Peter Schiff talks about Mish

[LibertyIn08]

You keep saying Schiff hasn't made any money but you haven't shown any proof. It's OBVIOUS his clients made money. Just look at gold for example. It was $300 an ounce in 2000 when Schiff recommended buying it. Plus I keep telling you that his funds are only a couple of years old and only a tiny fraction of his investing. But you keep ignoring that.

But the real evidence that you are wrong is that you keep insisting that it's IRRELEVANT whether we have DEFLATION or INFLATION for investors!!!! Are you kidding me??? I rest my case!!!

You're assuming they put their entire portfolio in gold. This isn't a good portfolio allocation model so it is not obvious that his clients made money. [One should be wary of any financial wizard whose "success" is pinned on one call. Schiff might have called investing in Gold in 2000 (although there are plenty of funds who have beat that performance with lower beta, like Renaissance Technologies) but that doesn't make him a good portfolio manager. John Paulson's fund is down dramatically over the past few years immediately following his huge gains due to the mortgage meltdown.]

For example, even if one was a large supporter of gold, one might purchase junior miners (Ron Paul owns quite a few mining stocks at apparently favorable entry positions). Over the past 5 years, some of these firms have had periods of extreme share price volatility. Many people have lost money on the junior miner stocks despite the thesis of higher gold prices broadly holding true.

Similarly silver has seen wide price volatility. Depending on when one purchased, they could be down deeply.

At the end of the day, we have no evidence of the success of Peter's clients beyond his claims that they've done well. Most successful funds and brokerage firms will tout their clients' results. Why? It is good marketing. The only thing we know for certain is that his claims in 2009 were absolutely incorrect and that his commission fees are a joke.

 

[itshappening]

At the end of the day, we have no evidence of the success of Peter's clients beyond his claims that they've done well. Most successful funds and brokerage firms will tout their clients' results. Why? It is good marketing. The only thing we know for certain is that his claims in 2009 were absolutely incorrect and that his commission fees are a joke.

Peter can't talk about his brokerage clients by LAW, he cannot release his performance or how well they've done. This is why he says Shedlock has an obvious agenda because someone like him should know that he cannot by law talk about his brokerage clients performance and he asked in his article for Peter to reveal what he cannot do.

I think it's safe to say his clients have done well over the last 5-10 years on the stocks they get recommended by Peter and his team otherwise why would 20,000+ customers stick around? because they like him? The dollar has lost value relative to several currencies like the aussie and new zealand dollar, just the other day he was saying he bought the new zealand dollar at 40 cents, now it';s 80 cents and he does that to invest in NZD stocks that pay dividends, that's his strategy and I think if you look at the other fiat currencies relative to the dollar and the price of gold and whatever else it's obvious that it's worked out well

 

[jclay2]

Isn't that what a businessman is supposed to do? Its not charity. Its about making money. Ayn Rand talked about shit like this. Rational self interest. Watch the movie Atlas Shrugged.

Are you freaking serious? So charging your unknowing and foolish clients rates 100s of times above the market rate for a service is what a businessman is supposed to do.

I support most of schiff's views, but he is in this for the money. And if that means ripping his clients off, he will do so with pleasure. Can someone give me any evidence that schiff is not completely screwing his clients over with his egregious brokerage rates to implement his investment strategy?

 

[itshappening]

Are you freaking serious? So charging your unknowing and foolish clients rates 100s of times above the market rate for a service is what a businessman is supposed to do.

I support most of schiff's views, but he is in this for the money. And if that means ripping his clients off, he will do so with pleasure. Can someone give me any evidence that schiff is not completely screwing his clients over with his egregious brokerage rates to implement his investment strategy?

He isn't ripping off his clients, he charges industry standard for managed brokerage fee's. This has been pointed out.

He has a team of 100 or so brokers, that's why managed brokers can be expensive.

It's not Interactive Brokers where you download the software, wire them the money and buy stocks yourself. These are people doing research, scouring the globe for opportunities, providing advice and handling clients with a personal touch and bespoke service. This is why his fee's for those services are 3% or so.

