Peter Schiff's Euro Pacific Capital: Down 40-70% in 2008?

If you’ve been following the financial markets this year with any degree of interest, you’ve probably heard of Peter Schiff. He’s been a media favorite over the past year for calling the U.S. financial collapse and has been everywhere from CNBC to Glenn Beck to CNN to Fox to Bloomberg. I even spotted him in Newsweek a couple weeks ago being credited with calling the collapse.

In an era of rampant corruption, fraud, inept CEO’s and fund managers, Mr Schiff has been made out to be somewhat of a hero in all this. Let’s give credit where credit is due. Peter Schiff has been sounding the alarm for quite a while and while doing so was often ridiculed by the talking heads on CNBC a year ago. Much of what he’s been saying has come to pass… at least in the U.S. financial markets.

Ah, but there seems to be one small problem. According to Michael Shedlock, Peter Schiff, the President and Chief Global Strategist of Euro Pacific Capital not only didn’t profit from the financial collapse, he failed to do what every other so called professional failed to do for their clients last year. PRESERVE CAPITAL. Turns out, he was largely right on the U.S. macro picture and called a U.S. equity crash but believed global markets would not follow due to decoupling and that the dollar would continue to crash. Rather than shorting U.S. equities he shorted the dollar (with a bet on hyperinflation) and bought foreign equities and commodities.

According to some of Schiff’s own clients, portfolios invested with Schiff were down anywhere from 40 - 70% last year. Ouch. (Shedlock posted an image of an actual Schiff portfolio)

Michael Shedlock points out 12 ways Peter Schiff was wrong last year:

12 Ways Schiff Was Wrong in 2008

• 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
• Wrong on interest rates, both foreign and domestic

I’ll point out that you can’t beat up Peter Schiff for being wrong. We’re all wrong at times. Where he can’t be excused is in risk management. He has a vested interest to stick with a certain strategy because he’s written a book about it, but he couldn’t admit when he was wrong and move on. Arrogance in this business is not a recipe for market beating returns. In my opinion BEWARE of the fund manager who is all over the news outlets.

Shedlock has not ruled out that perhaps he stumbled upon the worst portfolios from Schiff and offers a challenge to clear the air: post the average returns by clients of Euro Pacific Capital on a year by year basis.

:::::::::

UPDATE:

Peter Schiff’s brother Andrew Schiff responded to the article to the Baltimore Sun’s Jay Hancock, saying that Shedlock’s piece is “primarily an attempt to attract business to his own firm (Sitka Capital Management), by bashing a much larger and better known firm. However, the strategies employed by the two firms are completely different and make a direct comparison useless.”

Andrew Schiff does acknowledge that accounts at Euro Pacific have suffered badly in 08 but the losses are exaggerated by Shedlock and that because they are a broker dealer, aren’t allowed to post returns.

Comments

[Oso Velo:]

Staying in cash insures a loss of 5-15% per year because of (under-reported) inflation. That's a strategy?

Jan 27 07:29 AM

[stats:]

"Staying in cash insures a loss of 5-15% per year because of (under-reported) inflation. That's a strategy?"

In this market, yes!

Jan 27 08:35 AM

[Jim Hawthorne:]

Oso, yes, cash IS a position; and in times like these, with stagflation/deflation/... at least falling inflation, and in a bear market worse than any experienced in a generation, yes, cash is a very VALID position to be in!

On Jan 27 07:29 AM Oso Velo wrote:

> Staying in cash insures a loss of 5-15% per year because of (under-reported)
> inflation. That's a strategy?
>

Jan 27 08:40 AM

[t-bird:]

Agree with Jim that cash is a valid strategy. If Velo was invested in the financials I suspect he has to look up to see bottom, unless he was hedged shorting or inverse like SKF...

Jan 27 08:45 AM

[Batman:]

Mish is illegally (in my opinion) touting his own investment firm in violation of SEC rules.

I hope Peter sues him for defamation.

Jan 27 08:46 AM

[sliman:]

Schiff has made terrible stock calls last year. He bet heavily on commodity stocks all through the crash. He of course is not the only one, just the most arrogant.

Jan 27 09:21 AM

[John Polomny:]

It depends when you became a client of Mr. Schiffs. As always the timeframes being discussed matter. If you followed Mr. Schiffs advice back in July 2008 you may be down 40-70% however if you began following his advice since Nov 2008 you are up in some positions 100%. The question I have is if your account i down 40-70% who is really to blame you or Mr. Schiff? It is your money so you are ultimately responsible for your losses.

Jan 27 09:21 AM

[bricki:]

Schiff is a typical Dr. Doom in the mold of Joe Granville. There are a lot of them around. Occasionally the successful predict bad economic news correctly (a broken clock is right twice a day), but their investment advise, if followed is always ruinous.

Granville has a track record of losing 20% per year over a 25 year period. Ouch.

Jan 27 09:49 AM

[investorinPA:]

There's a little bit of truth in all of what was written in this article. Schiff did not have a great year at predicting individual investments. On bigger picture stuff, such as gold, the yen, the fall of the US economy, drop in housing, and decrease in consumer demand, he was spot on. On what to do once that occurs, he made some bad picks. I still think he trusts too much in other country's governments for decoupling to occur. There is no proof that other economies can manage better than the US can. Long term wise, emerging markets are a good place to be if you have a 10-20+ time frame.

Jan 27 10:15 AM

[MGA_1:]

I enjoy Schiff's commentary quite a bit, and think in *general* he been spot on, but not with everything. He even admits that he guessed the dollar rally incorrectly. Long term he's going to be right on. Jim Roger's also thinks along the same lines.
Wild times.

