Dollar failing, whats the alternative?

reply to post by sadchild01

Schiff's Overall Thesis

* US Equity Markets Will Crash.
* US Dollar Will Go To Zero (Hyperinflation).
* Decoupling (The rest of the world would be immune to a US slowdown.
* Buy foreign equities and commodities and hold them with no exit strategy.


Schiff was correct about point number 1 above. The US equity markets crashed. That was a very good call. Unfortunately, his investment thesis centered on shorting the dollar in a hyperinflation bet, and buying foreign equities rather than shorting US equities.

Furthermore, Schiff made no allowances for being wrong and had no exit strategy whatsoever.

What happened in 2008 was that foreign equities sold off much harder than US equities, and a strengthening US dollar compounded the situation.

In other words, Schiff failed where it matters most: Peter Schiff did not protect his client's assets. Let's take a look how, and more importantly why, starting with charts of various foreign indices.

2008 was a global equities bloodbath. Clearly there was no decoupling. The Shanghai index (China), Nikkei (Japan), TSX (Canada), AORD (Australia), and virtually every world equity index collapsed along with the S&P 500, the DOW, and Nasdaq in the US.

Many, if indeed not most, foreign equity markets did worse than the US indices. The Shanghai index fell from 6124 to 1665, a whopping 72.8% decline top to bottom.

Millions of Chinese Struggle to Find Jobs

In the wake of a global slowdown, Chinese export shrink, civil unrest is a worry, and unemployment is rising as noted in Xinhua says there will be more unemployment and social revolts in 2009.

The odds of China finding work for 33 million workers without printing vast amounts of money are slim.

Those hot money inflows were all part of the global credit boom that is now unwinding. Much of China's boom centered on exports. Now that the US consumer has thrown in the towel, a key question arises:

Can China expand enough to make up for the contraction in US and European demand given that the two economies are more than six times the size of China?

The answer to that last question is an emphatic no. One tail cannot wag six dogs.

Here is another way to look at it. The US is the world's largest economy. Housing had already weakened but commercial real estate had not. US retail stores and malls were being built at an unsustainable blowoff pace and those stores were crammed with goods coming from China and Japan.

The decoupling theory was that loss of the US consumer would not matter to the commodity producers like Canada and Australia or the manufacturers like China and Japan. How could any economist have thought that? Many did. Schiff was one of them.

Schiff has been ranting about hyperinflation for years. The dollar is substantially higher now than it was at the start of 2005. His explanation for the recent rally is there is no "real demand" for dollars, it's just deleveraging.

I agree that deleveraging is indeed happening.

But why is deleveraging happening? The answer is everyone herded into anti-dollar plays based on decoupling and hyperinflation theories that did not pan out. Those trades are now being forcibly unwound. The bulk of the carnage is likely over but the losses have been immense.

source for all above

Bottom line is i can find more articles and analysis of Shiff's "predictions" that all show where he was wrong, than you can find saying he was right.

Also Schiff is locked in with his predictions. he's written 2 books based on them, he now can't change those and admit he was wrong even though 9 out of 10 so called professionals say he is.

Bottom line is No economy is safe from this mess, no economy is going to come out smelling like roses, YOur Mr. Schiff has been predicting the collapse of the U.S. economy for years now and guess what he finally got it right Also your beloved Mr. Schiff has been predicting Hyperinflation every year since 2001. and it hasn't happened yet!

I love it when people like yourself blindly believe everything a talking head tells them. I bet before this financial mess started happening you never heard of Mr. Schiff. But once someone pointed out he predicted the mess you believed every word he said and you didn't even research the guy and other predictions he made before that didn't come true. its ok i know you probably won't answer with the truth

So you tell me who's the sheeple me or yourself?

Myself i research a person background when they make a prediction to see if they have made predictions in the past and what they were and if they were right before i give them credibility and even then i see if a majority of other so called pros agree with him or not.

There is NO way China can survive if the U.S. economy or even the European economies collapse. Just those 2 economies combined are more than 6 times larger than China's economy!

Sorry economics is against you when larger economies are in trouble or outright collapse the smaller economy will follow suite!



edit to add:

actual client portfolio of Mr. Schiff

2.bp.blogspot.com...

doesn't look good


[edit on 2/1/2009 by Mercenary2007]

reply to post by Mercenary2007


lol, the person who you refer to is Mike Shedlock a.k.a. Mish , who is a small money manager

small money manager

use something more credible , not a small money managers nonsense

peter schiff stated :

In addition to mischaracterizing many of my beliefs, he also is confusing short-term market fluctuations with long-term economic trends.
www.usnews.com...

there is a difference b/w long term trends and short term fluctuations

What's the alternative? A look at Zimbabwe gives the answer. The lack of producing goods (or services) that people want to buy is why that country's currency has no value. What matters is that a country produces things that people somewhere in the world will buy.

Originally posted by Mercenary2007
There is NO way China can survive if the U.S. economy or even the European economies collapse.

China has survived for 5000 years. They are used to hardship. Are you? (Well, I guess you can live off the fat of your fellow countrymen. )

Just those 2 economies combined are more than 6 times larger than China's economy!

I always laugh when I hear blind nationalistic platitudes like this. Those economies, with the exception of Germany's, were built on borrowed money. And now chicken has come home to roost.

It's a sad situation that we have no alternative to switch to while our currency goes to zero.

This lack of options exists by design. You can't make a population desperate and easily controlled if they have options.

We need different money systems like a ship needs water-tight bulkheads. If one floods, the rest of the ship can keep it afloat. But in a monopoly-controlled credit system, if the ship springs a leak, everyone goes down.