 

[jclay2]

I asked the manager at Schiff's precious metals company (who I bought my gold from) to respond. Here is what he wrote:

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The transactional fees are slim with any online broker dealer. Sure, if an investor wants to do his own stock picking, he’ll just pay the transactional costs per trade.

EPC clients pay to get Peter’s market insights and investment recommendations and to work one-on-one with a broker who will tailor a portfolio that is suitable to each individual client. 3% is very standard within the brokerage industry.
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I did some research on this and found you are not comparing apples to apples. Schiff's firm is a full service broker dealing in foreign accounts so if you want to compare prices you need to make sure it's both a full service broker and you're buying foreign stocks.

Here is a price quote I found from another international full service broker recommened by Casey Research:

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Question : What is your commission structure?
Answer : We believe that our commissions are very competitive, especially in light of our specialized services. They generally fall somewhere between those of the “discount brokers” and the larger, full-service brokerage firms. In percentage terms, you can expect to pay somewhere between 1/2 percent and 3.5 percent depending on the price of the shares and the number of shares traded, subject to a minimum of $60 per trade. There is a minimum opening transaction requirement of $1,500. Additionally, there will be a $35 charge deducted from your account annually unless you make at least two trades per year or maintain a cash balance over $10,000. To receive a commission-rate quote on a specific transaction, please don’t hesitate to call and speak with a Global registered representative.
**********************************************************************

So it would appear that 3-4% is within industry standards.

No offense, but these specialized portfolios are a joke. There is no intense research on Peter's part that goes into their picks. It is dart throwing at best and (at least in my dad's case) they put him into very volatile stocks that were not suitable for his circumstances. Trust me, I work in this industry, stay away from him. You can replicate any strategy that is touted by peter with instant diversification and extremely low costs using index funds and etfs. No need to pay 3-4 percent to have some moron broker blindly pick 20 companies from an excel spread sheet.

 

[LibertyIn08]

Peter can't talk about his brokerage clients by LAW, he cannot release his performance or how well they've done. This is why he says Shedlock has an obvious agenda because someone like him should know that he cannot by law talk about his brokerage clients performance and he asked in his article for Peter to reveal what he cannot do.

I think it's safe to say his clients have done well over the last 5-10 years on the stocks they get recommended by Peter and his team otherwise why would 20,000+ customers stick around? because they like him? The dollar has lost value relative to several currencies like the aussie and new zealand dollar, just the other day he was saying he bought the new zealand dollar at 40 cents, now it';s 80 cents and he does that to invest in NZD stocks that pay dividends, that's his strategy and I think if you look at the other fiat currencies relative to the dollar and the price of gold and whatever else it's obvious that it's worked out well

He's allowed to publish the returns of his managed funds. His site goes out of the way to hide the (mandated to be publicly presented) results of his funds because of their poor performance:

Here's the annualized returns since inception for his various funds:

EPIVX 1.3%
EPIBX 4.22%
EPASX -.16%
EPHCX 1.59%
EPHAX -3.24%
EPLAX -5.26% YTD (No annualized data yet available)
EPUSX -.53% YTD (No annualized data yet available)

Is it any wonder they hide this information in the fact sheet rather than openly advertise it? These funds might beat carefully selected MSCI indices but do quite poorly when contrasted against Mish's funds or other highly rated funds. In some instances they actually underperform even basic ETF trackers.

As an aside, nobody is asking for him to release the rates of return of his brokered clients. There are other ways to show how his brokerage firm is creating value for their clients (aka "results" in the case of brokered clients). He can be more upfront about the following:

Total AUM
Client Growth
Client Numbers
Comprehensive Fee Listing

I'd hazard the reason he doesn't is that it would show to anyone familiar with the wealth management business that his firm is a relative minnow. Funnily enough, this is the same reason his brother and Schiff dismiss Mish. At least Mish has a record of producing alpha in his funds.

As an aside, 3-4% is not the standard even for managed accounts these days. We're not living in the 80s anymore.

 

[jclay2]

It's not Interactive Brokers where you download the software, wire them the money and buy stocks yourself. These are people doing research, scouring the globe for opportunities, providing advice and handling clients with a personal touch and bespoke service. This is why his fee's for those services are 3% or so.

Interacting with clients? Yes. Scouring the globe for opportunities? HAHAHAHA. They are Salesman! End of story. They do not do research or look for opportunities. Their only job is to sign up clients and earn commissions.

