Peter Schiff - Crash Proof
Dear Friends,
This is a reprint of a review of Peter Schiff's book Crash Proof that I did about a year ago on my other site, Bull! Not bull. Considering the worsening state of the economy, that Shiff is now an adviser to Dr. Paul, and that he has been right, I'm reposting the review here. The original can be found here.
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Three Bears, No Goldilocks Part II - Crash Proof
Michael Nystrom
March 9, 2007
The first bear that showed up in my mailbox last month was Michael Panzner, with his book Financial Armageddon. (You can read my review of his work here.) Within days of that bear's arrival came another: Peter Schiff and his new book Crash Proof.
Everyone always says don't judge a book by its cover, but it is impossible not to. After finishing Panzner's truly disturbing vision of the future, the cover of Peter Schiff's Crash Proof looks positively glib. It shows a little pink piggy bank safely sheltered from stormy skies by its own personal (pigsonal?) umbrella. How cute. And then there is the cliché'd subtitle: "How to profit from the coming economic collapse." Oh, brother. Honestly, I didn't have high hopes, and as a result I was quite pleasantly surprised. Perhaps this will be the key to surviving the upcoming hard times: Low expectations.
Schiff pulls no punches in unmasking the rosy statistics that the government and its corporate media accomplices foist upon an unsuspecting and gullible public. The US economy is a paper tiger, and Schiff wastes no time getting straight to work with the shredder. "America.com" as he calls us, referencing the hundreds of dot.com companies that burned brilliantly until they burned out completely for lack of substance, has some mistaken ideas about the true nature of wealth and how it is created. Real wealth, Schiff reminds us, comes the old fashioned way - from saving, investment and production. In its salad days, America became a global manufacturing giant through hard work, and by investing the nation's abundant savings back into production. The salad days are gone, as America has gone from a nation of savers, investors and producers to a nation of borrowers, gamblers and consumers.
Copiously peppered with charts that depict the stark reality of America's economic decline, Schiff shows what many reading this site and others like it already know (and he doesn't mince words). America is on a slippery one-way slope, a fact that our government is trying desperately to hide (p.25):
A little dissimulation on the part of our leaders now and then is probably something we should learn to accept, lest the natives get unnecessarily restless. But it's something else - and to my mind, downright inexcusable - to have vital economic information routinely and blatantly misrepresented.
The economic statistics put out by the US government are propaganda, pure and simple. Issued by government agencies, interpreted by spokespersons for the government and the financial community, and reported by the mass media, the information we get has been manipulated to mold a public understanding favorable to the agenda of the powers that be.
Hooray for truth! It is a rare treat to hear someone tell it like it is. Schiff does not fear to tread where the establishment media (including Lou Dobbs) won't dare go. He takes the gloves off and unmasks the Federal Reserve for the fraud that it is in chapter four, Inflation Nation: The Federal Reserve Fallacy. He tears into what he sees as the obscene irresponsibility of the Wall Street / banking cartel and its role in rampant speculation, incessant cheerleading, and efforts to roll the financial bubble through every sector of the US economy, extracting maximum financial gain before finally letting it pop. He explains that through the Fed's policy of negative real interest rates, a nation of savers has -- through rational behavior -- been converted to a nation of borrowers and spenders. Borrowers are rewarded while savers are punished. The dollar retains its strength simply by virtue of the fact that it is the global reserve currency. Asian central banks keep the global ponzi-scheme going with their citizens' hard earned money in order to keep export markets open and their goods priced competitively. Behaving rationally to the irrational policies and schemes of the world's central bankers has created the current global mess - including our current housing bubble. But eventually, Schiff assures us, this mess will have to be cleaned up. But first, things are going to get even messier.
All bubbles share the same fate, and the US real estate bubble - caused by artificially low interest rates and lax lending standards encouraged by the Fed - is no different. Except for the fact that it is bigger than any bubble in history! When this baby pops, it is going to be bad. From page 140:
The collapse of consumer spending, associated with higher mortgage payments and vanishing home equity will plunge the economy into severe recession, further exacerbating the collapse in real estate prices, worsening the recession and continuing the vicious cycle...the country will be a lot poorer as a result of the unprecedented dissipation of wealth and accumulation of consumer and mortgage debt that occurred during the bubble years. Before real estate prices can return to normal levels, they will first have to get dirt cheap.
