Peter Schiff strikes again. DISCUSSION AND PLANNING FOR US

[Rawr]

So the guy who called almost everything to a T goes on the CNBC hype circle to bring some sense into the mix. Guess what happens next?

[ame=http://ca.youtube.com/watch?v=pGHODRNJqRo]YouTube - Peter Schiff[/ame]



I understand it is the job of these people to sell you and me on some stock that "will go up", but the truth is - this is a crapshoot.. notice "When will the selling end?" segment coming up - people are missing the forest through the trees.


Ok, now I believe we have an advantage, as people with common sense who know better than to follow the crowds.

If Peter is correct, and I believe he is, GOLD will go, here is what I would like to discuss:

1. Converting dollar into a stable currency - Yen? How is this done and when to do it?
2. Selecting the right vehicles to load up on gold - GLD reflects gold at 1/10 of the Ounce price, what else is out there?
3. Using that currency to purchase as much as we can while gold is down 25% off the highs. Is this better then purchasing in dollar? I believe so in case later when you sell, dollars mean nothing.
4. I believe this is most important - getting out before dumb money pours in. Another smart member on another board predicted gold as the next bubble, and I think once the panic hits it might just be so. So we will need some idea on when to get out - Peter says it will hit 2000 and go higher - how high is the question.


As they say, opportunity is always there, you just have to find it. This could be a very good 2009 for us.

 

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[MJ DeMarco]

Moved to another forum ... looks like Mr Schiff is garnering a little bit more respect!

 

[Bilgefisher]

Peter Shiff has been right. Here's my problem, how do you know who to listen to. It was talked about in another thread. Watch out for so called Gurus' (not saying he is or isn't), but if your like me and don't know jack about the markets, where do you begin?

 

[CMCarlin]

I now have the keywords 'peter Schiff' tagged on google alerts for a daily notice. I want to see what news pops up as it comes.

 

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[Edge]

Peter Shiff has been right. Here's my problem, how do you know who to listen to. It was talked about in another thread. Watch out for so called Gurus' (not saying he is or isn't), but if your like me and don't know jack about the markets, where do you begin?

You begin by taking advise only from people that are speaking in the same context and trading style as you. If "Guru A" says gold is going up BIG, you better know what he means by big. If "investor A" interprets that as going up 50% within the next month, he is going to be severely disappointed to find out that he meant 3% within the next trading day.

Saying "gold is going up big" has no entrance or exit criteria. "Guru A" is right in his context but wrong in someone else's context. To highly leveraged "Guru A", he was right and exited the trade at a nice profit after a 3% intraday run. If "Investor A" wasn't thinking in the same context, he could be holding the bag down 20% 3 months later. Two different people listening to "Guru A" will have diffent impact to their account balances.

I listen to Peter Schiff also, have for a few years. If you shorted the market when you heard Peter Schiff talking doomsday 2 years ago, would you of profited from his advise? Well, if you still held to this day, you would. But, the market went up for a long time after he declared doomesday, would you of held your short position through Oct 07 when the S&P was at 1500? My guess is a lot of people gave up on their short position and declared Peter Schiff an idiot long before they had a chance to profit from his advise.

Warren Buffet is doing the opposite right now. He started buying months ago. Right now he is wrong, and pundits are claiming that he's finally lost it. What about the person that listened to his view, followed in his footsteps, then took a 3 year vacation? In three years will someone be posting clips of Warren Buffet from August 2008, and declaring him the best guru to follow?

 

[andviv]

Edge, stop posting brilliant stuff that soon after other great post. I can't Rep++ you anymore for now. Thanks for your insight.

 

[Rawr]

You begin by taking advise only from people that are speaking in the same context and trading style as you. If "Guru A" says gold is going up BIG, you better know what he means by big. If "investor A" interprets that as going up 50% within the next month, he is going to be severely disappointed to find out that he meant 3% within the next trading day.

Saying "gold is going up big" has no entrance or exit criteria. "Guru A" is right in his context but wrong in someone else's context. To highly leveraged "Guru A", he was right and exited the trade at a nice profit after a 3% intraday run. If "Investor A" wasn't thinking in the same context, he could be holding the bag down 20% 3 months later. Two different people listening to "Guru A" will have diffent impact to their account balances.

