Peter Schiff Wrong SO many times/
Sorry, I should have kept my earlier thread "Peter Schiff was wrong". I will be sure to
keep this one up and running and added to as i find out new things over the next months.
For those who dont know, Peter Schiff is an economist and follower of the Austrian school
of economics. He is one of S&L's favorite economists. He might even be in love with him?
Not in a sexual way of course.
Among his most recent predictions: For 2011 he predicted a catastrophic collapse of the
U.S. stock market in Jan. 2011, he predicted HYPER inflation, and he predicted interest rates
on 10 year notes would climb to 6%. For the next 2 to 3 years he is predicting that
either Gold will reach $12,000 or the Dow will fall to 1,400. I believe S&L called this
a "brave" prediction. Of course, he supported the U.S.defaulting on the debt, so together with all his fellow Republicans (who seem intent on sabatoging the economy in my opinion) he might actually make this last prediction come true. :)
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 (JPM) 36%, Bank of America (BAC) 41%, Wells Fargo (WFC) 39% , Wachovia (WB) 31% and American Express (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 (BRK.A) Warren Buffett claims he cannot time the market and often watches share prices decline in investments (like recent investments in Goldman Sachs (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.
Is the Collapse of the U.S. Dollar Imminent?
Here is a very fair and balanced assessment of the possible collapse of the dollar. Some may not like Schiff because he is contrary to their political positions, but it is simply ignorant to ignore his concern about the value of the US dollar.
What Would Cause the Dollar to Collapse?:
Several conditions must be in place before the dollar could collapse. First, there must be an underlying weakness. Second, there must be a viable currency alternative for everyone to stampede into. Third, a triggering event would need to occur.
The first condition does exist. The dollar declined 40% against the euro between 2002 and 2011. Why? The U.S. debt more than doubled during that time period, from $5.9 trillion to $14 trillion. This increases the chance the U.S. will let the dollar's value slide, allowing it to repay the debt with cheaper money.
Is There a Viable Alternative to the Dollar?:
The dollar became the world's reserve currency when President Nixon abandoned the gold standard in the 1970s. The dollar is used for 43% of all cross-border transactions, and 61% the world's central bank foreign currency reserves are in dollars. The next most popular currency? The euro, which comprises only 30% of reserves. Although it is increasing rapidly, it is still less than half the amount held in dollars. China and others have argued for a new global currency. However, replacing the dollar would be a massive undertaking, would require great global resolve and not happen quickly.
What Event Could Trigger a Dollar Collapse?:
Altogether, foreign countries own $2.4 trillion in U.S. Treasuries. If China, Japan or other major holders started dumping dollars on the secondary market, this could cause a panic leading to collapse. China owns more than $1 trillion in U.S. Treasuries. That's because China pegs its currency, the yuan, to the dollar. This keeps the prices of its exports to the U.S. relatively cheap. Japan owns more than $800 billion in Treasuries, also keeping its currency, the yen, low to stimulate exports to the U.S. Japan is trying to move out of a 15 year deflationary cycle, and the 2011 nuclear disaster hasn't helped.
The whole assessment is here: http://useconomy.about.com/od/critic...r_collapse.htm