November 16, 2008

Peter Shiff, painfully correct and surrounded by clowns.

Financial punditry, 2006-2007. 10 minutes long and worth every minute:



(Via Bloggingheads.)

41 comments:

Larry said...

Wow! And the sad thing is these so called experts will never be held accountable.

Palladian said...

Ha. I also like how clownish the other "experts" look compared to Shiff. The cadaver with the bad hairpiece in the first clip (named, of all things, "Art Laffer")? The gasping Tiny Tim look-alike in clip number 2? Priceless!

joewxman said...

Peter Schiff has been bearish since Nero and broken clocks are right twice a day. But he did nail it and he reamins pessimistic. Meanwhile Mr Laffer and others don't really know where to turn now that the buzzards are circling.

Meanwhile right or wrong Michele Caruso Cabrerra Lima looks stunning no matter how many names she adds to her growing list!

Dust Bunny Queen said...

It's always tough to be the Cassandra of your generation.

Darcy said...

Very interesting. It just makes too much sense, really. Too much debt, not enough savings.

And the problem is that politicians don't want to say, like Sarah Palin did, that we all need to address this. They're too scared that we'll stop spending.
Crazy.

Palladian said...

I love, love, love the guy who picked WaMu as his stock recommendation for 2008. Schiff picked SPDR Gold Trust.

Value of WAMU 12/29/07: $13.07

Value of WAMU 11/16/08: $0.0590

Value of GLD 12/29/07: $83.00

Value of GLD 11/16/08: $73.30

EDH said...

Did anyone happen to catch Andrew Sullivan’s self-aggrandizing take on this video? Sullivan:

Watch the contempt from Fox News for Peter Schiff over the past two years.

First, obvious to anyone watching is that Fox invited Shiff on air repeatedly over time, and therefore Fox hardly tried to suppress his views.

Second, sure, Shiff's ideas were debated by the other panallists who got it wrong, but isn't that the format of these business roundtable shows, from stock picks to economic forecasts? You know, "fair and balanced, let the viewer decide" among competing opinions.

More proof Sullivan sees the world increasingly through the prism of left wing conspiracy.

Third, notice how Sullivan tries to take some strange form of vicarious "vindication" for Shiff's forecast, after the fact (of course), by saying:

Politically, some of us diagnosed the conservative implosion years ago - and earned the same kind of contempt from the same kind of baying hounds for getting it right.

Poor Andrew, it's always the visionaries that are persecuted.

Finally, after all of this, what is Shiff's forecast of the economy under the Obama administration that Sullivan had the independent foresight to endorse "politically"?

Watch here.

dmfoiemjsof said...

Wow, he was dead on and everyone thought he was nuts.

And Ben Stein was totally off. Since when did the "Beuler Beuler" guy become a financial pundit anyway?

Pogo said...

So, what about his Obama prediction, Ann?

Because he's going to be dead on about that one, too.

jdeeripper said...

joewxman said...Meanwhile right or wrong Michele Caruso Cabrerra Lima looks stunning no matter how many names she adds to her growing list!

What was that Schiff guy talking about? Something with ress...something, whatever.

Revenant said...

Why are people saying that Shiff was correct?

He predicted the economy would enter a recession in 2007 or 2008. We entered one at the end of 2008, so he was (just barely) right on that point.

But his stated REASONS for the recession don't appear to bear any resemblance to reality. He predicted a recession based on the wealth effect. People spend less when they perceive themselves as poorer, and with the housing collapse many of us are a lot poorer. But the wealth effect isn't the major problem driving this recession -- the collapse of the credit markets is. Shiff's prediction that people are spending less so that they can rebuild their savings is, thus far, painfully wrong.

dualdiagnosis said...

The left has successfully pinned the bust on the failure of too little regulation. I want to know why there hasn't been more pushback and why the Dems are getting off scott free on their complicity in the sub prime mess. It wasn't a failure of regulation, it was toomuch bad regulation.

Simon said...

Ouch. How embarrassing for Laffer.

rcocean said...

CNBC was even worse. There was no CNBC Cassandra. Cremer was recommending Bear Stears before it collapsed. He was also recommending Wachovia.

Kudlow is just as bad and is unwatchable. To Larry every problem can be solved by open borders, more free trade, more tax cutting, and bailouts for wall-street. A complete ideologue.

EDH said...

It wasn't a failure of regulation, it was too much bad regulation.

To the extent the government created and exempted the GSEs, it was a failure of government oversight, not business regulation.

