Peter Schiff’s Euro Pacific Capital Down 40 – 70% in 2008?

Posted By Tate Dwinnell |  Subscribe in a reader | Comment 32

peter_schiffIf you’ve been following the financial markets this year with any degree of interest, you’ve probably heard of Peter Schiff.  He’s  been a media favorite over the past year for calling the US financial collapse and has been everywhere from CNBC to Glenn Beck to CNN to Fox to Bloomberg.  I even spotted him in Newsweek a couple weeks ago being credited with calling the collapse.. In an era of rampant corruption, fraud, inept CEO’s and fund managers, Mr Schiff has been made out to be somewhat of a hero in all this.  Let’s give credit where credit is due.  Peter Schiff has been sounding the alarm for quite awhile and while doing so was often ridiculed by the talking heads on CNBC a year ago.  Much of what he’s been saying has come to pass… at least in the US financial markets.

Ah, but there seems to be one small problem.  According to Michael Shedlock, Peter Schiff, the President and Chief Global Strategist of Euro Pacific Capital not only didn’t profit from the financial collapse, he failed to do what every other so called professional failed to do for their clients last year.  PRESERVE CAPITAL.  Turns out, he was largely right on the US macro picture and called a US equity crash but believed global markets would not folllow due to decoupling and that the dollar would continue to crash.  Rather than shorting US equities he shorted the dollar (with a bet on hyperinflation) and bought foreign equities and commodities.  According to some of Schiff’s own clients, portfolios invested with Schiff were down anywhere from 40 – 70% last year. Ouch.  (Shedlock posted an image of an actual Schiff portfolio)

Michael Shedlock points out 12 ways Peter Schiff was wrong last year:

12 Ways Schiff Was Wrong in 2008

  • Wrong about hyperinflation
  • Wrong about the dollar
  • Wrong about commodities except for gold
  • Wrong about foreign currencies except for the Yen
  • Wrong about foreign equities
  • Wrong in timing
  • Wrong in risk management
  • Wrong in buy and hold thesis
  • Wrong on decoupling
  • Wrong on China
  • Wrong on US treasuries
  • Wrong on interest rates, both foreign and domestic

I’ll point out that you can’t beat up Peter Schiff for being wrong.  We’re all wrong at times.  Where he can’t be excused is in risk management.  He has a vested interest to stick with a certain strategy because he’s written a book about it, but he couldn’t admit when he was wrong and move on..  Arrogance in this business is not a recipe for market beating returns.  In my opinion BEWARE of the fund manager who is all over the news outlets. 

Shedlock has not ruled out that perhaps he stumbled upon the worst portfolios from Schiff and offers a challenge to clear the air:  post the average returns by clients of Euro Pacific Capital on a year by year basis. 

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UPDATE:

Peter Schiff’s brother Andrew Schiff responded to the article to the Baltimore Sun’s Jay Hancock, saying that Shedlock’s piece 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.”

Andrew Schiff does acknowledge that accounts at Euro Pacific have suffered badly in 08 but the losses are exaggerated by Shedlock and that because they are a broker dealer, aren’t allowed to post returns. 

More on this topic (What's this?)
Barron’s: an interview with Peter Schiff
Peter Schiff - Worst Case Scenario
Consistency Is My Superpower
Read more on Peter schiff, Gold Peak Industr at Wikinvest

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Comments on Peter Schiff’s Euro Pacific Capital Down 40 – 70% in 2008? »

January 27, 2009

Giordano @ 12:43 am

January 30, 2009

peter whittington @ 8:09 pm

I have been an investor with Peter Schiff for seven years. His rebuttal did say that those who were late to the party did lose significantly in 08 – I am hardly a new investor yet my portfolio is down over 55% from its high in 07.

He states those that have lost most focused on energy and mining stocks – ALL my stocks in Europacific were recommended by his brokers!- yet some are down over 90% because of lack of risk management – my concern that his buy and hold strategy can only work if you have an idefinite life span.

His strategy of high dividend stocks in foreign currencies I can accept – but not buy and hold for ever!

February 13, 2009

twk @ 11:53 am

I am considering transfering a portion of my portfolio to Euro Pacific. The fees appear to be reasonable and I am curious about your thoughts on service, fees, advice etc. I understand the premise of the goals ,i,e gold, currency and foreign equities but am interested in your thoughts on the services.