I listen to Peter Schiff also, have for a few years. If you shorted the market when you heard Peter Schiff talking doomsday 2 years ago, would you of profited from his advise? Well, if you still held to this day, you would. But, the market went up for a long time after he declared doomesday, would you of held your short position through Oct 07 when the S&P was at 1500? My guess is a lot of people gave up on their short position and declared Peter Schiff an idiot long before they had a chance to profit from his advise.

Warren Buffet is doing the opposite right now. He started buying months ago. Right now he is wrong, and pundits are claiming that he's finally lost it. What about the person that listened to his view, followed in his footsteps, then took a 3 year vacation? In three years will someone be posting clips of Warren Buffet from August 2008, and declaring him the best guru to follow?

Not if they made 150% ROI by putting it in gold. I understand what you are saying, but he does specifically say 2009 - $2000/oz. Up after. So even if you get out at $2000, you are good. And whether it will go up or not - personal thing but I think it is.

 

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[kidgas]

I find $2000/oz within 14 months somewhat difficult to fathom. I can surely see $2000/oz within a decade. I believe that the move toward physical assets is about halfway through a 15-20 year cycle which began in 2000.

 

[BryanC]

I think it has to do with his education. He has studied Austrian Economics. That's why he sees, says, and believes these things.

 

[hatterasguy]

You begin by taking advise only from people that are speaking in the same context and trading style as you. If "Guru A" says gold is going up BIG, you better know what he means by big. If "investor A" interprets that as going up 50% within the next month, he is going to be severely disappointed to find out that he meant 3% within the next trading day.

Saying "gold is going up big" has no entrance or exit criteria. "Guru A" is right in his context but wrong in someone else's context. To highly leveraged "Guru A", he was right and exited the trade at a nice profit after a 3% intraday run. If "Investor A" wasn't thinking in the same context, he could be holding the bag down 20% 3 months later. Two different people listening to "Guru A" will have diffent impact to their account balances.

I listen to Peter Schiff also, have for a few years. If you shorted the market when you heard Peter Schiff talking doomsday 2 years ago, would you of profited from his advise? Well, if you still held to this day, you would. But, the market went up for a long time after he declared doomesday, would you of held your short position through Oct 07 when the S&P was at 1500? My guess is a lot of people gave up on their short position and declared Peter Schiff an idiot long before they had a chance to profit from his advise.

Warren Buffet is doing the opposite right now. He started buying months ago. Right now he is wrong, and pundits are claiming that he's finally lost it. What about the person that listened to his view, followed in his footsteps, then took a 3 year vacation? In three years will someone be posting clips of Warren Buffet from August 2008, and declaring him the best guru to follow?

Very, very well said. You took the words right out of my mouth.

Warren Buffet is worth billions, whats Peter Schiff's net worth? Warren Buffet seems to be better at investing, so IMHO his advice is probably pretty good.

If you call a crash for 20-30 years, your going to be right a few times. Its like the weather guy saying its going to be sunny, once in awhile he is right!

 

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[CMCarlin]

NPR: Hear: Peter Schiff Is Warning You


Check out the podcast. Halfway through Peter comes in. Also, check out these comments. Nice stuff.

 

[BryanC]

I trust Peter Schiff over Buffet.

I trust somebody who has no partnership with Government or interest in the present system from falling apart. Especially somebody who is telling the truth about the shadow of deceit that is being played on us.

On this account, Buffet is the Government's patsy and cheerleader influencing the helpless small time investor at the bottom. It is in any big time investors best interest for the present monetary system to stay intact and running smoothly.

I'll put it as simply as I can.

Say in a past life you were an investor. The only way to accumulate capital for your investments was through the sweat of your brow. Then you died and came here.

The current system we are living in would be investor heaven.

Since the inception of the Federal Reserve Banks in 1913, it has given any investor the ability to have his own micro-franchise Federal Reserve Bank. All by way of owning your own Corporation.

