Mish Says Clients Invested With Peter Schiff Were Down Over 40% In '08...Wow!

January 26, 2009 4:12 PM EST
Even though Peter Schiff has been proven correct with his early predictions on the US markets imploding, a web blogger "Mish", who is a registered investment advisor and goes by the name of Mike Shedlock, says Peter Schiff is dead wrong. He does admit Schiff was correct about the US market imploding, however, he says, "most of the praise heaped on Schiff is simply unwarranted, and I can prove it."

Mish says he has spoken with clients of Schiff who are down anywhere from 40% to 70% in 2008. Mish said the clients' results are entirely feasible for "the simple reason Schiff's investment thesis was flat out wrong", says blogger Mish.

He says, Schiff's overall thesis was, "US equity markets will crash; US Dollar will go to zero (hyperinflation); Decoupling (The rest of the world would be immune to a US slowdown); Buy foreign equities and commodities and hold them with no exit strategy.

Shedlock admits that Schiff was correct about the the US equity markets crashing, but he says, Schiff's investment thesis centered on shorting the dollar in a hyperinflation bet, and buying foreign equities rather than shorting US equities. "Furthermore, Schiff made no allowances for being wrong and had no exit strategy whatsoever," says Shedlock.

Where Schiff ran into problems is that foreign equities sold off much harder than US equities, and a strengthening US dollar compounded the situation. And Shedlock says, "Schiff failed where it matters most: Peter Schiff did not protect his client's assets."

Shedlock did point out that many foreign equity markets did worse than the US indices. The Shanghai index fell from 6124 to 1665, a whopping 72.8% decline top to bottom.

An example that Shedlock points out is Schiff believed that the US weakening US economy wouldn't have a significant impact on foreign economy.

Here is what Shedlock said, "The US is the world's largest economy. Housing had already weakened but commercial real estate had not. US retail stores and malls were being built at an unsustainable blowoff pace and those stores were crammed with goods coming from China and Japan. The decoupling theory was that loss of the US consumer would not matter to the commodity producers like Canada and Australia or the manufacturers like China and Japan. How could any economist have thought that? Many did. Schiff was one of them."

Below is Shedlock's list covering 12 Ways Schiff Was Wrong in 2008

* Wrong about hyperinflation
* Wrong about the dollar
* Wrong about commodities except for gold
* Wrong about foreign currencies except for the Yen
* Wrong about foreign equities
* Wrong in timing
* Wrong in risk management
* Wrong in buy and hold thesis
* Wrong on decoupling
* Wrong on China
* Wrong on US treasuries
* Wrong on interest rates, both foreign and domestic

Shedlock said that Schiff was right about the collapse of US equities, but sadly for this clients, no part of his investment strategy sought to make a gain from that prediction.

"Schiff did not invest for doom; he invested for a bull market that did not exist. He was wrong where it mattered most, protecting client assets. For this amazing feat, people think of him as a star," says Shedlock.

Check a Schiff's client portfolio here.

Click here to read the rest of Mike Shedlock's/Mish's comments on why Peter Schiff was so wrong.

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