Tonight I’ve been reviewing some of the latest material from Peter Schiff, president and chief global strategist of Euro Pacific Capital. Schiff, as most of you may know, correctly-called the latest financial crisis the United States still finds itself in. From the Schiff Report YouTube Video Blog this past Saturday:
We are either in, or on the cusp of, a brand new recession. And remember, contrary to previous recessions, this one is starting, starting, with unemployment above nine percent, starting with interest rates already at zero. So, imagine what’s going to happen when we get the next round of fiscal stimulus- they’re going to blow the deficit off the charts. And of course, the Fed can’t do anything on the rate front. All they can do is print more money, which destroys the value of U.S. bonds. So I think S&P again is being much too generous with their rating forecast…
So, that is my warning to everybody, and I’ve been saying it. You can’t just get out of Treasuries. You need to get out of all debt denominated in U.S. dollars, because that really is what S&P is saying here. S&P is saying, “We have so much debt, that if you buy Treasuries, you’re going to lose, because you’re going to be paid back in inflated dollars.” Well, if you lose on Treasuries, you lose on any bond that’s denominated in dollars. In fact, you lose on your dollars. If you have them in your bank. If you have them stuffed underneath your mattress. S&P is telling you, “Get out of dollars.” That’s what I’ve been saying, and now they’re saying it too. Even if they won’t tell it to you that straight, they want to sugar coat it. I never do that.
“S & P AA+ on U.S. Sovereign Debt not Low Enough”
And the following is from an e-mail I received from his investment services company, Euro Pacific Capital Inc., earlier this evening:
As may have been expected, the majority of investment professionals are reacting perversely to the crisis. On the day after the first ever downgrade was issued on American government debt, investors reacted by igniting one of the biggest rallies in the history of the treasury market. Such an illogical reaction suggests that investments of better value and fundamentals continue to be overlooked.
I see many places to find shelter from the growing economic storm. While media attention is focused on weakness in the Euro, other currencies are doing quite well against the dollar. Over the last 12 months, the Australian dollar is up 12.6%, and the Swiss franc is up 37%. I believe investments that produce reliable income denominated in these, and other, currencies offer meaningful protection from declines in the U.S. dollar. Assets such as non-dollar sovereign bonds, utilities, and real estate trusts all offer these traits. Gold, which I consider to be the only real money, is up 41% so far this year and today had its biggest one day gain in history. I believe that in the current environment exposure to precious metals offers the best way to preserve wealth.
I know a number of mainstream financial/investing types don’t care for Schiff. However, I find it hard to dismiss the views of someone who’s made some terrific calls regarding the direction of the markets/economy over the past couple years- along with others still playing out.
(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.)
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