A problem the Bush admin correctly diagnosed and tried to address in 2003.

Pogo said...

The next credit-based bubble to collapse?

Student loans and their beneficiaries, universities.

Simon said...

EDH said...
"A problem the Bush admin correctly diagnosed and tried to address in 2003."

If only they hadn't faced that do-nothing Democratic-controlled Congress throughout Bush's tenure, they might have been able to do something about it, too!

Zeb Quinn said...

Laffer looks bad, but in the long run he's more correct than Schiff. Laffer's 1980 prescription would still be fine for 2008.

And I don't know what Schiff is talking about when it comes to failure to save. He must not be including all those 401ks, IRAs, and other mutual funds investments out there. Those are savings, maybe not be passbook savings, but savings nevertheless.

1jpb said...

palladian,

What about the price for Treasuries over that period?

I would guess (though I'm too lazy to spend two seconds looking) that they're up (especially short term stuff) in price, i.e. outperforming GLD.

Maybe there's a "too big to fail" dynamic that helps the US government. This dynamic may inspire confidence that motivates some entities to buy Treasuries because they're relatively safe for capital preservation. And, this dynamic may make some ultra-rich entities fearful of what could happen to the world economy if the US really rolled over, so they're motivated to double down and hope for the best.

P.S.

There is no great GSE conspiracy that is preventing them from being blamed for everything that is wrong in the world. Please look at this link, and adjust your GSE complaints appropriately. That is, make sure you spend equal time blasting the private (non-CRA) institutions that were more responsible--there's plenty of blame to spread around. You can't solve a problem if you don't understand the true causes of the problem.

1jpb said...

If it wasn't obvious, my post script was meant for the GSE ranters in this thread, i.e. not Palladian.

Palladian said...

"What about the price for Treasuries over that period?"

I think they required the commentators in that segment to pick only stocks. Earlier in the same segment Schiff says he doesn't really recommend stocks for 2008, but picked one because he had to.

SMGalbraith said...

If only they hadn't faced that do-nothing Democratic-controlled Congress throughout Bush's tenure.

Fair point but as we know there are a passel of fiefdoms (fiefdoms do come in passels, I believe) in Washington that control things no matter which party run Congress.

Which is why, in part, President Obama reached out for Muscles Emanuel.

jdeeripper said...

Palladian said...I love, love, love the guy who picked WaMu as his stock recommendation for 2008.

Yeah, that was great

EDH said...

Simon says,

If only they hadn't faced that do-nothing Democratic-controlled Congress throughout Bush's tenure, they might have been able to do something about it, too!

First, my comment was about a distinction to be made between "regulation" versus "oversight" with regard to GSEs, "[t]o the extent the government created and exempted the GSEs." I didn't say Bush got regulation of other stuff right. I simply spoke to the government's inability to keep its own house in order before trying to regulate others. It wasn't a "GSE rant," 1jpb.

Second, it was hardly a "do-nothing Democratic-controlled Congress," it was a do-something Democrat minority, which is is different. Protecting the GSEs from regulation was a priority for the Democratic caucus, and it was clear how they attacked the regulators even in public hearings. Moreover, I think people underestimate how many in congress of both parties were afraid they may have already engaged in regulatory over reach with SOX, and that's why the financial industry got a freer hand thereafter.

Third, in no way was I saying the leadership of the Republican congressional majority had it right on the GSEs. I said Bush did.

EDH said...

1jpb,

Far be it from me to suggest the GSEs promote perverse incentives and reckless behavior.

Are you an idiot to keep paying your mortgage?

The program announced Monday goes a step further by requiring homeowners to be late.

The Streamlined Modification Program, sponsored by the government agency that oversees Fannie Mae, Freddie Mac and 27 loan servicers, promises to swiftly reduce payments for certain homeowners who appear to be on the verge of foreclosure.

How to qualify.
To qualify, you must be at least 90days delinquent and live in the home as your primary residence. You must owe at least 90 percent of the home's value. It's fine if you owe more than it's worth.

Your mortgage must be owned or guaranteed by Fannie Mae and Freddie Mac or held by one of the participating loan companies...

The streamlined process looks only at income, not assets. If you refinanced your home to buy a Mercedes or own another home, you won't be expected to sell them to pay your mortgage.

Peter Schiff, president of Euro Pacific Capital, predicts that many homeowners who have little or no equity will stop paying their mortgage and then reduce their income to get the biggest payment cut possible. They could stop working overtime or, if two spouses work, one could quit. After the modification, they could try to boost their income again.

