Peter Schiff gets it right again .. great update

[hipmatt]

He never called an end to it in 00, calm down. If anything he was off by 2 years, which still would be damn close, and anyone who sold in 05 is doing just fine.

[(former)FormerSanDiegan]

Yes, Matt he is pure genius.

Here is an article in which he is quoted in bold italics from a 2002 Article regarding the stock market when the Dow was about 48% below what it is today.

“September. 7, 2002

Jobless Dip Doesn’t Wow Analysts

Ken Moritsugu – Knight Ridder Newspapers

Orange County Register

An unexpected drop in the unemployment rate cheered Wall Street on Friday but did little to change expectations of a slow, jobless recovery from the current economic slump for the rest of the year.

The unemployment rate fell to 5.7 percent in August, down from 5.9 percent in the previous two months, the Labor Department reported Friday.

However, the economy had a net gain of only 39,000 nonfarm jobs. That’s far fewer than the 100,000 to 150,000 a month that are necessary to keep unemployment from rising over time. In short, the economy doesn’t appear to be sliding back into recession, but the recovery so far is tepid.

“The most important thing to look at is the manufacturing number,” said Peter Schiff of Euro Pacific Capital in Newport Beach . “That’s the real wealth-producing part of the economy, and we lost almost 70,000 jobs. Where did we gain? We gained in government. Government jobs don’t help the economy. They hurt the economy. That’s more people taxpayers have to support.”

Economic forecasters pay more attention to the change in the number of jobs than they do to the unemployment rate. The two figures don’t always coincide because the number of jobs is based on a survey of 300,000 employers and the unemployment rate on a survey of 60,000 households.

The good news is that the economy has added jobs for four consecutive months. The bad news is the average monthly gain has been just 40,500 jobs. By comparison, the economy added an average of 253,000 jobs a month in the first half of 2000.

Also, the number of people filing for unemployment benefits has edged up in the past month. Most forecasters expect the unemployment rate to rise to about 6 percent in coming months. They don’t see a marked improvement in the jobs outlook until next year.

“The numbers suggest the economy is experiencing a classic recovery, with slow growth in the labor market at the early stages of an upturn, as companies are reluctant to add to payrolls,” said Lynn Reaser, chief economist at Banc of America Capital Markets in St. Louis.

Stocks, which fell sharply earlier in the week, rebounded Friday. The Dow gained 143.50 points, or 1.7 percent, to finish at 8427.20. The tech-dominated Nasdaq composite index rose 44.29 points, or 3.5 percent, to 1295.29.

Schiff said Friday’s rally was a function of short-covering – not the beginning of a sustained rally.

With the economy apparently growing slowly but steadily, most analysts don’t expect the Federal Reserve to lower interest rates when it meets later this month. But they think the Fed remains ready to cut rates later this year if the economy shows signs of deteriorating.

[(former)FormerSanDiegan]

Another “genius call by this guy in Spring 2003, when the stock market began it’s 4-year ~50% run …

Basically the guy is a perma-bear. And like the perma-bulls is right as many times as he is wrong. I wouldn’t base any timing on this guys views.

“Can the economy rally too?

By Rex Nutting, CBS.MarketWatch.com
Last Update: 7:07 PM ET March 21, 2003

WASHINGTON (CBS.MW) — Nothing moves as fast as money.

As the uncertainties about the Iraqi war faded one by one, money surged back into U.S. stocks and the dollar and out of the safe havens of gold, oil and bonds.

The rally in the financial markets over the past week was every bit as dramatic as the action on the ground in Iraq.

The market obviously believes the war is going well and that victory will be good for the U.S. economy. But economists aren’t so sure the economy can recover as rapidly as the markets did.

Lehman Brothers chief economist Ethan Harris is struck by the fact that “the Fed gazes into its crystal ball and sees nothing but fog, while the markets are quickly pricing in the ‘good war’ scenario.”

Are economists like Alan Greenspan lost? Maybe the better question is “whether markets are moving swiftly on the road to nowhere,” said Bob DiClemente, economist at Salomon Smith Barney.

Markets are designed to forecast the future, so it would be folly to ignore the bets millions of individual and institutional investors are making that the worst is over. “While it usually is profitable to be one step ahead of the market, being three steps ahead can be costly,” warns Jan Hatzius, economist at Goldman Sachs.

It can also be costly for investors to be three steps ahead of the economy.

“The Wall Street propaganda machine has managed to delude itself and the public into believing that the only forces restraining a new bull market are Saddam Hussein and the uncertainty surrounding his removal from power,” said Peter Schiff, president of Euro Pacific Capital. “But even before the dust settles in Iraq, investors will soon see that the outlook for the U.S. economy and corporate earnings remains bleak.”

Lower oil prices and a bull stock market will help the economy, but not immediately. Calling your broker takes a second; it takes time to plan and implement a business expansion plan, buy equipment and hire and train workers.

Trying to predict the economy at this point can be hazardous, but investors don’t have the luxury of punting like Federal Reserve policymakers, who admitted in the past week that they don’t really know how to weigh the risks to the economy. If you have capital to invest, you must park it someplace safe or put it on the table to risk the next roll of the dice.

