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Bullitt

Peter Schiff: Investment Recommendations

Rating: 6 votes, 3.67 average.
Peter Schiff has been heralded lately as one of the few who called this financial mess we've found ourselves in. He's been calling for a collapse in the dollar and housing markets for years now and in case you didn't know, finally had one of those predictions ring true. I recently read his latest book, The Little Book of Bull Moves in Bear Markets, and I must say I enjoyed it. Sometimes, I don't think he gets the credit he deserves. For example, everyone was calling for a rebirth of the secular bull at the top in 2007 yet in inflation adjusted terms we were 40% from the 2000 peak.

It's important to note that this book was published in June 2008, right around the point of ultimate gloominess, where inflation was off the handle and oil was making a run for $200 a barrel. The thesis for Schiff's argument is that the Fed will continue to print money until it runs out of ink causing mass inflation for goods while the value of real wealth in dollar demoninations continues to deminish as it nears it's final collapse.

I actually found most of Peter Schiff's advice to be good general financial advice, but some of it tended to be a little too extreme for my tastes. Unless invested in cash, I find it hard to believe that even Mr. Schiff's portfolio was spared from the market drop of 2008. I'll list his financial recommendations below and let you be the judge.

  • Avoid all US stocks that are dependent on the US consumer unless they are in the Oil Services sector. Avoid the so called long term Healthcare/Biotech sector because when the dollar collpses, Americans won't be able to afford healthcare anyway. Instead buy foreign based dividend-producing stocks.
  • Own commodities by way of direct ownership. This means managed futures, but for the average investor the agricultural basket ETF's could substitute. Commodities are not in a bubble.
  • Buy Gold. If anything, buy gold and have 30% of your portfolio invested in in it. Buy gold bullion because it will always hold their value unlike the gold tracking ETF's which will go bankrupt when the dollar collapses.
  • Invest in foreign economies through a broker who can buy stocks directly in foreign exchanges. If you must, ADR's and Mutual Funds are an alternative but not the same as owning direct stock in a foreign exchange. Some of his favorite nations are Australia, Canada, Singapore, Hong Kong and Norway.
  • Begin buying stocks in Emerging Markets by way of a broker who specializes in direct investment. Emerging Markets will rise when the dollar collapses.
  • Begin to stockpile food and other products such as tobacco, wine and liquor so that when inflation hits you'll be able to sell them at a premium. Buying a gun to protect your storage is not a bad idea.
  • Enroll in automatic savings accounts with your bank, but don't use a savings/money market account. Invest that money in gold, foreign economies, or commodities, all of which will increase in value when inflation hits.
  • Get frugal. Don't try to keep up with the Joneses. Learn how to live off your means and never use a credit card again. Begin saving money with automatic deductions from your paychecks. Never spend windfalls or bonuses on the spot. Instead, invest them for later.

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Comments

  1. tsptalk's Avatar
    Thanks Bullitt. Peter must be a blast at parties. Talk about doom and gloom.

    Many of us are talking about another 25% to 35% drop in the S&P, and he's talking Armageddon.

    I respect his foresight into seeing what kind of an affect cheap, easy money and excess spending can have on the economy, but I wonder if his personality will allow him to adjust when things improve. That will be his true test as, to use an oldie but goodie, even a broken clock is correct twice a day.
  2. Bullitt's Avatar
    The Great Humiliator (TGH) gets everybody eventually, and that was one of my lessons learned in 2008. Schiff was raking in a killing in his investments in the commodities sector right up until the point he published the above stated book. A great example for staying humble, taking profits, and keeping your successes to yourself. Be a Barry Sanders, not a Terrell Owens.

    Like most of the 'experts' who called this mess, they are only human, and that's the basis for me being long term bullish on the stock market. Everybody makes one or two good calls that are right on, but to make them every time a turn is coming is impossible. Meredith Whitney, Noriel Roubini, Peter Schiff, Marc Faber.... These guys had their time in the sun and now that they've become household names (well, almost), their calls will be scrutinized closer than ever. It's only human nature to pile on and follow the hot hand because they bring positive reinforcement. A Perfect example was merely 7 months ago when oil was $140 a barrel. Everybody was thinking, 'Oh boy, if it goes to 140 it will go to 200. We're Screwed! Buy a hybrid'. Anybody buying Hybrids today?

    Do I believe we're heading to new highs? Not any time soon. The leverage, funds and confidence amongst investors is just not there. At some point in time, these 'experts who nailed it' will begin to lose their credibility. Besides, we all know that following the headlines for stock market advice is in no way a means to long term success in the market. It's not different this time.
  3. Bullitt's Avatar
    Peter fires back at his critics! I believe the blogger he's referring to is Mish Shedlock.

    www.europac.net

    Mainstream economists, journalists, and investment professionals have never liked my message and have never resisted the temptation to shoot the messenger. When my investment strategies were performing well, I got little credit for it. Instead, all the attention was focused on the apparent failure of my dire economic predictions to materialize. Now that the economy is collapsing along the lines that I correctly forecast, criticism is being focused on the recent poor performance of my investment strategy (a fact that I have never tried to hide). Of course by the time my investment strategy is once again in step with my economic forecasts, an event that I believe will occur sooner than most people think, it will likely be too late for most people to do adopt it.
  4. tsptalk's Avatar
    I like that he doesn't mention the blogger's name. I agree with Peter that the blogger is trying to capitalize on Peter's recent popularity - whether it was deserved or not.

    It's kind of like that Don Harold guy who spends half his life dogging Jim Cramer. Jealousy.
  5. alevin's Avatar
    Hmm. Don't know if I agree with the jealousy/attention-getter thing. Mish is pretty well known himself anymore-by people paying attention anyway. There was a tone tho in Mish's last blog that I read that turned me off. It was honorable of Schiff not to mention him by name in his rebuttal.
  6. tsptalk's Avatar
  7. Bullitt's Avatar
    At the end of the day, everybody lost money in 2008. There's no sense in trying to hide it. The market gets everyone eventually, I truly believe that. Mr. Market's objective is to make sure everyone gets humbled, and if one doesn't get humbled the first time, he'll keep on trying.
  8. Bullitt's Avatar
    An unmitigated disaster is on the horizon.



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