Archive for the ‘Peter Schiff’ Category
Peter Schiff is sticking his neck out here. If nothing else it ought to make anybody thinking of selling gold and silver to think again. Mr. Schiff is probably right long-term but in the short-term? Well, the dollar is up since he ranted on this video.
A reader of ArabianMoney.Net is moving to Dubai and sent me a list of questions about life here. It is always interesting to hear how outsiders see things, and to correct some of the myths that are current in the popular media:
Q. I heard about thousands of cars left in a hurry at the airport, people are leaving Dubai, it must be a bad place to live after all?
A. A nice story but completely untrue as far as ‘thousands of cars’ at the airport are concerned. Maybe a few dozen. However, repossessions of cars from those leaving might total that number – but then how many loan defaulters have lost their cars in London this year?
Q. Muslim countries like the UAE are not friendly to women, they are not free to do what they like.
A. Completely untrue. My wife would not live anywhere else.
Q. After work, there’s not really anything interesting to do in Dubai besides shopping.
A. Apart from outdoor sports, indoor skiing, restaurants, bars, clubs, the usual things for children, miscellaneous concerts and cultural events. Not much different to any big city really and long warm evenings in the winter to enjoy.
Q. Dubai has no sustainable economy, it’s more like a mirage which is going to dissapear as soon as they are out of oil.
A. If that were true the UK would not be the second largest economy in Europe. The service sector is where the money is these days and that is Dubai with its trade, tourism, aviation and financial sectors.
Q. Dubai is hot! You have to stay inside for 6 months a year.
A. Yes but then the UK is cold and gray and you have to live indoors six months or more. The warm winter is a great compensation.
Q. The UAE must be supporting torture, why can a sheikh torture people without being held accountable?
A. Absolutely untrue and completely groundless. That sheikh has been held accountable. This sort of behavior is not tolerated but punished as in any civilized society.
Q. Some expatriates are being held in Dubai against their will because of debt issues, they are not free to go where they want?
A. Mr Polanski is being held against his will in Switzerland because he faces criminal charges. This is the normal process of justice in any country or the accused will run away (like Mr Polanski did).
Q. Dubai leadership is pretending its plans are real but it’s a scam in order to enrichen themselves.
A. You can see the Dubai Vision all around you in Dubai. And the boom going bust hardly leaves the leadership enriched at the moment, the debts are massive.
Almost convincing! But can the US dollar fall in value alongside a crashing US stock market? It seems unlikely as a sell off in equities means an increased demand for cash, and therefore a higher dollar – for at least as long as the sell off continues. That I think is a flaw in Peter Schiff’s case. This is rather like his getting carried away with oil prices last summer.
With the S&P up 46 per cent from its March low, a typical 50 per cent retracement is almost complete ready for the next plunge lower in this bear market.
Unless you are a born-again-bull or have shut yourself in a cupboard for the past two years I do not understand how anybody can see a further upside in markets at this point, the risk is all to the downside.
At the same time the outlook for the US dollar is not good, even if a new market crash brings a short rally for the greenback. At the very least then hedging the dollar with a currency of fixed supply looks attractive.
That is where gold and silver come into play. You can inflate the money supply but not the gold supply, although with IMF gold sales that is exactly what the central banks are going to do.
They will fail because the IMF does not hold enough gold to cause a serious price change, and might actually stimulate additional demand if this action is perceived as a desperate attempt to keep gold prices down because inflation looks inevitable.
It is the same story for those who say silver is not a currency. Just take note each day that when the gold price goes up silver doubles that increase, and when gold goes down silver drops by double that percentage.
The leverage is obvious, and as gold prices take off those who can not afford gold will buy silver. Also silver stocks are 100th the size of gold stocks so simple supply and demand will leverage the silver price up. Silver is money because of its link to gold, and look at this another way: could silver fall in price when gold is rising? Impossible.
This year I have noted that the flat-earth, tree hugging investors have become a little tired of waiting for gold prices to go up. But the new kids on the block are the hedge funds like Paulson & Co (who tend to get their timing right, that is why they have made billions), and also the more humble retail investor, represented by the enigmatic publisher Rich Dad or the gold ATM machines in Germany.
To my mind this is setting us up for a price spike, and actually it does not matter where the stock market goes this autumn.
A rising bull market would give rise to fears about inflation from the massive stimulus packages – like that already evident courtesy of China’s $1 trillion sub-sub-prime lending program in the first half. That would send investors into gold and silver.
A nasty little crash in October would send investors scurrying for safe haven assets in a renewed belief that the end of the world is coming. It would also mark a definite top for the bond market and investors would have no other alternative then except precious metals, fearing a surge in inflation from a second bailout package.
So with gold and silver heads you win, and tails you win. That is why gold and silver look the only attractive investments out there now. You might get a chance to buy them a little cheaper before an autumn stock market event, but do not count on it!