Peter Schiff

Gary Shilling: Say Goodbye to the Great Gatsby Era

Thanks Mark, lots of comments -- at least we started a good discussion. So far 2009 seems to be going our way. Perhaps by the end of 2010 this debate will be settled.


On May 15 01:18 PM TraderMark wrote:

> Hi Peter, I didn't flesh out the thought - it was "wrong in 2008"
> (latter) - the US Dollar strength and weakness in foreign equities.
>
>
> You were very right in 2006 and 2007 and I've been following your
> thoughts for a long time. Hope that helps to explain, I didn't expand
> on my thought completely and the wording above makes it look worse
> than it was ;) My comment was Schilling nailed the 2008 themes to
> a tee, unlike most of us who thought this egregious behavior would
> smash the dollar.... also there was no oasis in foreign stocks which
> on a relative basis was a theme.

Gary Shilling: Say Goodbye to the Great Gatsby Era

The subtitle to my book is "How to Profit from the Coming Economic Collapse" not the coming "stock market" collapse. That collapse is only just getting started. By the time it ends, I'm sure those who follow my advice will indeed profit.

On May 15 12:12 PM Robotto wrote:

> Peter,
>
> Your book is called "Crash Proof". "Crash" does not happen over years.
> "Crash" is something that happens quickly. Your are supposed to protect
> your clients from the "crash", which happened last fall. So, you
> can't suddenly claim that your definition of "crash" is something
> that takes years.

Gary Shilling: Say Goodbye to the Great Gatsby Era

The above comment is simply wrong. While some of my accounts were down 60%, most were not. Many who were down big in 2008 simply gave up profits earned during prior years and were still ahead. I just spoke with one client today whose account was down by over 50% at the lows last year, but whose account is now down by less then 25%. He did not add any money or rebalance any positions. He did however reinvest some dividends (the only cash he held in this account) that had accumulated.

The point is that despite being fully invested at the top he has already recovered half his paper losses in just a few months. Who knows what this account will be worth in a few years? My guess is that over time it will deliver a solid overall return, despite poor short-term performance in 2008.

Since all accounts are different and self-directed, I cannot hold any one account out as being indicative of performance of all my clients. However, as I cannot point to my best accounts to defend my investment strategy, my critics should not point to the worst performers to discredit it.

Gary Shilling: Say Goodbye to the Great Gatsby Era

Why do you accuse me of getting the investment theme wrong? I started preparing my clients for this crisis many years ago. Since the late 1990’s I have advised investors to get out of the dollar, own foreign stocks instead of domestic stocks, and own gold and other commodities. My major theme has been that the U.S. borrow and spend economy was a bubble that was destine to burst. I believed that economic dominance of the global economy would shift east, and I stressed China and natural resources. Thus far over the past 10 years, that advice has worked out extremely well. However if you judge my strategy based solely on how it preformed during the most recent major correction, you reach an unfair conclusion as to its effectiveness. Judging my long-term investment strategy based on a few bad months in 2008 is analogous to judging Warren Buffet’s performance based on the results achieved from Aug 1987 to Nov 1987.

Also, you need to look at how well my strategy has preformed since Oct. 2008, which marked the low point for most of my stocks. Since I advised investors to keep some powder dry to take advantage of short-term dips that might occur in foreign markets as a consequence of our economic problems, many were able to take advantage of what so far looks to have been an incredible buying opportunities.

Also by only looking at one part of my investment strategy you overlook other parts that did well in 2008. Do you realize that I helped form one of the only hedge funds in the nation that was established specifically to short subprime mortgages? We formed the fund in late 2006. My clients provided the seed capital for that fund and you can only imagine how well it preformed. I also advised shorting many U.S. stocks, specifically financials and homebuilders.

For whatever reason several people who post on this site seem to get some kind of satisfaction in criticizing the performance of my investment strategy despite such criticism being completely unwarranted by the facts. That’s fine with me, as I would rather make money while being publicly criticized for losing it, then lose money in obscurity.