Jan 27 10:34 AM

[wes mantooth:]

What inflation are you talking about? I went to cash in November of 2007 and one year later it bought more stock, real estate, commodities, and even gold. It was probably the best performing asset class of 2008. If I'd stayed in the stock market or invested according to Schiff's hyperinflation scenario I'd need roughly an 80% return just to get back to even. Stop it.


On Jan 27 07:29 AM Oso Velo wrote:

> Staying in cash insures a loss of 5-15% per year because of (under-reported)
> inflation. That's a strategy?
>

Jan 27 10:38 AM

[MGA_1:]

wes:
HUGE asset deflation which will continue for several years (housing & soon comm real estate), but, with huge projected government deficits projected and the printing presses running - I'm thinking inflation around the corner. Also, if and when foreign govt's lose confidence in t bills, that's a lot of money coming back to the US which I think the fed is just going to have to buy (monetize). I'm thinking gold irregardless.

Jan 27 11:18 AM

[wes mantooth:]

MGA_1:
I'm currently diversifying about half my portfolio out of cash and into commodities, emerging markets, and even some REITS. I'm not doing this because I know inflation is coming. I really don't know what's going to happen. I just know that after avoiding a bloodbath last year I need to start buying some of the most beaten down asset classes. I feel somewhat sick for doing so but it should pay off well in the long term. Hopefully.

Jan 27 12:36 PM

[MGA_1:]

wes:
=Things I do feel confident about=
* Real estate is going to continue going down (in the US). We have the Alt A & Option Arm resets coming down the pike - it looks to be about 1.5 trillion worth.
* There is a big treasury bubble. 3.25% for a 30 US T Bill is an awful rate of return. The fed has talked about buying back the long end to keep rates low.
=Confident, but moderately=
* Gold - up.
* US Stocks will do poorly at least for 3-5 years (maybe longer). I'm sure there will be rallies. I'm a schiffian and think the DOW & Price of gold will eventually go to 1/1.
* Commodities are at an all time low across many categories. Can only go up, right?
* Dollar fall against specific currencies - I'm thinking yen, franc & yuan.
=Not so sure, but think it's going to happen=
* China is going to tank - I'd be willing to wager that 30%-50% of china's economy is related to US exports. I think we're going to take them down with us. They'll recover.
* Inflation - Purely controlled by government policy. If & when the government cant find financing through t bills (foreign govt & the public), then things will get very intersting.

So, right now my plan it short t bills, then head into gold. I have some commodities (oil) & franc etf.

We live in interesting times. Good luck with the investing !

Jan 27 01:53 PM

[Augustus:]

Has anyone ever seen a Shedlock portfolio? The only thing I've ever read that he owned was Regions Financial. That was his suggestion of a can't miss value play. Shedlock is simply a perenial trasher of everything. The nutter has never found a positive investment. No oil, no coal, no nuclear, no derivatives, no disturbance for farming,. Only gold mining is an acceptable land use.

Jan 27 07:07 PM

[bones33:]

I wish I had been all cash around October.I'd still have some money to invest.

Jan 27 07:13 PM

[JoshRae:]

Peter Schiff's contributions as a macroeconomic forecaster should not be confused with his ability to manage securities at a micro level. Schiff's contribution has been in revealing exactly how and why the current financial system is broken. Anyone who believes that this should directly translate into huge returns for his portfolio in this market (especially one like we have now) doesn't understand the distinction between economics and finance. Additionally, in today's market, public policy is inextricably tied to stock market returns. Schiff bet on hyperinflation - something that can only be caused by government intervention - was a bet on what he though the U.S. policy would be. It looks like he was at least wrong in the short-term; however, this should not be used as a lens by which to judge his macroeconomic predictions in general. Even if you know a gigantic credit bubble is about to break and can effectively describe the reasons why, it is a whole different ball game to know how to profit from that breakdown.

Feb 03 04:09 PM

[AlexP:]

Schiff did not ignore the issue of deflation. His position is clear. He argues that deflation is not as serious a problem as politicians and banks would have you believe. By screaming about deflation the politicians and bankers are creating a narrative that justifies their printing even more money. What is the extreme problem with deflation? When prices go down on goods as they regularly do that fact doesn't stop people from buying them.

Clearly Schiff annoys the establishment and a lot of people are out to get him. These criticisms, as far as I can see, are economically and financially illiterate but that doesn't stop the headlines doing some damage.

Feb 07 08:10 AM

[User 355430:]

Money Talks, Bullsh*t walks...

Peter Schiff (Idiot Cassandra) down 40-70% -2008

George Soros (Cassandra) up 10%-2008

Nassim Taleb (Mr. Black Swan Cassandra) up 55-110%-2008

Where would you have your money?

You be the judge....

Feb 11 08:30 PM

[DuZCO:]

Invest long term: Peter Schiff
Expansion (Inflation) of the dollar is out of control. And the government will only keep doing the same thing.. run the presses 24/7!

Dollars > goods & services = Less purchasing power ..think about it


On Feb 11 08:30 PM User 355430 wrote:

> Money Talks, Bullsh*t walks...
>
> Peter Schiff (Idiot Cassandra) down 40-70% -2008
>
> George Soros (Cassandra) up 10%-2008
>
> Nassim Taleb (Mr. Black Swan Cassandra) up 55-110%-2008
>
> Where would you have your money?
>
> You be the judge....

Mar 06 10:05 AM