Last edited by jj-; 12-06-2012 at 04:35 PM.
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You got any links to your claim that Ron Paul outperformed Peter Schiff? I find that highly unlikely considering they have the same overall strategy.
Do you think there is going to be inflation or deflation?
There's nothing inherently un-Austrian (at least methodologically; whether it is shared by every Austrian isn't the point) about his arguments. If you think there is, you're likely the one who needs to review the materials.
Again, we know the results of Ron's portfolio and can extrapolate backwards his historical performance (with some degree of confidence). It is certainly higher than the track records of Schiff's funds available through the research services - and likewise better than the anecdotal reports listed here and on other forums of clients of Schiff's who have lost considerable sums of money through outrageously high commissions and bad equity recommendations.
Finally, whether I believe there is going to be inflation or deflation is irrelevant to whether Schiff or Mish were right over the past 3 years (Schiff was wrong), whether Schiff or Mish performed better over the last 3, 5, 7 years (Schiff performed worse, barring new evidence to be presented by him to exonerate him from his funds poor performances) and it is likely irrelevant to whether or not my portfolio is going to do well over the long run, given that my currency, precious metal and equity exposure already has accounted for the potential for either - not to mention I have the ability to change portfolio allocation dynamically.
And thankfully I won't have to spend 1-3% per position to do it.
You need both skills to be a really good investor. You need to understand economics to get into the right overall strategy and you need to be good at picking individual companies. However I think it's more important to understand economics. I've done really well the last few years just by following Schiff's general strategy. I've got physical gold, gold and oil ETFs, foreign mining companies and a some other foreign based firms that pay high dividends.
Why don't you put all your money into treasuries? Shedlock says there's going to be deflation. Put you money where your mouth is!
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!!!
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.
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
Last edited by itshappening; 12-07-2012 at 09:01 AM.
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 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.
Last edited by itshappening; 12-07-2012 at 09:22 AM.
Here's the annualized returns since inception for his various funds:
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:
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.
Last edited by LibertyIn08; 12-07-2012 at 09:27 AM.
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.
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?
Last edited by itshappening; 12-07-2012 at 09:37 AM.
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.
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.
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..
Last edited by itshappening; 12-07-2012 at 09:54 AM.
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.
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%.
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?
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.
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%.
Last edited by Danke; 12-07-2012 at 09:44 PM.
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