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Move over S Roach, There's a new bear in town

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wayneL

wayneL

VIVA LA LIBERTAD, CARAJO!
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...and his name is Peter Schiff.

They even let him loose on Bubblevision:

http://www.europac.net/media/Schiff-Bloomberg-9-8-06_lg.wmv

"we are living in a very inflationary time period"

"House Price gains of last 5/6 years erased"

"Mortgage debt will NOT be erased, in fact it will be increased because of negative amortization "

"Mortgage debt leading to US Recession that will last for years"

"Higher interest rates, making mortgage debt harder to finance"

"US Recession likely to start next year"

"US economy not growing, only consumption/debt increasing"

"Once equity vanishes, consumption is going to fall of a cliff"

"large job losses because of consumption fall"

"unemployment rate is going to move up dramatically as the real estate market declines next year"

...and again... a televised debate with one the Wall St permabulls. This was marred by the permabull's smiling and mocking style; a thouroughly detestable style of arguement and usually a syptom of fear :2twocents

http://www.europac.net/Schiff-CNBC-8-28-06_lg.asp

"whether or not recession is in 2007/08 is immaterial it will last for years"

"economy suffering from disease is debt financed consumption, cure is recession"

"phoney wealth of housing market"

"30% of employment due to housing boom"

"artificially low IRs will very quickly become a thing of the past"

"average american going deeper and deeper into debt"

Believers in the China/commodity stronger for longer theary will enjoy. Though he does not mention Oz, the resources sector will be winners according to his scenario.
 
A response on Schiff's website re issues raised in the televised debate:

In my most recent appearance on CNBC I debated Arthur Laffer, who gained fame during the Reagan administration for sketching his controversial "Laffer Curve" on a cocktail napkin. The encounter reaffirmed my belief that the same napkin would probably be large enough to hold the sum total of his economic wisdom.

In the pointed debate, the impeccably genial Mr. Laffer claimed that the U.S. economy has never been healthier, was not dependant on housing, and will be unfazed by higher interest rates. He described current monetary policy as "spectacular", declared wealth had risen dramatically, asserted our trade policy was working “beautifully,” attributed our trade deficit to foreigners outsourcing their monetary policy to America, and claimed that history had shown that such external deficits were not harmful.

Although I would love to refute all of his absurd positions, two in particular stand out as worthy of discussion.

First, Laffer compared today’s current account deficits to those experienced during America’s first two hundred years as a developing nation. This flawed comparison ignores that as a developing nation America borrowed to invest. Those current account deficits funded the construction of vast infrastructure, such as roads, canals, ports, and rail roads, as well the formation of capital equipment, farms, and factories, all of which fueled American productivity. Such investments enabled the production of vast quantities of consumer goods, which America sold back to its creditors, to both pay interest and retire principle. In the end, America's creditors got consumer goods, and America became the wealthiest industrial nation the world had ever seen, in the process turning its current account deficits into enormous surpluses.

In a “night and day” contrast, today's current account deficit has the much more limited role of solely financing consumer spending. Borrowing to produce is the way poor nations become rich. Borrowing to consume is the way rich nations become poor. By squandering borrowed money on consumption, America has no way to repay the principal of its debts, let alone the interest. Borrowing to build factories is not the economic equivalent of borrowing to buy flat panel, high definition televisions, and it’s amazing that Laffer can't see the difference.

Second, Laffer confused legitimate wealth creation with the mere paper appreciation of stocks and real estate. Real wealth creation refers to additions made to the capital stock or improvements made to land; such as constructing new homes, building new factories, opening new mines, laying new infrastructure, planting new farmland, etc. However, if an unimproved house simply appraises for twice its value of five years ago, how is society any wealthier as a result? The house provides no more shelter now than it did then. If stock prices rise merely as a result of multiple expansions, what real wealth has been created?

Though assets themselves may reflect wealth, their prices do not. Assets are wealth because they enable the satisfaction of human desires. In the case of factories it’s the ability to produce products, in the case of houses it’s the ability to provide shelter. Prices merely reflect the perceived value of those abilities and can change substantially over time. The point Laffer misses is that asset prices can fall just as easily as they can rise. Real wealth on the other hand, though it may depreciate if not maintained, barring natural or man made disaster, is far more lasting.

America’s paper wealth however is merely a dream that will soon vanish. Perhaps it’s our gargantuan trade deficit that will actually provide the wake up call. When it does all that will remain will be the debt. As higher interest rates make servicing that debt impossible, the dream will become a horrific nightmare. Perhaps if I drew it out on a napkin Laffer might finally get the picture.
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AS you know I am very skeptical on predictions.

