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

by: Tate Dwinnell

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.

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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.