November 13, 2008

S&A Quote of the Day

"Those who are currently patting themselves on the back for having had the apparent foresight to stay in U.S. dollars will be singing a different tune when the music stops playing"

- Peter Schiff, November 2008

32 comments:

Anonymous said...

peter is pissed. he will eventually be right but right now he has to be hurting. but then again, his book royalties must be cushioning the blow a bit.

we will have inflation but not yet. not sure if there will be any safe currencies.

Ozman said...

Hey Keith,

How does it feel like in the UK now with your dollars ?
Can you now buy a pint with $5 ? I'm sure you're feeling richer if your income is denominated in USD. I'm heading out to London for Christmas.

Derivs said...

Sorry. I agree he will be right but the guy refuses to use stops and just digs his heels in the sand deeper. That is a cardinal sin for a trader to do. I would fire him if he were on my desk.

Roccman said...

Well - seems of as of the 10th the world stopped showing up for the TAF.

Got gold?

Oh...

Got food?

theloknesmonster said...

Listen when I tell you...Don't listen to anyone.

If you would have dumped dollars and bought gold, oil, and foreign currencies like Schiff suggested, you would have gotten crushed as badly as anything that has happened in the economy, maybe ever.

He has been very Cramer-like in his recent dash from the dollar.

Anonymous said...

The devaluation of the dollar is of particular importance to me. Forget it's not at the forefront of some peoples' impression of what's going on, I'm concerned about not being able to use the money I have in the bank to afford all the "necessities" required to survive what's clearly on its way. At some point one must decide when to spend it while they still can.

happy snapper said...

me no understand why someone elses fiat currency will do better then then ours.

Jim said...

Hoard ammunition.

It'll be the premier currency in the not to distant future.

-Mad Max

happy snapper said...

It is important to understand that;
Eurotards are NOT savers
they are simply NOT earners

so we Sashers must be aware that in the end the Euro will totaly collapse.

The Dolar on the other hand may suffer significant weakness for a while but will definitly survive

Anonymous said...

There is no question that Europe is in worse financial shape then we are, and they will continue getting even worse.

Anonymous said...

He's also pissed with the US 'cause his daddy's in jail!

http://www.usdoj.gov/opa/pr/2004/March/04_tax_182.htm

Anonymous said...

Here's another great article from one of the few true journalists still around:

Beware The Obama Hype: What "Change" In America Really Means by John Pilger

Anonymous said...

I read Schiff years ago. Fiat is fiat. Glad to have bought Gold at 280 and silver at 6. Sold 1/3 of my holdings late last year. I did not take his advice on foreign stock markets because to me its just another casino. My portfolio is half hard assets, half government bonds. Most books like Schiff have to be updated because so much has happened in the last 8 months. With all the money creation, and borrowing caution to the wind, it seems we will have hyperinflation in the future. But, I notice Paul Volcker in Obama's team. Paul Volcker is Mr. 20% interest rates. Should be interesting between Hellicoper Ben and Cigar Smoking Inflation Killer Volcker.

Devestment said...

I agree with Peter that this crisis is coming.

I differ with his opinion in respect to the fundamental cause and effect.

China holds a large market share of our treasury. Therefore they have a controlling interest. By selling they can cause the effect of raising interest rates at auction.

This benefits them by generating income during recession and freeing up capital for their own stimulus while furthering depreciation of our assets.

China will not take any action that would jeopardize their savings.

I am still of the mind that crappy US Dollars are what I should be patting myself on the back with. I hope I have enough of them to buy all the crappy depressed US assets that I want the next couple years.

Stuck in So Pa said...

He has to be hurting BIG TIME. A relative has seen her holdings with EuroPacific drop below what they were worth when she started with PS in 2001. She was going to yank everything out(thinking short term)until I asked her "Where ya gonna put it. Everything is tanking today!" I told her that Peter will be right, just not right now. I also recommended the "Manias" book as a must read.

Gotta agree though, having dollars right now is great. Quality goods on the secondary market (yard sales, flea markets, auction houses, vehicles on front lawns)are plummeting in asking prices. Well, maybe not all the vehicles, some are really underwater, big time.

Tom Grey said...

Get into Yuan / Chinese currencies, if possible.