All you have to do is imagine your depositors as the banks who have unlimited liquidity to deposit and your borrowers as other companies with a good ROE, Real Estate, Gold, etc. etc.

Voila! Now you are money changer Warren Buffet.

BRK-A: Balance Sheet for Berkshire Hathaway Inc. CL 'A' - Yahoo! Finance

Wow, that is a lot of leverage there for somebody who claims to be against it. I.E. - Telling the worker drone who has never learned how to read this stuff to stay in line, shut up, and buy and hold my company for the long-term even though the Asset is highly inflated. :smx9:

 

[Rawr]

I also didn't mention this before, but I take Peter over what Buffet advises. Buy and hold? No thanks. He himself buys stakes in companies, he invests large amounts of money in one thing.
The more interviews of Schiff I see the more I am convinced he knows what he is talking about

 

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[BryanC]

Well, the problem as I see it is about the same as Peter Schiff sees it. We have become a 2/3's consumer based economy with consumption + government spending even being calculated into our GDP. So, if you borrow $60,000 to Buy that new Vette, you are expanding our GDP. If the government decides it needs 60,000 new computers for their comptroller departments and borrows $60,000,000 to buy the said computer we are expanding the GDP.

The way I see it is, it is so bad that even the Government has to botch their numbers. LoL.

If you go by Austrian economic thought and that is where Peter studied and developed these ideas of what is to come... We are definitely in for some rough times.

My advice is just follow your Entrepreneurial dreams and go with the trend of Globalization like the rest of the Rich. Create an ebusiness and market it in 193 different countries while working at home in your underwear. HAHA.

Like yeah, sure it's tough out there... but with economic and business knowledge at least you have a back door that the rest of the population might NOT have. They will get wiped out simply by not expanding their ideas, awareness, and foresight.

By the way, I don't want to make it seem like there will be bread lines, but I wouldn't wipe that out just yet.

Additionally, I believe what is going on today has to do with 1971 when we went off the Gold standard. I believe as we went off the Gold standard, more and more people had to take on debt because their purchasing power eroded with dollar devaluation. The big question remains when does the whole thing pop, nobody can take on more debt and it just collapses? Before 1971, we had a pretty solid middle class society. Today with a highly devalued dollar and all the gizmos and gadgets of kings and queens around us with no savings, consumers simply supplement their loss of purchasing power with consumer debt.

Then again, I could be wrong. Socrates even came to the conclusion that, while each man thought he knew a great deal and was very wise, they in fact knew very little and were not really wise at all. Saying,
"As for me, all I know is that I know nothing. "

 

[hatterasguy]

With all due repsect Bryan thats a bunch of bunk. (I'm sick and grumpy as hell) We all have stake in this. The only difference is that Pete Schiff probably has a seven figure stake, and Buffet has an eleven figure.

Both have different investment strategies, Buffett's has made him one of the wealthest people on earth, Peter Schiff was an unkown until he predicted the crash pretty well. Although the more I hear about Peter Schiff the more I think he just keeps saying the same thing and is once in awhile correct. Even a broken clock is right twice a day.

Talk is worthless and whiskey costs money. Buffett has an eleven figure net worth to attest to his investment strategy, Peter Schiff does not.

I only take financial advice from people who have money.


Stop reading that far out stuff online. Buffett is old, he doesn't work with the government, he is just having fun before he dies.

 

[BryanC]

With all due repsect Bryan thats a bunch of bunk. (I'm sick and grumpy as hell) We all have stake in this. The only difference is that Pete Schiff probably has a seven figure stake, and Buffet has an eleven figure.

Both have different investment strategies, Buffett's has made him one of the wealthest people on earth, Peter Schiff was an unkown until he predicted the crash pretty well. Although the more I hear about Peter Schiff the more I think he just keeps saying the same thing and is once in awhile correct. Even a broken clock is right twice a day.

Talk is worthless and whiskey costs money. Buffett has an eleven figure net worth to attest to his investment strategy, Peter Schiff does not.

I only take financial advice from people who have money.


Stop reading that far out stuff online. Buffett is old, he doesn't work with the government, he is just having fun before he dies.

