This Is Just the Beginning 105 comments
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The intense scrutiny recently paid to my investment strategy in the immediate wake of the financial crisis of the last six months has unfortunately obscured the central element of my larger economic forecast. The standard line has been that although I was able to predict the crash, in the form of the housing collapse and the credit crunch, my expected fallout of a weaker dollar and global decoupling has been proven false. However, this assumes that the crash has fully played out. In reality, all we have heard thus far is the overture.
In 2008, the bubble economy that I had meticulously described years ago finally hit the pin that I knew was out there. The corporate losses, frozen credit markets and plunging home prices were the opening salvo in the unfolding economic crisis. However, the vast majority of air has yet to leak out of the bubble. As it does, the U.S. economic crisis will kick into a much higher gear. I have positioned my clients to withstand the full fury of the gale, and when it finally comes, the question "was Peter Schiff right?" will finally be answered.
Thus far, our economy has actually been spared the worst due to the temporary strength in the dollar and the recent desirability of our Government's debt. These movements derailed the short-term performance of many of my investment recommendations (though clearly not to the extent alleged by my critics) and threw a life-line to the downing U.S. economy. The demand for U.S. Treasuries has led to one of the sharpest dollar rallies on record, which has helped bring about just as pronounced a decline in commodity prices. As a result, although consumer income has fallen, so too have prices and interest rates.
The stronger dollar gives the Federal Government plenty of cover to a pursue a policy of rampant monetary inflation in order to re-inflate the collapsing bubble. Even though the Federal Reserve has thrown trillions of new dollars into circulation, those dollars have actually gained purchasing power - contrary to economic law. This, along with inventory liquidations and going-out-of-business sales, has kept a lid on consumer prices. The continued, although misguided, appeal of U.S. debt has also made it possible for the government to garner cheap financing for its equally misguided and massive bails-outs and stimulus packages.
In addition to cushioning the blow for us, the dollar rally has exacerbated the pain abroad. As money has rushed to our aid it has created a global credit crunch. The rest of the world is not only dealing with losses on toxic U.S. credit instruments but is also shouldering the burden of financing our new borrowing as well. As foreign currencies have fallen, foreign consumers have not received as large a windfall as Americans have from falling commodity prices.
In effect, Americans have been using these life-lines to pull the rest of the world into the stormy seas. However, there are signs that those holding the lines are about to cast them adrift. The dollar rally has run out of steam, gold has clearly broken out, and commodity prices are moving back up. 2009 is already the worst year ever for US. Treasury bonds and foreign stock markets are once again outperforming ours.
This week President Obama claimed that failure to pass his economic stimulus bill will have catastrophic consequences for the U.S economy. The reality is the catastrophe will be far greater with his plan than without it. If the trends of January and early February of 2009 continue, the rug will be completely pulled out from beneath the U.S. economy, and the full cost of the President's "economic depressant package" will be apparent to all.
If foreign capital does not continue to pour into Treasuries, interest rates and consumer prices in the U.S. will soar. At that point, we will finally be confronted with the real crises that I have long predicted. When the day of reckoning arrives our policy response will be critical. If we continue on the course our new President has mapped out, the catastrophe will far exceed the scope of any he hoped to avoid.
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This article has 105 comments:
I think, however, right as you are in rest of your argument, the stimulus is needed, not to bring about recovery, which it never could but simply to mitigate the level of disjoint from the immediacy of the pending shock. Its effect at best will be to serve like an air bag in a road accident.
Under the circumstances it is not business as usual, and cash may not be trash.
On Feb 08 09:31 AM Dave Wrixon wrote:
> Well I think you have just about said it.
>
> I think, however, right as you are in rest of your argument, the
> stimulus is needed, not to bring about recovery, which it never could
> but simply to mitigate the level of disjoint from the immediacy of
> the pending shock. Its effect at best will be to serve like an air
> bag in a road accident.
1 1.46979 0.799699 1.2796 0.659347
The dollar rally has run out of steam? Really? Sure doesn't look like it. Maybe vs. the Yen, thats it.
The really big money, the ones that buy billions in Treasuries, have a lot smarter people than PS, and have analyzed the situation with I suspect far better data than PS will ever see. Perhaps he is right and they are all wrong.
We all seem to have a tendency to 'telescope' time, and I think that many of the trends described will happen later rather than sooner, but may well come to fruition with even more explosive volatility than we've seen to date.
'Investors' will have to learn to be 'traders', IMO.
But until "they"explain it in detail , and how it will play out in what time frame, we will have to assume from all the evidence that they don't have a clue.
Meanwhile I am giving Schiff the beefit of the doubt.
Also check leap2020.eu
This is pure fear mongering. I think by now everyone is aware of the clear and present danger of failed auctions, and eventual inflation and fall of the dollar.
The question now is what to do about it, how to soften it, and potentially avoid it. Peter says the stimulus plan is bad. Many other people say the same thing, but at least they have some other proposals.
If we are all doomed, and if there is no escape, then should we all just go and shoot ourselves? Is this what we need Peter Schiff for?
It's getting old Peter.
- He claims in this article the dollar rally has lost steam; that is factually wrong to date. Just look at the current exchange rates.
- He claims in this article that the Fed has thrown trillions into circulation; that is factually wrong, money velocity has not increased at all. The money is being "hoarded" by banks that received it. To define 'hoarding" , they are only making new loans to companies and individuals that actually qualify, not a bad thing at all.
- The big guys, Japan, China, Saudis et al lose their collective asses if the dollar declines precipitously, everyone loses not just the US. Doesn't mean it won't happen, but their are strong headwinds against it.
On Feb 08 10:25 AM Boubou wrote:
> Patio...it would certainly be nice if some 'big guys' out there somewhere
> playing a big game knew what they were doing. AND what "they " were
> doing were good for anyone but them.
> But until "they"explain it in detail , and how it will play out in
> what time frame, we will have to assume from all the evidence that
> they don't have a clue.
> Meanwhile I am giving Schiff the beefit of the doubt.
> Also check leap2020.eu
Another fact is that we are in uncharted waters. No one alive today has ever seen a situation like the one we face. Jim's point above is correct IMO, we see what we think will happen and we expect it to happen quickly, but massive economies contain massive inertia made up of hundreds of millions of individual investors and billions of people.
The unpredictable nature of government response is the overarching factor in the intermediate term IMO. Having said that, there are mathematical realities related to standard of living, capital flows and currencies that I believe that will be observed on the other side of this event. In other words, long term I think I know where we're going, but intermediate term I don't know what the road that takes us there will look like, and government intervention is the reason I don't know.
Keep speaking and writing, Peter, I need your input.
I believe it is best to avoid US backed equities-- American politicans and Wall Street Bankers ponzi schemes,whether you believe this or NOT, have trashed the Dollars future.
The future World in investing is moving offshore.
Sad but true wanted a Woman never bargained for you......
As for the emerging markets, well, I live in Brazil, and for all the complaints about corruption in the U.S., it doesn't hold a candle to what's happening here. Plus Brazil has a birthrate below the replacement level and a long-term Social Security that makes U.S. fiscal problems seem like peanuts. Russia has similar problems. China and India are dependent on exporting to the U.S.