They are investing pretty smartly; they've been holding their currency down, they will likely loosen it now with the USD going up. Then, as the deflation ends and inflation re-ignites in USD, and also probably Euro, the Chinese will be sitting pretty, currency wise.
(Country-side a polluted wasteland, but that's what National Communism is for, isn't it? Or is that National Socialism?)

FlyingMonkeyWarrior said...

No safe currencys? What about physical gold? Silver? What about a basket of a little of everything on the FOREX?
There has to be something.....right?
What does Paulson say?

FlyingMonkeyWarrior said...

I meant King Paulson, rather.

freedom dip said...

Seems like a familiar refrain.

"The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king"

Deflation now, inflation later.
Much pain to come.

duarte said...

He will definitely be proven right. But I think the iTulip guys will be proven to be the most accurate. They were predicting a period of disinflation (not deflation) before the hyperinflation begins. I think that is exactly what we are seeing (along with some massive interbank manipulation of gold and silver that couldn't have been predicted).

Unfortunately, the snap back could be dramatic enough to cause talk of freezing the trading of gold. Don't be surprised. We are going socialistic in every other way.

duarte said...

oh, and are you going to be apologizing to Sarah Palin now that the "Africa is a country" story turned out to be a hoax?

Anonymous said...

Every other major country will also have inflation, apparently, so what better choice is there? Even the Swiss are bailing.

keith said...

The rent on my flat has fallen 40% in the past few months

10% that I negotiated downward and 30% thanks to the US dollar.

A pint of beer has fallen from $8 down to $6

A movie ticket is only $15, used to be $22

But I feel it won't last. I'm going to start transferring dollars into pounds soon. Not yet. But soon.

It seriously feels like musical chairs. You really have to keep moving. What's up one day is down the next. There is no stability. No safe haven. And my biggest fear right now is waking up to the news that the dollar has been devalued 50% overnight.

And I don't get why gold is in the dumps. We're going to be printing money. It'll be toilet paper. It doesn't make sense. Our deficit LAST MONTH was $280 billion. I'm looking at GLD and ^HUI

Chime in

Anonymous said...

Keith?

Why pounds, the Brits are in worse shape than us?

Frankie and the open toed shooz said...

Well, well
Hey lawdy mama,
Can't afford no shoes
Maybe there's a bundle of rags that i could use
Hey anybody,
Can you spare a dime
If you're really hurtin', a nickel would be fine
Hey everybody
Nothin' we can buy
Chump hare rama, ain't no good to try
Recession
Depression

keith said...

Are brits in worse shape than the US?

Oh, my god. You have no idea. They caused the greatest housing speculation orgy in world history - not just in the UK but in europe and all over the world. And 15% of their GDP was financial services.

This was the ultimate credit-fueled ponzi-scheme consumer society. And it fell off a cliff like you'd never believe.

It could get downright scary here. I hope is doesn't, but it's all falling apart really quickly now.

And the pound reflects that.

DOPES 2 said...

TOOLS,

GOLD IS A COIN FLIP, I BOUGHT HIGH AND GOT BURNED!!!!

I WILL HOLD, I DON'T CARE UNLESS I HAVE TO USE THE GOLD FOR FOOD, ETC.!!!!

CONSUMER SUPPLY OF ACTUAL METAL IS SLIM!!!!

PREMIUMS RIGHT NOW ARE AS HIGH AS 60% FOR SILVER COIN AND 25% FOR GOLD COIN. LOOK IT UP AT THE BULLION SITES!!!!

BACK M1 SUPPLY WITH GOLD AND GOLD = ABOUT $950/OZ!!!!

MAYBE DEVALUE DOLLAR TO COINCIDE WITH FACE OF GOLD AND SILVER AMERICAN EAGLES?!?!?!?!

THAT WOULD RALLY PISS OFF THE CANADIANS AND AUSTRAILIANS. THEIR FACE IS HIGHER THAN EAGLES!!!!

IT WOULD BE FUN TO HAVE GOLD AND SILVER COIN IN CIRCULATION!!!!

CLINK CLINK GOES MY POCKETS JUST LIKE MY JINGLE MAIL TO TANGELO!!!!

TARDS!!!!

TOOLS!!!!

DOLTS!!!!

DOPES!!!!

