head for the exits.

Schiff got the short term wrong, there's no way he expected a fall of this magnitude outside the US - but he did expect a deleveraging driven drop or at least he said he did a few years ago...

Published: March 18, 2009 11:34 PM
Brian Macker

"Schiff got the short term wrong"

He only got the short term wrong if he was giving short term advice. He in fact is not controlling anyone's funds. He's an adviser not a manager. So he is not in the position to lose other peoples money.

I haven't heard enough evidence to conclude that he advised people to invest short term in precious metals. Do you think he advised someone who was planning to buy a car, or to pay their rent to park it in precious metals for the short term when they would be forced to sell on fluctuations? I don't think so.

Short term trading isn't investing. It's speculating. His recommendations sound like investment advice to me. At least from the outside. I don't receive his newsletter.

Published: March 18, 2009 11:45 PM
cs

US = DONE. Toast. Ya borrowed yourselves into oblivion. All of you did it. As shocking as this is to all of you, when you borrow and can't repay, two things always happen. 1. Your creditors stop lending you cash. 2. Your lifestyle changes for the worse, because it should not have been so good in the first place, as it was funded all on borrowed funds.
Very simple stuff....YOUR DONE SPENDING THE WORLDS CASH RESERVES.

Published: March 19, 2009 1:10 AM
Alan K.

What's not clear from his speech is if hyper-inflation is likely, wouldn't it be smart to buy real estate as a hedge against inflation especially in markets like in NYC (outer boroughs) where rents are strong?

Published: March 19, 2009 1:22 AM
Jareth

Powerful.

My ears on Tuesday had to grind through a presentation about the "stimulus." I grilled this guy afterwards about transparency. Note that this guy works at the Fed in one of the regional banks. He actually agreed with me and was critical with decisions that have been made, though he is still stuck obviously in the central banking paradigm. I went further and asked him about the Fed's revenues via interest and how the Fed profits off money they give to the government when it's the government's money to begin with! Guess what he said? No comment. I'm not allowed to comment on that.

Published: March 19, 2009 5:57 AM
Xavier

The question Peter never asked is a crucial one: How did America change from mostly industrial, goods exporting country into mostly importing, goods consuming country? It was not because of anything that FED or government did. Maybe it was because the government allowed something that should not be allowed. This structure change is the result of the "blessings" of global economy that benefits the owners of the companies, but destroys the wealth of the public. It creates uncompetitive environment that empoverishes the people in the post-industrialized nations and subsequently kills the production in the producing nations that was built on selling to them.
Can Peter explain how Americans are going to sell their cars to the Chinese with the difference in manpower cost in both countries (not mentioning the Chinese administrative protection of their market)? And, related, how is the market going to move the people from the service sector to the industrial production without inflating the purchasing power of the dollar?

Published: March 19, 2009 6:43 AM
JPM

Ed post- Absolutely got it right about Schiff. "His client portfolios have done terribly in the past year or so. As for long term strategy, not much use if you are a client of his who has lost so much of their capital."

Granted Schiff called the crisis but recommendations of foreign equities were hit just as bad. What solice is there in that? And now he has amnesia about that point.

Robert Prechter of Elliott Wave called it right (especially deflation) AND made correct recommendations...ie: Cash is king.
Schiff cost former followers like me a LOT of money.

Published: March 19, 2009 7:17 AM
newson

to jpm:
yes, prechter was right about the melt-down, but if you'd shorted all the way up to the top which he's been calling for years, you too would be broke. and i seem to recall his call that gold was headed for $250....
elliott wave theory: waves in waves in waves...pass the phenergan, please.
there's no deflation, only deleveraging. look at the tms chart.

i respect gurus who 'fess up.

Published: March 19, 2009 7:58 AM
newson

to xavier:
i wouldn't be so kind on the fed. bear in mind all trade is guided by prices. if a country like the usa is able to grow its money supply enormously, whilst not facing seriously competition until recently as the premium reserve currency, it's possible that the usd has been overvalued for years.

add to this the chinese mercantilist preference for an undervalued yuan, and you have a sure-fire recipe for exporting a large amount of us manufacturing. massive and prolonged mispricing of currencies never occured under the (imperfect) gold standard.

Published: March 19, 2009 8:08 AM
fundamentalist

Xavier: “How did America change from mostly industrial, goods exporting country into mostly importing, goods consuming country? It was not because of anything that FED or government did.”

The feds played a big role in it. Check out the chapters in Dr. Reisman’s book “Capitalism” on inflation. You’ll find that inflation destroys capital accumulation by 1) defeating the purpose of depreciation (the amount depreciated never keeps up with inflation so it can’t replace equipment) and 2) taxing inflated profits instead of real profits. Inflation leaves manufacturers with less money to invest in new equipment. In addition, taxes and regulation, as well as unions, increase the costs of manufacturing. The state and the fed have done everything in their power to destroy manufacturing in the US.

