Commentary

Beware Clowns Bearing Financial Advice

A friend of mine sent me a link to a YouTube video (after jump) featuring Peter Schiff, president of Euro Pacific Capital, and longtime critic of the debt-fueled U.S. economy. The video is comprised of interviews on financial news channels in 2006 and 2007 – before the subprime meltdown morphed into a full-blown Wall Street crisis. At the time, Schiff was predicting a collapse in housing price, chaos in the financial services industry and recession for the U.S. economy.

In all of the clips, Schiff is heckled and ridiculed mercilessly by his colleagues. I think the best segment is the berating he received from the economist and comedian Ben Stein, who was pounding the table for investors to scoop up Merrill Lynch just over a year ago because it was trading at such low price to earnings ratio. There were a few other classics in there as well; one analyst was pumping shares of Goldman Sachs late last year when they fetched $180 a share – they now change hands at around $65.

This video clip is extremely valuable because it really shows what an insulated bubble financial “experts” lived in. None of them saw this train wreck coming. Instead, they believed that America’s debt-fueled bender would last forever. (One analyst on the video predicted that the Dow would finish 2008 at 16,000 – well the year’s not over yet, but that is one steep climb.)

Now the Wall Street crisis is becoming a sad and painful drama with no end in sight. The federal government is spending $700 billion on a financial bailout of the firms that these buffoons were touting as cheap less than a year ago. The real estate market is still in a severe state of decline, jobs are disappearing at an alarming clip and consumption is dropping off a cliff – and the recession everyone thought would pass us by is now here with a vengeance. Let us hope that we never court the advice of such fools again.

A little on Peter Schiff from Wikipedia:

Peter D. Schiff (born 1964) is the president of Euro Pacific Capital Inc., a brokerage firm based in Darien, Connecticut. Schiff adheres to the principles of the Austrian School of Economics and the Ludwig von Mises Institute. Schiff frequently appears as a guest on CNBC, Fox News, and Bloomberg Television and is quoted in major financial publications.

Schiff points to the low savings rates of the United States as its worst malady, citing the transformation from being the world’s largest creditor nation in the ’70s to the largest debtor nation at the turn of 2000. His extremely bearish views on the U.S. Dollar, the United States stock market, bond market, and the United States economy have earned him the nickname “Dr. Doom.”

He was an economic adviser for the Ron Paul campaign in the 2008 Republican Party primaries. Schiff also hosts a live Internet/shortwave radio show called “Wall Street Unspun.”

His father is tax protester Irwin Schiff.

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© 2008 Splendid Marbles.