A recession is clearly coming, but Schiff only hints at systemic and social collapse by giving advice on how to protect your assets from such a possibility (p.249):
Social unrest caused by deprivation on a massive scale can produce violence and anarchy [but it is beyond the scope of this book to examine all such possibilities]. What extreme measures the federal government might take in the name of national economic necessity is also anyone's guess, but capital controls and confiscation of assets, combined with legal authority certainly have precedent in other democracies under comparable pressure. Since the US government seems to have no qualms about violating our individual liberties during times of apparent economic prosperity -- the US Patriot Act being only one example -- imagine how much more draconian will be the measures during the economic collapse that awaits. (emphasis mine)
Ouch. Like I said, he's not afraid to tell it the way it is. Sometimes the truth is painful. But he has, in my opinion, effectively diagnosed the situation. But better, he goes on to outline a number of proactive financial steps investors can take to protect their hard earned money now, not only from the collapse, but from a potentially repressive government of the future (p.250):
It would be a shame to have successfully avoided bankruptcy or have made a considerable profit following the investment advice in this book, only to have the US government confiscate it from you "for the good of the people" under the pretense of a "national emergency."
In other words, get your money out of the country while the getting is still good. Schiff emphasizes investing in foreign stocks since he believes a dollar collapse is coming. In contrast to Prechter and Panzner, he believes deflation to be a "bogus" threat. By holding solid foreign stocks, you benefit not only from dividends and capital appreciation, but also via foreign currency appreciation as the dollar falls. For holding gold, he advocates Perth Mint Gold Certificates, which are guaranteed by the West Australian Government and backed by gold on deposit at the Perth Mint. But buyer beware: Many of the products and strategies Schiff suggests are provided by his brokerage firm EuroPacific Capital. Does this mean his opinion is biased? Of course. Does this mean you shouldn't trust him? Like with everything you read, his opinion is one of many. Schiff's position as an independent broker - not beholden to investment banking fee income - gives him a unique perspective you won't get from a large establishment broker that gets most of its income from investment banking.
At the end of the day, the decisions you make are your own. Read as much as you can and try to assess the true state of the economy and the threats we are facing. The future remains to be seen, but we've now heard from two respected authors coming to much the same conclusion. I personally do not believe things are as rosy as they seem, and I'm sure we're in for some hard times. It certainly never hurts to be well informed and prepared for any outcome. Financial Armageddon and Crash Proof are two excellent references toward that end, and I highly recommend them both.
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Crashproof author was just on tv. I'm Buying it! You should.
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http://youtube.com/watch?...
Watch and feel the power!!!!!!!!!!!!!!!!!
to boston
you are missing the most important idea of crash proof.
move usd assets into other currencies. what you are doing does not get you out of usd.
take care good luck but reread crash proof for reasons to get out of the usdollar
Dollar-denominated assets
I agree that the premise of Crash Proof is that one needs to be out of dollar-denominated equities and debt securities. In particular, my read of the book was that Schiff likes dividend paying foreign firms with little exposure to the US market.
I personally own only foreign equities or international mutual funds, with the exception of some tax-advantaged retirement account holdings that are in gold-sector mutual funds, the closest I can to having a dollar bearish position without cashing out entirely. Like other folks, I have many, many choices in my retirement account, and really all of them except a gold sector fund are bad or atrocious. If I could just hold Australian or Swiss treasury bond funds (not dollar hedged), I would be happy to park some money in a mutual fund like that for a year or two until I see how things play out. Not an option, or even close. Instead, I can choose dozens of US equity and fixed income sectors to play with, all declining in value as the dollar erodes (or potentially collapses), on top of falling market values.
You may be making a broader point on the risk of US-based intermediaries (like my brokerage firm) failing while I own things like gold, silver, or agricultural commodity ETF's. In my view, this risk also exists with Europac. Even if my brokerage fails, I'm still the owner of the underlying asset, not the broker. Like many others here, I do possess precious metals.
Holding positions in gold (GLD), silver (SLV), and agricultural commodities like wheat, soybeans, corn, and sugar (DBA) are all dollar-bearish hedges to price inflation and maintaining buying power. Holding foreign currencies (FXA, FXE, FXF, etc) also avoid the risk of rapid quick downtowns in value to the US dollar. None of these ETF's invest in stocks, but the underlying asset itself.
I am not a client of Europac, but fundamentally agree with Peter's reading of the reality we are in, a conclusion I reached prior to ever reading his book.
More on agricultural commodity funds here:
http://seekingalpha.com/a...
Does our country fit this description?
"The power of the Executive to cast a man into prison without formulating any charge known to the law, and particularly to deny him the judgment of his peers, is in the highest degree odious and is the foundation of all totalitarian government whether Nazi or Communist."
- Winston Churchill, Nov. 21, 1943
Book Covers: Judging By Them
I was told yesterday, in connection with another book, that publishers usually have a contractural right to put anything they want on a cover, and that the author can do nothing about it (besides refuse the deal).
Authors and publishers often disagree on what they want on the cover, having, obviously, different points of view and goals. The publishers have learned not to give the authors control of the cover, believing they know better what sells.
