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333 of 391 people found the following review helpful
2.0 out of 5 stars Not exactly timely, and not exactly right, October 22, 2008
This review is from: The Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market is Down (Hardcover)
I was intrigued by Mr. Schiff's little book purports to pull back the curtain on the invisible erosion of the value of your money, your investments, the U.S. economy and our financial system in general. Let me say first and foremost that Mr. Schiff has a lot of smart things to say. Yes, the Federal Reserve is culpable and careless about its monetarist policy of inflationary increases to the money supply, especially as it helps put more air into asset bubbles (think the housing market). Yes, Americans borrow too much money for consumption that they don't really need. Yes, fiat currency is beholden to the whim of the market.

Schiff also makes some good and useful points that do not often appear in books about investing. First, he tells you how to actually invest in the things he recommends. Granted, he is often hawking his own wares (his company does many of the things he says investors must have, like stocks bought on foreign exchanges and custodial services for precious metals), but he also presents some things I'd never heard of (like that could have some utility, even if you don't buy his argument whole. Second, he gives some guidance for potential career and business choices that stand to benefit from the disasters he sees befalling the U.S. economy. Though I disagree with him on numerous points, I think his efforts here are an important part of any plan that relates to investing--that is, how you get the money you plan to invest--but are generally ignored in most books on the subject.

However, I have some serious problems with this book. Six of them. First, it looks like it was rushed to press to capitalize on the recent market turmoil. I don't think they pushed it to market in the wake of the disastrous first few weeks in October, but when everything was going to hell back in July it looked like Schiff's predictions (ever-higher commodity prices and perpetual dollar weakness) were prescient. There are numerous typographical errors, and the title doesn't really seem to fit with Schiff's premise. These aren't bear-market strategies: this what Schiff thinks everyone should have been doing back when things were swell, and he even says that he said this very thing in a previous book. So while this book has a timely title, I don't think it is as useful as it wants to be.

Second, since July, commodities have been largely in freefall and the U.S. dollar has been the strongest performing developed-market currency, undermining most of Schiff's major points. Now he would say--as I do when my own strategies meet an extended bout of resistance--that this is merely a cyclical change and does not run counter to the secular pattern of surging prices of hard assets and the concomitant decline of the greenback. Still, it is hard to find his claims credible when he trumpets the early-July status as proof that his strategies work--including investing in developed foreign stock markets, whose performance has been in many cases worse than that of the U.S. and has been further savaged by weakness relative to the dollar.

Third, he underestimates or misrepresents exchange-traded funds (ETFs). At one point, Schiff lumps in ETFs with actively managed mutual funds as a bad idea because their sole purpose is to beat the market. Not so, and he even says so later on. Why the inconsistency? At another, he describes how he talked a prospective client out of investing in ETFs (admittedly in favor of paying Schiff to build and manage a custom portfolio) because he couldn't find any to invest in that didn't have large allocations to financial-services companies. True, financial serivces are often large chunks of broad-market ETFs for any country, but writing the entire product line off for that alone is short-sighted at best and self-serving at worst.

Fourth, he really skimps on his foreign-market preferences. Yes, he gives a long list that includes Australia, Singapore, Norway and Switzerland, but the information he offers to buttress his preference is apparently gleaned from the CIA Factbook, which anyone can access for free on the Internet. Why do I need him to regurgitate that? If I'm going to pay for his book, he needs to give me something more than information I can acquire at less cost elsewhere.

Fifth, Schiff says the only way back for the U.S. economy is to return to a production-based economy, one where the U.S. produces goods, not services. (At the same time, he says that the entertainment industry in the U.S. is evergreen.) I think he has something there, but it won't be that we'll start again making cotton underwear and tires. We might eventually, but only once the supply of places where workers will supply labor for less money is exhausted, and we've still got big sections of Asia, the Middle East, Eastern Europe and all of Africa to go through before we get there. We're going to have fulfill the single greatest requirement of any business in a free market: make what people want. Obama thinks that's energy technology. Maybe it is, maybe it isn't. The point is that innovation and education are key, not an overpriced industrial base.

