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January 26, 2009

Schiff firm: Shedlock exaggerates our clients' losses

Andrew Schiff, Peter Schiff's brother, responds to the Shedlock piece. He notes Shedlock is trying to attract clients. He says Shedlock exaggerates the losses of clients of Euro Pacific Capital, Schiff's broker-dealer firm. (Not a hedge fund.) But he doesn't refute anything Shedlock said. The Schiffs say the dollar is overvalued, just as the housing market was three years ago, and will fall. Bottom line: Even prescient people, such as Peter Schiff and Nouriel Roubini, who both called the housing bubble, are not omniscient. But you knew that. (Or should have.)


It is disappointing that you would choose to raise the profile on Mr. Shedlock’s attack on our firm. In particular, his posting on Market Oracle is primarily an attempt to attract business to his own firm (Sitka Capital Management), by bashing a much larger and better known firm. However, the strategies employed by the two firms are completely different and make a direct comparison useless.

While it is true, that our accounts have suffered badly in 2008, a fact that we have never disputed or ran from, his estimates for the size our of typical client losses are exaggerated and unfair. We have thousands of clients, and since all of our accounts are run individually, holding up the performance of one client is not representative of our firm as a whole. In choosing to characterize our performance he considers only that time frame which he knows was the worst period for our clients. The biggest impediment to our performance in 2008 has been the rally in the dollar, which we did not predict. However, we believe that the rally is as illogical as it is transitory. We still believe that for many fundamental reasons the dollar will fall dramatically. Shedlocks’ criticism is similar to jabs peter got in 2005 when housing market experts were ridiculing him for making gloomy predictions about home prices which at that point were still strong. It didn’t mean that he was wrong then about a housing bubble.

Also, as a broker dealer (not a Registered Investment Advisor as Mr. Shedlock’s firm), it would be illegal for us to publish or to otherwise make claims as to past or expected investment performance. Mr. Shedlock knows this, but sees a chance to gain credibility as a result of our lack of response to his challenge.

I would ask that you mention that commercial interest rather than journalistic objectivity informs Mr. Shedlock’s posting. Please feel free to contact me with any questions.

Posted by Jay Hancock at 1:45 PM | | Comments (23)


I think this an attempt to apple a time frame to Peter Schiff's predictions. As I understand Mr. Schiff will attempt to predict when certain events may occur but I know he does his best not too.

Let's all agree that his 2005 prediction on the economy was dead on accurate. It's almost scary.

Opportunism. They all have their motives for smearing Schiff, but this latest attempt is sleazy.

Peter Schiff was right; inflation will increase this year and gold and silver are already rising. Look for them to continue to increase.

Before you start talking about inflation first learn what it is.
It is not rise in consumer prices as you think. It is the money supply + credit/debt. So we have been in deflation for a year now and are not going to get out of it this year. $10 Trillion worth of wealth wiped out and more to come and you are talking about inflation. The only reason Gold price is rising is precisely because we are in deflation caused by economic collapse. So people are fleeing to the safety of gold.

I am NOT an investment advisor--just some guy--and I did NOT lose any money last year, my own or anybody else's. I stayed in cash.

How come I was smarter than Mr. Schiff? You don't have to be smart to see the collapse of all asset classes due to the bursting of the largest credit bubble in the history of the universe.

sam, i think you need to look at some federal reserve charts.

@Sam, it depends on what money supply indicator you are using. If you look at MZM, things are still very inflationary. If you try to recalculate M3, the picture is very inflationary.

The Fed has expanded the monetary base, and this money has helped create the bubble in Treasuries. As this deflates, expect the dollar to fall (at least against gold, although very likely against other currencies as well).

At which point Schiff will be proven as correct.

Schiff will be a gentleman and concede that Shedlock is right on this one.

There isn't enough cash in the market to service the bad debt let alone the "good" debt. That's the problem. And until that goes away, any talk of inflation is absurd.

Gold is rising not because of inflation but because people are scared. It'll actually go down like it did in the depression.

I am an avid Mish reader and a fan of Peter Schiff, as well. The first part of Mish's analysis was detailed, and yes, showed losses that Mr. Schiff's clients may have experienced in 2008. But I quickly realized, in the second half of Mr. Shedlock's article, that it was a hit piece specifically designed to promote Sitka Pacific, for whom Mr. Shedlock is an investment rep.

Most average investors that are investing globally right now should not be looking for returns in 3 - 6 months, or even 12 months. In a global market as volatile as this one, it is easy to get burned, especially triming to time the market. Mr. Schiff's firm uses buy/hold strategies for the longer term. It is nearly impossible to time this market, and Mr. Schiff has said this on numerous occasions. If you invest in the overall trend, you will come out on top in this global recession. I believe the investments EuroPac recommends will, in the long-term, pay off.

Does anyone here really think Oil will drop to, and stay at $20 for the next 5 years? Does anyone think the price of corn, wheat, and soy is going to stagnate when currencies around the world are inflating? Will energy prices DROP in the next 5 years, or do you think they will go up? How about metals like copper, aluminum, and steel after infrastrucuture stimulus kicks in globally after 2010? If we have economic riots and currency collapses around the world, would precious metals not stand to benefit in the next several years? These are some of the long term trends to look for. From my experience, these are the types of investments Mr. Schiff's firm is positioning their clients for.