Published: March 19, 2009 8:38 AM
John Saputo

I have read many of your comments but I think some of you are reading far less into what Peter is saying.
The so called meltdown has started but the floor has not crashed as yet. It is not as important to make huge profits on your money as it is to retain the value of your money on Euro and Asian stocks. When you get paid in foriegn currencies that are not so debt laden the value even in a flat stock will double or more your US currencies when hyperinflation hits and make no mistake it is coming! I look at gold and silver and if I am fortunate enough to buy currencies from a country like Australia or New Zealand and if I buy good solid stocks that are paying dividends and not losing huge amounts of value over the next five years I will feel like I am winning. But winning will be very sad for those not prepared. I am watching at the end of the month and first week of April the G20 meeting outcome very closely and I hope no surprise hits us regarding a "global agreement to re-valuate all currencies". The new world disorder is upon us!
John
Jacksonville, FL

Published: March 19, 2009 9:03 AM
Rob

For those of you who say Peter gave bad investment advice but can see that he is right about the collapse all I can tell you is this.

You saw on the MSM how everyone laughed at Peter for YEARS said he was wrong and kept "proving" it with how much the stock market moved up when he said it would collapse.

You people are now THOSE MSM takling heads saying "see Peter does not know anything, the dollar is climbing and his recomendations are falling." The talking heads kept on worrying about the day to day market, but Peter keep his eye on the Big Picture and the LONG term.

He was right then and I believe that he is right now.

Remember 90% of people thought that the high market was real and only pulled out AFTER it was obvious what was coming.

Right now those same 90% are still following the herd off the cliff. When it becomes obvious that Peter is right it will be TOO LATE.

At that point the people who were buying these stocks while 90% were selling will make out like a bandit. But the herd will loose everything.

The BIG PICTURE Long Term truth is what is important not the insane fluctuations of an irrational market, which is what we have now.

I knew Peter was right but I also knew he would be early. I bought 100% gold and silver and held off on the stocks for that reason.

But I see a bottom in Asia coming soon and a little later Europe will climb as we fall into further chaos.
I will be buying with both hands very soon.

Remember everyone KNEW Peter was wrong before, just like you do now, I would not want to take that bet.

Published: March 19, 2009 9:24 AM
hungry

Who needs GOV Money , the States can call an outside source for their lending needs , there are a ton of ETF funds out there fired up and ready to go , to compete with the GOv and all their funny money , Got Gold , look to it as your stimulus lender of the 21st Century !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Published: March 19, 2009 10:05 AM
sam

Brian Macker,

when I wrote he got the short term wrong, I didn't mean from a investment advice point of view. I meant from a prediction point of view. He expected a temporary blip downward in foreign markets, but nowhere near as large as this.

His investment advice was long term, and I suspect he's got that mostly right - the US dollar can't stay high as the Fed prints money like crazy and the government borrows like crazy.

Published: March 19, 2009 11:09 AM
jrj90620

Great common sense commentary.Didn't even get seasick with his constant swaying on the boat.Next time do the speech on firm ground.

Published: March 19, 2009 12:51 PM
John

So Peter's recommendations of foreign stocks, commodities and precious metals sold off with every other asset class. Shocking. Of course many of those asset classes have seen spectacular rebounds in the last few months. Many precious metal stocks for example are up 100% or more.

As others have pointed out, the real crash is still coming and that is the crash of the dollar. And when that day comes, Peter's investment theme will be rewarded. As Peter says, he's not playing to be ahead in the first quarter, he's playing to be ahead at the end of the game.

Published: March 19, 2009 3:05 PM
Tom U

Xavier:

Re: "Can Peter explain how Americans are going to sell their cars to the Chinese with the difference in manpower cost in both countries (not mentioning the Chinese administrative protection of their market)?"

Simple. Soon the USD will decline in relative value due to all the reasons already pointed out. The standards of living between US and China will narrow significantly. US car makers would have gone bankrupt and new smaller makers will come in to replace them. Using US vastly superior auto technology, US will be able to design and make enough higher-end autos for the Chinese car market to reap a profit. Buick made in China is a hot seller in China you know. Can this be 'outsourced' back to America? This can happen. But will it happen? Probably not. Chinese government trade policy will make sure this never happen. While America turned free trade into stupid trade, the Chinese don't do dumb trade, period.