So if you want to flee the dollar, where will you go? What will support commodity prices if all the world economies are in recession?
I don't have any answers--but I do believe that much of the negativity surrounding the U.S. is not because things are much worse there, but because they garner more attention and so are better known.
I think all Americans should be writing to their Congressmen, Senators and other elected officials to get the selfless message through that the Administration needs to divert all possible budget and other monies in the immediate term to improving the lot of the American consumer. The American consumer must start spending again. To me the American consumer spending again is the only obvious available key to U.S. economic recovery.
I am utterly against the tax cuts, because I don't believe they achieve anything useful. There is no such thing as a free lunch, and tax breaks send totally the wrong message to the people, many of whom need to get their butt into gear and get a proper job.
I am 100% behind infrastructure investment because most of it is needed anyway if you are to have a competitive economy in the longer-term.
I work on highways in the UK. The money that could be save by investing adequately in the first place is unbelievable. Can you imagine how much it costs to maintain infrastructure that is already at breaking point? Everything is done piecemeal in the middle of the night, often in freezing temperatures. Do you really think that is effective use of Government money.
Having said that if you invest when the economy is on its knees, you do tend to reduce costs. If contractors are struggling to make ends meet, it surprising how much they will sharpen their pencil.
Also you must remember that lost momentum in the economy cost the Government dearly because of increased social cost when the tax base in shrinking. For the stimulus to have an impact you need to have a Keynesian multiplier as high as possible. In other words the Government spend induces additional private sector spend that exceeds the usual wastage. Only infrastructure projects will deliver that multiplier.
On Feb 08 09:43 AM sheople wrote:
> Dave, I might agree with you if we had money to burn, which we don't.
> Assuming that the dollar could recover, the taxpayer will be inundated
> with taxes, assuming that we are going to pay our debts. Realistically
> you are right only if the dollar is to fail and the monies will not
> have to be paid back. The stimulus to the economy is like kicking
> a dead person. The body will move from the kick.
>
> On Feb 08 09:31 AM Dave Wrixon wrote:
Yes foreign financing is critical to maneuver through this economic crisis. But has not America helped the world develop through our spending? Free trade has benefited the world economy immensely. It is in their best interest to help aid the US through this time because a healthy economic engine of America makes for a healthy world economy.
The big movements will have to wait to the real numbers start to emerge. If and when it becomes clear that companies in Europe and Asia are more profitable than those in the US, then the big capital flows will follow and the currencies will realign. At the moment it is still all up in the air, but the dust will settle.
Only blind faith could convince you that the US is going to come out on top of the heap. Obama has created a lot of hope and expectation, but hope doesn't pay the bills.
On Feb 08 12:37 PM expatsp wrote:
> Many of Schiff's criticisms of the U.S. are correct, but the fact
> is, the rest of the world is often worse. Even with the stimulus,
> debt/gdp ratio in the U.S. will be far lower than that in Japan or
> pretty much any European country.
>
> As for the emerging markets, well, I live in Brazil, and for all
> the complaints about corruption in the U.S., it doesn't hold a candle
> to what's happening here. Plus Brazil has a birthrate below the replacement
> level and a long-term Social Security that makes U.S. fiscal problems
> seem like peanuts. Russia has similar problems. China and India are
> dependent on exporting to the U.S.
>
> So if you want to flee the dollar, where will you go? What will support
> commodity prices if all the world economies are in recession?
>
> I don't have any answers--but I do believe that much of the negativity
> surrounding the U.S. is not because things are much worse there,
> but because they garner more attention and so are better known.
To use a currency to manipulate markets and economies is supremely arrogant. This is not the first or the last time in human history this will occur. The result is always the same.
As far the the argument goes that the dollar can't decline b/c there are too many stakeholders: Think Roman aureus/denarius, tulip bulbs, dot-com stocks, real estate, and every other bubbled asset in history. There were always powerful stakeholders that lost fortunes from the collapse. The same will be true of all the wishful thinkers who hold USD and U.S. debt.
On Feb 08 10:36 AM patio wrote:
> - PS has lost his clients a lot of money; so far that is a fact
>
> - He claims in this article the dollar rally has lost steam; that
> is factually wrong to date. Just look at the current exchange rates.
>
> - He claims in this article that the Fed has thrown trillions into
> circulation; that is factually wrong, money velocity has not increased
> at all. The money is being "hoarded" by banks that received it. To
> define 'hoarding" , they are only making new loans to companies and
> individuals that actually qualify, not a bad thing at all.
> - The big guys, Japan, China, Saudis et al lose their collective
> asses if the dollar declines precipitously, everyone loses not just
> the US. Doesn't mean it won't happen, but their are strong headwinds
> against it.
>
>
> On Feb 08 10:25 AM Boubou wrote:
You need to check the St, Louis Fed website and look at the recent Excess Reserves reporting. In fact it significantly dropped this week which indicates banks are taking money from deposit from the FED and loaning it out. This stupid idea that banks are hoarding cash is not logical. Banks have to pay depositers for their deposits. In addition they have overhead; leases on offices, salaries, taxes, etc..The banks will and are lending again thats what they do they are banks if they do not they go out of business. These things take time to happen. You mention velocity but do not mention the fact that the TED spread has dropped fromm 400 to below 90. The fact that LIBOR is down shows that risk tolerances are increasing. Look at the the Baltic Dry Index, Gold, the emerging markets stockmarkets have bottomed and turned up. Even Dr. Copper has shown that it has bottomed. These are all prelimenary indications that the next reflation cylce has begun.
First, that a decline in the U.S. $ will trigger inflationary pressures. Second, (though he doesn't quite put it this way) the big increases in money supply are currently being offset by hoarding / saving by banks and consumers. A movement upward in prices could unravel that fast and lead to huge inflationary pressure.
So, everything depends on the rest of the world accepting increasing U.S. debt and dollars. They have so far but at some point unknown the costs of existing U.S. assets will be less than the increasing incredibility of U.S. commitment to repay in non-hyper inflated $s.
The present situation is v convenient for those seeking a staged withdrawal from the U.S. $.
Contra expatsp, there are plenty of countries (including some of the big Euro members) with much better fundamentals than the U.S. and most will be issuing plenty of bonds to fund their own stimulus and rescue packages. Place your bets...
Not a big fan of PS or of the US market continuing to fall apart but I think on a smaller scale investments outside the US will do better.
If Peter is right about the future of the dollar and the US economy, I don't believe that we will be able to hide in foreign dividend stocks as Peter recommends.
As Lars 39 mentioned, the only investments that will be of value if Schiff is correct are gold, beans, ammo, and bourbon. Foreign stocks will get fried along with everything else.
Just the other day I did go out and "invest" in canned foods. It doesn't hurt to be prepared if this crisis gets out of hand. A run on the banks is a possibility and in that event, banks would close for an indefinite period and credit cards will not be honored. I don't believe that this has a high probability of happening. But when it comes to food, it is better to have it and not need it.
IMO, correct. Plus, I tend to focus on political issues, and I've yet to get an answer to this question: from where will the political pressure develop to actually raise rates once (if) the economy starts to recover? In the midst of which 2-year Congressional election cycle will this occur? Where is the majority caucus in Congress that will advocate slowing down an economy soon after a devastating recession / depression so as to avoid inflation, when that very inflation actually helps the government out of its hole? Who will stand up and say "unemployment is low enough now"?
