It’s kind of weird to see a person on TV in person. But anyway, Peter Schiff looks just like how he is on TV.
I thought I may be able to hear something new in Schiff’s seminar. But he simply went over his standard set of arguments and viewpoints.
1. Bad mortgage and housing bubble causing all these credit and economic trouble.
2. Eventually government is going to monetize most of these bad debts, including Fannie Mae and Freddie Mac’s debts.
3. Get out of $US and US-dollar based assets right now.
4. His theme of investment has always been foreign stocks. He likes foreign stocks that pay good dividends in particular. And his strategy is to buy and hold for a long time, especially since selling will involve capital gain tax hit.
5. His arguments has always been that gold & silver don’t return anything to buyers, unlike a good foreign company/stock. And he has stated many times that when foreigners stop subsidizing US economy, foreigners will be much better off because they will enjoy their own fruits of labor from all the manufacturing and production instead of sending those products to US.
In summary (especially regarding #4 and #5 above), he is in the camp of a decoupling scenario for global economy (you can read this post on more details of the macro-economics if you want to understand more about decoupling scenario).
Although in the long term, I kind of agree with Peter Schiff on the decoupling theory. In the short term however, I simply cannot agree to it a bit. The global economics is too much intertwined. Even though the current economy are supposed to operate at the speed of internet, in reality, it takes TIME to find new customers when your old customers who are the big spenders in the United States stop buying more products from you. Yes, eventually these new customers will be domestic customers. But it will really take TIME.
What’s going to happen in the meantime, before the entire economic transition is complete? Before the economic transition of US dollar falling, and foreign currency rising, and shift of US consumption to other foreign countries, I believe that there will be a global synchronized economic slowdown. This slowdown may last for 3 to 5 years, but probably less than 10 years. At the end of the global economic transformation, I do see the decoupling theory to prevail. Unfortunately, during this transition, foreign stock markets are going to get whacked big time, possibly even worse than US stock markets. In fact, it’s sort of in progress already.
Due to my own economic projection, I try not to invest in economic sensitive area, which includes energy sectors.
In spite of what I believe in, it is extremely hard to predict how the decoupling theory and/or global synchronized slowdown plays out and/or interact with each other. Stock markets obviously are kind of schizophrenic, and the markets in the short term will definitely undergo episodes of both decoupling theory and global synchronized slowdown and global synchronized recoveries. It’s almost like weather. One day it will be sunny, and another it will be rainy. I think it’s more important to get the “season” right, rather than the daily weather correct. And I’m voting my own dollars for a global stagflation scenario.
Peter Schiff has been right on money on the housing bubble. I don’t know whether he will be right on the decoupling. But frankly, this is too important to mess it up. Although the current “weather” in the stock market looks like energy sector is going to go back to possibly new high, I’m not so sure how the two opposing factors of peak oil and global economic recession will play out in 2009 on this highly volatile sector.
Best luck trading.
Frugal at My 1st Million At 33.