Sixth and finally, Schiff's notion of decoupling is debunked by this year's events. His analogy is that the U.S. thinks it is the engine of economic growth in the world, when really it's the caboose. If the rest of the world lets the caboose go, the rest of the train will be able to move faster. True, China and India will have their hands full of production and demand just supplying goods and services for their own populations. But for better or worse, the financial and economic fortunes of the developed and emerging worlds are married, perhaps not happily but married all the same.

In all, I am glad Schiff wrote this book, as it has allowed me to firm up my own ideas about markets and economies. I disagree, but I understand Schiff's strategies as a reaction to real problems. And in his defense, I don't think that investors would necessarily be all that bad off doing what he says. Inflation is a mostly invisible monster, but one that can be tamed. Paul Volcker did it (and Schiff credits him for it), and even feckless Ben Bernanke seems to have some newfound interest in pricking asset bubbles with interest rates and open-market actions. We'll see, but for now I'm sticking with my cheap U.S. stocks and my Treasury inflation-protected securities.
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Tracked by 2 customers

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Showing 1-10 of 21 posts in this discussion
Initial post: Oct 28, 2008 9:05:03 AM PDT
Last edited by the author on Oct 28, 2008 9:31:28 AM PDT
Y. Jossa says:
Peter Schiff is an idiot.
On October 28th 2008 he gave an interview on Bloomberg TV stating that the strategies outlined on BOTH his books "are NOT working"

The prices of Gold and Commodities are not taking off as he hoped, and investing in foreign currencies was a disastrous move, as the dollar has gone up while most foreign currencies have collapsed.
Investing in foreign markets had an even worse effect than even investing in the US market, as exports to the US have collapsed and the dollar has gone up.
Anyone who drank the decoupling of foreign economies Kool Aid is a fool and is now paying the price.

Peter thinks that despite the failure of his theories, this is still a good opportunity for buying "foreign stocks" and he claims that the Chinese and other Asian economies are going to consume all the cheap junk they have been exporting to the USA.
Yeah, right.. and with what money they are going to be doing that?
Without all the money we have been sending them for their cheaply made exports, those economies are just as broke as we are.

He was also blaming our current economic collapse to "government intervention" when everyone with half a brain knows that it was the lack of government regulation on mortgage lending and investment banking what allowed Wall Street companies and banks to create the collapsing shadow banking system and the credit crisis.

This guy is clueless, as anyone who followed the advice written in both his books already knows.
The Austrian school of economics that Schiff peddles, where the free unregulated markets rule is a monumental failure, and you will see the tide turn around against it in the form of much needed regulations to the lunacy unleashed by 8 years of the brilliant Bush presidency.

In reply to an earlier post on Oct 28, 2008 6:54:12 PM PDT
If you think that the Bush administration was a free market system then it's you who has been drinking the "Kool-Aid". The problem was government regulation that forced banks to make risky loans or face lawsuits, and artificially low interest rates that caused a bubble. The Bush administration likes to pretend that they were free market but anyone with one open eye could tell that they were one of the most oppressive administrations we've ever had. More Fasist then socialist but controlling none the less. Both Democrats and Republicans were at fault, you can't just blame "lack of government regulation" when they were a big part of the cause. (lets have the fox guard the hen house) I agree Peter made a bad judgment, but only an early one. Just wait 10 years while we are still in a recession and China had moved on.

