Here is my problem with the praise being heaped on Peter Schiff. Watch the following video.Great right? No.
The problem? Here is Schiff in 2002: Schiff predicts Nasdaq 500 and Dow 4000
Now, had you listened to Peter in 2002, 2003, 2004, 2005, 2006 or even 3/4 of 2007, you lost your shirt. Had you placed bets based on Schiff’s market calls, you lost everything you wagered.
The S&P (.INX) went from 1054 in May of 2002 (the date of the interview) to 1561 in Oct. 2007, a 48% gain and the Dow (.DJI) rose 40%.
Banking stocks, the primary victim of the housing bust, JP Morgan (JPM) up 36%, Bank of America (BAC) up 41%, Wells Fargo (WFC) up 39% , Wachovia (WB) up 31% and American Express (AXP) was up 51% during that time frame (dividends excluded which would dramatically add to results).
Bottom line? Had you listen to Mr. Schiff at anytime before Oct. 2007 you lost…big. To those who did, there is little consolation in the praise being heaped on him today.
Milton Freidman said “markets can stay dislocated longer than you can stay solvent”.
For those who bet with Schiff between 2002-2007, they know the statement well.
Why is it a big deal? After all, Berkshire’s (BRK.A) Warren Buffett claims he cannot time the market and often watches share prices decline in investments(like recent investments in Goldman Sachs (GS) and GE(GE)) before a rebound. How is this any different?
For one, Warren’s loss is limited to his investment. He buys 1 share of stock “a” at $25. $25 is the most he can lose.
Now, if we listen to Peter and “short” stock “a” at 25, our loss has no limit. If it goes to $100, we lose $75. In shorting, we are only limited in our upside. If “a” goes to zero, “Schiffers” profit $25.
Buffett’s strategy is an investing one and Schiff’s is a trading and timing one.
Buffett followers can hold their shares, collect their dividend and wait for the rebound. Schiff followers collect no dividend and watched for over 5 years as their bet went wrong. How many stuck around? How many shorted into every market drop or “presumed” top over 5 years only repeatedly lose money as the market kept rising and Schiff kept pounding his message home.?
Schiff should not be getting the praise the is getting today for being “so right” after saying the same thing and being “so wrong” for the previous 5 years.
Disclosure (“none” means no position):Long GS, GE, WFC, none
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10 replies on “Being Wrong for 5 Years Makes You Right Now?”
Ironically it was Keynes who said it 30 odd years earlier!
http://en.wikiquote.org/wiki/John_Maynard_Keynes
http://www.prospect-magazine.co.uk/article_details.php?id=10476
It may be argued that Friedman is now (again quoting from the great man) a defunct economist!
I’m amazed you can put your pants on in the morning with this kind of intellect.
Schiff has done very badly this year and he has a long only fund.
He has done fantastically well over the rest of the time frame because he owns non US dollar positions and the dollar has collapsed. At the same time foreign markets exploded in a genuine bull market.
Your article could not be factually more incorrect if you tried.
sly,
to the contrary. i make no comments on his funds. could care less actually. i make a comment simply on his advice and those who may have listened to it 6 years ago.
he was dead wrong on the dow and nasdaq for a long time before he was right.. simple point of the article..
so, if he does what you say, he has got mashed the past 6 months as the dollar has risen and international markets have collapsed…
it that case, he was right then and wrong now..either way, the praise on him is misplaced
What kills me about Schiff is that he was so correct about what’s happening, yet his investment ideas (I’ve skimmed his book) seem to have offered no alpha. The Straits Times, Nikkei, and Hang Seng (his preferred foreign markets) have all done as poorly, or even worse, than a US index, and being short the dollar has been a losing trade as well.
Sorry, but I don’t think Peter said anything about “shorting” stock, or anything so risky. He adviced investing in gold, silver, things that keep or slightly increase their purchasing power (in food and commodities) over time. He also suggests investing in foreign currencies of countries he thinks have a sounder underlying economy. Regarding the current rise of the dollar, he says it’s due to “deleveraging” (people selling assets because they need liquidity) and it’s not gonna last more than a few months, maybe less. Time will tell. You say you “don’t care” about his founds, but I think you should find out what his advice is before criticizing it.
mob
peter was wrong on every count for 5 years. we cannot tell if he was right on what stocks he actually picked because it is not public..
as for now, i did say he was right now…..
that is the point of the post..
one video from 02 doesnt mean a thing… he could have changed his mind the next day. schiff has been making his clients excellent returns since the 90s when he called and avoided the tech bubble… during the whole period from 01/02 til 2008 were the years of his best performance, his returns were stellar, as was his advice…. he only became commonplace on the interview circuit around 06 in advance of the publication of his first book, which was incredibly lucid and accurate. hes got weekly columns going back years that were extremely accurate. people’s opinions can adapt with circumstances, and as a long term investor (for his clients) his worst performance has ironically (contra your article) been in the past 4-6 months, when the de-leveraging/deflation forces trumped or pre-empted the coming pressure on the dollar/bond market that he foresees. hes only right/wrong once the whole story his told. he’s not a trader, he’s a long term portfolio builder/manager who analyzes the fundamentals from a classical/austrian economic viewpoint. although he was extraordinarily competent and successful in shorting sp mortgage tranches cdos/indexes, likely a year before the climax of that meltdown, and well before most net pundits/traders caught on… hes not a trader, he manages billions for clients.
schiff was no more ‘wrong’ in that video than the predictors of deflation were wrong as the cpi rose through 2007 and commodities soared. you wrote an ill informed article, schiff’s performance/advice and approach to markets is public and well known, admit you were wrong and move on.
Sullivan, you're a truly clueless sole. It's clear you are trying to make a name for yourself by trying hard to be a 'contrarian' by going against Peter Schiff. But alas your attempt is a failed one.
For starters, kudos to Schiff for advising against the US market from 2003. Those who invested in the US market lost their shirt- it is back at its 1998 level. Quite pathetic.
Secondly, just because Schiff advised against the US market doesn't mean he wasn't investing in other markets. Emerging markets earned Schiff's clients a ton of money and collected them fat dividends- far fatter than the measly crap offered by US companies.
Thirdly, a 7 month 'bad period' for Schiff is not sufficient to label him as a bad investor. Other than from July 08 to March 09, Schiff has been making plenty of money. You clearly know nothing about investing if you think that a 7 month 'correction' in the market is a destined collapse.
And as for you point about people losing their shirts if they didn't invest in the US market from 2003, you're wrong. All the gains in the Dow and Nasdaq since 2003 are due to inflation (aka no real gain). Measures in gold or foreign currencies such as euros, the US market actually lost value from 2003 to 2007. Please recheck your facts before trying to spread false information.