Peter Schiff is a well-known investment guru who’s frequently featured in top business outlets like CNBC, Fox Business, and The Wall Street Journal. Schiff originally gained fame for predicting the 2008 financial crisis, and he’s remained one of the staunchest predictors of coming financial collapse in the US.
While Schiff’s investment theories run against the grain of most mainstream investors and economists, his advice can be very useful for developing a hedging strategy against the US stock market. In this article, we’ll cover Peter Schiff’s top 10 pieces of advice for investors.
Peter Schiff Investment History
Peter Schiff began his investing career at Lehman Brothers in the early 1990s before founding his own brokerage firm, Euro Pacific Capital, in 1996. He gained widespread celebrity in the financial world when he predicted in 2006 that twin housing and financial crises would happen the following year.
Since the 2008 crisis, Schiff’s investment predictions haven’t always borne out. He told investors that the rise in stocks that began in 2009 was a “rally in a bear market” and that gold would reach $5,000 per ounce. Despite this, Schiff has continued to remain in the spotlight as a frequent contributor for CNBC, Fox Business, and The Wall Street Journal. He also authored a book, The Real Crash: America’s Coming Bankruptcy, in 2012.
Peter Schiff Investment Advice
While Schiff’s economic predictions haven’t come true over the past decade, it’s worth understanding the financial big picture as Schiff sees it. So, let’s take a closer look at Peter Schiff’s investment advice.
1. Get Ready for Financial Collapse
Peter Schiff’s investment outlook centers around the idea that the US economy is headed for irreversible collapse in the near future. To Schiff, climbing US federal debt, social welfare programs, and a restrictive tax code will combine to stifle economic growth. At the same time, individuals and businesses will be left to shoulder the burden of repaying debt.
According to Schiff, “when the dollar finally falls…it’s going to implode. It’s just going to collapse overnight. Interest rates are going to spike up. You’re going to see a bond market crash.” Schiff predicted the coming collapse in his 2012 book, again in 2019, and then once again in 2020 in response to federal spending during the COVID-19 pandemic.
2. Inflation is Coming
One of the main consequences of the financial implosion that Schiff sees in investors’ futures is inflation. “As we enter the recession,” says Schiff, “consumer prices will rise faster, which will further push up consumer prices once the dollar starts to depreciate.”
For investors, that means that assets that are negatively impacted by inflation – like stocks and bonds –lie directly in the path of financial implosion.
3. Stay Out of US Stocks and Bonds
Schiff implores investors to get out of the US stock and bond market. He sees the preponderance of government and corporate debt currently in the US market as a particularly huge problem. “The dollar will bottom out and will drive the bond market, and the next crisis will not be caused by subprime mortgages, but by the bond market,” says Schiff.
4. Diversify with Foreign Stock
For investors who do want to keep stocks in their portfolios, Schiff recommends dividend-paying shares from Europe and Asia. While these stocks might suffer from the collateral damage of a US financial collapse, the fact that they’re not priced in US dollars insulates them from US monetary policy.
In addition, “valuations in foreign markets are far more reasonable and sustainable” than in US markets, Schiff points out. “This creates tremendous opportunity in…non-dollar stocks.”
5. Invest in Gold
Schiff is one of the most ardent supporters of gold in the investment community. He’s gone so far as to predict that the price of gold will hit $5,000 per ounce multiple times over the past decade, although gold futures only briefly topped $2,000 last year.
According to Schiff, gold is the best hedge against the financial collapse he sees on the horizon. It serves as a safe haven during inflationary periods and isn’t affected by US monetary policy in the same way as dollar-valued assets. Many of the funds that Schiff’s brokerage firm, Euro Pacific Capital, offer are heavily invested in gold and gold-related stocks.
6. Avoid Cryptocurrency
Investors might think that Schiff would be a major fan of cryptocurrencies, since they’re completely untethered from the US dollar and could serve as a safe haven in the event of financial collapse. On the contrary, Schiff tells investors to avoid digital currencies at all costs.
Schiff argues that cryptocurrency is more like a collectible than an investment asset, and has even likened Bitcoin to Beanie Babies. “I don’t think these Bitcoin collections are going to be worth anything when the music stops,” he says. “You can’t do anything with a Bitcoin. Once nobody wants your Bitcoin, it’s completely worthless.”
7. Question the Dominant Narrative
Schiff’s outlook for the US economy is much bleaker than that of most economists and investors. In his telling, though, he stands outside the mainstream investment community in part because he’s dared to question the dominant narrative of endless market growth.
He tells investors that they shouldn’t “listen to the typical stock broker, who doesn’t question the dominant narrative, no matter how absurd that story may be. Such blind faith can be costly in the end.”
8. Don’t Ignore Valuation
Schiff also believes that, regardless of the US’s economic fate, stocks are overvalued at current prices. He points out that “many advisors suggest that when sectors are hot, valuations don’t matter.” According to Schiff, however, valuation always matters – and anything that can’t be justified on a valuation basis is nothing more than a bubble.
9. Stay Active
Another key to succeeding in the markets as an economic transition looms is to invest actively rather than passively. Schiff says that passive investors can easily be hurt by ignoring cracks in the US market’s foundation and holding until after a financial collapse occurs. “Active investors who make well-timed moves into underappreciated sectors,” on the other hand, “should do well,” he says.
10. Focus on the Big Picture
Schiff also tells investors to remain focused on the long-term. “Don’t confuse short-term performance with long-term results,” he warns.
In other words, Schiff’s predictions haven’t come true – yet. Investors need to remain on guard to avoid losing the gains of the last few years when Schiff’s forecasted financial catastrophe strikes.
Conclusion: Peter Schiff Investment Advice
Peter Schiff was one of only a few investors who accurately predicted the 2008 financial crisis. Over a decade later, he’s predicting another, larger crisis, one fueled by corporate and government debt. To stay safe in the coming financial collapse, Schiff warns investors that they need to look beyond US assets to foreign stocks and gold.