Peter Schiff

[stumunro]

Just thought I'd share an email I received today, and would love to hear your thoughts. Peter Schiff is the author of "Crash Proof" and advisor to Ron Paul.

Dear Friend,

In the scrapbook that is ultimately put together for the now defunct real estate bubble, one moment may make for an interesting piece of nostalgia. It came in November 2006 when I was invited to speak at a convention of mortgage brokers in Las Vegas. At the time, I was known as one of the most recognizable housing market bears. Admittedly, this was an odd call for such a conference, which could have been seen as a cheerleading event for the mortgage industry. It was akin to inviting an atheist to speak at a tent show revival. But to their credit the organizers felt comfortable enough to give a stage to all perspectives.

By most accounts the market had peaked by the end of 2005. But the belief held by the vast majority of forecasters was that homeowners, homebuilders, and the mortgage industry would simply have to live without the dizzying double digit price increases that predominated during the prior decade. Most believed that after the largest and fastest increase in history, appreciation would just return to the traditional 2% to 3% annual rates. And although some distant rumblings from the subprime market could be heard in the second half of 2006, no one given much credibility on the national stage was predicting that the subprime problems would spread, or that the country faced serious declines in national home prices, rocketing defaults, rampant bankruptcy among lenders, or bailouts for Fannie Mae or Freddie Mac. As you'll see in the attached video, I delivered the bad news which turned out to be completely accurate. Although the speech is divided into 8 segments, the discussion of the bad news for real estate begins in the 4th.

http://www.youtube.com/watch?v=xNKs8lBnd2U&feature=related

Now, as the U.S. Congress formally passes the bailout package that socializes the losses of the housing bubble, it is worth a moment to think about the national blindness that easy money can cause. Take it from one of the few people to have accurately forecasted this disaster; this government cure is actually worse than the disease it created in the first place.

It is interesting to note that the Mortgage Broker Conference has not invited me back since. Perhaps, my views could be tolerated when they could be dismissed as wild speculation, but not so much now that they would play as an "I told you so." On the other hand, it's possible that given the state of the market, mortgage brokers no longer stage lavish conventions in Las Vegas.

Best regards,

Peter Schiff
President and Chief Global Strategist
Euro Pacific Capital

 

[peastman]

Very interesting video.

I am not so sure about his statement about appreciation "that doesnt happen, I mean it can happen for a short period of time"

From all the figures I have seen the opposite is true, depreciation doesnt happen, I mean it can happen for a short period of time.

On the long term perspective property will at least keep up with inflation and what is happening in the US now is an adjustment to bring the price back to where it should be, it just grew to much to quick. But in 20 years from now the prices before the fall will still look cheap.

 

[stumunro]

From what I've read, good US property investments are all cashflow. RK always harped on, that you invest in something that makes sense from day 1, something that makes a profit.

In Australia it is significantly different, and for me the reason for this has not been properly outlined by anyone.

When I first started investing it didn't take long to realise that the sort of investment that you read about in US property books aren't the kind you can find where we are.

 

[Rockstar]

Thanks Stu, Well he was pretty accurate with his predictions. Wonder what he is predicting now?

Comparing the US scenario with Oz is tempting but there are major differences in the circumstances as we are well aware. To have a situation where it is easier to buy a house than rent one - and at no risk to the buyer is a recipe for disaster. Mass speculation by not only investors but also OO's exacerbated the problem.

Time to tread carefully in Oz and remain diligent - but not time to panic that's for sure unless maybe if you're over leveraged with questionable serviceability.

 

[Kenster]

This is the transcript to an interview with Peter Schiff (by Jim Puplava) in early 2007:

http://www.financialsense.com/transcriptions/2007/0310.html

 

[stumunro]

This is the transcript to an interview with Peter Schiff (by Jim Puplava) in early 2007:

http://www.financialsense.com/transcriptions/2007/0310.html

great article!