This is the reason Volcker is on Obama's "economic advisory team" and why he is frequently visible standing behind Obama during economic press events; he is supposed to be a credible threat to control inflationary expectations and make us all believe we can reinflate without inflating, and the currency will remain strong while we're debasing it.
Btw, there are many strategies that you can utilize in the current environment if you find the dollar unstable. You just have to be quick on your feet.
On Feb 08 12:37 PM expatsp wrote:
> Many of Schiff's criticisms of the U.S. are correct, but the fact
> is, the rest of the world is often worse. Even with the stimulus,
> debt/gdp ratio in the U.S. will be far lower than that in Japan or
> pretty much any European country.
>
> As for the emerging markets, well, I live in Brazil, and for all
> the complaints about corruption in the U.S., it doesn't hold a candle
> to what's happening here. Plus Brazil has a birthrate below the replacement
> level and a long-term Social Security that makes U.S. fiscal problems
> seem like peanuts. Russia has similar problems. China and India are
> dependent on exporting to the U.S.
>
> So if you want to flee the dollar, where will you go? What will support
> commodity prices if all the world economies are in recession?
>
> I don't have any answers--but I do believe that much of the negativity
> surrounding the U.S. is not because things are much worse there,
> but because they garner more attention and so are better known.
Somewhere, along the road to find solutions, logic, reasoning, critical thinking and rationale have taken a flight. Just like majority, who thought housing values go only up and business cycles of boom and bust have been abolished, we will learn a lot more costlier lesson in Economics. We will lament again ' no one foresaw this coming'! Enjoy the show!
However,Peter`s basic thesis is correct,America is living way beyond its means;needs to move from consumption to saving and create real jobs;needs to create honesty in its politics and financial markets.Until it does so ,it will continue to decline.
Although there is no way to be certain, doesn't it seem at least plausible that one or more of our foreign creditors will soon get cold feet and, out of fear, start renouncing U.S. debt? Once the first member of the herd breaks keeping the rest in line will be a challenge.
I was 100% in cash through the summer and up until this October. With a mind towards wealth preservation I've been gradually making moves to overseas markets (Australia, Canada & China--no ADRs, real local currency plays) and some gold as a hedge. If the U.S. recovers quickly I'll be surprised, but I'll also be quite happy to repatriate after I see evidence that the deficit has been reigned in to some degree.
I don't expect blood in the streets and massive upheaval and based on my close reading I don't think that Mr. Schiff does either. What I do read Mr. Schiff as saying is that as individuals we can't really change the way things are going to go for the macro economy, but we can be smart about where we invest and that the most prudent thing to do right now is to look to a market where the host is not running a balance sheet with so many major red flags.
Each of us will do our own best in this world and try to make the most prudent investment choices. In hindsight it will all be crystal. I wish each of you the best of luck whatever course you decide to chart.
Further to this, make no mistake that huge printing of money will not cause inflation/dollar to fall as long as the money is used to cover losses at the banks as it will not find its way into the money supply as it is stored at source on the balance sheets of the banks.
The maths are simple, around 3 trillion has been wiped off USA LLC.
It will take more than 3 trillion of new money before we start to see any increase in the money supply. This is why Bill Gross is stating we need baliouts in the trillions not billions.
The USA can not lose because it prints the reserve currency.
Now if Nations start to refuse to accept the USD as the worlds reserve currency, all the problems the alarmists have been speaking about for years will come true.
Of course though the USA have the USD firmly integrated into the entire worlds system. Have military/policitcal integration in a large part of the world and are the worlds super-power. Therefore we will not see the USD being refused by the world in the short term. This will take many years to occur.
If the USA gets sick so does the rest of the world. There is no such thing as decoupling. Anyone who theorises this is possibly (at this time) does not understand the worlds various systems the USA has put in place by force/war and financial colonialism.
The USD was always going to strengthen as the weaker countries in the system got hit. (Russia, UK, Eurozone--except Germany--, Korea, Australia).
By hook or by crook, the huge bailouts will be financed.
Financed by if need be - the FED.
When undisclosed bidders come in and save auctions - you'll know the FED is at work.
Lets not kid ourself the system is created, ran to benefit the USA and its cronies. And make no mistake everyone reading this comment benefits from this fact.
Make no mistake I dont agree with it
But I am sure happy that the USA is running the system.
First, he talks of a "pin" he always knew was out there, waiting to derail the economy. While the US was definitely on pace to overbuild in housing, the major declines in home values, and increased corporate losses, didn't occur until the Fed raised rates 18 times, artificially elevating short term rates above long term rates. It's one thing to say someone's headed for a fall, it's altogether another to push them.
Secondly, he talks about buying power of the dollar. Given the US position as the largest economy, extensive foreign trade connections, and emerging energy sources that are friendlier and lower cost than Mr. Schiff's worst case scenario envisions, there is one more factor to add- a burgeoning labor pool. It turns out that the baby boomers aren't all going to retire at age 62.
A recent study found that 60% of nurses have pushed back their retirement plans- poof! there goes the nursing shortage we've heard about, and the exhorbitant salaries (and inflation)associated with that vision of future healthcare. And let's not forget that drugs are becoming more affordable as economies of scale kick in, thanks to both technology and re-levelling of government incentives. And this inflation-mitigating combination- more labor and economies of scale- is sure to present itself in many other industries.
The one potential factor that could make Mr. Schiff right is this- are we really running out of anything? Will there be a commodity that cannot be added to world supply below or near current (deflated) cost? It is possible in that scenario that bidding wars for these precious assets emerge, eventually creating significant cost-push inflation. But I'd like to ask- what will it be? Because it's certainly not, and will not be, labor. More likely, the main shortage may continue to be the trusted and plentiful medium of exchange the world has grown to use on an increasing basis- the US dollar.
I was assuming that the public generally disagreed with your views and invested in the market, so I was expecting your clients to outperform the average joe when this crisis you were predicting was finally beginning to unfold. I guess I was wrong.
What you say makes a lot of sense, but it doesn't have much predictive power.
I hereby predict two things:
1) "the market" will reach new highs
2) "the market" will crash to new lows
Both statements are true because i haven' told you how i define and measure "the market" and when 1 and/or 2 is going to happen.
However, neither statement has any predictive power.
The only real test of predictive power is long (as in forever) term return. IMHO, Buffet stands up to this test so far, but recent performance of some of your clients casts doubt on your ability to stand up to this test.
Although these recently publicized returns do not prove anything, neither do your attempts to rationalize them.
I guess for a money manager it's not nearly as important to be factually right as it is to be able to convince other people that you may be right, otherwise one would just manage his/her own money and not have any clients. I guess that's why so much energy and time is spent constantly debating if Peter is right and when and how it may be considered "proven" :)
This is where PR comes in. This imho explains that predictions need to be as bold as possible. No, it's not just a market crash, it's an Armageddon! Otherwise who would be interested, how would the celebrity status be obtained? Where will the new clients come from?
I believe some of your "predictions" are influenced by the this conflict of interest. Please correct me if I'm wrong.
Good points. Though I believe the dollar is no good. What other
currency is any better. It's a tough decision. Hold gold and especially
physical gold for insurance.
