Comments on: Peter Schiff Was Wrong

By: Blackhalo

Blackhalo — Wed, 28 Jan 2009 03:26:05 +0000

Seems early to me to be calling anyone right or wrong, until this crisis finds a direction. There are far too many levers being pulled by the gov. to pick the winners and losers yet.

Except for Kudlow, Fuld and whoever heads the Realty assn.

By: vic

vic — Wed, 28 Jan 2009 02:39:51 +0000

Mish is AWESOME. Find me even a handful of fund managers who have done anywhere near this well during this crisis who don’t charge absurd fees.

Poor Peter Schiff has just been skewered

By: Andy Tabbo

Andy Tabbo — Wed, 28 Jan 2009 01:58:35 +0000

To be fair and add on to my long winded post….

He was correct. Shorting the S&P and going long Gold or Short the Dollar would been a perfectly good trade, so long as you had the proper hedging ratio for such a trade. Where one OFTEN gets tripped up is by having the wrong sort of ratio on….i.e: Short the U.S. stock market coupled with a Donkey-Long Short U.S. Dollar will not help you…there is definitely a ratio that worked well based on volatility and correlations before 2008 began…but if you went NUTS shorting the Dollar you would have screwd up the cross-trade.

However, if his clients were Short S&P/Long Gold with similar notional values, they should have done quite well.

Sounds like he put some of his clients in the “stocks” of Gold miners….big NO NO. The ebbing tide takes out all boats….

By: Andy Tabbo

Andy Tabbo — Wed, 28 Jan 2009 01:50:36 +0000

I’ve often wondered about Schiff’s theses….

If you have hyperinflation, the local stock market won’t fall. It will actually rally, because the price of everything rallies. It’s true that the stock market will not rally as fast as the hard assets denominated in the same currency, but the equities will go up.

The decoupling thing was debunked by many folks on this blog before it was debunked in real life.

The cognitive dissonance of Peter Schiff is: He understands that something is “wrong” but he doesn’t quite know how to employ a correct strategy. For instance, his apocolyptic scenarios for the US and its debt problems were completely in line with a coming “debt crunch.” In a debt crunch, the ENTIRE world must buy back the debt-denominated currencies, Dollars and Yen. This causes a temporary, though severe, demand for Dollars and Yen.

He could have easily employed his “world views” by either going LONG or SHORT the Japanese Yen, a very ‘clean’ trade.

He’s correct….”someday” we will have hyperinflation. The problem is his clients my be broke before that plays outs.

And even if the “hyper-inflationary” scenario plays out, you don’t want to be short equities. You just want to be long hard assets like grain or oil. Gold is NOT your optimum long position, either. Gold is a fake commodity. If you fear real inflation, get long grains and oil.

I’m not sure we’re there yet. I think we still have a lot of debt to pay back first…..