Published: March 19, 2009 3:35 PM
Mashuri

You guys do understand that the ticking time bomb called Eastern Europe hasn't really exploded yet and how deep Western Europe is in it, right?

http://news.goldseek.com/GoldSeek/1236193200.php

Austria, Britain, Italy, Greece and Spain are all in serious trouble and will bring the more fiscally responsible countries (like Germany) down with them. Couple that with the new wave of commercial/construction real estate and consumer credit defaults that will hit all financials this year and we'll realize that the previous down legs were only warmups. Why anyone would choose to expose their capital to long-term bullish calls on ANY stock or bond worldwide is beyond me. The only thing I'm sitting on is my physical gold bullion stash. All other investments I have are reevaluated daily -- and I try to respond to them by what the market is doing, not what it should be doing. To those of you that call my behavior speculative, I counter that, in today's unprecedented turmoil, it's less speculative than any non-physical-precious-metal, long-term bullish "buy & hold" strategy. You guys (and Schiff) have the macro fundamentals right already. Arm yourself with some education on technicals (and emotional detachment -- easier said than done, I know...) and you will find yourself getting a better handle on the short and medium term behavior.

Published: March 19, 2009 5:56 PM
Gerald Brells

Have you noticed how difficult it is to get information on the foreign companies that Peter has recommended? Try to find a pe or earnings or anything else about his companies on the internet and you will find almost nothing.Does Peter get more information than his customers? My account went from 50000 to 23000 in less than a year.Also all of the dividends have nearly disappeared.
GKB dentist

Published: March 19, 2009 6:09 PM
Andrew

Has anyone got a transcript(or the link to it)of Peter Schiff's speech on 'Why the Meltdown Should Have Surprised No One'? The net speed in my citi is slow to watch the youtube version.
Thank you.
Rgds.

Published: March 20, 2009 8:43 AM
Steven

I like the Austrian school phylosophy but to pursue free market to the extremes will likely to bring upon too high a human cost that a civil society are willing to bear.

For example, the natural law of selection don't really care if 10million disable people perishes as long as the 290 million rest will be much much better off.

On the other hand, lefty wants the 10 million to live a decent standard of living even if the rest of the 290 million will be far worse off.

We need to strike a balance. 75% Austrian, 25% Democrat style government may be a solution. To the extremes, neither works.

Published: March 20, 2009 12:14 PM
C. Evans

Steven,
If you really think that humanity is so cruel as to allow its helpless members to perish, then how would creating a government which comprises these same callous individuals make life better? Seems to me if humanity is that corrupt, we're doomed with or without a government, but at least without a government the decline will be slower.

I would also suggest should study more Austrian philosophy before you comment on this sight. There is no middle ground between freedom and socialism. As Mises pointed out in his essay Middle of the Road Policy Leads to Socialism, every government intervention leads to unintended consequences which the government deems worse than the problem it is trying to solve. The goverment intervenes again which leads to more unintended consequences which then leads to more government intervention. The cycle continues until the economy becomes socialist. If you have a rebuttal of Mises argument, then post it.

Published: March 20, 2009 12:23 PM
victorp

Alan K.
Real estate for rent is no good because if you have read Adam Smith you would notice that this is not a productive asset as the tenant need a job (source of income) to make money to pay you. So residential real estate, even if it look like an asset, is not.

victor

Published: March 20, 2009 2:28 PM
D. Mac

So what I don't exactly understand, is how are foreign markets ever going to benefit if, and when, the the U.S. Economy collapses under the burgeoning weight of its service obligations for that debt?

For if any benefit were to be reaped, those countries would first have to completely divest themselves of the dollar. But then exchange it for what?

Perhaps if the U.A.E. and the Saudis have their newest Bank up and going after their recent 1.3 Billion in real Gold purchase, I could theoretically see a global flight to their currency as its actually backed by something other than SUV's, Big Screen T.V.'s and defaulting homeowners.

Schiff has, as part of his investment strategies for his clients, the Perth Mint? This is nothing more than holding a foreign futures contract. And then only a benefit if you decide to flee the U.S. due to the fact that many of your investment assets would be stuck here. But seriously, the Perth Mint? Yeeeahh. And furthermore like the government of Australia wouldn't just lock down any possibilities of financial flight should the U.S. dollar crash in a feeble attempt to avoid the same fate. Nothing against Schiff but good luck with that financial stratagem going long or short. Its just better to buy the real thing here and now. Paper is always going to be just paper, and when Rome is burning, I'll stick with the less flammable.

While I completely agree with his logic and reasoning as to how we got into this mess. I can't say he gives a complete picture on how exactly one can avoid these ills when they in fact will spill way beyond our currency's borders given the inexorable financial ties; and thus, the unquantifiable entanglements with other world currencies. Not to mention factoring in the inherent complexities of an ensuing civil unraveling globally should that happen.

