Posts filed under “Really, really bad calls”
Barron’s observes: “By most measures, Jim Cramer did worse than the market, but CNBC and the TV journalist have taken few steps to clarify his exact performance for his show’s growing audience.”
Here are the charts Barron’s uses to make their argument:
I love this excerpt from GMO’s quarterly update, by Jeremy Grantham: > 1. The Story So Far: Greed + Incompetence + A Belief in Market Efﬁciency = Disaster “Greed and reckless overconﬁdence on the part of almost everyone caused us to ignore risk to a degree that is probably unparalleled in breadth and depth in…Read More
I am speaking at an AEI panel today, with Tim Bitsberger, Joshua Rosner of Graham Fisher & Co., Walker Todd, of the American Institute for Economic Research, and R. Christopher Whalen of Institutional Risk Analytics. Summary: The credit crunch and financial panic of 2008 triggered a remarkable series of government interventions and bailouts, including huge…Read More
On Sunday night, Mike Shedlock lobbed a hand grenade Peter Schiff’s way (here, and mirrored here). Around late 2008, some PR flacks were circulating a Schiff’s greatest hits — short excerpts of his appearances on major media. It was apparent to me that these heavily edited clips were not coming from random readers, but rather,…Read More
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
There are numerous YouTube videos, articles, and references to Peter Schiff being “right” rapidly circulating the globe. While Schiff was indeed correct about the US imploding, most of the praise heaped on Schiff is simply unwarranted, and I can prove it.
First, let’s start with a look at the claim being made. Peter Schiff concludes many of his articles, books, etc. with the following statement.
Mr. Schiff is one of the few non-biased investment advisors (not committed solely to the short side of the market) to have correctly called the current bear market before it began and to have positioned his clients accordingly.
Highlight in red is mine.
I would like to see some proof of that statement. Specifically I would like to see the average returns posted by EuroPacific clients for 2008.
I have talked with many who claim they have invested with Schiff and are down anywhere from 40% to 70% in 2008. There are many other such claims on the internet. They are entirely believable for the simple reason Schiff’s investment thesis was flat out wrong.
I have an actual portfolio statement from one of Schiff’s clients at the end to discuss, for now let’s discuss the main points of Schiff’s thesis.
Schiff’s Overall Thesis
- 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.
Schiff was correct about point number 1 above. The US equity markets crashed. That was a very good call. Unfortunately, his 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.
What happened in 2008 was that foreign equities sold off much harder than US equities, and a strengthening US dollar compounded the situation.
In other words, Schiff failed where it matters most: Peter Schiff did not protect his client’s assets. Let’s take a look how, and more importantly why, starting with charts of various foreign indices.
click on any chart in this post for a sharper image
$SSEC Shanghai Stock Exchange Weekly
$TSX – Canada TSX Weekly Chart
$AORD Australia ASX Weekly Chart
$SPX S&P 500 Weekly
2008 was a global equities bloodbath. Clearly there was no decoupling. The Shanghai index (China), Nikkei (Japan), TSX (Canada), AORD (Australia), and virtually every world equity index collapsed along with the S&P 500, the DOW, and Nasdaq in the US.
Many, if indeed not most, 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.
Let’s investigate why this happened, starting with the decoupling thesis itself.
Princeton professor Alan Blinder identifies the 6 key policy errors that were the key elements in the financial crisis. He especially notes that this was not a neccessary outcome of capitalism, but rather, was the result of six avoidable errors. And while the professor calls them “human errors” he himself errs — these were not…Read More
Since I am in Grand Cayman, a British Overseas Territory, I thought it only appropriate to note that its now official: the UK joins the US in the ranks of formally being in an announced — and pronounced — recession. The British economy contracted 1.8% for the 2008 calendar year. For the first time since…Read More
Fascinating discussion via Wired‘s Clive Thompson, and Stanford historian of science Robert Proctor, on Agnotology: “When it comes to many contentious subjects, our usual relationship to information is reversed: Ignorance increases. [Proctor] has developed a word inspired by this trend: agnotology. Derived from the Greek root agnosis, it is “the study of culturally constructed ignorance.”…Read More
Part of the story about the Madoff Ponzi scheme was that Madoff created this elusive, difficult-to-become-a-member club. The exclusivity and rejections made membership all the more desirable to greedy investors. That actually is turning out to be somewhat of a myth. There is much more to his canny trick of rejecting investors than initially meets…Read More