Well-known economy analyst and internet blogger Mike Shedlock (Mish) argues in a recent articleÂ that while peter Schiff may have called a collapse in the US financial markets and economy, he dropped the ball where it matters most: with his clients’ portfolios.
I have talked with many who claim they have invested with Schiff and are down anywhere from 40% to 70% in 2008. There are many other such claims on the internet. They are entirely believable for the simple reason Schiff’s investment thesis was flat out wrong.
This has been confirmed by a variety of forum and blog comment sources on the web with one investor indicating his portfolio is down 60%Â . Another investor on Chris Martenson’s forum claims, that as of November 2008, his investments are down 40%.
Schiff was correct about point number 1 above – The US equity markets crashed. That was a very good call. Unfortunately, his investment thesis centered on shorting the dollar in a hyperinflation bet, and buying foreign equities rather than shorting US equities.
Furthermore, Schiff made no allowances for being wrong and had no exit strategy whatsoever.
What happened in 2008 was that foreign equities sold off much harder than US equities, and a strengthening US dollar compounded the situation.
In other words, Schiff failed where it matters most: Peter Schiff did not protect his client’s assets. Let’s take a look how, and more importantly why, starting with charts of various foreign indices.
Mish explains that Mr. Schiff’s theories on decoupling and hyperinflation of the US dollar simply did not pan out as Schiff had predicted, though Schiff continues to maintain, in recent interviews, that this will be the case in the future.
Schiff asks “But what if it [the US dollar] keeps falling? What if it’s down 5% next week? And 5% the week after that? And then what if it drops 10%? ….”
That was quite some rant, enough to scare many who listened. Schiff is indeed very charismatic.
He never bothers to ask, “What if it doesn’t?” The answer was not so pretty for his clients. The simple fact of the matter is Schiff was wrong where it mattered.
Mish suggests that if hyprinflation were coming, that Schiff should be recommending that his clients buy houses. I had a similar theory in my recent article Brief Thoughts on The Real Estate Market.
Here are 12 reasons Mish gives for why Peter Schiff was wrong:
Wrong about hyperinflation
Wrong about the dollar
Wrong about commodities except for gold
Wrong about foreign currencies except for the Yen
Wrong about foreign equities
Wrong in timing
Wrong in risk management
Wrong in buy and hold thesis
Wrong on decoupling
Wrong on China
Wrong on US treasuries
Mish goes on to post a statement from a EuroPac client portfolio, showing a loss of 61% and challenges Peter Schiff to prove otherwise.
Mish has most definitely called Peter Schiff out on his recent performance in global investing. His clients seem to be down by at least 40% or so. Only time will tell how those portfolios end up. Per Schiff, these are buy and hold strategies, so 6 – 12 months proves nothing. We’ll have to see where these portfolios are in 3 – 5 years.
My feeling is, that now is precisely the time to buy into certain foreign markets like China and sectors like Commodities, Infrastructure and Mining. Prices seem to be way off their highs from mid-2008. I have a strong feeling there’s a bull market somewhere!