In reply to an earlier post on Oct 30, 2008 3:51:07 PM PDT
Well said John, I too believe in truly free markets where interest rates are set by suppy and demand and not Fed dictates. Pity that politicians, bureaucrats and financial journalists don't seem to know much about economics or business success.
I do however have some concerns about the deflation then inflation hypothesis that Peter is now proposing in interviews in October. But don't take my word for it. Economics professor Roubini says it best:- Quote No.30188] Need Area: Money > Invest
"[With the large amounts of fiscal and monetary policy stimulation to cope with the 2008 credit crisis, share market crash and looming global recession, there has been a lot of talk of asset deflation followed by massive inflation:] So should we worry that this financial crisis and its fiscal costs will eventually lead to higher inflation? The answer to this complex question is: likely not. --First of all, the massive injection of liquidity in the financial system - literally trillions of dollars in the last few months - is not inflationary as it accommodating the demand for liquidity that the current financial crisis and investors' panic has triggered. Thus, once the panic recede and this excess demand for liquidity shrink central banks can and will mop up all this excess liquidity that was created in the short run to satisfy the demand for liquidity and prevent a spike in interest rates. --Second, the fiscal costs of bailing out financial institutions would eventually lead to inflation if the increased budget deficits associated with this bailout were to be monetized as opposed to being financed with a larger stock of public debt. As long as such deficits are financed with debt - rather than by running the printing presses - such fiscal costs will not be inflationary as taxes will have to be increased over the next few decades and/or government spending reduced to service this large increase in the stock of public debt. --Third, wouldn't central banks be tempted to monetize these fiscal costs - rather than allow a mushrooming of public debt - and thus wipe out with inflation these fiscal costs of bailing out lenders/investors and borrowers? Not likely in my view: even a relatively dovish Bernanke Fed[eral Reserve] cannot afford to let the inflation expectations genie out of the bottle via a monetization of the fiscal bailout costs; it cannot afford/be tempted to do that because if the inflation genie gets out of the bottle (with inflation rising from the low single digits to the high single digits or even into the double digits) the rise in inflation expectations will eventually force a nasty and severely recessionary [former Chairman of the Federal Reserve Paul] Volcker-style monetary policy tightening [to extremely high double digit levels of interest rates] to bring back the inflation expectation genie into the bottle. And such Volcker-style disinflation would cause an ugly recession. Indeed, central banks have spent the last 20 years trying to establish and maintain their low inflation credibility; thus destroying such credibility as a way to reduce the direct costs of the fiscal bailout would be highly corrosive and destructive of the inflation credibility that they have worked so hard to achieve and maintain. --Fourth, inflation can reduce the real value of debts as long as it is unexpected and as long as debt is in the form of long-term nominal fixed rate liabilities. The trouble is that an attempt to increase inflation would not be unexpected and thus investors would write debt contracts to hedge themselves against such a risk if monetization of the fiscal deficits does occur. Also, in the US economy a lot of debts - of the government, of the banks, of the households - are not long term nominal fixed rate liabilities. They are rather shorter term, variable rates debts. Thus, a rise in inflation in an attempt to wipe out debt liabilities would lead to a rapid re-pricing of such shorter term, variable rate debt. And thus expected inflation would not succeed in reducing the part of the debts that are now of the long term nominal fixed rate form. I.e. you can fool all of the people some of the time (unexpected inflation) and some of the people all of the time (those with long term nominal fixed rate claims) but you cannot fool all of the people all of the time. Thus, trying to inflict a capital levy on creditors and trying to provide a debt relief to debtors may not work as a lot of short term or variable rate debt will rapidly reprice to reflect the higher expected inflation. [Or in other words - if the United States had a high proportion of long-term fixed-rate debt, needing neither to refinance or access new borrowing, a 'capital-levy' inflation might work. But it does not - with Treasury skewing recent issuance not to 10- and 30-year bonds but to the short duration end of the interest rate curve, where financing has been far less expensive to obtain.]" - Nouriel Roubini
Professor of Economics at the New York University's Stern School of Business, who predicted the 2008 credit crisis and share market crash. Quote from October, 2008.
Quoted from website
Cheers, Seymour.

In reply to an earlier post on Oct 31, 2008 8:53:55 PM PDT
Solzhenitsyn says:
Peter is right about government intervention. Have you forgotten about Alan Greenspan? The CRA? Or are you such a political partisan that you're unwilling to recognize the truth?
Peter has been spot on, on so many things, for YEARS. Go back and check it out.
He might still turn out to be right. He says that the current spike in the dollar is a head fake due to deleveraging. We'll see.
I hope that Peter is wrong, but he's been uncanny correct so far.