The very best way for bloodless revolution to ensue and to thus perpetuate the change necessary in my humble view is to simply switch to the very end game currency now; that being, Beans, Bullets, Gold and Silver. After all, if those that decree our money is valuable because they say it is, were to suddenly realize they have no clothes, how or who could stop it?

The "Federal Reserve" is a private consortium of banks that have perpetuated the lie that Debt, is really money. It would be a bloodless revolution should every single working man, or woman, one day just decide they wanted Gold or Silver for their daily wages instead. Sure the Government could outlaw Gold or Silver but if nobody wanted their phony money, where would their power be then?

Published: March 20, 2009 4:14 PM
Rich

Schiff is correct - everyone should feel it. I have been saying for years -- "What does anyone do ?. In other words - I looked at my neighbors - stock broker, banker, real estate agent, insurance, lawyer -- all service sector fluff. No real wealth creation - myself included (safety inspection company). The only one who made something of value was a high end home builder. All of the other stuff is parasitic fluff - shifting $$ - no wealth creation. Good for a time but in the end - it will all go away. Now I live in an area w/ a large Gov't Army base - we may escape for a time with the superficial influx of Gov't cash. But the market will, in the end, level the playing field - And the hangover will be painful. --- Rich

Published: March 20, 2009 6:02 PM
akira

Thank you for inviting Peter to speak and posting this video to the web. Why can't we get a genius like Peter to come in and level with the rest of the US and fix things before we're forced to live through a total disaster??? oh well, another video to play in a couple of years and show people that there were people who knew the problem and the non solutions that were being touted by the Obama deception!

Published: March 20, 2009 8:29 PM
snoopyjc

For all of you that are complaining about Schiff's stock picks - I just looked at my EuroPac account, which I opened on 11/17/08 and saw:

Gold - up 28.8%

Anhui Conch Cement - up 19% (since 3/10/09)

China Life - up 6.3%

Skyworth - up 68.4%

TeliaSonera - down 3% (I'm trading this one in for Crescent Point)

Vitasoy - up 1.1% (since 3/9/09)

So, I don't know what everybody is complaining about!!
--joe

Published: March 21, 2009 12:41 AM
Steven

C Evans -

It is ridiculous to suggest that government action always lead to the society to be worse off. Some (probably a majority of it) actions probably lead the society to be worse, but some obviously does not. Even Milton Friedman etc does not exactly thing education should be wholely and solely run by private enterprises. Defence, police forces are unlikely to be better run by private enterprises. Small government does not equate NO government.

If there is a time machine, it would be nice to send you back to the 16th century american where there was very little government and let you be there with just a tiny bits of gold.

The key rebuttal against government intervention is that government does not have enough information (as provided by free market price signal) to make the right choice. Even if government does not have the information and simply stab in the black, probability dictates that they got to get some of those right.

There are also issues when private monopolistic enterprises grow so big that it behaves like government (set prices as tax, eliminate competitors through use of force). I don't suppose that you also want anti trust legislation to be completely scrapped so that you can pay a bit more for the copy of windows on your machine and if you ever infringe the license, to have privately hired Microsoft police come knocking at your door ?

Very few things works when going to the extreme. If you believe otherwise, I suggest that you go to your local library and read up as many history book as you can.

Published: March 21, 2009 8:40 AM
Lawrence

Peter has a solid grasp of the fundamentals and is a great communicator. he was also spotting the fundamentals early on even though as another poster correctly says, we have only just got started on this road to ruin. This whole fiasco is about to turn a lot nastier and the only risk is that as before people dont quite believe the end prognosis and get prepared. There is only one way this can all end and that is with a huge collapse in our living standards along with all the social unrest which comes with it. Anyone trying to dabble in the markets these days are plain fools. Start trying to preserve whatever wealthyou have with physical gold and silver.

Published: March 21, 2009 11:34 AM
Lee C

Great discussion great video!

I'd love to stay and add some value here but I have to run.

Just want to say I'm glad I was lead here.

All the Best, Lee

Published: March 21, 2009 1:31 PM
Bill

I have a minor in economics and have studied several market crashes. There are many correlations that this downturn has with past crashes - over expansion, over leverage, sudden inability of investment banks and trusts to sell bonds or equities related to the preferred industry of choice in which to speculate. In this case 2008 was housing/homes. In 1873 it was the US Railroad industry, In the 1990s it was the Internet Bubble, they're all the same. Had I studied systems theory related to economic functioning I would have seen this coming. LIG Capital Management in Oklahoma City saw it and moved to cash in 2007. They pulled completely out of the markets for their clients. I bet those clients rewarded LIG handsomely...I certainly would have.

