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Peter Schiff TV Appearances

Peter Schiff, author of the book Crash Proof: How to Profit from the Coming Economic Collapse, appeared on FOX News Saturday morning and CNBC Tuesday morning. Schiff told viewers of “Fox Bulls & Bears” that the downturn in the U.S. economy goes beyond a “slowdown.” He warned:

We’re already in a severe recession, and it’s going to get a lot worse.

Commenting on the poor performance of the U.S. stock market lately, the president of Connecticut-based Euro Pacific Capital said:

This is a bear market. We’ve been in a bear market since 2000. The market’s going a lot lower, not only in nominal terms, but in real terms.

Later on in the show, Schiff gave a timeframe for how long he thought the bear market would last. He told viewers:

We are in a secular bear market. It’s been going on for 8 years. It’s going to go on for another 5 to 10 years.

As to where investors may want to look at putting their money, the host of the weekly radio program “Wall Street Unspun” said:

It’s [oil] probably going up to $150…

And, you know, trying to catch a falling knife in the financials? They have a long way to go down. I wouldn’t touch them…

Look at gold. You want to see a good chart, look at commodities. Look at foreign currencies.

At the conclusion of the show, Schiff predicted:

Well, this week Bernanke said the economy was going to improve and inflation was going to moderate. He was wrong on both counts. The economy is going to get a lot worse. Inflation is going to get worse. And you’ve got to get out of the dollar. It’s going to fall at least another 10%.

FOX News Appearance
YouTube Video Link

On Tuesday morning, Peter Schiff appeared on CNBC’s “Squawk Box,” and responded when asked who was responsible for the financial mess the United States has found itself in by saying:

Well, first of all, it’s the government, and when I say the government, I also mean the Federal Reserve, that has artificially kept interest rates much too low in this country, and in so doing, they’ve encouraged a culture of consumption, of borrowing to buy things. In America, we borrow to buy houses, to buy cars, to send our kids to school, to remodel our houses, to take vacations. And what we’re seeing right now is the fact that we can’t pay any of this money back. And the lenders are cutting us off, and this whole bubble economy that we have is now deflating. But it never would have existed if we had honest money. If we were on a gold standard and we had higher interest rates, we would have been saving, we would have been producing, and we wouldn’t be in this mess.

Schiff shared his views about how to avoid a financial armageddon. He said:

We need to raise interest rates dramatically. What’s that going to do? It’s probably going to bankrupt most of the financials. It’s going to bankrupt a lot companies. We’re going to have to go through a big retrenchment because we basically spent ourselves into bankruptcy. But we can’t keep trying to reflate the bubble. That’s what the Fed is doing. That’s what the stimulus is trying to do. They’re trying to get us to spend more money. That’s the problem. We’ve spent too much. So, we’re going to have to live through a severe recession. If we keep fighting it, all we’re going to have is higher inflation, higher oil prices, higher commodity prices, and eventually, we’re going to get something far worse than just a severe recession. We could have hyperinflation and a complete destruction of our currency.

You can access the 7 minute 16 second CNBC segment here.

Sources:

“Fox Bulls & Bears”
FOXNews, June 28, 2008

“Squawk Box”
CNBC, July 1, 2008

Who’s To Blame For The High Price Of Oil?

I read the following the other day in a grocery store publication on Chicago’s northwest side. Regarding the high cost of oil and gasoline, the bureau chief of the paper wrote:

Whew! What is the answer? I think we should contact our elected officials, both state and national, and let them know we, the taxpayers, need some relief. Yes, I know about Bush’s economic stimulus package that is on the way- but I don’t want to put it all in my gas tank.

There’s no use arguing with most Americans over who’s to blame for high oil and gasoline prices. In their minds, “Big Oil” is the culprit, with a dash of President Bush, his oil buddies, and every level of government sprinkled in for good measure. But before you forward on that e-mail about a “gas station holiday” to five of your friends, consider this: Could it be possible that the high price of crude oil is mainly due to the basic principle of supply-and-demand? Just a thought. Bloomberg’s Mark Shenk wrote today:

China, India, Russia and the Middle East for the first time will consume more crude oil than the U.S., burning 20.67 million barrels a day this year, an increase of 4.4 percent, according to the International Energy Agency in Paris.

And here in the good old US of A?

U.S. demand will contract 2 percent to 20.38 million barrels daily, the IEA says.

Shenk noted that economic growth in China and India of more than 8%, coupled with increasing car ownership among the countries’ combined populations of 2.45 billion people, will more than compensate for declining demand in the United States. According to the IEA, global oil use will increase 2% this year largely because of emerging market growth.

Regarding the topic of car ownership, China’s passenger car sales jumped 22% to 6.3 million units sold last year. Reuters’ Joe Mcdonald reported on the Chinese auto sector today, and wrote:

Auto sales in China are booming, with analysts and automakers forecasting growth at 15-20 percent this year. But demand for the biggest vehicles is even stronger, with sales of luxury cars and SUVs expected to surge by 40-45 percent…

“Chinese buyers typically like bigger cars and they have the resources to go for them,” said Tim Dunne, J.D. Power’s director of Asia-Pacific market intelligence.

