Here is my problem with the praise being heaped on Peter Schiff. Watch the following video. Disclosure ("none" means no position): Long GS, GE, WFC, none
Great, right? No.
The problem? Here is Schiff in 2002: Schiff predicts Nasdaq 500 and Dow 4000
Now, had you listened to Peter in 2002, 2003, 2004, 2005, 2006 or even 3/4 of 2007, you lost your shirt. Had you placed bets based on Schiff's market calls, you lost everything you wagered.
The S&P (.INX) went from 1054 in May of 2002 (the date of the interview) to 1561 in Oct. 2007, a 48% gain and the Dow (.DJI) rose 40%.
Banking stocks, the primary victim of the housing bust, went up (JP Morgan (NYSE:JPM) 36%, Bank of America (NYSE:BAC) 41%, Wells Fargo (NYSE:WFC) 39% , Wachovia (NASDAQ:WB) 31% and American Express (NYSE:AXP) 51%) during that time frame (dividends excluded which would dramatically add to results).
Bottom line? Had you listened to Mr. Schiff at anytime before Oct. 2007, you lost...big. To those who did, there is little consolation in the praise being heaped on him today.
Milton Freidman said, "markets can stay dislocated longer than you can stay solvent." For those who bet with Schiff between 2002-2007, they know the statement well.
Why is it a big deal? After all, Berkshire's (NYSE:BRK.A) Warren Buffett claims he cannot time the market and often watches share prices decline in investments (like recent investments in Goldman Sachs (NYSE:GS) and GE) before a rebound. How is this any different?
For one, Warren's loss is limited to his investment. He buys 1 share of stock "a" at $25. $25 is the most he can lose.
Now, if we listen to Peter and "short" stock "a" at 25, our loss has no limit. If it goes to $100, we lose $75. In shorting, we are only limited in our upside. If "a" goes to zero, "Schiffers" profit $25.
Buffett's strategy is an investing one and Schiff's is a trading and timing one.
Buffett followers can hold their shares, collect their dividend and wait for the rebound. Schiff followers collect no dividend and watched for over 5 years as their bet went wrong. How many stuck around? How many shorted into every market drop or "presumed" top over 5 years, only repeatedly losing money as the market kept rising and Schiff kept pounding his message home?
Schiff should not be getting the praise he is getting today for being "so right" after saying the same thing and being "so wrong" for the previous 5 years.
Disclosure ("none" means no position): Long GS, GE, WFC, none