Published: March 21, 2009 1:48 PM
Schiff2012

Thanks to Peter, I bought a stock in december 2008, and as of today March 21st, I'm up 49%. Anybody want to guess what it focuses on or what country its in? Anybody want to guess what currency or country it's NOT in? (oh- my 'exit' strategy is called a trailing stop-loss order)

Peter Schiff now knows what NOAH went through. People don't like to hear that they are WRONG...let alone that YOU are right. It's part of being a fool, they cant help it.

Keep up the good fight Peter and if you goto my site, I'm putting up a dvd rip of this 'sermon' for download so you can burn to a disk and show a friend on their T.V.

Published: March 21, 2009 1:59 PM
May

Peter can easily put all the blames on the government for this time, how about the big depression? Back then, there were not Freddie or Fannie, not FDIC, no social security. Who does he blame for that disaster.

How can he assume that without FDIC, people would be more cautious on their deposit? Government never, ever guaranteed people's house price would go up forever, people still jumped in.

Just as insufficient as the government is in handling the economy, free market is an illusion also. Because this free market is no magic but the collective action of uninformed, stupid, and greedy people. How stupid individuals will come together to run a magical, never-wrong free market economy?

Published: March 21, 2009 2:26 PM
tjmmz9843

I am a big fan of Schiff's. He is a really great teacher and speaker.

I'm such a big fan that I invested with his firm several weeks ago. The Mish article was making the rounds, so I knew the stories about people who lost 60% or more with Schiff because he invested them in foreign equities and commodities back at the dollar-height of those bubbles. But I figured, we've had massive corrections, and the dollar is riding high-ish... what could go wrong?

Well, I'm down around 15%. In 4-6 weeks. My Euro-Pacific broker picked 11 investments for me and 9 are down. He put me in a couple of Canadian oil trusts just before they announced dividend cuts. I thought I was paying him his 3% commission to know about stuff like that and steer me clear.

I understand about long-term investing. But in the last 4-6 weeks, the Hang Seng and FTSE indexes are *not* down. (They dipped, at which point I was down -25% at E-P. They came back up, bringing me to -15%.) In other words, the indexes are beating my E-P broker, out of the gate. I could be doing better if I'd gone with foreign index funds, like I'd originally planned.

So my advice is, listen to Peter Schiff, but don't invest with his firm. If you want to move money into foreign stocks or commodities, open a Vanguard account and pick regional index funds, country and/or sector ETFs.

I'm not going to pull out of E-P, but I'm not going to put any more money there unless I can get a highly recommended broker. I gather that some E-P brokers are better than others. If anyone can recommend their E-P broker, please let me know the name.

Published: March 21, 2009 4:39 PM
tjmmz9843

# snoopyjc - For all of you that are complaining about Schiff's stock picks...

Great, joe! So who is your E-P broker? Mine put me in Skyworth and that is just about the only one he picked that is up. He didn't pick the other names you mentioned.

Published: March 21, 2009 4:53 PM
Alex

In principle I agree with Peter’s logic but one thing missing is political situation we are in. If as advocated by Peter we should bankrupt all companies being currently bailed out this could bring unemployment to 20-30 million. At these rates I would not be surprised to see social turmoil and ultimately collapse of capitalistic system. The government is not talking about it but I’m sure it’s one of the major worries. We have to remember that China is still communist country.

Published: March 21, 2009 6:39 PM
John Young

What Peter is saying, that we are headed for an economic disaster that is unprecedented - I believe whole-heartedly. But this might only be the tip of the iceberg. Economic problems on this scale usually sponsor political difficulties and cause even wars. That is what I am most concerned about. If the unthinkable happens the economic problems will look like a banana cream pie!

Thank you Peter for the warning.

John

Published: March 21, 2009 8:03 PM
Gil

"You saw on the MSM how everyone laughed at Peter for YEARS said he was wrong and kept "proving" it with how much the stock market moved up when he said it would collapse." - Rob.

If a prophet keeps declaring doom&gloom will occur this year for years on end - is he enlightened or just plain persistent knowing one year will be bad every now and then? I'm sure the baby boomers who bought a bomb shelter and spent years outfitting it might still yet get their money's worth, but would they be considered 'wise' investors too?

"If as advocated by Peter we should bankrupt all companies being currently bailed out this could bring unemployment to 20-30 million. At these rates I would not be surprised to see social turmoil and ultimately collapse of capitalistic system." - Alex

How many here would like social turmoil if it meant people had to start from scratch but it did allow the old mixed economy to die out and allow a primordial free-market capitalist system to emerge?

Published: March 21, 2009 9:21 PM
Robert

You people are all fools for believing in this garbage.
Peter Schiff's forecasts are about as usless as my own forecats. Absolutely no one can forecast the future. Peter Schiff makes a living by selling his worthless newsletter to "suckers" who are dumb enough to buy it. Schiff is no different than a used car salesman.