 

[itshappening]

No offense, but these specialized portfolios are a joke. There is no intense research on Peter's part that goes into their picks. It is dart throwing at best and (at least in my dad's case) they put him into very volatile stocks that were not suitable for his circumstances. Trust me, I work in this industry, stay away from him. You can replicate any strategy that is touted by peter with instant diversification and extremely low costs using index funds and etfs. No need to pay 3-4 percent to have some moron broker blindly pick 20 companies from an excel spread sheet.

They aren't blindly picking companies, they do research and find those companies all over the world.

IF you buy mutual funds some of them have management fee's of 2-3%, some of the world's biggest like Blackrock charge 3%. This isn't Peter ripping off his clients, he charges what everyone in the industry charges for similar products and services.

 

[itshappening]

Interacting with clients? Yes. Scouring the globe for opportunities? HAHAHAHA. They are Salesman! End of story. They do not do research or look for opportunities. Their only job is to sign up clients and earn commissions.

I'm sure he has a research team that finds the opportunites and a sales team to handle sales and everything else in between but I dont know his company. I'm sure he also employs backend staff, web designers, compliance lawyers, they're not all sales people are they?

 

[itshappening]

He's allowed to publish the returns of his managed funds. His site goes out of the way to hide the (mandated to be publicly presented) results of his funds because of their poor performance:

Here's the annualized returns since inception for his various funds:

EPIVX 1.3%
EPIBX 4.22%
EPASX -.16%
EPHCX 1.59%
EPHAX -3.24%
EPLAX -5.26% YTD (No annualized data yet available)
EPUSX -.53% YTD (No annualized data yet available)

Is it any wonder they hide this information in the fact sheet rather than openly advertise it? These funds might beat carefully selected MSCI indices but do quite poorly when contrasted against Mish's funds or other highly rated funds. In some instances they actually underperform even basic ETF trackers.

As an aside, nobody is asking for him to release the rates of return of his brokered clients. There are other ways to show how his brokerage firm is creating value for their clients (aka "results" in the case of brokered clients). He can be more upfront about the following:

Total AUM
Client Growth
Client Numbers
Comprehensive Fee Listing

I'd hazard the reason he doesn't is that it would show to anyone familiar with the wealth management business that his firm is a relative minnow. Funnily enough, this is the same reason his brother and Schiff dismiss Mish. At least Mish has a record of producing alpha in his funds.

As an aside, 3-4% is not the standard even for managed accounts these days. We're not living in the 80s anymore.

He has said he has over 20,000 clients. Most of them, infact probably nearly all of them are brokerage clients who sign up and then are presented with different strategies by the broker. They're dividend paying foreign stocks. That's his focus and i'm sure they do ok over the long term otherwise why would they stick around? If the client Shedlock wrote about in his silly article stuck around, he would be up and outperforming the market despite one of the companies in the portfolio going bankrupt and despite Shedlock claiming it would take 25 years for that to happen.

Mutual funds charge 3-4%, some of the "high growth" ones can charge up to 5% management fee's. Why is this hard to understand? his fee's are standard. Have you looked at the fee's for the funds with some wall street firms?

 

[itshappening]

Yes you can cut out the middle man if you signup with Interactive Brokers and do the research yourself but not everyone has the time of the expertise to do that. That's where Peter and his team come in. It's no different to buying a mutual fund who can charge up to 5% for the privilege of owning a basket of stocks.

 

[LibertyIn08]

I'm sure he has a research team that finds the opportunites and a sales team to handle sales and everything else in between but I dont know his company. I'm sure he also employs backend staff, web designers, compliance lawyers, they're not all sales people are they?

Here's my problem with that model: there's very tenuous evidence that over the long run fund managers can create alpha. There's even greater evidence that the large number of fund managers will at best match the market minus transaction costs. There's a great book on the topic called A Random Walk Down Wall Street.

That means that his research staff is likely at best, over the long run, match the long term results of the market minus transaction costs. The problem? His transaction costs are dramatically higher than what an average individual investor can get through a discount broker - and still larger than average for the wealth management industry as a whole.