The economy on the brink of war was soft and getting softer. The trick for investors and policymakers alike will be to look through the incoming data that reflect pre-war nerves.

Economic data from February and March shouldn’t be totally discounted, but they should be examined in the light of the market’s rally and the early signs of success in Iraq.

Of the coming week’s data, markets would normally pay the most attention to the two consumer confidence surveys. But most of the responses to the Conference Board and University of Michigan surveys were pre-war.

Economists expect the Conference Board survey to sink further from a nine-year low of 64.0 in February to about 61.6 in March. The number is released on Tuesday.

The University of Michigan’s preliminary survey already incorporated much of the drop in consumer confidence early in the month, but the final survey may not fully reflect the likely bounce from the war’s early days and the market’s rally. The Michigan survey is expected to rise to 75.1 from 75.0, when it is released on Friday.

“I believe the bounce will be very significant,” said Scott Rasmussen, a pollster who tracks consumer and investor confidence on a daily basis. His consumer confidence gauge hit its year-to-date high on Friday, rising in one week from 88.3 to 103.4.

It might take a month for the war relief rally to show up in the monthly consumer surveys.

Consumers have more on their minds than Saddam Hussein, of course, including jobs, incomes and prices.

Consumer spending probably fell about 0.2 percent in nominal terms in February, which would be the first back-to-back declines in spending in more than decade.

Meanwhile, consumer incomes probably grew just 0.1 percent. The income and spending figures will be released on Friday.

“Many things have conspired to fatigue the consumer,” said Jill Thompson, senior economist at FleetBoston Financial. She points to huge job losses, high energy prices, high debt and buyer’s fatigue.

Jobs are probably at the top of that list. Businesses won’t hire until they are convinced that more Capital spending has been rising, “but we are not convinced that business was really stepping up to the plate,” Thompson said. A third of the gains in capital investment were merely an economic adjustment to Moore’s Law. “Nominal investment in computers actually fell,” she said.

Data on capital investment should capture some market attention on Wednesday with the release of the durable goods orders report. After an outsized 2.9 percent gain in January, economists are expecting orders to fall 1.3 percent.

As always, core capital goods orders, which exclude defense and aircraft orders, will be the crucial number. Core orders rose 4.5 percent in January, bringing year-over-year orders up 2.8 percent.

The home sales numbers are likely to get little attention. Housing is strong and has been propped up by low mortgage rates. Some softening is expected in the months ahead.

Sales of existing homes probably fell from the record 6.09 million annual pace in January to about 5.77 million in February. Sales of new homes probably rebounded from January’s 15 percent plunge to 914,000 to about 923,000.

Finally, the government will give its third estimate of fourth-quarter gross domestic product, which was estimated at 1.4 percent annualized growth. No change is expected in this revision.

Economists expect growth of 2 percent in the current quarter and 2.1 percent in the quarter than begins April 1.

“We are optimistic about war and peace and the fundamental underpinnings for recovery beyond that,” Salomon’s DiClemente said. Many other economists share his views.

Others, however, believe the true weaknesses of the economy have been hidden by the run-up to war. “There are still plenty of headwinds facing the economy,” said Lehman Brothers’ economist Joe Abate.

[cr]

It reminds me of that guy who predicts earthquakes all the time. Enough predictions eventually he’ll be right, but the issue is credibility. Obviously Schiff wants to establish or further his.

Either way, it’s obvious no one listened to him 5 years ago. If they did, maybe the run up (and fallout) would not be as bad.

As far as a bail out, I agree Kewp, once this thing hits full scale there will not be enough money anywhere to cover it. However, I think the FED is more likely to raise rates due to inflation, to keep the dollar out of the toilet, and bring back some foreign investment. I agree too that much of the market is still dependent on what I call artificial money from the bubble.

Since the bust is only beginning, it seems we are still in a bull market. Today stocks jump more than 1% on a 2.3% drop in oil, and 0.7% rise in pending-home-sales index, despite bad news from the Big 3.

No one really knows the timing, but no doubt things will get worse. We’ve bailed out two recessions with two bubbles. What’s the next one going to be, BS?

[DaCounselor]

“He never called an end to it in 00, calm down. If anything he was off by 2 years, which still would be damn close, and anyone who sold in 05 is doing just fine.”
_________________________

I’m calm as calm can be. As for The Oracle – I think the last few posts indicate his track record for predictions.

[Ozzie]

Schiff is a PermaBear. Whenever there is a rally he comes out with an article explaining why the next market direction is down. Whenever there is a downturn he comes out with an article on why this is just the beginnng of a huge Bear market.

It’s not objective. You know exactly what he’s going to say before reading it. It’s like trying to get objective commentary from Limbaugh or O’Reilly

[kewp]

Well, I happen to think the guy will ultimately be proven right.

It’s funny how folks here can easily see the problem with Joe FB, while missing that his problems are mirrored at the national level. Complete with our Bank of China credit card.