Anonymous said...

with the euro heading to par and maybe the pound too, $US looks to blast higher. Long term US is screwed but dollar looks to have more legs and more pain for Schiff.

investorinpa said...

For those owning gold and silver (which I do too)...remember, you bought gold and silver NOT to make money, but to maintain purchasing power. Gold and silver are holders of value. They are not get rich quick schemes. They are meant to keep stability of your money during unstable circumstances. Remember that.

Anonymous said...

Shiff's luck ran out... like all future predictors there is a component of skill and luck. Mostly luck.

Peter H said...

Keith -

Thank you for running the blogs you have. It's given me hard facts to back up hunches I'd held but didn't quite know what to do with. And saved the asses of more than a few friends who listened to us.

Vis-a-vis gold:

I agree completely that this doesn't make sense and doesn't feel right. Just like housing didn't feel right. Also confusing is the hammering on gold equities and mines. For example - I've got IRA money in USAGX (at the time I didn't know short mutual funds like BEARX existed, it was my bet for safety). Historically, it has more or less gone up and down with gold ETFs. But as of recently it has been pounded into the dirt. The decoupling started in August, and accelerated from there. Same thing seems to have happened with other precious minerals funds. Same timeframe too.

I don't have access to pro information, but I get suspicious whenever fundamentals seem not to be driving things. The timing is also somewhat peculiar. I wonder if this might represent a clue towards your question about Gold.

My theories to date on the matter include:

# Market actors pricing in an anticipated future decrease in the price of gold beyond what we have seen. But who would be doing that in quantities large enough to move the market?

# Hedge funds unloading positions? I don't know where to look for that information. Also why would they have started that in August? Trying to raise cash to get in on some other position? There seemed to be a run-up beginning 2003 on industrials (e.g. steel companies), gold, and some other candidates I had for sectors which I felt would do ok under inflation (large capital infrastructure already financed, low marginal production costs, basic and essential products, output often purchased on future contracts). As of a year ago, the run up made no sense to me. Might there be a relationship?

# Pricing in of expectations that rising energy costs would reduce profits and dividends for these firms. This makes sense to me, but that's not really a problem anymore. It could be that the original impetus was this, and it has not been corrected because of the souring on equities in general. That theory has one major flaw - it indicates that I understand something that people with more experience, more access to data, and more money at stake do not. Such things can happen, but it's very dangerous to let yourself believe that without hard facts.

(things like unrest in Central Africa and whatnot I'm leaving out because I'm looking at composites of many companies. Plus USAGX is mostly invested in Canadian mines. Comparisons of the various metals funds, ETFs, and individual stocks has not yielded any patterns that I can see)

So whose been selling off these stocks? Has any movement happened on the bonds from these companies? (arbitrage plays?) Why did this begin in August? Is there any relationship between this and the price differential between gold ETFs and delivered bullion? (distribution channel insufficiency could account for some of that, but it seems out of proportion)

Something smells, well, slightly fishy in Denmark :-)

HP'ers - do you think this might lead anywhere?

I'd like to do the research but I don't know where to look. How would one find out who has been selling so much stock in gold mining companies?

Peter H said...

Two more notes on my previous post:

#1 - Another theory - Resource extraction industries were overvalued compared to the underlying commodities in the first place. I don't see any specific evidence of this. P/E's seem mediocre, profit margins are high, etc.

#2 - interesting news...

TEHRAN, Iran (AP) -- Iranian newspapers are quoting a top adviser to President Mahmoud Ahmadinejad as saying the country has converted some of its foreign currency reserves into gold.

The papers published Saturday did not say how much of Iran's estimated $120 billion in reserves were converted into gold. Iranian officials could not immediately be reached for comment.

The daily Jahan-e-Eghtesad, or Economy World, quoted presidential adviser Mojtaba Hashemi Samareh as saying Ahmadinejad ordered the change.

The decision comes after a dramatic fall in oil prices recently triggered by a global financial crisis. About 80 percent of Iran's foreign currency revenue comes from oil exports.


P.S. I am not a gold bug. I'm more focused on shorting indexes and looking for indicators for shorting 20yr bonds. But just as housing wasn't my focus and pointed to these massive systemic problems, I fear that these discrepancies in metals may be effects of larger trends of which we are unaware.