Thanks Tom

Tate Dwinnell @ 6:30 pm

Tom, I don’t know anything about them other than it appears they don’t have a preservation of capital plan in place when the market heads for the shitter. In my biased opinion, you’re better off spending the measly $50 bucks a month for my gold service :) I keep my clients out of harm’s way in an uncertain market and only get aggressive when safer to do so.

March 9, 2009

kindle waters @ 12:58 am

I am down 60% and counting with EPC. I moved my account over in July 08. shoulda, woulda, coulda,…whatever. Scary part about is, what happens if we capatilize on our gold and silver? Is that a good thing? would think the US would be in the crapper if we go 3 or 4 times our earnings on the metals.

March 13, 2009

Antlion @ 6:24 pm

Schiff and his brokers mean well, but they are all still brokers. I pulled all my money with them, and put it in gold and silver bullion, losing about 54% of the money! I’m not whining, after all, it is the stock markets we are talking about. Learning a lesson is hard somtimes! My advice to anyone with Europac is get out while you can!

Antlion @ 6:32 pm

By the way, the United States is in the Crapper no matter what, with all due respect!

May 29, 2009

David Young @ 4:42 pm

I’ve worked as an advisor at Sitka Pacific since last fall and can tell you that a lot of people have come to our firm because we’ve done quite well, and the transparency is extremely refreshing. What will happen in the future, who knows? But, I would put our firm’s returns up against any other firm’s returns anyday. Mr. Andrew Schiff’s comment can be lauded, who wouldn’t want additional funds under management? The trick is whether or not the returns are really there…

June 11, 2009

dobedobedo @ 1:31 am

I’ve been living in China for the past 4 years, completed an MBA, propounding Schiffian ideas since mid-’07. It’s really a straw man to say Mr. Schiff is ‘wrong’ on so many ideas that have yet to play out. How can we deny the debasement of the Dollar? – look at real inflation and the money supply; it follows the most basic of economic PRINCIPLES. As Schiff and other realists have touted, the West is merely in the eye of a perfect shit-storm, and hardly deserves the immaculate glossing currently being spread by rampant gov’t spending. China, or any other economy firmly based on actual manual labor, hardly needs to concerned; their problems have been opposite the West’s, and could stand even further contraction. In any case, I pushed family and friends away from Dollar assets in time to save many from the worst of the last 10 months. And I always credit Pete Schiff for waking me up to the facts at hand. Hell, even Buffett was warning us to get out of housing and derivatives 2 years ago and more! shall we blame His Majesty for our losses as well?

June 22, 2009

Mwb333 @ 8:33 am

I am an advisor in GA and I ahve had several clients ask me about my thoughts on Peter. I called Euro pac and asked questions anyone concerned about their money should ask. I was given some alarming answers:

-Peter doesn’t really think the US is a bad place to invest. It’s just not good now. His opinion is the same on the dollar.

-I asked the guy to compare Euro Pac’s returns to the S&P. “Returns cannot be quantified” according to the guy I had on the phone. Huh?!?!? Really? Sounds “Madoffish” to me.

-Gold has only returned 3% on average over time so why would you consider that a long term hold? That jsut keeps pace with inflation. It has been a huge loser as of late.

-He has been “saying the sky is falling” for years. How about all of the years he was wrong? He was right in 2008 so now he is saying, “I told you so.” I don’t buy that.

Schiff is in it to make money. He has some good principles, but his investment judgement is seriously flawed in my opinion. To each his own, but if you can’t quantify numbers, there is a real issue. How do your clients know if you are performing?

July 1, 2009

George @ 6:50 am

What is a gold backed US dollar???

July 20, 2009

BOB @ 2:03 pm

Pete was RIGHT!!!!!!!!!!!!

http://www.youtube.com/watch?v=2I0QN-FYkpw

August 30, 2009

Jack @ 8:49 pm

Over the past several months, I watched many interviews with Peter Schiff. I learned from them. He is very knowledgeable and articulate. It’s amazing that he called the crash that that took place in the equity markets in 2008. I noticed recently that he is calling for hyperinflation. Then I came across Mike “Mish” Shedlock’s interview with Max Keiser “On the Edge” (Aug. 28, 2009). After considering both viewpoints, I am more inclined to go with Mike Shedlock’s deflationary scenario as the more likely one. One obvious sign of deflation is that real estate prices have fallen, and they are likely to continue falling. Falling real estate prices do not support a hyperinflationary scenario. It will be interesting to see how things develop.