Certainly if you invested with Europac in May of 2008, your investments are going to be down for the most part. But what if you invested with his firm in November 2008? What if you are investing now? Only time will tell.


Schiff was wrong, dead wrong, on his fundamental assumption: that the current crisis would cause the world to "decouple" financially from the US and that the economic pain would thus be limited to the US. What follows logically from that premise is a massive devaluation of the dollar, but the premise was dead wrong: the recession is global, and the US is not even among the worst-hit. With a basic premise as incorrect as Schiff's theory of decoupling, why would anyone believe that he is simply off about the time frame? The foundation of his investment strategy is completely undermined.

We've got several years before this plays out globally. Personally, I think it is premature to assume Schiff "was" dead wrong. We don't know that yet.

At this point, each individual investor has to decide what he/she thinks is going to happen. All that the 'experts' can do is give us their theories and advice. We are ultimately responsible for what we invest in and when we do it.

Don't get me wrong, Mish has some excellent theories and investment recommendations. But I feel that Peter Schiff does, as well. Of course, I did not invest in mid-2008, so i have not been negatively affected in the last 12 months - so it's easy for me to not be upset at Schiff. :)



First quarter of the football game and your calling it already... The principal theory from the likes of J.Rogers and P.Schiff is USA bad, the Pacific rim, and commodity based countries like Australia and Canada good...


In this reply his brother said "it would be illegal for us to publish or to otherwise make claims as to past or expected investment performance."


In this US News and World Report article ( he said "I have clients that made 10 times their money."

I am confused.

I was one of the Europac clients recently quoted in the WSJ article.

Look up the following stocks which were in my portfolio:

Babcock Power
Oz Minerals
Minara Resources

What is the health of these companies? They are basically goners ..dividends? .. winding up in some type of bankruptcy. So its more than just theory or time .. are these companies even going to be around that Europac put us in?

Here is another one they told a relative of mine to buy .. Silver MIning Company (SRLM ticker). Follow the news on it.

Many of the companies are not healthy in the least.

In my opinion, Shedlock is just a bottomfeeder out to advertise his company by trying to bash someone like Schiff. Its a sad, desperate attack by a Nobody who thinks he can become Somebody and capitalize off it at the same time. I would personally NOT invest with someone like this because he was not only dead wrong about a lot of things, but the manner he went about it was just plain sleazy, and anyone who knows how the industry works realizes that. The only reason this "gentleman" is getting any attention is because of his specious attacks on Schiff. Personally, I can't wait for "Peter Schiff was right.. AGAIN" on Youtube.

so what happens when the dollar does lose it's value and we start experiencing inflation and gold, oil & commodity prices start really rising again? New blog headline: Peter Schiff wasn't as wrong as we thought.. LOL!

PS and his brother are opportunists. He calls his firm much larger and better known...they are scorned because Mish basically sited fact after fact after fact where PS was clearly short-sighted. The REAL PROBLEM here is that Schiff is married to his decoupling theory and will refuse to admit he was wrong. His attempts to claim that things haven't finished yet are desperate attempts to save face. I am sick and tired of PS's interviews, his self promotion and his "beyond reproach" attitude...this letter is like a "how dare anyone call us out" whine more than anything else. Today PS's newsletter was titled "The price of being popular" Its clear that popularity are his chief aims

ha. It’s fun reading things from the future.

June 1st, 2009 — Peter Schiff’s calls look to be right again. Dollar Index/Bond Market crashing, Foreign Assets/Gold Stocks back up again. When everyone was crying that decoupling was a myth, Schiff double-downed and now has reaped on an opportunity when others saw reason to panic. When you know where the trip is going to end, sometimes you just need the balls to stay on the ride.

The world is decoupling, just read articles from 321gold and you'll see all the maneuvering that is going on. It's just a delicate matter for China and Japan to dump the US dollar reserve system without destroying the value of their substantial dollar assets. China and Japan are moving into Euros and Gold and other assets. Japan is even talking about debt issued to the US in Yen. There are also numerous currency swap deals with China now to bypass the dollar. The US is going to be left out in the cold and become another Argentina.

Looks like China is talking about removing the peg... wouldn't this be one step towards decoupling? Seems like, with all the price inflation our dollars are causing in Asia, currencies have no choice but to remove their dollar peg.

"I think this an attempt to apple a time frame to Peter Schiff's predictions. As I understand Mr. Schiff will attempt to predict when certain events may occur but I know he does his best not too.

Let's all agree that his 2005 prediction on the economy was dead on accurate. It's almost scary."

Here's my Sciff like prediction: one day we will all die. I don't know when, but I will be vindicated

As one of his investors said when he called in to Schiff's radio show: "Wasn't the name of your book, "How To Survive The Coming Economic Collapse""? A grasp of the overall macro situation and great marketing never translated well to any of the portfolios. Why anybody would trust anyone else on Wall Street to handle their money after whats gone down in the last few years could only be construed as sheer lunacy at this point.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.

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