Mr. Schiff's predictions are spot on - and these will manifest themselves in our long term trends. the question remaining is timing. Is it six months or six years? my caveat is that reacting too early to take advantage of this movement will only result in a haircut. If you know what will happen you can be observant and make your move at the appropriate opportunity.
1) The dollar: everybody, every business, and every government needs it. Price corrections for every day goods, demand increases as businesses continue to slow, and eventual (a) interest rate increases (thus returning MORE dollars on a guaranteed investment) and (b) increased taxes (meaning that people demand yet more dollars since a greater chunk is taken away) all point to a stronger dollar.
2. Precious metals will continue to strengthen as countries seek to have solid assets to back their budgets. I personally believe that silver has largely been ignored, and see far much more upside for it relative to gold.
Not necessarily. Your analysis ignores how Americans may adapt to the new circumstances, for instance, by saving more and consuming less.
In addition, if foreigners shun US dollar denominated assets, prices for these (aka interest rates) will increase which will entice some foreigners to come back. It is far from a black and white process.
Finally, you fail to see how bad things are elsewhere. From a global investor point of view, the US dollar looks better than many of the alternatives (euro, pound, Swiss franc). The Asian currencies, other than the Yen, do not look like viable alternatives for safe storage at this time (although that may change in the future).
On Feb 08 09:32 AM yellowhoard wrote:
> What would happen to the dollar if China, India, or Japan bought
> up some of the worlds larger gold and silver producers and backed
> their currencies with precious metal?
"I hereby predict two things: 1) "the market" will reach new highs
2) "the market" will crash to new lows"
Hi Vladimir
Where were you when Peter went on TV in 2005/2006 to warn everybody of an impending big property/debt/stock crash? On all the talk shows he went to, he was ridiculed for what he said. It is easy to say on hindsight that there would be a crash. It is not easy to say it when everybody laughs at you when you say it. Give Peter some credit, if not for his 'predictive power', for his courage and conviction.
Peter is Right!
Good contrarian view. Gold is in for a rough ride. I'm always very cautious when every pundit is saying the same thing, and now almost everybody, including all the Wall St investment banks, are saying Gold will go up -- and that's scary.
Yes, I don't believe Gold has completed decoupled from the Dollar -- although lately that seems to be the case.
But if the Dollar strengthens, even if Gold can still go up (as it has been doing so lately), its upside is limited.
On the other hand, the Dollar weakens, Gold will go up by quite a bit.
On Feb 08 12:43 PM Jase wrote:
> Gold broken out? You must be kidding me. It's pierced the declining
> tops line, but it has yet to confirm the move. It's more likely
> to break $800 than it is to break $1000.
Yes, but:
"doesn't it seem at least plausible that one or more of our foreign creditors will soon get cold feet and, out of fear, start renouncing U.S. debt? Once the first member of the herd breaks keeping the rest in line will be a challenge."
IOW, individual advantage takes precedence over the common good, in the real world. this is "the tragedy of the commons."
On Feb 08 09:22 AM prudentinvestor wrote:
> I agree with all the trends you describe, but expect them to happen
> to a much lesser extent, at a slower pace, and without extreme catastrophic
> consequences. The global system has too much damping built in for
> a meltdown in the world's largest and most powerful country.
Arguments for both scenarios above and most possibilities in between can be made and have there adherents.
I'm not counting on big returns in the short term...maybe not even in the medium term. And I am not stocking up on ammunition and food either (I don't believe we will be shooting each other over food even in the worst case scenario...we didn't do that during the depression. We cooperated and helped one another on a grand scale. We often are at our best when things are at their worst).
I have faith in US and God...not pollyanna, simply optimistic.
Mr. Schiff, for all of our sakes, I sincerely hope that you are being overly pessimistic. God Bless.
The solution is to let the banks fail, let the debt liquidate.
Yes, there will be extreme economic pain and panic, but that is better than one or two decades of stagflation or worst a total collapse (as the writer mentioned above).
On Feb 08 10:51 PM Sanjeev Sharma wrote:
> Unfortunately, the writer has trashed the government policy without
> proposing any alternative solution.
On Feb 08 10:02 PM Augustus wrote:
> What one of these countries should do is to buy Citi. It is selling
> for nothing but has a world wide franchise. Move headquarters outside
> the US. Then offer to denominate deposits in Citi bucks - backed
> by gold. It would be the same as creating a new currency for them.
>
>
>
> On Feb 08 09:32 AM yellowhoard wrote:
The problem is these industries do not provide enough good jobs and wealth for the kind of lifestyle which Americans are used to.
If Americans can accept a lower material standard of living. If they can all live in high rise apartments in densely populated cities, mass transit will be more economically feasible, and US will be more energy efficient. Right now, the US consumes more energy than any other country, including those with much bigger population, e.g. China, India, etc.
But the Americans, like the Romans, are unlikely to change their indulgent ways.
All this talk about alternative energy... but I don't hear anybody talking about Energy Conservation. Alternative energy won't happen so fast. It may take years or even decades. Conservation is something we can start doing immediately.
On Feb 08 11:44 PM Ohrama wrote:
> When folks compare ourselves with Japan and declare we are better
> off based on the debt/GDP ratio, they forget an important point.
> Our economy has become too much of a hamburger and shoe polishing
> economy and to fat to make others interested in what we make. There
> is not much that we can sell to the outside world from this economy
> to pay down our debt (Look at our trade deficit which keeps hovering
> around 600 B$ per year; think of products that we can sell at the
> price the others want to close that gap. Not much). When the foreigners
> wake up to this fact, they will start running away from our currency
> and our bonds.
The important thing about China is : it is still a developing economy and there are still many poor Chinese - and so China will still grow and do well until it matures and then maybe it will implode or collapse or whatever (probably due to the problems you highlighted).
On Feb 09 12:24 AM Strangewalk wrote:
> I agree with much of what Schiff says but he is just flatly in error
> with some of his assessments. For example, he like Rogers talks up
> a storm about China--the problem with this is that I lived there,
> and can see that they are just wrong. Rogers even went so far as
> to say China was the best governed country in the world. Ha Ha Ha!
> Why doesn't he live there then? Because there isn't any 'air'--it's
> a thick, carcinogenic soup leading to unprecedented rates of cancers
> and birth defects which will only get worse! A blacker, fouler vision
> of hell could not be imagined than to see some of the rivers there!
> Corruption levels are far, far worse than anything that exists in
> the US. It's estimated that 80% of the populace would vote to remove
> the illegitimate regime from power if they could! Most of the impressive
> architecture you see in Shanghai and other cities will last for 20
> years before being condemned, the quality of construction is horrifying!
> China has run out of water, China will soon have the oldest average
> population in the world. China has an AIDS epidemic that is growing
> exponentially. China's claim to fame is entirely based on foreign
> investment that is now drying up and even leaving. Hey Schiff, is
> the world going to run from the Dollar to the RMB?...with the "greatest
> mass murderer of human history" Guiness award winner Mao smiling
> down from every note?
Thanks for the feedback. There are few indicators that together suggest that gold's upside is limited, the technical reason I commented on is just one such indicator. The gold/oil ratio, the US Dollar Index, interest rates, various sentiment indicators--all these paint a similar picture.
