Schiff is chief executive officer and chief global strategist at Connecticut-based Euro Pacific Capital. He has authored many books, including Crash Proof: How to Profit from the Coming Economic Collapse, and The Real Crash: America’s Coming Bankruptcy. His nickname is, not surprisingly, Dr. Doom.
Where do you see opportunities?
The U.S. economy is a bubble that will burst. In contrast to prior monetary excesses, this time the U.S. Federal Reserve has inflated simultaneous bubbles in stocks, bonds and real estate. As the Fed prints more and more dollars to keep those bubbles from popping, the dollar will lose value and eventually precipitate a financial crisis larger than the one we experienced in 2008. The U.S. dollar is being propped up by foreign central banks. But when our creditors finally understand the box we are in, they will not be willing to hold as many dollars. You don’t want to own U.S.-dollar-denominated assets, and you certainly don’t want to own U.S. treasuries or corporate bonds. You’re better off owning equities outside the U.S. I like resource stocks like Franco-Nevada, Goldcorp, Yamana Gold, Agnico-Eagle Mines and Endeavour Silver. Many people don’t understand how much inflation is being created, and how that benefits gold. Gold is going to be several thousand dollars an ounce before the bull market ends.
What would you do with a $100,000 windfall?
I am a 50-year-old guy with a family, but I would go with all equities, precious metals and little bonds. I’d buy more gold stocks and bullion because of how cheap they are. Also, buy dividend-paying foreign equities and get into emerging markets.
What are your best and worst investments?
Shorting subprime mortgages in 2006 was both my best and worst investment. There was a book written on it, called The Greatest Trade Ever. But it was also my worst trade, because I didn’t have it on big enough for me or my clients. At the time, I had a lot of money in gold stocks, which I didn’t want to sell because of a significant tax liability. I expected that the monetary policy that would result from the bursting of the housing bubble would send gold prices much higher. As well, my brokerage account was already highly leveraged, as I had just borrowed against it to settle a divorce. Of course, those gold stocks imploded in 2008, and I could have sold them, paid the taxes, and then bought them back for much less with the profits I would have made shorting subprime. I was also under-invested because I thought the performance fees from my hedge fund [which returned just over 1,000% after fees over one year] would provide me with ample upside. As it turned out, very few clients actually invested in the fund, so my fees were much smaller than anticipated. Sure, I made a few million dollars, but it wasn’t a lot of money compared to what others made. I just didn’t put enough money where my mouth was.
What keeps you awake at night?
I worry it’s going to be a long time before the economic collapse happens. The longer it takes, the worse it is going to be. I want the world to stop financing the growth of the U.S. government—that is, to stop buying treasuries so that our economy can restructure in a healthy way.
What was the best investment advice you ever received?
I have been given lots of advice over the years—most of it bad. That is why I try to invest for the long term.
What advice would you give average investors now?
Be skeptical of mainstream Wall Street firms. Analysts who have buys on stocks are often trying to get investment banking deals from those companies, or to help favoured institutional clients sell their shares at higher prices. They will be reluctant to tell you to sell those stocks, even if they see problems. Also, be skeptical of government numbers. The U.S. government says there is no inflation, because the Consumer Price Index says that. But they have specifically redesigned the CPI to conceal inflation. The Fed is creating a lot of money. That is the definition of inflation.
Do you have a mentor?
Jim Rogers, Marc Faber and Jim Grant are people I used to listen to before I became one of those people. I gravitated to them because they were pretty much saying what I was thinking on my own. And now a lot of people listen to me.