Permabear Peter Schiff's Worst-Case Scenario

May 30, 2008 RSS Feed Print

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How about some predictions?
• I think the stock market is headed lower. Gold is going to be $1,200 to $1,500 by the end of the year. That puts the Dow at a less-than-10-to-1 price ratio to gold. Right now, it's about 13 to 1. That's another 30 percent drop in the real value of stocks by the end of the year if you price them in gold. The Dow was worth 43 ounces of gold in 2000. It'll get to 10 by the end of the year and continue to fall from there.

• Oil prices had a pretty big run and might not make more headway by the end of the year. But we could see $150 to $200 next year. I don't think oil will hit $250 because there will be enough destruction of demand in the United States to keep it from doubling. The big problem for us is if the Chinese substantially allow their currency to rise. It could increase at least fivefold against the dollar over the span of a year or two. That reduces the price of oil by 80 percent for 1.3 billion Chinese. Consumption would go through the roof, and that will drive prices through the roof for us.

• At a minimum, the dollar will lose another 40 to 50 percent of its value. I'm confident that by next year we'll see more aggressive movements to abandon the dollar by the [Persian] Gulf region and by the Asian bloc. That's where the stuff really hits the fan.

You're a Ron Paul adviser. He's out of contention, so who wins the election, and what happens then?
The Obama presidency will be like the Jimmy Carter presidency on steroids. I'm pretty sure it's Obama because the economy will be so bad into the election that as damaged a candidate as the guy is, I don't think a Republican could beat him. I think Ron Paul could've had a slim chance because he was different enough.

So how bad do you think this economy will get?
The other problem we'll have during those years is civil [unrest]. There will be a big increase in crime. People are going to be hungry. People are going to be cold. There's a sense of entitlement in this country, and when a lot of people used to having things suddenly don't, everybody looks for someone to blame.

Really?
We're going through a very rough period in our history. In many ways, it's going to be worse than the Depression.

Tags:: investing,; economy

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I am 33 years old. I've been studying Austrian economics for 10 years, but have always invested for short-term wins on swing trades. Recently, I've come to the conclusion that to survive this economic meltdown I need to get serious about hedging inflation and scarcity of the things we all take for granted. I have a small portfolio (roughly $80,000) that I just moved into oil and gold. These are commodities that have a steady demand but whose value will adjust to the falling value of the dollar and protect me against wild swings in the economy. Furthermore, it is clear that oil reserves are waning and demand is growing whilst we continue to print dollars with no backing, which will further inflate our currency and destroy wealth... It's really the only safe bet.

Riley of UT 11:12AM June 15, 2009

I have nothing against Schiff and I often agree with his investment opinions but I have a few problems with the way he argues, especially in his book. In his book he mentions how great his currency picks have performed (at the time) against the dollar in the prior 12 months. Since then, the dollar has trumped all of the currencies he has mentioned. When pressed about it during media appearances he claims that (1) 12 months is too short of a time frame and (2) they are all fiat currencies so it doesn't matter. That is dishonest dialogue.
For my full review of Schiff's book please go to http://soyouthinkyoucaninvest.blogspot.com/2009/04/peter-schiff-little-book-of-bull-moves.html

SoYouThink of NJ 6:40PM April 10, 2009

Peter Schiff is getting a hearing because he's accurately pointing out our bad economic policies and their consequences.
Regarding short term outcome of investments, its certainly possible to invest in things that lose money in the short run, but that work out in the long run. Foreign investments with dependencies on the US economy (and they all do) will all go through pain as the US economy goes through its contortions.
Things like gold will do well as the dollar collapses. But gold also went down when people pulled out of stocks and dollars became more valued.
Its impossible to predict how the actions of government and the unwinding of all these bad investments will interact.
But the long term trends are clear. The dependency of the US on debt is unsustainable. The housing bubble cannot be re-inflated. The government's response to this crisis will wreak more havoc.

Al Brown of CA 7:30PM April 08, 2009