There were the great bears – Roubini, Faber, Rogers. But there was also Schiff.For those unfamiliar, Peter Schiff is the President of Euro Pacific Capital. He is also the author of the books “The Little Book of Bull Moves in Bear Markets” and “Crash-proof: How to Profit From the Coming Economic Collapse” (published February 26, 2007).
An arch uber-bear, Schiff’s entire investment strategy over the years has been focused on protecting clients’ money from an upcoming reweighting of global economic power away from the US. He has appeared many a time on television to stress that point, often in a classic ‘bull vs bear’ format on account of his ‘extreme’ views.
By pitching him as the rogue contrarian, the networks openly presented Schiff as game for abuse — a fair target for ridicule by the countless market cheerleaders cluttering the networks. Unsurprisingly, many jumped at the opportunity. Schiff stood his ground.
And now, is that the sweet smell of vindication for Peter Schiff in the form of a youtube montage? It may be.
Alea links to what, in hindsight, is now a brilliant, if cringe-worthy, warning to all those who would still dare shout down the contrarian view. Here are some highlights from circa 2007.
CNBC’s Michelle Caruso Cabrera: “Although there are more and more people saying the US economy is going to be in a recession next year, it is still a minority position – why do you think a recession is coming next year. How bad is it going to be?”
Peter Schiff: “I think it’s going to be pretty bad, and whether it starts in 07 or 08 is immaterial and I also think it’s going to last for years rather than quarters. You see the basic problem with the US economy is we have too much consumption and borrowing and not enough production and savings, and what’s going to happen is that the American consumer is basically going to stop consuming and rebuild his savings, especially when he sees his home equity evaporate. And when you have the economy at 70 per cent consumption you can’t address those rebalances without a recession. Rather than the recession being resisted, it should be embraced because the disease is all this debt finance consumption. The cure is that we stop consuming and start saving, and that’s a recession. Sometimes the medicine tastes bad but you’ve got to swallow it.”
Cabrera: “Do you believe that, Art?”
Arthur Laffer, CEO, Laffer Associates (he of Laffer curve fame): “No I don’t believe any of it whatsoever, Michelle. Excuse me, what he’s saying is savings are way down in this country but wealth has risen dramatically, the United States economy has never been in better shape. There is no tax increase coming in the next couple of years, monetary policy is spectacular and we have freer trade than ever before and not only that there’s no income policies here, I think Peter is totally off-base and I just don’t know where he’s getting his stuff.”
Schiff: “One of us is off-base but it’s definitely not me.”
Laffer: “I’m going to make a bet with you on this one. I’ll bet you a penny on this one, If you’ll sign a letter saying that you were wrong to me on this. But, you’re way off base, there’s nothing out there that tells us this – we’re going to have a nice slowdown but it’s not going to be a crash.”
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On Fox News
Anchor (Cavuto): “you say this could be a perfect storm for buyers.”
Economic pundit Ben Stein: “The credit crunch is way overblown, the financials are being given away they’re so incredibly cheap. The subprime problem is a problem but it’s a tiny problem in the context of this economy… it’s a buying opportunity, especially for the financials – maybe as I’ve never seen before in my life.”
Schiff: “This is just getting started, this isn’t just about subprime, it’s a problem for the entire mortgage industry… it’s not limited to mortgage credit…this is going to be an enormous credit crunch.”
Stein: “Subprime is a tiny tiny blip. I think stocks will be a hell of a lot higher by this time next year.”
Schiff: “The worst is yet to come. The fundamentals are not sound, they’re awful.”
Stein: “The financials, as I keep saying, are just super bargains, like Merrill Lynch, which is an astonishingly well-run company, trading a couple of days ago at barely more than seven times earnings.”
More pundits testify on their full belief that financials are super bargains, among them Goldman Sach (like getting Dolce Gabbana on sale), Bear Stearns …
Schiff: “Stay away from the financials they’re toxic, they’re not cheap they’re expensive. You think they’re at low PEs, they have no earnings, their earnings are going to disappear.”
Collective Pundits: “Wow,.. what are you talking about? Stop being so pessimistic. They have no earnings? Their earnings are huge!”
Schiff: “These financials are going to be hit, and they’re going to be hit hard.”
Cavuto: “Peter, wish we had more time with you – I know you want to continue that exposé on Santa Clause.”
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All of which is priceless stuff, best seen via the link below.
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