Peter Schiff says gold will rise to $5,000. Again. But is he really a gold bug?
The founder of Euro Pacific Capital who made The Call as well as anyone (and who recently announced a run for U.S. Senate), was banging on yet again on the intertubes Thursday about gold hitting $5,000 an ounce.
True, Schiff didn't say it was a certainty -- just that it wouldn't surprise him if the yellow metal hits that level in the "next couple of years."
We felt we were pretty even handed last week when we said Schiff was a smart guy with bad timing. He's clearly not dumb. His doom-and-gloom prognosis for the dollar, U.S. equities -- heck, our whole economy -- is shared by sober, thoughtful economists, analysts and fund managers. It's a credible macro call, if even we would dump it in the possible-but-not-probable file.
It's just that when Schiff makes the case, he comes of as slightly . . . um, unhinged. Probably because he appears to get too much pleasure consigning the U.S. to a totally bleak, Mad Max Beyond Thunderdome future.
And we also should have probably added the adjective "repetitive." Schiff has been sounding the alarm on gold $5,000 since at least early 2008. Maybe he's right. (Like we said, his macro view isn't so fringe that it can be dismissed out of hand.) In his latest pronouncement, Schiff contends that gold hit $1,000 by "climbing a wall of worry" (Wall Street lingo for panic buying or selling), and once it broaches $2,000, that will bring in great hordes of return-chasing investors. (You know, the same brilliant punters who helped take Nasdaq to 5,000 at the peak of the tech bubble.)
So it's rather interesting that as bullish as Schiff is on gold, it remains a pretty small and reasonable portion of his clients' accounts -- for a gold bug, anyway -- according to Andrew Schiff, a Euro Pac spokesman, broker -- and Peter's brother.
Euro Pac's accounts range anywhere from $20,000 to $10,000,000, but the exposure to gold averages only 15 percent per portfolio, Andrew Schiff says. "We never recommend that anyone go 100 percent gold," says Schiff. "Most of my clients are between 15 percent and 20 percent gold. A $20,000 account would be 10 percent to 15 percent exposure, depending on age. If people are simply interested in wealth preservation, then gold becomes a bigger part of the strategy."
It's almost as if Euro Pac has switched the one-size-fits-all traditional fixed-income part of the asset allocation model with gold.
Of course when it comes to wealth preservation, the safest investment might be TIPS, or Treasury Inflation Protected Securities. These bonds, backed by the full faith and credit of the federal government, adjust according to the consumer price index, ensuring that the yield always keeps up with inflation. Gold is also an inflation hedge, but you could still suffer loss of principal. Gold prices have been known to go down, too, you know.
But Euro Pac doesn't have any use for TIPS, Andrew Schiff says, because "we don't trust the government to ever really report an honest CPI number."
Plenty of folks quibble with the way the federal government calculates CPI, but then you'd figure the best and brightest bond guys from Pimco to China would have already priced that in.
So gold it is for Euro Pac -- though not as much as you might think.