As far as I'm concerned, gold is a dead store of wealth. It doesn't interest me, save for its place as part of balanced/diversified portfolio (I hold about about 8% of my wealth in the form of bullion: 0% silver, 3% gold, 5% platinum. To me, holding gold via an ETN like GLD is missing the point entirely.)
If push comes to shove and the US dollar begins to decline substantially (personally, I believe it will eclipse 95 to 103 on the US Dollar Index before any such reversal materializes), then a balanced investor shouldn't be hurt materially by this. Holding ones wealth in a single currency is a stupid, stupid idea. 40% of my portfolio in is Canadian Dollars, about 25% in US Dollars, the balance is in a mix of Francs and Sterling (yes, Sterling--never, ever bet against the United Kingdom long term.). I'm also holding crude oil in several of these currencies as a hedge. Australian Dollars, Brazilian Real, Canadian Dollars--currencies from resource-rich nations, are a good way to protect oneself from future chaos. I consider currency losses a small price to pay for a good night's sleep. As you get older, such things matter.
I like the US Financial sector from a 5-year point of view. I like crude oil (and the solar sector, for that matter) over that same time-frame. I still really like tech and especially the digital content industries, longer term. 2009 and 2010 is the time to pick up some of these assets. You complained when they were too expensive, now they're really inexpensive. Buy something, learn technical analysis, and sit tight.
Peter makes some excellent points, but the fact of the matter is... the world isn't going to end. Let things worsen, those living life within their means (be it those with assets of 100k or 100M) shouldn't be affected in the least. If you're an entrepreneur, now is the time to build. If you have a job, now is the time to work harder for your company to improve its competitiveness globally. If you are young, now is the time to educate yourself. If you're no-so-young, enjoy yourself, you've earned it.
The cycle playing out right now is just that, a cycle. It's the logical end to the actions that were made during the past several decades. The reasons for it aren't important--they can't be changed. Focus on what you can control. Blue skies will return, they always do. Until then, go build something.
On Feb 08 10:20 PM ron_paulite wrote:
> Hi Jase
>
> Good contrarian view. Gold is in for a rough ride. I'm always
> very cautious when every pundit is saying the same thing, and now
> almost everybody, including all the Wall St investment banks, are
> saying Gold will go up -- and that's scary.
>
> Yes, I don't believe Gold has completed decoupled from the Dollar
> -- although lately that seems to be the case.
> But if the Dollar strengthens, even if Gold can still go up (as it
> has been doing so lately), its upside is limited.
> On the other hand, the Dollar weakens, Gold will go up by quite a
> bit.
>
>
On Feb 09 12:39 AM ron_paulite wrote:
> Sure, China has its problems, but it is not as bad as you portrayed.
>
>
> The important thing about China is : it is still a developing economy
> and there are still many poor Chinese - and so China will still grow
> and do well until it matures and then maybe it will implode or collapse
> or whatever (probably due to the problems you highlighted).
>
>
Maybe next lifetime those much smarter guys you are talking about will do something. Or at least say something.
On Feb 08 09:46 AM patio wrote:
> USD GBP CAD EUR AUD
> 1 1.46979 0.799699 1.2796 0.659347
> The dollar rally has run out of steam? Really? Sure doesn't look
> like it. Maybe vs. the Yen, thats it.
> The really big money, the ones that buy billions in Treasuries, have
> a lot smarter people than PS, and have analyzed the situation with
> I suspect far better data than PS will ever see. Perhaps he is right
> and they are all wrong.
Maybe next lifetime those much smarter guys you are talking about will do something. Or at least say something.
On Feb 08 09:46 AM patio wrote:
> USD GBP CAD EUR AUD
> 1 1.46979 0.799699 1.2796 0.659347
> The dollar rally has run out of steam? Really? Sure doesn't look
> like it. Maybe vs. the Yen, thats it.
> The really big money, the ones that buy billions in Treasuries, have
> a lot smarter people than PS, and have analyzed the situation with
> I suspect far better data than PS will ever see. Perhaps he is right
> and they are all wrong.
This was before the real estate fiasco, back in pretty benign times by comparison to today. The unwavering convinction portrayed was unmistakable, this man was either an economic genius or insane. well it turns out he wasn't insane.
Mr Schiff knows his macro econ. He knows why things are the way they are and more importantly what governments actions are going to be before they actually do it, which is beyond economics training and entails a yet to be defined discipline, perhaps government psychology. Mr Schiff in my opinion ALWAYS made the case for deflation and his most accurate predictions were deflationary (although anybody remember rising emmerging markets and oil not 7mos ago?)
Now his decoupling thesis has yet to bear itself out, but I really think thats coming as well, just not in the short time span that Mr. Schiff thinks. I also think he underestimates the deflationary effects of this massive credit bubble and expects, ironically, "government efficiency" when it comes to reflating and possibly hyperinflating this economy.
This is going to take time. This scenario didn't make itself overnight or even within the last decade, but perhaps over the last century.
Developing markets have to devise a "work around" for the dollar, and the Chinese need to retool for other markets than the US. They'll do all this and more, but the question is what will we do and how much pain do we need to change to the new realities out there that we're broke?
China has some pollution and health issues, are you buying peanut butter in the USA lately?
China has corruption and it is controlled by the central government, have you been around Wall Street or to any government or even a political campaign procurement office?
The evolution of a nation is just that of becoming a knowledge provider of more professional and high technical services. This movement of lower skilled and semi technical work tasks is a natural process that we need.
Yes making things is real ownership but service is profitable, flexible and clean.
Ok one funny thing, it was great to see the Chinese Navy sail to stop the pirates around the horn of Africa and close their eyes as they went past Nanjin road in Shanghai (bag, movie, rolex every 2 feet).
Some day copyrights and patends and creative compensation will be under control and the inventions of those nations with good education systems will remain in cash and comfort.
For those thinking China will be a magical economic story, I think you should revisit that thesis. Compare it to the US in 2006, with overextended credit, poor risk models, and insufficient due diligence on loans. Then multiply that absurdity by 10,000 and you have China. While visiting China, I got to see exactly why the Chinese (those that can) keep their money in US treasuries and NOT in Chinese securities.
For those thinking China will be a magical economic story, I think you should revisit that thesis. Compare it to the US in 2006, with overextended credit, poor risk models, and insufficient due diligence on loans. Then multiply that absurdity by 10,000 and you have China. While visiting China, I got to see exactly why the Chinese (those that can) keep their money in US treasuries and NOT in Chinese securities.
Who exactly are we talking about here?
Largest and most powerful country?
China? India? Russia?
It seems to me from the trend of the comment on this thread that hopes are riding high and largely totally unrealistic.
What is the backlash going to be like when Obama comes back like Oliver Twist asking for MORE!
On Feb 09 04:56 AM Save Money Tips wrote:
> It's hard to separate his argument here from his hyper-defensive
> tone.... I don't know, his argument would seem more believable without
> it...
"Things take time to occur"
That is an investing/ economic statement I live by each day as this continuing crisis keeps moving forward.
Peter Schiff is going to be right. He is wrong in the short term because he limited his time frame to the "immediate" future.
