Forbes vs. Peter Schiff: Petty Smackdown

Forbes magazine:

"Herein is a formula for making a lot of money as a money manager. Have a shtick, get known, wait for your sector to get hot. In the 1970s James Dines acquired fame and fortune by being a gold bug. In the 1990s George Gilder minted money as a fan of technology stocks. In the past six years Renee Haugerud's Galtere International Fund (FORBES, Jan. 20, 2003) has grown from $1 million in client capital to $1.5 billion by being in commodities...

That was the reductio ad absurdum paragraph from what I can only describe as a really weird hit piece from Forbes on Peter Schiff. I'm not sure why they took this route, but the column is rather unsatisfying in both its critique and its proof:

"Schiff's Chicken Little take on the U.S. economy--that it is on the brink of collapse--isn't new. He's been serving up the same spiel for a decade. But these days he's getting more applause than eye-rolling from jittery investors. He's also getting a lot of attention from financial media outlets, in part because he has mastered the delivery of three-alarm sound bites. ("The consumer is in great trouble!" "Things are worse than in the 1970s!")

Schiff perfected his rant in stock newsletters in the late 1990s, when few investors had heard of him or Euro Pacific. He posted commentaries on his Web site and started sending them to CNBC. His first big media hit came in April 2005, when CNBC asked him to appear on Squawk Box. Schiff faced a hostile panel when he said the dollar would lose half its value--which still hasn't happened. That first interview ended with the host, Mark Haines, saying: "I don't know whether to shoot him or shoot myself."

Now, if Schiff is really such a perma-bear who has been negative and wrong on US stocks for 10 years, that would be worth discussing. There must be 100s of examples of his bad calls if that's the case. But oddly, Forbes cites exactly zero examples online (I haven't seen the dead tree version).

Such bald accusations make for poor journalism. If you are going to make that claim, then back it up. Is it asking too much to pull a few wrong trades as evidence? Can you show me the guy was Bearish on Tech in 1998, hated dividend payers in 2002, avoided oil firms in 2003, sold industrials in 2004, dissed the miners in 2005, shorted exporters in 2006? Just imagine what a similar hit piece on Jim Cramer would have to include.

Anyone who works on Wall St. long enough should be able to pull a long list of pretty bad calls over the years (my own list of market boners is extensive). If you are any decent at running money/doing stock or market analysis, however, the good ones should outweigh the bads ones.

What's so very odd about this whole affair is, at its core, a critique of a strategy that is making investors money. Weird.

I'm not looking to defend Schiff -- he's a big boy, and can do that on his own. My beef is with Forbes -- it's a sloppy work.

What I was singularly disappointed with involved the lauding of George Gilder's 1990's success. What Forbes failed to mention was what came after: From 2000 forward, Gilder's readers lost 44%, then 43%, then 56% in each successive year [WSJ]. Apparently, it was okay for George Gilder Newsletter to lose 89.4% of his readers' money, because he was permanently bullish.

Oh, and one other thing: Gilder's newsletter is a joint publishing venture with Forbes, another disclosure also somehow misplaced in the column. Shame on Forbes for omitting that disclosure; if Schiff had done that, it would be worthy of an SEC/NASD investigation.

According to this article, making money by identifying risk is somehow not good, but losing nearly all of it by cheerleading the tech bubble is A-okay. That doesn't seem very much like the Forbes "free market" ideology I know from over the years. Then again, it is an election year.

Capitalist tool? The article makes them look more like capitalist fools to me . . .

UPDATE: February 23, 2008 9:29am

Schiff discusses the Forbes piece in a radio interview here.

Source:
Spin Cycle
Michael Maiello
Forbes, 03.10.08

Previously:
Where Are They Now: George Gilder
MARCELO PRINCE
WSJ, May 8, 2006

George Gilder: So THAT explains it
Tuesday, May 09, 2006 | 07:15 AM

Gilder Technology Report
Gildertech: "GTR is published by Gilder Publishing, LLC in association with Forbes Inc., 1996-2007"

Comments

[Bhakta:]

A year ago, Tobin Smith of "Change Wave" blasted Mr. Schiff. Now, Tobin has joined the Bear Camp solidly and should apologize to Mr. Schiff. From what I have read, Schiff saw a lot of things happening, well before others took note. Give the man a bit of credit!

2008 Feb 24 09:33 AM

[sliman:]

Barry
How about your bad calls. Big drop for S&P in 2005 to name one. What happened? How about setting up a simple list of your calls for all of us to judge?

2008 Feb 24 11:37 AM

[Greg in Al:]

Sliman, Barry openly admits in this article he has made some bad calls. But Cramer takes the cake.

I will give Forbes a point about one thing: even a broken clock is right twice a day. Having said that, I lean much more towards Schiff's camp more than I lean towards the Wall St cheerleaders. I don't consider myself a conspiracy theorist but you have to wonder why some of these industry experts think it's just fine to lose our manufacturing base and finance our way into a false sense of prosperity.

Schiff has really helped raise awareness of some of the root economic problem this country has. The sooner we really deal with them, the quicker we can continue with true healthy economic growth.

2008 Feb 24 12:32 PM

[Steve in SC:]

Based on Peter Schiff's investment philosophy, I will be able to retire soon if I wish to do so on an income of growing dividends from foreign stocks. The drop in the US dollar yesterday gave me a huge increase in stock value and also dividend payout value.

The reason behind the hit job on Peter is nothing more than the establshment Wall Street cheerleaders cannot stand the competition of his insight based on helping his clients.

2008 Feb 28 02:24 PM

[otbricki:]

Peter Schiff has predicted 20 of the last 2 recessions. He has made up his mind what will happen, and no facts will change his position. He admits being an Austrian School economist, which is equivalent to admitting being a village witch doctor.

2008 Dec 16 08:02 PM

[Michael B.:]

The author does not even understand the position he is attacking. Schiff is not a day trader -- he evaluates the inherent value of a company, not what Wall Street might THINK a company is worth next week or next year. Schiff never touched the tech bubble because he understood that those companies were all way overvalued. It didn't matter if they went higher because he knew eventually they were headed for a collapse.

Schiff has a very solid understanding of market fundamentals, and he knows how these fundamentals will play out in the long run. That is completely different from a Jim Cramer type who tells you that GOOG is going 800 by the end of the year.

Jan 24 08:21 PM