I understand you have a point of view and I respect that. I am just going on what I see after having studied Austrian Economics. Peter and I see the same thing because we are coming from the same school of thought. He has studied what I am now studying and far excelled. I am nothing like Schiff but it is not hard to see we are in bad shape economically.

And hey, I may be out there sometimes but I am firm on this belief. My gut tells me that the system (the ship) is sinking and the Captain (Buffet) is willing to sink with the ship. It is only the "right thing to do."

As with anything, I am trying to see this through his eyes, my eyes, the rest of the populations eyes. But ultimately, I can only convey my thoughts after researching it and evaluating the subject matter to the best of my ability with presently consumed and digested information. I can't speak on behalf of everyone only myself and my followers. I am aware that my conveyed thoughts will intersect with the opposition, but I will stand my ground.

 

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[Edge]

Wow, this whole thing really got off track, and I think it was my fault. It wasn't my intent to turn this into a Buffet vs. Schiff debate, I was just trying to generically answer the question about how to find a guru to listen to.

So, Rawr thinks gold goes to $2000/oz in 2009 and wants to discuss how to profit from it. I'm thinking about taking on a position in gold also.

What I find interesting is that he threw out this could be 150% ROI. If we want to discuss gold going to $2000 in 2009, lets discuss ways to profit 500%-1000% ROI on such a move. If you've got a crystal ball that gives you a price target with a date attached to it, you've got to use it to your advantage on a much larger scale than just 150%.

I'm going to come up with a few strategies and post them here over the next week or so, my ideas will focus around using options on either the GLD ETF, futures contracts, or options on futures contracts.

Lets get this thread back to Peter Schiff's prediction on gold, let's discuss the fundamental analysis, technical analysis, and investent vehicles. I sincerely doubt that either Schiff or Buffet will profit 500+% if gold does go to $2000 in 2009, but it can easily be done.

 

[Edge]

OK, here's a possible trade (not one that I am making right now) that would return 1,150% ROI if gold closes above $1,350/oz in Jan 2010. Well within the realm of what Peter Schiff is prediciting.

Buy 100 contracts of the Jan10 GLD 130 strike calls
Sell 100 contracts of the Jan10 GLD 135 strike calls
net debit 0.40/share

If GLD closes above 135 on Jan 15, 2010, this trade will turn a $46,000 profit for each $4,000 invested.

Max loss is $4,000
Max Gain is $46,000

 

[hatterasguy]

Well I hope Peter Schiff is wrong becuase I don't want to be worrying about where my next meal is coming from and buying bread with a bucket full of hundreds. Well at least I have a rifle I guess I could always shoot dinner.

We all have a stake in this game.

 

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[andviv]

BryanC, I found your comments too cynical for my taste.
Usually, when I find comments like this I like to answer with a question:
What are you doing about it?

The current system we are living in would be investor heaven.

Since the inception of the Federal Reserve Banks in 1913, it has given any investor the ability to have his own micro-franchise Federal Reserve Bank. All by way of owning your own Corporation.

All you have to do is imagine your depositors as the banks who have unlimited liquidity to deposit and your borrowers as other companies with a good ROE, Real Estate, Gold, etc. etc.

Voila! Now you are money changer Warren Buffet.

It seems, based on your comments, that you have deciphered the formula to become as wealthy as Buffet. I can only assume that you now own your bank, or at least created your corporation, and your net worth is at least in the millions, correct?

Edge, awesome posts. You are discussing ways to profit from this. I admire a lot the way you present your ideas and how you constantly look for practical formulas to profit from the environment.

I also find interesting that this is the second "guru" that has predicted gold over $2,000. I remember Kiyosaki and his advisors discussing earlier this year the possibility of having gold going as high as $5,000. Maybe it is time to start looking at it more seriously.

 

[BryanC]

BryanC, I found your comments too cynical for my taste.
Usually, when I find comments like this I like to answer with a question:
What are you doing about it?


It seems, based on your comments, that you have deciphered the formula to become as wealthy as Buffet. I can only assume that you now own your bank, or at least created your corporation, and your net worth is at least in the millions, correct?