In case anyone else has not been following the comments and speeches from other nations around the world:
Although a few other nations had their own share of excess, most other nations around the globe are in trouble, not because of anything they have done. No.
They are in trouble because of the garbage they were sold by US institutions or the models they used to run their own countries were based on US models. Those days are over. Though the US media is trying to downplay any negativity towards the US, it is out there, it is being spoken, and it is growing.
Here is another realization the rest of the world is coming to, that all US investors had better take into account:
The rest of the world is starting to understand that letting 5% of the worlds total population (The USA) account for most of world consumption and progress is a deadly mistake that cannot, and will not be repeated. Though it is going to take time (I mean years not months) as that time going on, the billions of people in other countries are going to start making, consuming, and developing their OWN economies, their OWN consumption, and OWN finance, and generating their OWN self sustaining economies going forward.
The average brainwashed citizen has absolutely no clue what is going on in the world, especially since the new season of "Dancing with the Stars" is right around the corner.
I do not consider myself any smarter than anyone else around here, and hell I am the worlds worst trader to boot, so I certainly would not claim to be otherwise.
However I at least understand that looking forward and anticipation is what is required to succeed in the coming decades in this little world of investing / speculating/ etc.
.I think it will be somthing like this:
1-massive liqiudation of non-basic products rapid-deflation including oil
2-steady inflation in food and gold and firearms
3-the Gold rush and collapse of the dollar
4-I am not gonna write this one ,(but have you been to a high school lately and seen how the future generation looks and acts)
still think the market will rebound ? good luck
Yeah, gold is a real "dead store of wealth". You must be from the Gordon Brown school of economics. As Chancellor of the Exchequer in 2001 he decided to sell over 200 million tons of gold reserves @$250/oz. Gold has only appreciated 260% since then. Remind me again, what has the S&P or Dow returned over the same time period?
Keep chasing the Financials. One of these days the XLF might get to ZERO. It could be a good buy at that price.
Yank
On Feb 09 01:12 AM Jase wrote:
> Ron,
>
> Thanks for the feedback. There are few indicators that together suggest
> that gold's upside is limited, the technical reason I commented on
> is just one such indicator. The gold/oil ratio, the US Dollar Index,
> interest rates, various sentiment indicators--all these paint a similar
> picture.
>
> As far as I'm concerned, gold is a dead store of wealth. It doesn't
> interest me, save for its place as part of balanced/diversified portfolio
> (I hold about about 8% of my wealth in the form of bullion: 0% silver,
> 3% gold, 5% platinum. To me, holding gold via an ETN like GLD is
> missing the point entirely.)
>
> If push comes to shove and the US dollar begins to decline substantially
> (personally, I believe it will eclipse 95 to 103 on the US Dollar
> Index before any such reversal materializes), then a balanced investor
> shouldn't be hurt materially by this. Holding ones wealth in a single
> currency is a stupid, stupid idea. 40% of my portfolio in is Canadian
> Dollars, about 25% in US Dollars, the balance is in a mix of Francs
> and Sterling (yes, Sterling--never, ever bet against the United Kingdom
> long term.). I'm also holding crude oil in several of these currencies
> as a hedge. Australian Dollars, Brazilian Real, Canadian Dollars--currencies
> from resource-rich nations, are a good way to protect oneself from
> future chaos. I consider currency losses a small price to pay for
> a good night's sleep. As you get older, such things matter.
>
> I like the US Financial sector from a 5-year point of view. I like
> crude oil (and the solar sector, for that matter) over that same
> time-frame. I still really like tech and especially the digital content
> industries, longer term. 2009 and 2010 is the time to pick up some
> of these assets. You complained when they were too expensive, now
> they're really inexpensive. Buy something, learn technical analysis,
> and sit tight.
>
> Peter makes some excellent points, but the fact of the matter is...
> the world isn't going to end. Let things worsen, those living life
> within their means (be it those with assets of 100k or 100M) shouldn't
> be affected in the least. If you're an entrepreneur, now is the time
> to build. If you have a job, now is the time to work harder for your
> company to improve its competitiveness globally. If you are young,
> now is the time to educate yourself. If you're no-so-young, enjoy
> yourself, you've earned it.
>
> The cycle playing out right now is just that, a cycle. It's the logical
> end to the actions that were made during the past several decades.
> The reasons for it aren't important--they can't be changed. Focus
> on what you can control. Blue skies will return, they always do.
> Until then, go build something.
On Feb 08 09:32 AM yellowhoard wrote:
> What would happen to the dollar if China, India, or Japan bought
> up some of the worlds larger gold and silver producers and backed
> their currencies with precious metal?
The next Bull will be 2013 and be tepid compared to the growth of the 80's and 90's. What you saw this last year was a looting of the Treasury.
You are now seeing those still in power attempting to socialize the crushing pain the middle and lower classes are/will feel so you could say that current political leaderships focused on electability and quieting of the wrath of J6Pack. Out of 3 U.S. depressions, each one is followed by voter revolution after four years. This time will be no different so by 2012 and thereafter, we should make economic progress and the U.S. will pay down it's debt but in doing so growth will range from 1%-2% after that time.
Until then, I expect more volatitlity but not as severe as what we saw Q4 and this quarter. I am not afraid to buy and hold for 5 years beginning in March. A search of comments reveals I have said the same thing for the last three months. And I can check cash flows and management, go company specific to buy equities.
On Feb 08 11:36 AM SW Richmond wrote:
> The fact remains that the US government has committed $Trillions
> to the reflation effort, the budget deficit for this year is projected
> at over $1 Trillion absent a stimulus package, and Treasury thus
> far has actually come to the well and funded very little. The recent
> movement of the USDX and gold can be interpreted as reactions to
> growing awareness of the US debt situation.
>
> Another fact is that we are in uncharted waters. No one alive today
> has ever seen a situation like the one we face. Jim's point above
> is correct IMO, we see what we think will happen and we expect it
> to happen quickly, but massive economies contain massive inertia
> made up of hundreds of millions of individual investors and billions
> of people.
>
> The unpredictable nature of government response is the overarching
> factor in the intermediate term IMO. Having said that, there are
> mathematical realities related to standard of living, capital flows
> and currencies that I believe that will be observed on the other
> side of this event. In other words, long term I think I know where
> we're going, but intermediate term I don't know what the road that
> takes us there will look like, and government intervention is the
> reason I don't know.
>
> Keep speaking and writing, Peter, I need your input.
Peter and half a million others called housing.
On Feb 09 02:35 AM bcncv wrote:
> I agree with your assessment of required foreign money flowing into
> treasuries, but not necessarily the conclusions. Foreign capital
> will continue to seek the safety of treasuries until there is actually
> a better investment out there. Where else can it go? Europe? Japan?
> China? Emerging Markets? Until there is something else out there
> that is considered "safe", I don't see this money going anywhere
> else. Even then, the general consensus (right or wrong) is that the
> US will lead the world out of this recession. If that turns out to
> be true, the foreign money in treasuries will shift into US equities
> very quickly.
>
> For those thinking China will be a magical economic story, I think
> you should revisit that thesis. Compare it to the US in 2006, with
> overextended credit, poor risk models, and insufficient due diligence
> on loans. Then multiply that absurdity by 10,000 and you have China.
