Peter Schiff sent out this letter today to his investors. It's scary, daunting and depressing (literally) Video & rest here: http://www.newmogul.com/item?id=1002
While I appreciate his concerns and share many of them to a considerable extent, IMO he is wrong about hyperinflation. For all the jokes made, the US is nothing like Argentina - the quantities of debt held externally are mind booglingly large - any attempt to hyperinflate out of this mess will hit a brick wall within two Treasury auctions. Barring a miracle of foresight and international cooperation, the way this will end is with a sever contraction in government spending and a hell of a nasty recession. How long that recession lasts will depend entirely on how quickly the citizens and political leadership can come to terms on a prudent fiscal policy. IMO it is extremely likely virtually all defined-benefit and gov't (fed & state) pension funds will have significant "redefinition" of benefits as PBGC is as underfunded as FDIC. Ditto for Social Security. Medicare will not, IMO, survive at all, and will be replaced with a quasi-private insurance solution along the lines Obama has suggested. Defense spending will be greatly curtailed. The bills are coming due. All that said, the sun will still come up every morning. Life keeps flowing...
Peter sounds scared. He must have been totally killed this year. a) Long gold mines = killed b) Long MLPs & Canadian Royalty Trusts = killed c) Short USD = killed (Peter: "The USD will goto zero, buy foreign stocks as you are not exposed to the imploding USD then". Problem is foreign stocks went down much harder than US stocks. Emerging markets have been killed. Emerging market currencies imploded 30, 40% in the last 3-4 months.) d) Long coal miners = killed (I remember Peter was running his mouth in 2007 of how 'The new gold is black, buy Canadian coal stocks!!!!') e) Long China stocks = killed f) Long physical gold is still standing. Let's see how that shapes up for the rest of the year. Silver is down 55% from the March 2008 peak. I don't see why gold can't follow suit. He's delusional. The UK, Germany, France are bailing out banks and tinkering with the economy. The ECB and BOE started cutting rates in panic. Bail outs and interfering with markets aren't purely a US phenomenon. Read: "I was completely wrong and lost you money, but heck, I think I will still be right like I always am!!!!"
at least in one thing he is right, there are better places to invest compared to US, I think China is one of them (very long term). People there have no dept and the gouverment has lots of fire power because they have so much cash on hand (1 Billion US-Dollar allone). You will have to avoid US-Bonds though, I think they will get slaughtered.
Governments ready for you . They may do shit to protect you, but they are ready to protect themselves from you. March 13, fourth set of secret Congressional meetings in the history of the once great US. 3rd ID coming home to train in tactics like 'crowd control.' 6 Executive Orders dealing with Martial Law. All documentable facts. BTW. Our wonderful leaders in Washington, I am told by those paid to express the interests of Companies that retain them, are afraid to walk down the street. They well full realize that all it takes is one guy, 401K in the drink, no job, divorced, to flip over the edge.
He's wrong for many reasons, but the over all reason is that markets are now global. People who tried to find shelter in foreign markets lost just as much $$$. The EU is down about 40%, same with japan, china even more, brazil with its energy independence is down 57%? percent. "Foreign" markets barely exist anymore. We are one great big huge global market now. LEH failed at 31 to 1 leverage. Some of the EU's biggest banks are at 61 to 1 leverage. They made all the same mistakes and even worse. What we are seeing now are hyper-boom-bust cycle since modern electronic markets and arbitrage have linked all markets so tightly. You have a world of lemmings all following one another that will create bubbles and busts like we have never seen before. This is why even gold and oil failed as a hedge. They are barely commodities now. Instead, they are liquid trading instruments and when all the lemmings hit the sold button at the same time, they too crashed. This high speed drop was caused by shear panic. Everyone all over the world took their money out at the same time and its sitting in cash in brokerage accounts everywhere waiting to be invested somewhere after things cool off a bit. With the threat of inflation everywhere, its going to start pouring back into the markets shortly and you are going to see insane rallies like we have never seen before, once again causing by the global lemming effect, where everyone starts buying at the same time. I just feel sorry for the weak hands that washed out at 40% down and will get left behind.
you nailed it. People will realize that Cash is just another asset and Cash with all the money now beeing pumped into the system (and you can never get it out again) will be the worst asset class during the next 10 years. It is possible that we see a very short lived deflation but it will probably last only a year.
I don't fear the financial distress as much as I fear the racial riots after the election. Damn if Obama wins and Damn if McCain wins.
After watching the video you can see how out of touch and DEAD WRONG that Art Laffer was on the economy. It's sad that guys like that have the ear of policy makers. Schiff's message of returning to saving, investing and producing is dead on. If one of the presidential candidates latched on to this message, it would definitely fly with the American public at this point.
Agreed traderdragon2. Believe this will be a challenge for traders - adjusting to the "quickening" of movements on all timeframes. Find myself being correct about the next swing, but reacting at the speed that was optimal last time around - too slow. It will be interesting to see if the increasing speed of market movement is a just another bubble as well...