"This is a once-in-a-lifetime opportunity," Schiff says. "People are going to feel like complete morons if they don't participate. The people getting punished are the ones who never made an irresponsible decision to buy a house they couldn't afford."

The government is offering loan servicers $800 for every homeowner they get into the plan.

Schiff predicts that loan agents "will be cold-calling people trying to get them into it. Just like they encouraged people to overstate their income to get a bigger loan in the first place, now they will encourage them to understate their income to qualify for a smaller loan."

Michael said...

Fox & Company beat this guy to death for two years, Cavuto and Laffer especially.

And he's been right on the money every time they had him on every show.

They just did not want to admit we were heading for a fall.

Sound familiar?

Michael said...

Simon says: "If only they hadn't faced that do-nothing Democratic-controlled Congress throughout Bush's tenure, they might have been able to do something about it, too!"

Do you even have a job? Have you ever taken a business course in your entire life?

You constantly represent yourself as some kind of political guru yet you appear to be completely unaware of how our government works, especially regarding the party who is the "minority" in Congress and what they actually get done.

Educate yourself and get back to us.

1jpb said...

EDH,

Don't mix apples and oranges. My link properly apportions blame for causing the problem.

The new plan for the GSEs referenced in your link is for what to do now. That's two different questions. And, don't forget that this is a plan under Bush oversight.

In some ways this plan is similar to the Bair (FDIC) plan, except that Bair will go as low as 31% for the housing expense. And, they have different ways to deal with the underwater part of the homes' values. [By the way, is Bair "going rogue?" Why is she supporting a competing plan that could be considered "looser?"]

If they put teeth into this part of your link:

"To prevent fraud, the government says a borrower "must certify that he or she experienced a hardship or change in financial circumstances, and did not purposely default to obtain a modification.""

They should be OK. Auditing the employment history on a standard loan application would easily show if folks are trying to commit fraud with sudden negative changes in income. Make the penalties very high, and make sure that a lot (all?) borrowers are audited for this sort of fraud.

Also, a $800 ($1000 for the Bair plan) fee is nothing for lenders. I'd be shocked if lenders weren't charging other fees or generating some other income. I really doubt that $800 alone is going to motivate a lot of fraud, especially if the lenders need to go through the hassle associated with a typical FHA type of loan.

BTW, this hassle reinforces the reasons the GSEs and government loans (VA, Rural, FHA) didn't provide the really scary subprime loans before things fell apart. The private Wall Street side of the mortgage business had lower regulations and requirements. They were invented to go where the GSEs and the government loans wouldn't go, and they would go there with few questions asked and big fees.

For the record, I'm not advocating for any of these particular "fixes." But, I'm not against them either. Something needs to be done. My principles (which do have the capacity to conflict with each other if not carefully balanced) are to:

1)make the lenders take some sort of losses (admittedly the tax payers need to recapitalize these losses w/ loans (equity injections) so that the lenders can continue to lend so this could be a little tricky.)

2)make the borrowers defer (but NOT eliminate) at least some of the underwater portions of their loans at the same time the borrowers get some sort of temporary payment plan so we can kick this can down the road for about five years. (Admittedly this is a sort-of neg-am loan, which are terrible loans, but there needs to be some way that we're sure folks can't end up profiting when values turn around. Maybe throw on a second for the deferred/lost equity. And, maybe some sort of deferred unsecured instrument on top of the second. In the banking business this is called "hog tying the customer," and it's what happens when an institution is putting it's own capital at risk--it's a good thing.)

3)check for and strongly punish folks (including lenders) who choose to change their income circumstances to manipulate the system.

Messy solutions indeed.

But, we're at the early stages of a big mess and it could become much messier than necessary if we continue to fool ourselves into thinking that things won't be so bad and they'll work themselves out if we just walk away.

Tom said...

OK, Schiff by being a perpetual bear, stumbled into a correct call.

HOWEVER, if you followed his advice, you've lost money big time. The dollar, has strengthened, not fallen, overseas stocks have done worse then US stocks and Schiff evidently gave an interview on Bloomberg TV on Oct. 28th admitting his strategy was not working. Ohhh, and anyone who bought gold one year ago has lost much less then the S & P, but still lost 10%

FOX, by having Schiff on so often, did prove they are "fair and balanced.

Bushman of the Kohlrabi said...

joewxman said: Meanwhile right or wrong Michele Caruso Cabrerra Lima looks stunning...