> While visiting China, I got to see exactly why the Chinese (those
> that can) keep their money in US treasuries and NOT in Chinese securities.
----------------------...
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On Feb 08 12:48 PM Dave Wrixon wrote:
> No, you don't have money to burn. Every dime must count.
>
> I am utterly against the tax cuts, because I don't believe they achieve
> anything useful. There is no such thing as a free lunch, and tax
> breaks send totally the wrong message to the people, many of whom
> need to get their butt into gear and get a proper job.
>
> I am 100% behind infrastructure investment because most of it is
> needed anyway if you are to have a competitive economy in the longer-term.
>
>
> I work on highways in the UK. The money that could be save by investing
> adequately in the first place is unbelievable. Can you imagine how
> much it costs to maintain infrastructure that is already at breaking
> point? Everything is done piecemeal in the middle of the night, often
> in freezing temperatures. Do you really think that is effective use
> of Government money.
>
> Having said that if you invest when the economy is on its knees,
> you do tend to reduce costs. If contractors are struggling to make
> ends meet, it surprising how much they will sharpen their pencil.
>
>
> Also you must remember that lost momentum in the economy cost the
> Government dearly because of increased social cost when the tax base
> in shrinking. For the stimulus to have an impact you need to have
> a Keynesian multiplier as high as possible. In other words the Government
> spend induces additional private sector spend that exceeds the usual
> wastage. Only infrastructure projects will deliver that multiplier.
>
On Feb 08 09:22 AM prudentinvestor wrote:
> I agree with all the trends you describe, but expect them to happen
> to a much lesser extent, at a slower pace, and without extreme catastrophic
> consequences. The global system has too much damping built in for
> a meltdown in the world's largest and most powerful country.
How long does good ole Pete get for this to all unfold? 5 years, 10 years, 30 years?
This guy is a salesman. He doesn't care what happens to the US but yet some of you herald him as a wise sage.
Why do we let investors like this get away with saying "My strategy isn't for the near term, give it time and it will work" without providing how long that time is, while with companies, many of which are failing in the short term just like Peter.
I for one root much more for companies to get out of their short term troubles and return to solid ground over Peter and his 100% certainties. The guy is upset Austrian Economics isn't practiced in the world today. Plain and simple.
Maybe we can give Austrian Economists a country to live it. It would be great to visit when after 20 years there is mass internal wars over the lack of any forward mobility of the economy and society due to the fact its tenets are based on a static population and a petri dish economy of robotic humans.
So just ask yourself how long you're willing to give Peter for his plan to come to fruition...hopefully you'll still have some wealth left by the time it comes around cause so far he's a failure.
Globalization is going to win out in the end...It may take some time and it will have its ups and downs...
The buyers are currently experiencing massive reductions of equity in their homes which necessitates an equal but opposite reduction of wealth from the original seller of the home who in most cases participated in fraud to get their homes appraised at much higher values then they were actually worth.
This is what I call "Resultant Equity Equalibrium". To achieve this the US Dollar has to fall and we must jump to hyper inflation. There is no avoiding this.
Short the NYBOT US Dollar, sit back and watch the fireworks.
Enjoy!
The Lobster
You failed to realize that the only thing capable of calling the dollar a fraud is gold, and the gold market is small enough at present so as to be easily manipulated by the fed. Given that foreign currencies that make up the USDX are themselves fiat currencies which are arguably in worse shape than the dollar is, and given the destruction in wealth that is occurring worldwide which will temper gold purchases, it is no wonder that the dollar still appears strong. This could last for some time before the print-o-nomics of the US drive an overwhelmingly large amount of people into the metal and once they are in it (especially via concentrated gold repositories like GLD ETF), the gov't can just confiscate it all again in the national interest.
Tony down at the docks is no kind of gangster relative to uncle sam.
Just as Mish Shedlock has pointed out, there are multiple pieces of the money pie. Currency is one, and the Fed has assuredly increased its supply. However, Credit is another, and credit is an order of magnitude larger than currency. If credit is contracting faster than currency expands, the net is an increase in purchasing power (disinflation or even deflation) - perfectly in agreement with economics.
Until PS incorporates this fact into his analysis, I will find his conclusions suspect.
On Feb 08 12:43 PM Ian R. Campbell wrote:
> I find Schiff’s comments interesting. In the past few months as the
> U.S.$ has strengthened, U.S. consumers have lost further confidence
> and are spending less and saving more than they previously did. If
> Schiff is correct in his observations, it seems to me that unless
> U.S. job losses are quickly curtailed and the U.S. consumer gains
> confidence and again spends, Schiff’s scenario has the abyss in site
> and the locomotive moving down the track at full speed with a comatose
> driver at the helm.
>
> I think all Americans should be writing to their Congressmen, Senators
> and other elected officials to get the selfless message through that
> the Administration needs to divert all possible budget and other
> monies in the immediate term to improving the lot of the American
> consumer. The American consumer must start spending again. To me
> the American consumer spending again is the only obvious available
> key to U.S. economic recovery.
You've missed my point:
1. I do hold Gold, there's a place for it in my portfolio. I just don't worship it. It's a dead store of wealth as it generates nothing for me;
2. Brown was right in 2001, the US Dollar Index had topped out that year and it was an excellent year to dump gold. You mention that he dumped it at $250/oz. What you fail to mention is that the $250 referred to "2001 US Dollars", the buying power of a US Dollar in 2001 was over 40% more than is today. It's incorrect to compare gold's $1000/oz price in 2008 and think that gold appreciated by 400% since 2001. It absolutely did not. If it did, then an ounce of gold would buy 4x as much oil as it did in 2001. It does not, not even close. If the gold/oil ratio is anything to go by, oil is set to rocket and gold set to dump when viewed over the next 24 months.
As for your XLF comments, if it goes to zero, you won't have a vault to store your yellow metal, nor a functioning country. I suggest you lads sort out that problem in a hurry.
I maintain that the XLF will outperform gold, on a % basis, over the next 24 to 36 months. Gold belongs back below $500/oz, ready for the next generation of suckers.
His advice to invest abroad kind of misses a large part of the crisis, in that it is global. Every market has been hit. Peter should just drop this part of his argument and he would become far more credible.
As for the course of this crisis.When the job losses mount up, and savings run dry there will be a tipping point / multiplier effect on the economy which I haven't seen adequately expressed anywhere yet.
I think the stimulus plan is a parachute plan, nothing more. Its not inflationary as yet because the velocity of money has been decreasing.
Inflation will signal that the economy is on the first step to recovery. confidence returning and consumers are spending / investing / speculating again. This is when holdings in commodities will be truly valuable. If inflation becomes hyperinflation, then we have made a false start, and we'll need to go back to square one again.
Remember, the vast majority of the worlds debt is held in dollars. It is not going to vanish overnight. But, keep your dollars under control in case a weakening trend becomes apparent.
In the meantime, now isn't a great time to do business, but it is a great time to get back to the fundamentals of life, spend time with your family and enjoy yourself (without spending money).
I was playing a coin racing video game the other day at the movie theater. It was hard of course because if I slightly swerved my car to the left I'd have to swerve even harder to the right to keep the car on course which then in turn caused me to have to jerk the car even further to the left until inevitably I crashed. This is the course the US economy has been on for some time. The Fed is losing control because interest rates can only go so low and fighting inflation now requires ever larger interest rates.