Published: March 22, 2009 5:59 PM
Tom

So"schiff seriously erred in his strategy in recommending foreign stocks over american"?
Wait-for-it!The-last-two-weeks-emerging-stocks-rose-20%.Wait-for-it!

Published: March 22, 2009 10:09 PM
DanielinOhio

Both Peter Schiff and Jim Rogers point out that they are not traders. They do not try to time the markets. They look at the longterm trends and invest accordingly. Their theory is that it is better to move too early rather than too late. Longterm that seems to work. There will be a lot of those in bonds/cash that will be caught off guar and will lose very big. If those of you who want to trade in and out of stocks etc. then you should not be following Peter Schiff or Jim Rogers. Buyer beware!

Published: March 23, 2009 11:09 AM
DanielinOhio

I have not found anyone in the investment community who called this massive worldwide deleveraging that is taking place. The main reason being that nobody knows the amount and extent of the derivatives market since most of it is exempt from reporting courtesy of government. The Hedge Funds and some of the brokerages are exempt from regular accounting standards. HMMM... I wonder why?!

Published: March 23, 2009 11:18 AM
DanielinOhio

Steven,
You could not be more wrong in every point. Governments make monopolies possible. There are more restrictions by local State and the Federal government to prevent individuals from starting and succeeding in a business than could ever be implemented by businesses. This makes it possible for the large corporations to maintain their market positions. The current Bailout is nothing more than giving privileged Wallstreet Banks free money to buy up smaller banks. They are conslidating the banking industry courtesy of Congress and the Fed. Government always gets corrupted due to wealth and power. That is why the US is in such a bad position economically and financially. Those running government and corporations are totally corrupt. If we had an honset monetary system and individulas could keep what they earn there would be little need for all of the welfare programs for individuals and corporations. Remember that the most evil and corrupt people gravitate towards positions of power. Only governments have the ability to commit genocide. Only governments can ensure a systematic raping of the people both financially and freedom wise. Socilalism/Communism/Fascism all lead to nothing but massive misery for the maximum number of human beings. Allowing others to decide how much you can earn/keep what you earn is bad enough. But they also get total control as to where your paycheck is spent. This is despotism not freedom.

Published: March 23, 2009 1:41 PM
Doni Tamblyn

So unregulated corporations would NOT seek to form monopolies? What corporate activities have led you to such a sanguine opinion of their social conscience?

It has long been my observation that the business model that virtually every corporation tends toward is “the company store” scenario of the coal corporations in the early 20th Century. I’m sure you know all about this: Trading at these stores was compulsory for the miners, using “currency” (scrip) issued by the coal corporations themselves. Not too surprisingly, prices at these stores were far higher than those charged by independent retailers. Store-keeping coal operators could actually undersell the market by cutting the price of coal below cost and making up their operating losses out of company-store receipts -- one Ohio coal operator worked two mines for thirteen months and made a profit of only $287. During the same period his store earned him a net profit of $22,000!

Debt-peonage is the ideal business model, if you look only at the numbers, which corporations, of course, tend to do. I don't recall the name of the humanistic businessman in the last century who commented that this was a far better system than slavery, because slaves didn't pay you for the privilege of working for you.

Interestingly, this corporate tendency does not take place because corporations are inherently “evil,” but because their structure has nothing to do with morality. They are structured solely to make profit -- to be profit-making machines, if you will. It’s like the way a shark is structured to eat anything that moves. You don’t blame the shark for this -- indeed the shark performs an important ecological function. But you also don’t let sharks swim around in your kids’ wading pool. You acknowledge those tendencies of the shark that are dangerous to you, and act appropriately. This is what government regulation is *supposed* to be about.

I cannot understand how this very necessary regulation is so reviled here in the US. To cry “socialism” when governments “interfere” with corporate activities is quite ridiculous. Would any of us really like to have no socialism? Would you enjoy building your own bridges, roads, and water and power supplies, while educating your own children, policing your own plot of land, and maintaining your own medical facilities? Any time people form communities, you have socialism. Socialism is in no way synonymous with oppression, and I wish people would stop this sloppy thinking once and for all.

Governments “make monopolies possible,” as you say, when they are controlled by corporations, which they currently are. And they need not be. For a brief while at the beginning of US history, they were not. Only over the past century have we come to say that “the business of America is business.” Well, possibly it’s time to rethink that. When I lived in Canada for 20 years, it was harder to get rich, but frankly my quality of life in that more socialistic country was much higher. How long will we keep chewing on this meatless bone?