In reply to an earlier post on Nov 13, 2008 6:11:18 AM PST
E. D. Sacks says:
Just to correct you the government intervention he's talking about is the artificially low interest rates the fed set that spawned the reckless mortgage lending. To say he's clueless is just flat wrong. In fact his predictions are based on sound capitalistic economic fundamentals. The regulations you're suggesting are what's slowing down the inevitable collapse of our economy and the creation of a socialistic economy.

In reply to an earlier post on Nov 26, 2008 1:20:27 PM PST
Bob D says:
Your critique is mostly a political attack on eight years of George Bush. I think you really need to read 'Crash Proof' and then it will be apparent that Schiff's observations are about the long-term economics of the USA since we dropped the gold standard in the '70s and then let the Fed run wild! If you look at the big picture you will see that he has been mostly right about these issues (housing prices plummeting, investment banks in free fall, commodities soaring, and the dollar falling). Once the real estate flippers, hedge fund cowboys, and financial traders are forced to dump every thing they have at fire-sale prices, the markets will stabilize and Schiff's observations will continue to play out. Katie bar the door!

In reply to an earlier post on Nov 29, 2008 3:50:27 PM PST
A. Newman says:
you are a) most likely hispanic with little formal education b) short, overweight and unattractive and c) have never read any Mises, Menger, Rothbard, Rockwell, Hazlitt (to name a few) d) completely unaware what "velocity of money" or the fact that money is a commodity, or what leverage is

You, also voted for Obama and think he will provide change and gives you a nice warm feeling of hope! Moron.

In reply to an earlier post on Dec 6, 2008 4:50:05 PM PST
Last edited by the author on Dec 6, 2008 5:04:48 PM PST
Regulating a corrupt system by making its enabling partners larger is like trying to put out a fire with gasoline. Our system of credit, banking and monetary supply is the "Pimp Daddy" and the politicians are the whores spreading the diseased system far and wide. If people ever wake up to the scam of the money changers, we will rid our government of the parasite of the Federal Reserve. Write to our political whores in Washington, have them support HR 2755 (google it)! Kill the banks! Take back the government. Peter Schiff has got part of the equation (unfortunately he still thinks Americans can invest their way out of the collapse of our economy). The people need to take back the government NOW! Invest in beans, rice and firewood so we have the strength to restore the Republic when the dollar is worthless and the masses are hopelessly looking for the government to save them with soup, regulations and borrowed money. Its the system that is broken. Restore the Constitution of the United States of America.

In reply to an earlier post on Dec 18, 2008 3:44:21 PM PST
Sef Daystrom says:
While true that in the past year, commodities have fallen, look at the long term, and look at the fake dollar rally finally starting to end. In 2000, Peter recommended gold when it was $250. It's $850 now and he still recommends it, and he's right, stop looking at these short term drops and look at the big picture. The USDI also fell from 88 to 79 since you posted this premature criticism, the fake rally he talked about in that Bloomberg video is happening, and it's going get to 40 or worse. You're the only one looking like an idiot now with this daytrader criticism. Tech stocks were going up the whole time he avoided them, people thought they were rich and the bears were fools. Their accounts got wiped out because they didn't sell and they couldn't time the collapse. The companies they were investing in were farcical, it was short term gambling that people mistook as a sure investment.

In reply to an earlier post on Dec 20, 2008 3:47:56 PM PST
Jack Flack says:
Hi Koolaid drinker,

Schiff predcted this crash in detail when others refused to see it.

The mortgage mess was almost totally a result of government intevention, and to the extent that Fannie & Freddie were factors, it was the Democrats who refused to look at them when Bush asked them to.

The dollar is tanking and will continue to do so, so Schiff was right.

Gold will take off soon and again Schiff will be right.

I encourage you to do the opposite of everything Schiff suggests.
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