But most of what he says seems right to me.. :)
 
I've been following this guy for a while. I'm downloading the clip now, but I think I've seen it (and in fact I think I even posted it here a few weeks ago).

Edit: Nope, diff clip. He was on Bloomberg about a month ago as well, but this interview is a lot longer.
 
swingstar said:
I've been following this guy for a while. I'm downloading the clip now, but I think I've seen it (and in fact I think I even posted it here a few weeks ago).

Edit: Nope, diff clip. He was on Bloomberg about a month ago as well, but this interview is a lot longer.
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He's my new poster boy :D

...and he's not quite as ugly as Stephen LOL
 
wayneL said:
He's my new poster boy :D

...and he's not quite as ugly as Stephen LOL
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:D

peterschiff200.jpg
 
wayneL said:
Believers in the China/commodity stronger for longer theary will enjoy. Though he does not mention Oz, the resources sector will be winners according to his scenario
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He makes the shift from the drop in US consumption to the increase in Chinese domestic consumption sound like a smooth transition. IMO there'll be quite a large time gap in between that drop-off shock and the Chinese take-up. At least two-three years sounds like a reasonable time frame for this to happen.
 
juddy said:
He makes the shift from the drop in US consumption to the increase in Chinese domestic consumption sound like a smooth transition. IMO there'll be quite a large time gap in between that drop-off shock and the Chinese take-up. At least two-three years sounds like a reasonable time frame for this to happen.
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My thoughts exactly... except I think a bit longer FWIW. Surely the Chinese "middle class" will feel the heat from a drop in US consumption; and a resulting recession of there own.
 
wayneL said:
My thoughts exactly... except I think a bit longer FWIW. Surely the Chinese "middle class" will feel the heat from a drop in US consumption; and a resulting recession of there own.
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and the inevitable ripple effect to our economy hanging on to growth by that single resources thread. :eek:
 
To be a devil's advocate in this Bear Party:

The US and Australia have been carrying massive CAD deficits for DECADES. Why is it now going to be a problem?

Private debt from refinancing has been blowing out for years and nothing has happened, but the corporate sector is cashed-up.

What is more important? Who cares perhaps?

Roach has been consistently wrong. Why is he now going to be right?

The yield curve has been negative for a long time, but we havent seen a slowdown. Should we continue to hang-on to this failed signal?

Growth in industrial production and GDP ex-the US is very strong. Perhaps we dont need to rely on the US for the next decade of growth?

What happens if oil remains steady (or falls) and metals stay steady (or fall) and inflation (it was always cost push remember) falls and Bernanke CUTS RATES - do we have a massive rally?

As for metals, the short selling speculators are all singing from the same song books at the moment, but an oversupply of physical metal is nowhere to be seen. Neither now or in the immediate future.

The shorts are driving the prices down, but the physical markets remain in deficit and the inventories continue to fall.

If we were in such a speculative bubble, why isnt spot copper now $2.00 already?

Because of REAL buying from consumers and not hedge funds, perhaps?

We weren't buying metals of the way up because of the Florida housing story

I wouldnt want to be the punter short 30,000tn of Nickel at the moment.

You cant cover what you cant buy back and there looks as though there is going to be some sharp hedge fund knobs carried out backwards if this metals market rallies again.

"He who sells what his'n, must buy it back or go to prisn"

.... or at least close his hedge fund.


Just another line of thought to consider at the moment.
 
Talk about ultra bearish.

Unfortunately for Mr Schiff Gold has continue to tank it, commodities in general continue to fall, the US Dollar is starting to gain upward momentum and looks to be in a new upward multi month trend, and the Dow continues to rise since that September 7 interview. Looks like it was bad timing for a TV interview by Mr Schiff!!!

:banghead:
 
Wayne, beauty is only skin deep! lol


On a serious note whats your take on current status of Aus Mkt and whats to come in 6 months, I notice you changed your thing to say "in hibernation" under your nick, care to expand on that?


Regards
 
Well only half way through the clip but the pro economy guys is all fired up isn't he?

Makes you wonder, I'm always a bit scared when people start campaining that the good times will roll on forever
 
BSD said:
To be a devil's advocate in this Bear Party:

The US and Australia have been carrying massive CAD deficits for DECADES. Why is it now going to be a problem?
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To my understanding the Australian CAD has reached the level (as a % of GDP) where it has been a problem in the past. Remember the "banana republic" in the 1980's?
 
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