Published: March 24, 2009 8:00 AM
Zack4

I'm curious about what may happen to my income. My line of work is entirely dependent upon state and federal medicaid funds. If the gov't becomes starved of revenue, I would imagine these funds would be slashed deeply. Mind you, I'm not saying they shouldn't be, we have far too many people on medicaid. But it seems to me what would ordinarily be a quite secure job seems to suddenly be very insecure.

Published: March 24, 2009 9:51 AM
Brian

I'm amazed at the lectures from people who haven't invested with Schiff on how those who did invest with Schiff should not criticize him because he is "long term"

Look folks, the guy is an investing idiot. Look up the following stocks:

Sterling Mining Corp
Babcock Power
Oz Minerals
Minera Resources

These are Schiff portfolio stocks. They are basically bankrupt. So how does my "long term" investing plan include bankrupt companies trading as penny stocks? His organization is a mess. I put a sell order in and it took them over a week. I just got my 2008 tax information from them and its March (and it was revised!). When I did sell they came up with a formula that basically guarantees a bigger comission then stated by percentages. I can ellaborate but basically if its a "losing" stock they charge more. They are incompetent investors and aren't out for you. Real experiences trump what you may think about him through his speeches against the Fed. If he decides to run for office the opposition will have a field day with people who invested with him (and this is why he probably won't run).

Keep in mind folks - bankrupt companies don't pay dividends

Published: March 24, 2009 2:32 PM
Brian

As I pick up my mail today .. my 3rd tax statement for 2008 from Europac in the mail. 2nd revision I guess you would say. Incompetent. Am I to expect something after April 15th as well?

Published: March 24, 2009 2:56 PM
Mashuri

Wow, how timely for this Mises blog entry:

http://blog.mises.org/archives/009663.asp

This is what Peter missed and why Brian and many others can't wait out their losses. Bankrupt investments don't rebound.

Published: March 24, 2009 4:24 PM
michael

Brian and others,
I'm amazed at the lectures from people who have invested with Schiff and gave up after a few months, because they believed they would only go up and not one stock would turn bad!

And Brian, you forgot to point out the great dividends paid by never-going-bankrupt US companies.

On March 18, 2009 9:28 PM I wrote here:
"I started investing with Peter on September 30th, averaged-in 'til December, and am 8% down right now."
On March 20th that had turned into 6% up overall. For example I have 4 stocks down 50%, but one up 130% and another up 200%.

To me everything is moving in the right direction!

Published: March 24, 2009 5:26 PM
Brian

Michael - I'm glad you feel good about your gain you have seen in your stocks. The numerous people I know that invested in Schiff have all lost big money with him. I mentioned four stocks in my post on Schiff portfolio stocks. Of my 20 stocks, 3 were in my "conservative" portfolio. I checked on them just now. They are all still in the mud (from dollars per share to cents per share). There is no recovery on these losses. I think you are the exception rather than the rule in investing with Schiff. I've known 3 other people who had my experience as well. Based on the way he conducts business, his poor research and frankly his inflated ego I would tell anyone not to invest with this guy. If Peter Schiff truly believed in capitalism then he should be out of business as he is a failure. Many good people trusted their savings to weather an economic storm and he didn't give due diligence to protect them. And secondly now that they have been killed he goes around telling stories about how we was right. What baloney.

Published: March 24, 2009 10:06 PM
newson

the "long-term investment" is the short-term punt that went wrong. or that's how it used to be when i sold shares.

Published: March 24, 2009 10:42 PM
Doug Geologist IN VA

Absolutely Outstanding and a Fantastic Finish....I have enjoyed the ride with Peter and Jim Puplava since at least 2003...WoW!!!! they were so RIGHT!!! Get Gold and Hold real Money...DONT FORGET TO SEND THE WHITEHOUSE A TEA BAG BETWEEN APRIL 1 AND 15...I THINK IT SHOULD BECOME A HOLIDAY...TIL THEY GET IT!!!

Published: March 25, 2009 4:16 PM
Steve Davis

Like Peter's writing, this speech is a concise background on our econmic condition. One disappointing piece that I believe is a bit misleading is his assurance that foreign economies are in better shape.

Trusting this theory, I invested $100K in Euro Pacific last May in a nicely diversified portfolio of foreign investments. Today it's worth under $50K and it sounds like foregin markets are in worse shape than ours.

I wonder why peter doesn't address this issue. Hindsight is 20/20 and humility about future projections may be in order on his part.

Published: March 26, 2009 3:15 PM
Goodoldbirdie

Just wondering, why some of you (like Ryan and Newson among others) consider Marc Faber "Austrian" style or from the "Austrian school"??
He has not much in common with Austria, he was born and educated in Switzerland...! But I guess, for some people, that's the same as they might not even know the geographic difference...?
Goodoldbirdie

Published: March 27, 2009 7:10 PM
ehmoran

Marc Faber: Now there's a wonderfully honest individual. I heard an interview with him, this man is just like Soros, he's dishonest, self serving, and I wouldn't believe a word he says.