Yes, I actually have recently created my own Wyoming Corporation. I am slowly learning how to maneuver it and what tools are available to me. I believe the current system we have in place is an investor's paradise because it is based on being a good corporate manager of already existing resources.

I see it as you have to be a good corporate buyer and buy the right things with your corporation and your corporation's net-worth will increase. I kind of think of it as no-risk capitalism because of the insurance and corporate products available.

I.E. - First, buy FRN's with corporate shares or corporate debentures you create out of nothing. Second, you use those FRN's to buy the proper things that will return the initial allocation of FRN's with an additional outlay of FRN's (profit, interest, capital appreciation) what ever you want to call it. Third, once you have the initial FRN's returned with additional FRN's, you return your initial FRN's back to the purchaser of your corporate shares or corporation debentures. Fourth, now you are playing with FRN's you have extracted from the economy with all of your shares/debentures returned.

Or in more simplified terms: Shares/Debentures>FRN's>Labor/Product/Service>FRN's> (repeat 2-4 as many times as possible till your life clock has ended)

Well, that is how I see it but, everyone has their own vision of it and how things are. I do believe there is a certain science to it all, though. I don't know if I will ever have a Buffet networth, but I don't really care. I haven't ruled it out or set a ceiling on what is possible. I really just want to play the game, have fun, and expand what is possible for my life.

 

[hakrjak]

The reason why he is predicting $2000/oz gold is because he is also predicting a massive devaluaiton of the US Dollar. If the US Dollar becomes practically worthless, you bet you'll see $2000/oz gold -- that's a no brainer.

The problem with that is that you won't get rich buying gold even if it does go to $2000 an oz under that scenario, -- you'll just maintain your same level of wealth. Because if it now takes $10 to a buy a $1 loaf of bread -- it won't matter if you've 10X'd your net worth... your reality stays the same!

It's like predicting that the world will end, and then being right -- whoohoo... but what have you got left when it happens?

- Hakrjak

 

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[Edge]

Great call, Edge...

I really like Gold right now, and have been trying to figure out the best strategy to purchase either stock or futures on it...

I just executed a vertical spread order similar to your suggestion above:

Buy 200 contracts of the Jan10 GLD 115 strike calls @ $5.64
Sell 200 contracts of the Jan10 GLD 120 strike calls @ $5.09
Net debit 0.55/share

So, it cost me a little over $11K to take the positions, and if GLD ends above $120 a share as of Jan 2010, I should make nearly $100K.

In reality, if GLD makes a run, I'll probably sell sooner...

Thanks for the suggestion!

Cool, did you have any problems getting filled? Total of 400 contracts that far out with so little volume is a pretty good sized order.

 

[hatterasguy]

Well I think hyper inflation starts at 26% per year. Thats a lot and gold would be a good hedge. Although real estate would also probably be a nice hedge. Really anything but dollars.

AFAIK the highest we have seen in recent memory was 13% under Carter.

 

[jaytrader43]

Imo, Americans now are just acting like chickens with their heads cut off...Jamaica sees stuff like this EVERY YEAR and its waaaaaaaaay worse, so yeah...Also, remember, in every recession, opportunity is created.

 

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[Rawr]

The reason why he is predicting $2000/oz gold is because he is also predicting a massive devaluaiton of the US Dollar. If the US Dollar becomes practically worthless, you bet you'll see $2000/oz gold -- that's a no brainer.

The problem with that is that you won't get rich buying gold even if it does go to $2000 an oz under that scenario, -- you'll just maintain your same level of wealth. Because if it now takes $10 to a buy a $1 loaf of bread -- it won't matter if you've 10X'd your net worth... your reality stays the same!

It's like predicting that the world will end, and then being right -- whoohoo... but what have you got left when it happens?

- Hakrjak

You missed the point. Putting money in gold bars and foreign currency was talked about. Also, America would have to get screwed royally for prices to go up 1000%.

Edge, thanks for the info, is it possible to swing this without staying in dollar? Any idea if Scottrade allows that?

 

[Edge]

I hadn't thought about it before, but had originally thought that if the option prices increase before Jan10, I could sell for a profit. After thinking about it for 5 minutes, I realized that the actual price is meaningless, just the spread. But, I guess it's reasonable to assume that if GLD increases, the longer-term option prices will increase, and so will the spread.

