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This is worriesome because Schiff is the guy who predicted that this whole house of cards would come crashing down a couple of years ago when no-one wanted to hear it.
Do you think it's possible that homes will soon be less expensive than they were 10 years ago?? That would mean huge drops in this area. Thoughts?
"The goal of all these plans is to give consumers more money to spend. However, excess consumer spending is part of the problem, not part of the solution" he said. "After a decade-long spending orgy, market forces are finally trying to restrict consumer spending and dampen credit. But the stimulus looks to provide a new source of funds after savings, income, and credit have been exhausted. Our imbalanced economy is in desperate need of retrenchment, but stimulus plans will effectively hold the firemen at bay while throwing gasoline on the flames."
Schiff explained that the housing boom's exotic mortgages, which let people buy homes with zero money down, have vanished. Now people must save to afford a home. But easy credit means people will buy more consumer goods and save less to put towards housing. As a result, he expects home prices to fall a lot more. "They'll surrender all the gains they made in the past 10 years," he said, "and be even lower than they were 10 years ago."
Are you perhaps confusing Peter Schiff with Bob Shiller ( Case/Shiller)?
No, Peter Schiff works for Euro Pacific Capital and writes columns for Financial Sense. He got quoted predicting the crash, and that made his name. But there were others doing the same, at the time. In any case, it's important to remember that just because someone makes a correct prediction, it does not mean they'll be right the next time around, no matter how many times they have been right in the past. It's like playing roulette-- just because the black ball came up several times, doesn't mean the next one will. Las Vegas exists because some people refuse to believe this mathematical fact.
Yesterday someone posted a video with Peter Schiff in it, on one of these threads.
It was from January 2008, where he was arguing with a Beverly Hills R/E agent on TV. The R/E agent was advising people that this was a GREAT time to buy... housing prices couldn't possibly fall any further. Schiff just laughed at her.. in retrospect it is all very amusing.
Actually.. there are multiple videos of Blonde R/E agent vs. Schiff. They are really funny.
No, Peter Schiff works for Euro Pacific Capital and writes columns for Financial Sense. He got quoted predicting the crash, and that made his name. But there were others doing the same, at the time. In any case, it's important to remember that just because someone makes a correct prediction, it does not mean they'll be right the next time around, no matter how many times they have been right in the past. It's like playing roulette-- just because the black ball came up several times, doesn't mean the next one will. Las Vegas exists because some people refuse to believe this mathematical fact.
Very true scone,
And I've skimmed through Schiff's book called Cash Proof, and although some things make sense, like diversifying off of the dollar to hedge against inflation... in reality the world is actually more intertwined than we've assumed.
I don't think too many people predicted the ability of World central banks to doll out trillions of dollars and act in a collaborative effort (interest rate cuts globally instead of just the US, nationalizing banks, pumping trillions of Euros, Dollars, etc, etc.). In the past Countries were more self-contained and "selfish"?
Furthermore, many writings and economic analysis is based on the fact of "all things being equal"... X would most likely happen. As we've seen in the last year... many things once "unthinkable" has become reality. The credit markets have smoothed out a little in the last week... and slowly our society is moving away from consumption (as seen by retail closures) toward production (factory orders increased unexpectedly in Sept. and alt. energy / clean tech production is still moving along).
Hopefully, we can get through this tough patch... as it'll make US better in the long run. It sounds like Schiff has little faith in Americans and our ability to use the "stimulus" checks wisely. Of course some will use it for consumption... but based on the last stimulus, many more put it into savings and paying off debt. If we do get another one, I think the funds would be directed similarly. Easy credit on the other hand, may cause another bubble... may be or may not be in housing... but it may cause problems if it remains too easy for too long.
No, Peter Schiff works for Euro Pacific Capital and writes columns for Financial Sense. He got quoted predicting the crash, and that made his name. But there were others doing the same, at the time. In any case, it's important to remember that just because someone makes a correct prediction, it does not mean they'll be right the next time around, no matter how many times they have been right in the past. It's like playing roulette-- just because the black ball came up several times, doesn't mean the next one will. Las Vegas exists because some people refuse to believe this mathematical fact.
This is true, but I believe that Schiff has a certain amount of credibility. I also think that a lot of what he says makes sense.
I don't think that dismissing his views offhand is necessarily wise. He seems to have called a lot of this debacle with surprising accuracy, and his thoughts seem to be based on analysis rather than luck.
Well, we've just had a Lost Decade in the stock market, where ten years of gains have been wiped out in just a few months. The irrational exuberance in housing was just as pronounced-- more so in some areas-- so there's no reason why housing can't have a Lost Decade as well.
In fact, if incomes and housing prices revert to traditional metrics, we have a long way to go. Homes in speculative markets like SoCal are still selling at double their pre-bubble prices, if you believe that the housing bubble started after the tech bubble burst and the 2000-2001 bear market gave rise to the easy money era.
No, Peter Schiff works for Euro Pacific Capital and writes columns for Financial Sense. He got quoted predicting the crash, and that made his name. But there were others doing the same, at the time. In any case, it's important to remember that just because someone makes a correct prediction, it does not mean they'll be right the next time around, no matter how many times they have been right in the past. It's like playing roulette-- just because the black ball came up several times, doesn't mean the next one will. Las Vegas exists because some people refuse to believe this mathematical fact.
Do not mistake random events from logical assessment and conclusions... he didn't "guess" that the housing crash would happen... he said based on his analysis, it WOULD happen... as is the plummeting home prices that it leads to... I didn't read his book so I don't know how he based home prices dropping below 10-year levels... but what I can say is that 10 years ago homes are about half as much as they are now... and with the trend it is going... it IS going to happen (if it hasn't already happen to your neighborhood already)... and based on government poorly planned actions, it IS going to happen for many reasons... based on my own analysis... which is not based on "random events"...
This is true, but I believe that Schiff has a certain amount of credibility. I also think that a lot of what he says makes sense.
I don't think that dismissing his views offhand is necessarily wise. He seems to have called a lot of this debacle with surprising accuracy, and his thoughts seem to be based on analysis rather than luck.
I'm not dismissing his views, I'm saying that you can't rely on anyone's predictions with certainty no matter how much analysis they have put in, simply because of the mathematics of random chance. This is part of the "random walk" argument, not a reflection of Schiff's brains or character. In other words, you could have a very bright, very well-informed person making predictions with surprising accuracy, but you can never be sure, from a mathematical point of view, that the next prediction might not be totally wrong. It's hard to believe, I know, but by this theory even a (presumably) exceptionally skilled investor such as Soros or Buffet might owe his success to random chance alone. After all, with 7 billion people in the world, someone is bound to hit the jackpot and become a billionaire. Seems unlikely, until you consider the "easy come, easy go" people who blow up with some regularity on Wall Street. You'd think all those guys would do enough analysis to avoid going bust, but that's not the way it works.
In any case, this last prediction of Schiff's was not unique-- many people knew 2 years ago (or more) that things were getting out of hand, and the "bubble" word was being used, I believe, as early as 2005-- if my recollection of Krugman is correct. I'm sure you can google other references, they may prove instructive. This debacle was certainly was not a "black swan"-- an unforeseen catastrophe out of the blue-- see Taleb on Bloomberg about this. So that's why I'm not as impressed with Schiff as all that. He's just one voice among many, and not the most profound, IMO.
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