Source: China Daily

Mike Wittner, head of oil research at Societe Generale SA in London, told Bloomberg:

Does the U.S. matter anymore? Has the U.S. mattered for the last few years? It is debatable. As far as the oil market is concerned, demand growth is going to be continued to be driven by China and the Middle East.

Still feel like contacting your elected officials?

Sources:

“Emerging Market Oil Use Exceeds U.S. as Prices Rise (Update2)”
Mark Shenk
Bloomberg, April 21, 2008

“Gas guzzlers a hit in China, where car sales are booming”
Joe Mcdonald
Reuters, April 21, 2008

Latest U.S. Economic Forecast: Apocalypse

Peter Brimelow from MarketWatch talked about Harry Schultz, the highest paid investment consultant in the world, and his International Harry Schultz Letter this morning. For those of you not familiar with Mr. Schultz, I wrote about him back on December 13:

Have you ever heard of Harry Schultz? I sure have, and to this day I am still in absolute awe of the money this man earns. Mr. Schultz, publisher of the International Harry Schultz Letter, is the highest paid investment consultant in the world at $3,500 an hour (or $4,900 an hour if you require his services during the weekend).

Brimelow, in “Schultz still sees an apocalypse,” wrote that since Schultz declared a “financial tsunami is upon us” in the December issue of his investment newsletter, the Dow Jones Industrial Average has lost some 2,000 points. According to Brimelow:

So I checked to see if Schultz is any cheerier.
Answer: No.

The MarketWatch columnist talked about Schultz’s latest U.S. economic forecast. He said:

Schultz writes: “It’s a derivative crisis, stupid!… 9,000 U.S. banks failed in 1929-1932; look for new records… Hyper-inflation is a distinct possibility; stay awake!”

Among his more colorful recommendations: “Buy a few local non-rare gold coins of whatever country you are in for emergency/barter use, smallest denominations… Keep 6-12 months cash at home/ office/ lawyer-doctor office. Pretend an emergency is coming, because it may be.”

According to Brimelow, Schultz recommended traditional inflation hedges that were popular in the 1970s: art, commercial property that yields certain income, and farm land. In addition, Brimelow noted that:

The HSL section called “Actions To Take - In A Nutshell” epitomizes Schultz’s combination of sensational and shrewd. It begins: “The global derivative/credit crisis is nearing breaking point. Take immediate measures to safeguard your assets before it becomes too late, due to sudden (bank/government) restrictions on cash withdrawals, wire transfer limitations, the loss or recall of credit facilities, frozen fund redemptions, foreign exchange controls, etc…”

This outlook is consistent with what Schultz was predicting in his December newsletter. From MarketWatch on December 13:

Among other interesting ideas raised by Schultz in his intense, somewhat terrifying introduction: recession, possibly depression; bank failures; exchange controls; housing prices down by 50%; credit card company failures; money market fund dangers; tripling of U.S. jobless numbers; federal bail-outs for Fannie Mae.

Apocalypse, indeed.

(Note: The author disclaims any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

Goodbye Yankee Dollar

Amid growing expectations of a slowing U.S. economy and potential interest rate cut by the Federal Reserve, the U.S. dollar fell to a new record low against the euro. Earlier on Wednesday the euro touched $1.3913, its highest level since the European currency was launched back in January 1999. “It’s all about lower growth, lower rate expectations now,” Gregory Salvaggio, senior currency trader at Tempus Consulting in Washington, told Reuters this afternoon. He added, “That combination is fueling a shift to the euro, especially ahead of the Fed’s meeting next week, and now that we broke $1.39, the next one at $1.40 is within sight.” Jonathan Cavanagh, a currency strategist at Sydney-based Westpac Banking Corp., told Bloomberg that, “The dollar is likely to continue falling with the potential rate cut in the U.S.. The European Central Bank has a tightening bias, which puts them at a favorable differential to the U.S.”

Highlighting the longer-term decline of the greenback versus other currencies was the International Monetary Fund (IMF) announcement today that the dominance of the U.S. dollar as the world’s reserve currency is declining as the euro becomes more popular, especially among developing countries. The IMF found that, “Nonindustrial countries hold some 30 percent of their reserve assets in euros and 60 percent in dollars (as of December 2006), compared with 19 percent and 70 percent, respectively, six years ago.” Developed nations are also adding euros to their currency holdings. “Industrial countries’ use of the euro has risen to 21 percent from 17 percent in December 2000, while their dollar holdings have remained fairly steady at 72 percent compared with nearly 73 percent six years earlier,” according to the Washington, DC-based organization.

The importance of the U.S. dollar as the world’s reserve currency lies in the fact that the United States was able to run trade deficits exempt from free market forces that would have required an adjustment and a devaluation of the dollar. And what will happen if the dollar loses its reserve status? According to Peter Schiff in his book Crash Proof: How to Profit from the Coming Economic Collapse:

In any event, the U.S. dollar’s status as a reserve currency immune from market pressures cannot last indefinitely. When it ends, all those surplus dollars will come home to roost, creating hyperinflation domestically.

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