In a vicious attack, Mish uses a poor performance by Schiff portfolios over the last year to twist and turn the knife.
...most of the praise heaped on Schiff is simply unwarranted, and I can prove it.I think this is a cheap shot.
First, let's start with a look at the claim being made. Peter Schiff concludes many of his articles, books, etc. with the following statement.
Mr. Schiff is one of the few non-biased investment advisers (not committed solely to the short side of the market) to have correctly called the current bear market before it began and to have positioned his clients accordingly...
I would like to see some proof of that statement. Specifically I would like to see the average returns posted by EuroPacific clients for 2008.
I have talked with many who claim they have invested with Schiff and are down anywhere from 40% to 70% in 2008. There are many other such claims on the internet. They are entirely believable for the simple reason Schiff's investment thesis was flat out wrong.
As Mish should know, one of the toughest things to do when it comes to investing is to get timing exactly right in the short-term. To point to an investment track record over an isolated period of less than a full business cycle is an extreme disservice. Schiff's portfolios are down big over the last year, so what? Warren Buffett's Berkshire Hathaway is down by more than 40% from its 52 week peak. Does this mean Buffett is a clueless investor? Based on Mish's logic used against Schiff, investors should probably be selling short Berkshire Hathaway for the rest of their lives. (Note: Not recommended for the truly sane.)
Further, Mish distorts Schiff's investment philosophy. It just so happens that an EPJ reader sent me, a few weeks back, a clip of Schiff defending himself on his radio show against an irate caller/investor who had lost money investing with Schiff. What stood out about the call was Schiff's defense. It was quite remarkable. He asked the caller who he clearly didn't know, "Are you still getting dividends from the stocks in your portfolio?"
So Schiff had hedged against the possibility that he might be wrong, or early in his investment strategy, by buying dividend paying stocks. Nice move, I thought to myself when I heard this, very nice. Schiff was humble enough in his investment thinking to lock in solid yields in his investments, so that if things went wrong, at least his clients could sit and collect dividends while things turned around. Folks, this is an investment adviser who has his clients interests at heart. Things have gone wrong, short-term, in Schiff portfolios, but his clients have locked in yields that, I'm guessing, were locked in at very high rates.
As for Schiff's overall philosophy of investing in non-dollar denominated foreign stocks, it is sound. It is based on the belief that US monetary policy is out of control and that the government will attempt to print its way out of disaster. This money printing will ultimately lead to major inflation in the US and a crash of the dollar. Thus, high quality foreign stocks are exactly where you want to be.
The poor performance by Schiff portfolios last year was a result of Fed chairman Bernanke being so clueless that he didn't know how to properly, from a technical perspective, inflate the money supply. Money growth stopped all summer, this was a major reason behind dollar strength. Bernanke finally got the money printing mechanics figured out, and his outrageous money printing over the last couple of months will ultimately crash the dollar, and Schiff has his clients perfectly positioned for this.
It is pretty outrageous for Mish to attack Schiff and scare investors who are following Schiff. Schiff's investment philosophy is sound, and will prove very correct. Ultimately, what Mish has done is attack Schiff the way Laffer and Stein did, earlier, (Although Mish is scared enough of Schiff's analytical skills to not go completely against Schiff's call, and, thus, Mish hedges all over the place). But when all is said and done, Mish will sadly look like Laffer and Stein by attacking Schiff.
I'm sure Schiff has downloaded Mish's attack. He'll bide his time and wait for the dollar crash to begin and mash Mish in a marketing piece, just like he did Stein and Laffer.