Yet lets presuppose that Schiff has a higher than average team. He would still need to beat the market by 2-3% per annum to account for his higher transaction costs (check his mutual funds to see the weighted performance with and without fees). That kind of performance over the life of an investor is untypically difficult to deliver. I can think of three firms(funds)/investors who have done so off the top of my head: Berkshire Hathaway (Buffet), Renaissance Technologies (Simon et al) and Fidelity's Magellan Fund (Peter Lynch). Renaissance is now closed to outside investors and Magellan is no longer run by Lynch. BH's returns as of late have been middling as well.

My overall point is this: I think Schiff has quite a bit of value to add to the economic debate. He's undoubtedly a bright guy and a gifted communicator. My concern is that his firm's products will not likely generate sufficient alpha over the long run to justify their abnormally high transaction costs. I think most investors would be better following his general advice through a discount broker and using specialty firms only for the alternative asset classes that they cannot acquire at a much lower transaction cost.

Until the track record for his funds changes dramatically, I will likely continue to hold this view.

 

[jclay2]

He has said he has over 20,000 clients. Most of them, infact probably nearly all of them are brokerage clients who sign up and then are presented with different strategies by the broker. They're dividend paying foreign stocks. That's his focus and i'm sure they do ok over the long term otherwise why would they stick around? If the client Shedlock wrote about in his silly article stuck around, he would be up and outperforming the market despite one of the companies in the portfolio going bankrupt and despite Shedlock claiming it would take 25 years for that to happen.

Mutual funds charge 3-4%, some of the "high growth" ones can charge up to 5% management fee's. Why is this hard to understand? his fee's are standard. Have you looked at the fee's for the funds with some wall street firms?

You have been reading the industry propoganda. Go check out vanguard. Instant diversification and near 0 fees. You could litterally put a schiff portfolio using vanguard index funds in less than an hour. The only thing you would have to do is pick out the 5-6 index funds in your portfolio and your % allocation to each.

 

[itshappening]

Here's my problem with that model: there's very tenuous evidence that over the long run fund managers can create alpha. There's even greater evidence that the large number of fund managers will at best match the market minus transaction costs. There's a great book on the topic called A Random Walk Down Wall Street.

That means that his research staff is likely at best, over the long run, match the long term results of the market minus transaction costs. The problem? His transaction costs are dramatically higher than what an average individual investor can get through a discount broker - and still larger than average for the wealth management industry as a whole.

Yet lets presuppose that Schiff has a higher than average team. He would still need to beat the market by 2-3% per annum to account for his higher transaction costs (check his mutual funds to see the weighted performance with and without fees). That kind of performance over the life of an investor is untypically difficult to deliver. I can think of three firms(funds)/investors who have done so off the top of my head: Berkshire Hathaway (Buffet), Renaissance Technologies (Simon et al) and Fidelity's Magellan Fund (Peter Lynch). Renaissance is now closed to outside investors and Magellan is no longer run by Lynch. BH's returns as of late have been middling as well.

My overall point is this: I think Schiff has quite a bit of value to add to the economic debate. He's undoubtedly a bright guy and a gifted communicator. My concern is that his firm's products will not likely generate sufficient alpha over the long run to justify their abnormally high transaction costs. I think most investors would be better following his general advice through a discount broker and using specialty firms only for the alternative asset classes that they cannot acquire at a much lower transaction cost.

Until the track record for his funds changes dramatically, I will likely continue to hold this view.

I don't see how you can have lost buying dividend paying foreign stocks over the last five years. I dont see how you couldnt have done incredibly well and outperformed the market following that strategy even after fee's. If Peter was buying New Zealand dollars at 40 cents and investing them in dividend paying stocks do you not accept that he has done incredibly well from that considering the New Zealand dollar has doubled in value since then?

If I go to fidelity.com there are literally hundreds of funds to choose from and they all charge 3-5% management fee's. Granted, they have published data and track records but Peter's brokerage business is basically the same thing; a managed portfolio for the individual investor and the fee's he is charging are not uncommon

By the way, why do you refuse to look at the portfolio Shedlock posted in his Peter Schiff was Wrong article, how is it doing now relative to the market over the last 4 years? On the radio Peter said it was up substantially despite 18% of it being in one australian company that went to zero (bankrupt). So there's an example of Schiff outperforming the market I'd guess..