We’ve bounced from a tech bubble, to a housing bubble, to… what ultimately? We don’t have an infinite air (ie, money) supply.

Our economy naturally moves in cycles. We’ve averted at least two recessions through cynical currency manipulation by the fed. Strike three is long overdue.

[Chris Scoreboard Johnston]

Chris Johnston

If my memory serves me correctly, he moved out of Newport Beach around 2000 or thereabouts claiming RE prices were going to crash. He sold his home, and moved back east. He had offices on both coasts, and just went back to the one back east. I might be off by a year or so on the date. I also recall that he rented a place back east when he moved.

I am not 100% sure about this, so do not hang me with this. However, he was pretty outspoken at the time as I recall, which is why this story sticks with me. I had never heard of him at the time.

My home that I sold in 05 gained over 1 Million dollars during that time between when he left and my sale, which is now in my pocket. My point is, his timing on this specific topic was quite a bit off, so there is no reason to believe that just because he is still out there making the same comments, that they will be timely. Maybe he has been dead on about other things, I do not know, but on this topic, he has not been too accurate. We have a well known approx 10 yr cycle in RE so being off by 5 years is not very close.

It does appear that the downturn is happening, but in my business, missing by that much does not make for a good call. Most of his views it seems are generally bearish on our economy, so you have to take things he says within that context. Although I am bearish on RE I do not share the extreme views that many here do. However, do not mistake my comments for being bullish. I am not bullish on RE for the next few years, quite the opposite.

[Borat]

Yeah, the guy is obviously an idiot. He didn’t make millions holding on to an overpriced asset. He’s like those morons that sold their Cisco stock in 1998. What a fool.

[(former)FormerSanDiegan]

Yeah, the guy is obviously an idiot. He didn’t make millions holding on to an overpriced asset. He’s like those morons that sold their Cisco stock in 1998. What a fool.

Borat – Great example. You proved Chris’ point.
On April 3, 1998 Cisco closed at 11.78.
Today it is at 26.

That’s an annual return of over 9% per year during some of the worst years for the stock market out of the last 30 years.

[Borat]

Fair enough, FSD, my example wasn’t a good one. Comparing performance of housing against stocks is probably apples vs. oranges. Most houses just sit there, they don’t produce anything. If someone doesn’t improve them or the areas around them, they should appreciate at or near the rate of inflation over the long haul. Publicly-owned companies are dynamic, they create things and hopefully become more valuable as the business becomes more efficient and expands into new areas, so their returns should be higher. I hadn’t looked at CSCO in a while, I was surprised at how well they recovered!

[bob007]

Bubble does not imply that all assets in the bubble are worthless. Amazon, Yahoo, Akamai and Cisco did well in the tech bubble even though you would have lost $$$ if you bought at the peak.

Houses in Del Mar and La Jolla will have some value as opposed to a home in Temecula.

[(former)FormerSanDiegan]

Well, I happen to think the guy will ultimately be proven right.

The battery died on my clock, but I happen to think that the time it tells will ultimately be proven to be right.

[powayseller]

Chris, Peter Schiff would have been right, but a few external events aided the flailing US economy. Schiff could not have predicted the Bush tax cut, the Federal Reserve 1% Fed Funds rate, and little known: the Bank of Japan would print 35 trillion yen to buy $320 billion of US Treasuries in 2003, reflating the global economy and creating the US housing boom. If the BOJ had not done that, the housing bubble would have popped in 2003. Now, in spite of any efforts to reflate, the US consumer cannot service any more debt.

I think Peter Schiff is great, although I disagree with him on the commodities boom. Looking back at 2000/2001, when the US had a tiny capital spending led recession, but the US consumer kept spending. What happened is that the stock markets all over the world plunged, and so did commodities (except gold). This time, it will be even worse. Commodities and global stock markets will take a big hit as the world’s #1 consumer cuts back on spending. What can save the export countries is if they would stop relying on exports. China is a bubble waiting to pop.

Schiff is right, that we should keep our assets outside of US dollars.

In the 1980s, the dollar lost 50% against the yen, and in early 2000’s, the dollar lost 30% against the euro. I think the next leg down is soon. Timing these things is difficult, as I have been waiting for a recession for over a year, that is finally approaching. Even now, I am amazed that stock investors are not pricing in the upcoming recession. I am early too, like Schiff, but our logic still holds true and what he predicts is likely to pass. His arguments are solid.

[NeetaT]

Although I am new to this website, I like to interject when I find a topic of interest. I watched the Peter Schiff video and came to the conclusion that his assertions do have merit. Would someone please explain to me the difference between a strong and weak dollar as related to confining it to purchases made in the US. The reason I ask this question is because I have always saved money via the best savings or CD rate available at the time. Right now I am receiving 5% in a savings account. When someone says to me that the dollar is weakening and interest rates will go up dramatically, I immediately rejoice to the fact that I will receive more in interest payments. If the savings account rate goes up to 10%, I have doubled my income. Now what does this weak dollar mean to me now? Without calling me an idiot, would someone please edify me?

Thanks, NeetaT

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