December 8, 2009

CRAIG @ 12:55 pm

THE SIMPLE ;AW OF DILUTION IS IN PLAY HERE. I F YOU CAN NOT SEE THIS YOU ARE HEADED FOR BIG TROUBLE PETE IS CORRECT. YES IN THE SHORT TERM METALS HAVE PULLED BACK DUE TO THE BANK USING FREE MONEY TO INVEST IN TESE SAME METALS. YES THE DOLLAR LOOKS GOOD NOW BUT WAIT. WHEN THE GOVERNMENT STOP PUMPING TRILLIONS INTO THIS MARKET THE EFFECT WILL BE TRAGIC
OF EPIC PROPROTION.
PETE IS RIGHT ON.

January 7, 2010

jon @ 3:16 pm

Leaving a year old article on you main web page puts the web site’s Believability in question.

Get on to something current!!

Jon B

Tate Dwinnell @ 6:34 pm

The article isn’t in the main page Jon. The main page blog page is at http://selfinvestors.com/tradingstocks/

Hope I’ve regained my believability :)

February 8, 2010

BobH @ 2:14 pm

Please don’t take down the article! It was very informative – it didn’t reduce my inclination to go with EPC. (I hope the guy who pulled out in March didn’t leave the market altogether!) My guess is that most of EPC clients didn’t do any worse than investors in the US with the same asset allocation. EPC appears to me to be a decent hedge against the worse happing here in the US due to poor management by the administration.

February 26, 2010

Peter Dimopoulos @ 1:35 pm

Yeah but whatever you have invested with Euro isn’t it for the long term 5- 10 years from now

April 2, 2010

Matt m @ 4:42 pm

I have a few random thoughts..
I have some stocks at Euro Pac that are up over 600% in one year…. That can speak for itself. My good US stocks that I have had for years have rarely seen more that 20% in a single year. Regarding the EPC strategy they invest in countries all around the world in different currencies and in different asset classes (not just gold and metal), How is that for diversification? I think they do a fantastic job and have excellent service compared to many other brokers I have dealt with.

April 22, 2010

KB @ 9:16 pm

Don’t now about the rest of you but my EPC account is up 70%. Most portfolios are long term . As for the guy in for seven years and down. I consider seven years a joke . Tell us all at thirty years.

May 1, 2010

nick @ 8:35 pm

been with Peter for about 14 months & am up about 22% … sure this profit could evaporate but i’m hedging against the dollar collapse within 5yrs .. this country is 100% bankrupt , only way out is keep printing & borrowing. the dollar cannot survive …

June 17, 2010

Rex @ 1:55 pm

I pulled my head outta my arse about Feb 09 thanks to Peter and some others, and over next few months fired Merrill Lynch private investment managers that did NOTHING before, during, or after 08 housing collapse, (or the 01 tech bubble bursting for that matter) and still are looking for rosy US recovery altho with more cautions than before, fat chance really. Over the last 15 months, I invested more than half of my portfolio holdings with EPC and am well diversified with energy in all forms, agriculture, water, commodities, reits, some tech, metals and mining, getting significant dividends and growth in some, but the main point is to be out of the dollar because when it unwinds, it will be hard and fast, and I dont want to be competing with everybody else tryin to shed dollar holdings. Anyone that wants to be critical of Peter’s approach doesnt understand his message or the time frame, this debt crisis has been playing out for a long time, seems to be coming soon to a tipping point, altho many have been pointing it out for a long time, for a lot of different reasons, now its bigger, badder, and more ominous than ever before.

August 19, 2010

ctp @ 7:14 pm

you need to give the guy some time for his predictions and strategy to play out or fail. this isn’t vegas.

October 5, 2010

Joe @ 9:52 am

Of course, it went back up and has stayed up for quite some time, and the bull market in gold has been active for years prior, so a temporary decrease with explicable reasons behind it makes the entirety of this discussion seem rather useless.

October 30, 2010

Chad @ 12:14 pm

LOL how can you say Peter was wrong on Hyperinflation and the dollar in 2008 when he NEVER said there would be hyperinflation or a dollar collapse in 2008! He said it is coming and coming really soon he even gave warning signs of what to look for in his book. They even said in the article that a lot of his strategy is hedging against the dollar which will collapse. Don’t be short sighted he will be right on it just look at the Quantative Easing crap that Bernake is doing!

January 12, 2011

anon @ 6:52 pm

It is quite funny to read the comments over the last few months (years!).