 

[LibertyIn08]

Mutual funds charge 3-4%, some of the "high growth" ones can charge up to 5% management fee's. Why is this hard to understand? his fee's are standard. Have you looked at the fee's for the funds with some wall street firms?

http://www.icifactbook.org/fb_ch5.html

I don't know where you're getting your numbers. You clearly don't work in the industry, as 3-4% has not been the standard for some time. The above link is an extensive look at the fees paid by mutual funds and the allocations therein. You'll find that the vast majority of funds have a basis point load fee much, much lower than Schiff's brokerage charges for commissions or the fees on his own mutual funds.

Here's the bottom line: the average inclusive fee rate for mutual funds these days is 1.3-1.5%. This rate has been dropping steadily for 2 decades and doesn't show much signs of stopping or reversing course and moving higher.

Why? Mainly because fund managers can't deliver long term alpha. They're really competing against broad basket ETFs who don't have to pick stocks - and thus are lower cost.

 

[LibertyIn08]

I don't see how you can have lost buying dividend paying foreign stocks over the last five years. I dont see how you couldnt have done incredibly well and outperformed the market following that strategy even after fee's. If Peter was buying New Zealand dollars at 40 cents and investing them in dividend paying stocks do you not accept that he has done incredibly well from that considering the New Zealand dollar has doubled in value since then?

If I go to fidelity.com there are literally hundreds of funds to choose from and they all charge 3-5% management fee's. Granted, they have published data and track records but Peter's brokerage business is basically the same thing; a managed portfolio for the individual investor and the fee's he is charging are not uncommon

If your entire performance comes from one trade your portfolio is perilously balanced.

Regarding your claim, lets check the highest rated Morningstar funds on Fidelity.

Of the top 13 funds, only 1 has an expense ratio above 2%.

Of the next 10 (using the bottom box to sort), again only one has an expense ratio above 2%. (And this is 3%, not 4-5)

Of the next 10, not a single has an expense ratio above 2%.

Of the next 10, only a single fund has an expense ratio above 2%.

Of the next 10, again only a single fund has an expense ratio above 2%.

I don't see how a hit rate of perhaps one in ten of "over 2%" funds posits the typical fund is 4-5% - especially when an even larger number were south of 1%.

 

[itshappening]

So Peter charges 3%, 1% more than most of the "common" fidelity funds that everyone buys and which offer very little value and where fund managers are paid millions of dollars.

I have seen mutual funds with high annualized returns that charge up to 5%, some more. The ones that are offshore for instance.

Can you report back on the portfolio Shedlock posted in his article?

 

[LibertyIn08]

So Peter charges 3%, 1% more than most of the "common" fidelity funds that everyone buys and which offer very little value and where fund managers are paid millions of dollars.

I have seen mutual funds with high annualized returns that charge up to 5%, some more. The ones that are offshore for instance.

Can you report back on the portfolio Shedlock posted in his article?

Mish outperforms the S&P index as well as the Hedge Fund tracker index in his absolute return fund.

Again, I'm not convinced of the value of his funds over a standard low-fee fund when the track records of his publicly available funds are quite poor.

I don't expect we're ever going to see eye-to-eye. I feel at this point we're diverging from a data based argument to a philosophical one - which I don't really want to engage in. At the end of the day, if you feel comfortable investing with Schiff and are happy with your progress, I am absolutely not going to question that. The most important part of investment is feeling assured that you are going to achieve your goals.

If you're on track to do that, no reason to change course.

 

[Danke]

My Dad invested with Schiff ~ 4 years ago. His portfolio initially went down, but last time I saw a statement (around 2 years ago?), it was already up over 50%. I'll have to check with him and report back where it is today.

Edit. OK, I just checked with him. Yes it is over 50% of his initial investment now, but at one time it was over 58%.

 

[LibertyIn08]

My Dad invested with Schiff ~ 4 years ago. His portfolio initially went down, but last time I saw a statement (around 2 years ago?), it was already up over 50%. I'll have to check with him and report back where it is today.

Please do. I've not seen too many positive anecdotal reports but the more data points, the better.