Me? I'll take Becky Quick. Maybe she can't compete with Caruso Cabrerra in the breast department but girl next door looks and sexy hair get me every time.

joewxman said...

i am a huge becky quick fan. I think she is one of the brightest women on television. Squawk Box on CNBC is for me the only show i watch with the volume up.

Michele is a die hard capitalist and wants government to stay out of way of the priviate sector.

She also has a great rack!

Joe said...
This comment has been removed by the author.
Joe said...

Shiff is making multiple arguments, not all of which are correct, so to pronounce his general prediction of recession with him being right is misleading. His argument that the consumer society is bogus. Even the mortgage market speculation argument is overstated--oddly, Shiff only touches on the problem of market distortion due to government forcing lending standards lower and doesn't at all mention the under-captilization of Fannie Mae and Freddie Mac nor the Credit Default Swap market, which is at the core of all this. Without the latter, the mortgage problem would be easily weathered.

A more important point; if you invested medium to long term according to all these analysts advice, including Shiff, you would have lost money.

(Shiff wrong about inflation, but right about gold for the short term. He was wrong about inflation and gold for the long term. Ben Stein was right about Goldman Sachs in the short term and absurdly wrong in the long. And the market hitting 16,000--that was nuts even then.)

LoafingOaf said...

I don't know squat about the financial markets but I always suspected most of the pundits on those kind of shows were full of shit.

Especially Ben Stein. I may not have known for sure that he was a moron in this area (because I'm a moron in this area too), but he's such a moron on subjects I do know some things about that I knew he couldn't be trusted to have a clue. For example, Stein believes in Intelligent Design theory to the point where he made a documentary pushing it (that is, he wasn't just saying he believes in Intelligent Design as a casual layperson, but as someone who has spent time studying up on it).

Anyway, if such a huge percentage of our so-called economics experts - whether in government, on Wall Street, or in the media - have absolutely no idea what they're talking about, us laypeople and loafing oafs have to fear the absolute worst (a total meltdown) is possible in the months and years ahead. Hope for the best, but prepare for a DEPRESSION. I remember when the media used to call Alan Greenspan the "maestro" -- blah blah blah. 95% of the financial experts in America - from the highest levels to the loudmouths on cable news -are WEARING NO CLOTHES.

rhhardin said...

For each thousand gurus making ten predictions each, one will be correct for ten out of ten.

That genius winds up on TV the next year as the expert.

This typically lasts a year.

MadisonMan said...

Gold peaked earlier this year, I believe. If you took Schiff's advice and bought a gold-based stock, as long as you knew when to bail, you might have made money.

(I don't really follow stocks).

marklewin said...

Based upon a compilation of this comments section (which, for me, has been quite instructive), it sounds like the prototypical Foxnews-type economic shill was extremely incompetent, while Shiff was somewhat incompetent. Add to the mix, the Dems who helped distort the lending markets and the pubs who encouraged us to buy and consume our way out of this fiscal crises. Even Greenspan, who basically said that his model of economic reality has been shattered by the current financial crises, does not know whether to shit, piss, or go blind right about now.

What is most interesting is that Bush, who brought us the incompretent Rumsfeld, Brown, Gonzalez, and Paulson actually had it right in 2003 with respect to Fanny Mae and Freddy Mac. But who cared back then about the mortgage 'crack' known as the 0 down, adjustable rate loans offered to us poor and blue collar types when we were tracking Bin Laden and plucking Saddam out of his Iraqi hole?

Is there consensus here at Althouse regarding any competent economists out there who can guide us through this economic storm?

I have often privately mused (public for the first time here) that the discipline of economics seems too heavily influenced by self-interest and political ideology to offer useful theories that generate effective interventions. I wonder if we need a new kind of economic theorizing that is more sophisticated than the simple free-market vs. socialism vs. communism paradigms that seem to dominate our discourse today.

AJ Lynch said...

FWIW the clip shows two of the regular econ pundits laughing and mocking Schiff.

One is a far left liberal Wall Street type and the other is a rightwing Wall Street type. They are regulars on the Fox show.

Hucbald said...

"I think the Dow is going to go to 16,000..."

Um, last I checked it was about half that.

LOL!

Doyle said...

Ouch. How embarrassing for Laffer.

Hard to believe, coming from such a respected economist.

/snark

Doyle said...

One is a far left liberal Wall Street type and the other is a rightwing Wall Street type.

Most of the sneering, and totally incorrect bullishness (in this selection of videos and in general) was from wingnuts like Laffer, Luskin, Kudlow, Cavuto, etc. etc.