Schiff’s firm would have you in commodity and PM stocks that have been on fire, especially the smaller caps, the last few months. So accounts that were created in mid 2009/2010 must be up huge…

Sitka Pacific, I have a lot of time for them, but I don’t think they have done what they said. My impression from market letters earlier in 2009/2010 that they “respect” the market, but they don;t appear to be following that….it is a shame…I REALLY hate to say it but they are looking like another “lucky” firm.

Perhaps 2011 will be kind to their investment strategies, but to be bearish in mis summer 2010 was a HUGE mistake. That was the consensus view and many 2008 winners are looking totally ordinary now.

Anyone notice how Mish never comments/annotates charts with market levels anymore? That is one bear who is seriously licking his wounds. You gotta be flexible in this market. And Sitka Pacific aren’t.

You want to be long risk premia in the long run. Maybe Mish will be right, but at the moment, on price action, you seriously have to question the bear case.

Good luck to all investors/speculators!

February 6, 2011

JackOfAllTrades @ 11:24 am

I’m interested in investing with Euro Pacific Capital, but their fees are really really high. For managed accounts, the first tier (250K and above) they charge 2% (typically the fee is 1.25%). And if you dont’ want a managed account but just want to buy into the mutual funds, there is a 5% load charge (minimum purchase 25K). Also, the mutual funds are not (yet) available through other brokers, so you must buy them direct.

Peter Schiff seems like a sensible no-BS investor adviser (ie: gold bullion only, in your possession only, don’t leverage PM, don’t buy numismatic coins, etc), but these fees tell a different story. They’re the highest fees I’ve ever seen.

April 15, 2011

Dave @ 3:39 pm

I invested with Schiff’s firm in 10/08 and again in 5/09. These were when the market was down, but actually not at short-term lows by any stretch. I missed the big drop in 3/09.

My account is up 125%. My dividend returns are quite high, around 10%, I think. Now, a new investor won’t get either of those numbers because the market has swollen, but I have been impressed by their recommendations and their overall track record.

No one is right 100% of the time, but I followed Schiff for a long time before I gave him my money and he’s called a lot of market moves.

The fees are high, but if you are a long-term investor they are better than the annual fees charged by retail brokers because they are one-time fees, not annual. (I am comparing to SmithBarney where my dad worked.) Also, I’m not sure where you will find a broker with lower fees who lets you buy on foreign markets directly for cheap without paying the pink sheet spreads as well. If they exist, please let me know.

April 30, 2011

Jim @ 3:10 pm

bet your pissed now you pull out right at the bottom…

June 13, 2011

SJB @ 2:49 pm

Some good comments in this thread over the last two years. I have been following Peter for several years, read his books, listen to his radio show, and even financially supported his bid for CT Senate race. I have used his company Euro Pacific Precious Metals and have been very satisfied with the service to date, although I have only been on the buy side and have not sold anything to this point.

Now considering moving a chunk of my IRA to one of Euro Pacific Capital managed accounts. I asked my representative about the disaster in late 2008, and what their lessons learned were following a significant loss of capital and betting against the US dollar. They said that world investors still thought that the dollar was a safe haven in times of uncertainty, but that recent trends in the dollar, the debt, etc. have changed investor’s perspectives relative to the US economy, and that future world market downturns would not necessarily lead to a stronger dollar. Foreign markets were uncoupling from the dollar so would be less affected. He also said that Euro Pacific had benefited from significant gains in the 2003-2008 time period, so those long term investors were less impacted.

I philosophically believe in their approach (foreign dividend paying securities), but concerned that they don’t appear to be agile in their management, but rather have a low churn, and want investors to commit to a 5-10 year time frame. It is a lot of money to commit, and seems like it will be difficult to control if the markets make another 2008 like run. The returns from their three managed accounts were ~6%, 12%, 12% for 2010, but since they were only established in Nov 2009, there is not much of a track record to go by, and there was a lot of volatility month to month.

Comments welcome as I continue to mull this over.

June 24, 2011

RBG @ 8:39 am

I have a different take on Euro-Pacific Capital.
My portfolio with them- all stocks picked by a broker, did pretty well in the recovery following the 2008 tumble, but not as well as my Fidelity Pacific Rim fund- and that is not even accounting for the very high trading charges with Euro-Pacific. More disturbing were the high pressure sales pitches for their “private placement” opportunities. These have almost uniformly been a DISASTER! Euro-Pacific gets their cut up front, and the concern is that their research is less than thorough.

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