Posts filed under “Really, really bad calls”

Mish vs Peter Schiff

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, were part of an organized PR campaign.I do not know if this annoying guerilla marketing approach is what motivated Mish to write his takedown, but it sure made me come close several times.

Regardless of the motivation, in a meticulous, fact-based post, Shedlock highlighted the poor investment returns Schiff has generated in 2008. Through the grapevine, I have heard that Schiff was livid, and is threatening a lawsuit.

Too late: I understand more fireworks are coming, via a major media outlet that picked up the specific details from Mish, and independently verified them. Look for a major story soon (possibly as early as Weds/Thur). As is so often the case these days, a blogger discovered something newsworthy, and the MSM picked up on it afterwards.

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In the past, I defended Schiff against a pretty shoddy piece of hit journalism by Forbes. It was a case of pretty weak investigative reporting — and I expect much better from Forbes. I have also highlighted the works of Blog Spotlight: Mish’s Global Economic Trend Analysis (November 30th, 2006, 7:00PM).

I’m not sure you call me neutral — but I am certainly even handed in this case. However, I simply cannot find anything in Mish’s blog post that is actionable. Besides, who would want to open themselves up to the sort of discovery process slander/libel litigation would entail for the plaintiff. It would make a colonoscopy look pleasant by comparison . . .

Category: Investing, Markets, Really, really bad calls

Peter Schiff Was Wrong

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.

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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


$NIKK Tokyo Nikkei Weekly Chart

$TSX – Canada TSX Weekly Chart

$AORD Australia ASX Weekly Chart

$SPX S&P 500 Weekly



2008 Equities Bloodbath

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.

Read More

Category: BP Cafe, Investing, Really, really bad calls

Six Ideological Errors That Led to Financial Crisis

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

Category: Bailouts, Markets, Politics, Psychology, Really, really bad calls

Calpers Bad Bets

via WSJ > Source: Risky, Ill-Timed Land Deals Hit Calpers MICHAEL CORKERY, CRAIG KARMIN, RHONDA L. RUNDLE and JOANN S. LUBLIN WSJ, DECEMBER 17, 2008 http://online.wsj.com/article/SB122947172015212225.html

Category: Digital Media, Investing, Real Estate, Really, really bad calls

Congratulations Britons: Its a Recession!

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

Category: Economy, Really, really bad calls

Agnotology

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

Category: Psychology, Really, really bad calls, Science, UnScience

No, Madoff Never Turned Down Money

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

Category: Hedge Funds, Investing, Legal, Really, really bad calls, Regulation

What 60 Minutes Missed on Oil Speculation

Last night’s 60 Minutes had a story on Oil Speculation. Its not that they said anything that was factually wrong per se, its more that they told 10% of the story of the rise and fall of energy prices. The entire report was surprisingly thin, and avoided discussing all of the many other factors that…Read More

Category: Commodities, Energy, Financial Press, Markets, Really, really bad calls, Trading

Time to Overhaul the Bailout Plan

The Treasury Department TARP/Bailout plan has been an utter disaster. It has been mishandled from day one — poorly planned, poorly executed. Both Hank Paulson and Congress for passing such a shoddy piece of legislation should be ashamed of themselves for their horrific judgment and egregious failures. It is hard to see a single thing…Read More

Category: Bailouts, Credit, Really, really bad calls, Taxes and Policy

Beware Wall Street’s Happy Talk

Over at Marketwatch, Paul Farrell sifts through a book (sitting on my shelf) and pulls out these embarrassing quotes. 15 reminders of how happy talk misled us a decade ago October 1999: James Glassman, author “Dow 36,000.” “What is dangerous is for Americans not to be in the market. We’re going to reach a point…Read More

Category: Financial Press, Humor, Markets, Psychology, Really, really bad calls