The Peter Meter: Assessing Schiff's predictions
Since the launch of the CNBC program "Futures Now" in October of 2012, one of its most frequent guests has been Peter Schiff, who runs both investment advisory Euro Pacific Capital and precious metals dealer SchiffGold.
In these appearances, he has made a series of brash (often bearish) predictions, which tend to generate a great deal of attention and provoke strong emotions.
Following yet another set of bombastic statements on last week's episode, CNBC felt it may be high time to use the benefit of hindsight to assess the wisdom of some of his more eyebrow-raising prognostications. Some of those predictions were made when he appeared on the program toward the end of its first month — on October 25, 2012.
Schiff's call: Gold will rise to $5,000 within a few years
Like most prominent gold bugs, Schiff is a sharp critic of lax U.S. monetary and fiscal policies, which he maintains will eventually weaken the dollar and lead investors to snap up bullion as a safe haven.
"Gold's got only one direction to go, and that's higher," Schiff said in October 2012. "People are going to be shocked at how inexpensive gold was" when it was trading at $1,700.
In that interview, Schiff called for gold to rise to $5,000 in a "few years"; when asked about the time horizon for this target, he replied: "I think you're going to see a big move sometime in the next couple of years."
Made when gold was trading about $1,700, this prediction may count among the least prescient ever made on CNBC.
Following a dramatic crash in April 2013, gold was trading at $1,316 a year later; a year after that, gold was trading at $1,230.
When asked about his prediction in October 2014, Schiff granted that "obviously it's going to take a little bit longer than what I believed at the time," but went on to predict that "it'll go through $2,000 very quickly, and people will be upset that they didn't buy gold at $1,700."
That prediction, too, has turned out to be flat-out wrong. Rather than quickly moving higher, gold has continued its slow move lower, and ended trading on Friday around $1,060.
In a long series of emails with CNBC, Schiff maintained that his $5,000 gold call has not yet been proven incorrect.
"I never specified that gold would hit 5000 in two years," Schiff wrote. "You can say that Schiff thought gold would make a big more [sic] in two years . He was right, but the move was in the opposite direction."
The investor also hedged on the original time frame he gave.
"A few could be 3, but it could also be 4 or maybe 5," Schiff wrote. "The marines are looking for 'a few good men.' They are certainly looking for more than two. I used that word specifically to be non descriptive as I did not know exactly how long it would take for gold to hit 5000."
He further points out that he's been bullish on gold for more than a decade, which has also entailed making bullish calls at lower prices.
Schiff's call: The dollar will crash
In the same interview, Schiff laid out what had been his primary bullish case for gold — that Federal Reserve policies would cause a rapid decrease in the dollar as compared to other currencies.
"I think ultimately, the dollar index will be cut in half, at a minimum," he said.
Actually, dollar strength has turned out to be one of the biggest market themes of the past few years. The dollar index, which compares the U.S. dollar to a basket of other currencies, was trading at 80 that day, and hasn't fallen lower than 78.90 since. On Friday, that index closed near 99.
Meanwhile, inflation has hardly run rampant. Instead, several different metrics show that inflation has remained below the Federal Reserve's 2 percent target, even as the central bank stopped its bond purchasing program, and even more recently has raised its interest rate target.
On this front, Schiff is once again doubling down. He told CNBC Friday that "the dollar will crash, just from a higher level, and the collapse will be that much greater now as a result of the huge sucker's rally we've had."
Closely tied into Schiff's dollar call was his prediction that investors would lose their faith in the ability of the U.S. to pay its debts.
"We're going to have a real fiscal cliff that we're going to go over," Schiff said. "We're going to have a monetary crisis… we've got a bigger debt problem than Europe, and we're going to have this crisis of confidence in the dollar, in the Treasury market."
Needless to say, there has been no such crisis. Treasury yields remain at historically low levels, and U.S. bonds and its dollar continue to serve as the safe havens of the world. Moody's rating of U.S. debt is Aaa, compared to Baa2 for Italy and Spain.
When asked about this prediction, Schiff retorted that he was simply "too optimistic on the world's ability to figure out the truth, so it will take a bit longer than I once thought for these forecasts to play out." However, he still believes that "the bond market will collapse."
Schiff also warned: "Since my forecasts of the coming crisis will likely end up being just as accurate as my forecasts of the 2008 financial crisis, CNBC criticism of me now will only make the network look all the more foolish in the future."
Schiff's call: Quantitative easing will not improve the U.S. economy
The Fed's quantitative easing program is "not going to create jobs, but it will help destroy the dollar," Schiff predicted.
Clearly, the now-completed bond purchasing scheme has not destroyed the dollar. However, when it comes to reviving employment, the critics are out.
The total number of non-farm employees has increased from 135 million in October 2012 to 143 million in November 2015, according to Labor Department data. Meanwhile, the unemployment rate has fallen from 7.7 percent to 5.0 percent.
While some say the Fed's stimulative policies have played a role in this positive development, others say there's no clear link between QE and economic activity.
Either way, Schiff's frequent predictions that the Fed would not be able to stop purchasing bonds or to begin raising rates without the economy cratering have proven completely unfounded, at least thus far.
When asked about this call, he maintained in an email to CNBC that "most of those jobs" that have been created "will be lost in the coming recession that will likely begin in 2016."
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