Any tips on what I should be looking for or considering if GLD makes a run and I decide I might want to close my positions early?

Look at your greeks to see how the price and time impact the cost of the spread. You’ll see that you have a positive delta of about 23, but at the cost of –theta of about .47. This means that at this point in time at constant volatility, you make about $23 for each $1 gold goes up in price. It also means that it costs you about $0.47/day to hold this position if the price doesn’t move at all.

Your greeks will always be changing with time and price action. If GLD went up by 10% today, your new greeks will be a positive delta of about $26 and a theta of $0.53/day, or you could close out the spread for a small profit.

Would you ever consider closing the SELL position earlier than than the BUY position if option prices drop? For example, if the Jan10 $120 drops by $.55 a share, I could technical BUY TO CLOSE my 20K shares and am now free-rolling on the original BUY position, correct? Is that a reasonable consideration?

I’d consider it in some instances, but not necessarily this one. What you are asking about is a much more aggressive positon, your delta goes up, but your theta sky rockets. Your thinking is flawed, if Jan10 120 drops by $.55, and you decide to close it, you aren’t free rolling. You paid $0.55 for the spread, that is the sum of about $5.55 for the Jan10 115 and -$5.00 for the Jan10 120. Now you see that if you close out the Jan10 120 for a .55 profit, you’ve really only shaved off .55 of the $5.55. This leaves you with $5.00/share at risk instead of $0.55/share at risk for the spread.

The way I like to roll positions to end up with a free call or put in a far month out is through the use of calendar spreads. Buying a far out month contract and selling the near month contract of the same strike. If the price of the underlying slowly goes towards the strike price, you can keep rolling your short call month-to-month for a credit. The idea is to collect enough credit for the monthly rolls to pay for the far month contract and give you a free contract. I'm curerently doing this with SLW and discussing it here: http://www.thefastlanetomillions.co...ding/17135-low-risk-77-annualized-return.html

I also like skip strike butterflies to get myself rolled into a free lottery ticket position. I think I talked about skip strike butterflies quite a bit in this thread:

http://www.thefastlanetomillions.co...tions-iron-condors-vertical-spreads-flys.html

Any other suggestions?

Make sure you understand and are comfortable with the risk/reward/probability of your position. I think of risk/reward/probability as a triangle where the closer you get to one angle, you get farther away from the others. In your example you paid very little (risk), compared to the reward (max gain), at the expense of probability of success (market doesn’t think you have a high probability of success, but you, Rawr and Schiff have a different idea of market direction). If you wanted to improve your probability of success, it would be at the expense of risk (I’d cost you more capital for a closer spread), and reward (even if successful, you’d make less than your current position, lowering your ROI%).

If your bias on probability changes, close the trade and move on.

 

[Edge]

This particular trade for me was very much a hedge against a devalued dollar. If the dollar stays strong for the next year or so, I'll be very happy despite losing money on this trade (given my cash holdings and real estate flips). If the dollar gets weak, I'll have some upside on this trade despite losing value in my cash holding and my likely inability to sell my houses.

I'm sooo glad you said that! That's what options and other derivative contracts are for.

One persons speculative trade is another persons hedge. You've put yourself in a position to profit from this trade as both a speculative trade and a hedge. Rep+

 

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[MJ DeMarco]

Today is not a good day for those, like me, who are hoping Peter Schiff is wrong.

The dollar is taking a beating today ... down 2% against most other currencies. It was this kind of breakout I was hoping not to see.

 

[Edge]

Congrats! About 82% in under 3 months. :banana:

Don't thank me, you are the one that identified the opportunity and took the risk. I was just sharing a couple of ways that I was thinking about playing it. Besides, I don't give trade recommendations. :smxB:

Gold has actually gone up faster than I was expecting, I have a Feb/Jan2010 GLD 90 calendar spread that i'm going to have to close early unless gold starts coming back down. Gold went up so fast last month that that position has made all that it can make, if gold keeps going up, it will actually start losing money.