In (partial) defense of Peter Schiff, he made some correct calls, but unfortunately did not turn these calls into profits for his clients. True, it was a particularly vicious year for being only part right! 
The Wall Street Journal Weighs In On Peter Schiff
Courtesy of Greg Feirman, at Top Gun Financial Planning
Geez…. Mish’s post from Sunday night, “Peter Schiff Was Wrong”, has sure generated a lot of interest and controversy. That’s because Peter Schiff is a polarizing figure. People tend to either love him or hate him and have a hard time coming to a balanced, realistic assesment of him.
Today, The Wall Street Journal weighed in with a piece on the front of their Money & Investing section: “Right Forecast By Schiff, Wrong Plan?” (subscription required – [but see excerpt below]). In it, they mainly rehash criticisms from Mish’s piece. Schiff was wrong about decoupling, wrong about commodities, wrong about the dollar in 2008.
They provide a couple of specific examples of how this played out for specific Euro Pacific clients. Richard De Gennaro, an 83-year-old retired Harvard University librarian, put $100,000 into a Euro Pacific account early in 2008. The account is now worth $37,000 – a 63% plunge.
Similarly, Brian Kullberg, a design engineer in Portland, Ore, put $70,000 into a Euro Pacific account early last year. That account is now worth about $25,000 – a similar 64% drop.
Schiff has put up a piece defending himself: “Peter Schiff Answers His Critics”. The main defense is that short term market fluctuations don’t disprove his longer term investment theses: “[Mish] is confusing short term market fluctuations with long term economic trends……I never held myself out to be a market timer. My advice was always geared to long term investors.”
That’s primarily how I defended Schiff as well in my “In Defense Of Peter Schiff – A Response To Mish”.
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The truth, as usual, lies somewhere in the middle. Peter Schiff deserves a lot of credit for the correct calls he made about the housing bubble, the financial system and the US economy – not only for the calls but the intransigent way in which he made them time and again well in advance of when most others had any clue this was on the horizon, and often in the face of ridicule and dismissal.
At the same time, the bottom line for any investment advisor is performance, and by that standard Schiff failed miserably in 2008. He was wrong, at least in terms of timing, as far as decoupling and commodities. Longer term (I’m talking about years), I think he’ll be right here as well but that doesn’t mean that losing 50+% in the medium term hurts any less.
I think what this comes down to is that Schiff is an excellent big picture, macro economic forecaster but he is not an excellent trader. That means his positions can get hammered in the short term, though longer term I believe he will outperform most other investment professionals.
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Right Forecast By Schiff, Wrong Plan?
by SCOTT PATTERSON, JOANNA SLATER and CRAIG KARMIN, in the WSJ.
Peter Schiff predicted a collapse of the U.S. financial system. The bust-up he didn’t foresee was the one that made mincemeat of investors who took his advice in 2008.
Mr. Schiff’s Darien, Conn., broker-dealer firm, Euro Pacific Capital Inc., advised its clients to bet that the dollar would weaken significantly and that foreign stocks would outpace their U.S. peers. Instead, the dollar advanced against most currencies, magnifying the losses from foreign stocks Mr. Schiff steered his investors into…
Most had one thing in common last year: heavy losses. A number of investors said their Euro Pacific portfolios lost 50% or more in 2008, worse than the 38% drop in the Standard & Poor’s 500-stock index last year. People familiar with the firm say that hardly any securities recommended by Euro Pacific brokers gained ground in 2008…
Such losses came as something of a surprise. Mr. Schiff’s prescient call for the collapse of the U.S. housing market and the weakening of the financial system helped him gain fame as an economic guru and savvy investor who promised shelter from the financial storm…
Mr. Schiff says one year’s poor performance doesn’t prove he was wrong. He has admitted in notes to clients that his investment thesis hasn’t performed as expected, particularly with respect to the U.S. dollar. But he holds fast to his convictions and has been telling investors to scoop up a number of depressed stocks…