IMissLiberty
Excellent book.
No scare tactics, just solid info backed up by historical facts. I already opened my EuroPac account. Try his weekly radio show, it's archived at www.europac.net.
When one understands that the destruction of the dollar is a planned event, this book makes a lot of sense.
Completly Logical....
for the individual/family who has the means to "get your money out of the country while the getting is still good."
Think about it. If it does indeed go down anyways close to his scenario, we would indeed profit from our own Nations economic degradation, which is simply a reflection of what our own corporate fatcats and politicians have been doing for years. What perfect irony, to improve your status while the idiot socialists rot due to their own demands.
On the other hand, if Mr. Schiff is completly wrong and the much lauded, yet denied, New World Order becomes the utopia that they dream of, we have STILL proffited through advancement of those very same foreign investments.
Either way we win. But first we have to personally come to grips with, and admit to ourselves that the America that we once knew is dead. This has to be the greatest example of "hollow victory" that I know of.
God help us all.
Start organizing a National Republican Debate sponsored by the..
Start organizing a first ever National Republican Debate sponsored by the people. What do you think about starting support by the people to have a national republican debate sponsored by the people with top calibur commentators and organized by top nonbiased individuals who will ask intellegent questions on all the issues. The people can select a panel that would stick to the issues and allow each candidate the same amount of time to answer the same question. If the financial backing is there and only Huck and Ron Paul show up that would give the nation a shot in the arm. Let McCant be a no show. Many local and independent communications groups would jump at the chance to cover such an event.
What do you think? Having the right people involved I believe this can be accomplished. We have time to do this.
UK
I'm in the UK and have just finished this book. Can anyone recommend similar books that focus on the UK?
Agreed.
I've purchased and read Crash Proof, and bought it for others to hear the message.
Peter sets forth an easy-to-read, logical case for why were are where we are, the real challenges the nation faces, and how to diversify out of dollar-denominated assets. It's been very valuable to my own portfolio allocation, and has given me further confidence in trading (and investment) decisions.
Videos of Peter can be seen here:
http://www.europac.net/vi...
Agreed Great Book
I bought ten copies and gave them out to family and friends. Wonderfully written and easy to understand.
Canadian Investments, Boston?
I just recently transfered an IRRA to Europac and and looking at what to do with my portfolio. Noticed that several recommended energy companies are Canadian companies. I'm just wondering what will happen to investments in Canada given the NAU. Seems that if the Amero became reality, the Canadian $ (which is only slightly higher than the dollar) would be worth less. wake up and find that in your bank account (given the banks hadn't crashed) that your dollars, loonies, pesos would be Ameros and probably worth a great deal less in order to bring the peso up to par.
Does anyone know how that would work and am I right in thinking I don't want to be invested in Canadian Energy companies?
Partial answer
Your argument sounds right to me. The NAU looks like an imminent problem, although I believe it will come together after the full impact of the current crisis. The economic challenges we face today are more immediate and grave than the NAU in my view. If the dollar were to quickly collapse, that may be the time to be most concerned that a new Amero currency would be introduced. I think we have time before the Amero gets here unless China decides to dump trillions of their holdings overnight. It is a risk, but not one that would keep me out of some Canadian investment.
From the US perspective performance in some Canadian equities has been exceptional when combining the market levels with gains in the value of the Canadian dollar against the US dollar. Canada is also rich in natural resources, much of which is suitable for export not just to the US but to the world. In other words, you're better off up there than folks in the US markets exclusively. You actually produce something people need.
I'm not a client of Europac, but in my view the recommendations to invest a portion of a portfolio in Canada may serve to diversify European, Asian and emerging markets holdings.
If Peter Schiff wants to make this easier for many of us, I'd like to see him launch a mutual fund that invested in safe foreign dividend-paying firms (like utilities), responsible foreign government bonds, commodities, foreign currencies, precious metals, and perhaps shorts on equity areas that are weakest (like US homebuilders).
Peter should consider that if he doesn't do so, another individual or company might. Some related offerings exist, like the Merk Hard Currency fund. While a mutual fund can't be tailored in the same way that a custom portfolio can, it would have an instant following if it addressed all these asset classes.
Today I use ETF's to quickly and cheaply get some exposure to areas I like. I buy agricultural commodities with funds like DBA, invest in gold with GLD, silver with SLV, and buy foreign currencies with Euros FXE and Swiss Francs FXF. There are others to choose from, from Australia to Japan. I even occasionally short some sectors, like the technology-heavy Nasdaq 100 with QID, or real estate with SRS. I have never been short financials, because I'm still concerned about government bailouts of firms in the sector. This may be overly cautious.
Currencies:
http://www.bestwaytoinves...
Another article I liked:
http://seekingalpha.com/a...