I'll try to remember what he said that made me think this way.

Published: March 27, 2009 7:14 PM
iswani

I am Chinese living in China,I read Peter Schiff's Crash Proof：How to Profit From the Coming Economic Collapse.

His prediction made sense,you see what is happening in 2008 and 2009 in America is exactly what Schiff mentioned years ago.

I think his biggest ability is in firmly realizing that there is always a bubble in any economy and industry and period of history.

And I believe many others have the same ability like Schiff,but the difference is that they didnt write a book like Schiff did before crash.

Actually in China several Chinese predicted this kind of crash many years ago,therefore you see Schiff is not a magician,it is a common sense to know that the economy will likely crash if you know there is a bubble,simple and pure.

So do not blindly believe Schiff is a God,he does right things,he does wrong things,like all of us. (dont mistake,I am huge fan of Schiff).

Some people say "Schiff is genius",some say " Schiff is scammer",this is not relevant, the most relevant thing is that,you should have your own brain.

At last,let me write a little opinion about his book Crash Proof：How to Profit From the Coming Economic Collapse:

The book generally makes sense,especially he wrote about how USA economy would go collapse due to house bubble and "consumption financed by debt",this is excellent. (although as I said earlier,this is common sense that many of us know as well,he merely wrote this out for us).

Of course I feel he is probably also not right in other things.

for example, he wrote "Chinese citizens now produce export goods from which they themselves derive no direct economic benefit. In effect, consumer goods are rationed in China so as to make them plentiful in the United States".

I think this statement is ridiculous,the reality is that Chinese people's standard of living has been improved greatly because of export. without export based model,China would have been poorer back to 20 years ago.

"consumer goods are rationed in China so as to make them plentiful in the United States",Jesus,is that the image of China in Schiff's mind is still in 20 years ago?

As far as I can remember ( I am 28),there is no such thing in China as ration,we can buy everything at whatever quantity you want as long as you have money!

Therefore,Schiff is great,but he is just like all of us.
Dont inflate him,otherwise a bubble will come,he will crash as well.

Published: April 3, 2009 1:25 AM
Jeremy

Hi Iswani,

Peter doesn't mean China literally rations goods so that Americans can have more - he just means that if China had exchanged goods for other goods instead of accumulated dollars, that the RMB would be higher and the average Chinese person's standard of living higher.

Published: April 4, 2009 2:12 AM
Alan

So much for land of opportunity. God save America.

Published: April 4, 2009 2:31 PM
ドクトリーヌヤリ過ぎた

ナースの卒業試験は開脚台で股を開き、パイパンマンコにドクターのごっつい注射を注入され空っぽになるまで受けれたら合格です。

Published: April 13, 2009 2:40 AM
ドクトリーヌヤリ過ぎた

ナースの卒業試験は開脚台で股を開き、パイパンマンコにドクターのごっつい注射を注入され空っぽになるまで受けれたら合格です。

Published: April 13, 2009 2:41 AM
Stephen Burgoyne Coulson

The problem isn't the government: the problem is the people who own the government.

Published: April 14, 2009 12:14 AM
よよよ

いいいいいよ

Published: May 11, 2009 3:53 AM
tjmmz9843

Since I knocked Schiff's investments earlier, I wanted to post a follow-up.

My Euro-Pacific account is doing a little better right now. It has gone into the black and is up about 10% from when I started it in Feb.

Given the broad recovery in foreign stock markets (up 30% in dollar terms), that is not fantastic. But it could be worse. And I am beginning to see some good dividends paid by the foreign stocks that my E-P broker put me in, which is nice.

If I could do it over again, I still would not have invested with E-P. They have no clear exit strategy, just "buy and hold forever". If I take charge and tell them to sell an investment, I believe that I still have to pay them their 3.5% commission as I get out. So they make 7% from me on each investment. As I said earlier, I could have gone with Vanguard index funds and enjoyed a bigger cut of the recent international stock recovery, as well as avoiding E-P's expensive commissions. That's why I still wish I hadn't invested with them. Having said that: it's not like my money went down the tubes; in fact, I am slightly ahead now, esp. with dividends.

Published: May 26, 2009 12:19 PM
flyingcat

Hi HM,

Unfortunately, I'm a Chinese and watched this video. It is fantastic. I have translated it into Chinese, and paste it on my blog at:
http://blog.sina.com.cn/wordteller

I'm a great admirer of Peter Schiff.

Published: January 7, 2010 6:54 AM