In theory the Fed can reduce the supply of currency by buying it back. But what do they buy it back with. Surely the US Government isn't going to return any dollars for their treasury notes. So they either sell their treasury notes or they sell all the junk debt they just bought. We may find that the FED can't buy back as much dollars as they will need to, to keep inflation in check.
Of course things can only deflate so far. Prices will not drop forever. At some point demand destruction leads to supply destruction and the standard of living will drop.
I think this is the point that I've heard several others make recently. The US government is trying to stimulate demand that has always be debt based demand or a temporary demand. Rather they should try to stimulate supply. Lower prices will result in true sustainable demand. So I guess I'm more of a supply sider.
The argument between supply siders and demand siders is simple. Its kind of like the chicken and the egg argument only much easier to solve.
Man works then man buys. Man can't buy anything if there isn't anything to buy. So first comes work then comes the buyer. We need to keep people working. Even if you find yourself unemployed just keep working. Fix up your house, start a business, etc...
On Feb 09 09:17 PM betweenthenumbers wrote:
> "Even though the Federal Reserve has thrown trillions of new dollars
> into circulation, those dollars have actually gained purchasing power
> - contrary to economic law."
>
> Just as Mish Shedlock has pointed out, there are multiple pieces
> of the money pie. Currency is one, and the Fed has assuredly increased
> its supply. However, Credit is another, and credit is an order of
> magnitude larger than currency. If credit is contracting faster than
> currency expands, the net is an increase in purchasing power (disinflation
> or even deflation) - perfectly in agreement with economics.
>
> Until PS incorporates this fact into his analysis, I will find his
> conclusions suspect.
He made it abundently clear "HE had no control over their accounts--he's a stock broker and nothing else." In other words, he does NOT manage their money and is NOT respsonsible for their results.
Now he, according to this article "I have positioned my clients to withstand the full fury of the gale"
So let me get this straight. When his clients LOST 40-60% of their account balances in 2008 it was THEIR fault, but now he has taken over his clients accounts, positioned them to "withstand the gale" and IF gold rallies and the dollar tanks he IS 100% responsible for their good fortune.
In my 10 years of debating Peter on dozens of television programs, the ONE take away that has been constant along with the parables of Dow 400 and complete collapse of the American economy with little or NO impact on emerging economies is his rhetorical jujitsu over credit and blame.
On the shows I have appeared with him on he had NEVER been wrong about ANY call...just early.
Can't have it both ways Peter.
If even some of what Peter predicts comes to pass the results will be so non-linear in nature that all his best positioning and prognosticating won't prove any greater than just rolling the dice.
Not surprisingly, nearly all the Schiff faithful I encounter tend to also suffer from overconfidence bias, arrogance about their own ability to predict the future, and the delusion that they have never been wrong about anything.
I think you do a great job on Fox's Saturday morning line-up. Please call Peter out on the point you just made the next time he's on.
On Feb 11 09:56 AM TSmithDC wrote:
> Isn't it interesting that when Peter was on FBN's "America's Nightly
> Scoreboard" with me he made the point over and over that "EuroPacific
> is a stock broker", the "He is a stock broker and does not have a
> dime of discretionary money under management."
>
> He made it abundently clear "HE had no control over their accounts--he's
> a stock broker and nothing else." In other words, he does NOT manage
> their money and is NOT respsonsible for their results.
>
> Now he, according to this article "I have positioned my clients to
> withstand the full fury of the gale"
>
> So let me get this straight. When his clients LOST 40-60% of their
> account balances in 2008 it was THEIR fault, but now he has taken
> over his clients accounts, positioned them to "withstand the gale"
> and IF gold rallies and the dollar tanks he IS 100% responsible for
> their good fortune.
>
> In my 10 years of debating Peter on dozens of television programs,
> the ONE take away that has been constant along with the parables
> of Dow 400 and complete collapse of the American economy with little
> or NO impact on emerging economies is his rhetorical jujitsu over
> credit and blame.
>
> On the shows I have appeared with him on he had NEVER been wrong
> about ANY call...just early.
>
> Can't have it both ways Peter.
Also, come 2012, there's the demographic tsunami coming... no one here's talked about that yet.
George Soros - Permabear- up 10% 2008
Nassim Taleb - Permabear- up 55-110% 2008
"Res ipsa loquitor"
Look it up Petey. Probably didn't get to that chapter at Bezerkley...
> and conviction.
I would if I thought this was courage, but I believe there is a conflict of interest here. And being on TV and giving "radical" predictions is exactly what a fund manager would need to do to get a certain amount of fame, to find his followers. There are a million fund managers out there and to get noticed you need to come out and say something that will resonate with some people. Peter was good at that and he got his following.
Those people who invested money with him may have underperformed during bull markets because of his "crash proof" strategies but that's ok. Now when the crash finally came (it always does eventually) and they still underperformed you just have to wonder how "crash proof" those strategies really are.
What Peter says makes a lot of sense. He is smart and educated and it shows. However, I don't think any of it has to do with courage. Madoff on the other hand, that's courage! :) Just kidding.
My opinion is that the internet caused the bubble, built over 100 years, to burst. The abundance of information available to everyone exposed many corporations' devious ways. The means of creating economic strength is also no longer an international mystery. We have to stop pretending we have "an edge," and work longer and harder (with specific goals...) than anyone else. There are fewer mysteries than people wish to believe and many need to stop scratching their heads so we can produce something.
On Feb 08 07:16 PM Vladimir Senkov wrote:
> Peter, for as long as I can remember, you were predicting "the crash".
> And I actually agreed with you, I was as sure as you were that the
> crash is going to come. What I didn't know and I believe neither
> did you, is exactly how bad the crash was going to be and exactly
> when it was going to happen.
> I was assuming that the public generally disagreed with your views
> and invested in the market, so I was expecting your clients to outperform
> the average joe when this crisis you were predicting was finally
> beginning to unfold. I guess I was wrong.
>
> What you say makes a lot of sense, but it doesn't have much predictive
> power.
> I hereby predict two things:
> 1) "the market" will reach new highs
> 2) "the market" will crash to new lows
> Both statements are true because i haven' told you how i define and
> measure "the market" and when 1 and/or 2 is going to happen.
> However, neither statement has any predictive power.
> The only real test of predictive power is long (as in forever) term
> return. IMHO, Buffet stands up to this test so far, but recent performance
> of some of your clients casts doubt on your ability to stand up to
> this test.
> Although these recently publicized returns do not prove anything,
> neither do your attempts to rationalize them.
>
> I guess for a money manager it's not nearly as important to be factually
> right as it is to be able to convince other people that you may be
> right, otherwise one would just manage his/her own money and not
> have any clients. I guess that's why so much energy and time is spent
> constantly debating if Peter is right and when and how it may be
> considered "proven" :)
> This is where PR comes in. This imho explains that predictions need
> to be as bold as possible. No, it's not just a market crash, it's
> an Armageddon! Otherwise who would be interested, how would the celebrity
> status be obtained? Where will the new clients come from?
> I believe some of your "predictions" are influenced by the this conflict
> of interest. Please correct me if I'm wrong.