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They Still Don’t Get It

They Still Don’t Get It

Prior to my last appearance on CNBC in October 2007, I had made more than 50 appearances on the network over the prior two years. In those segments, I repeatedly exposed the superficiality of our prosperity, described the American economy as a “house of cards???, pointed out that borrowing and spending were a ticking time bomb rather than a viable plan for long term economic health, and explained how investors could prepare for the tough times ahead. At the time, those forecasts were met with ridicule and led to my being nicknamed “Dr. Doom???. Now that these predictions have come to pass, most on CNBC now claim that no one saw it coming!

In my 2006 and 2007 on-air appearances, to a chorus of sneers and laughter, I predicted the bursting of the housing bubble, the collapse of the subprime mortgage market, the credit crisis, tightening lending standards, waves of defaults, bankruptcies and foreclosures, weakness in financials, retailers and homebuilders, stagflation, surging gold, oil and other commodity prices, soaring federal budget deficits and a collapse in the value of the U.S. dollar. You would have thought that some of the reasons I gave for making those predictions would now be given some credence. They have not.

The current line at CNBC is that, prior to the “unexpected??? contagion emanating from the subprime mess the U.S. economy was experiencing a “Goldilocks??? era of optimal health. They now believe that if the Fed and the Government can divine the right combination of fiscal and monetary policy, Goldilocks will once again be blissfully picking daisies…or more precisely, buying SUV’s. Unfortunately, as I said then, Goldilocks was, and still is, a fairy tale. In fact, the unfolding economic disaster is a direct consequence of the misguided faith placed in that absurdly optimistic parable. And since they were incapable of diagnosing the disease, is it any wonder that their cures are completely ineffective?

This lack of understanding is further confirmed by the skepticism with which the mainstream financial community still regards my diagnosis. For example, in a Feb 22, 2008 article in TheStreet.com, entitled “Dr. Doom Zeros in on Inflation???, Mike Holland, a CNBC regular leveled two common criticisms often used to discredit me. Holland says “investors who listened to Schiff throughout the recent bull market missed out on some attractive returns in the stock market??? and “A broken clock is right twice a day. If you say things are going to be bad long enough, eventually you’re going to be right.”

What attractive returns does Holland think my clients missed out on? Those who followed my advice invested in foreign stocks, bonds and currencies, as well as precious metals, oil and other commodities. Investors who listened to me instead enjoyed much greater returns by participating in the real bull markets. It’s amazing how few people have managed to figure this out!

The “stopped clock??? analogy is one I have been dealing with for years. Those using it maintain that my early warnings invalidate my forecasts. It is precisely because my warnings were so early that they were so valuable to investors. In addition, such charges assume that the current downturn is unrelated to those warnings and that my critique of the U.S. economy was inaccurate until now. My critics, the real stopped clocks, still do not understand that the phony prosperity they were defending and that I was challenging lies at the root of the current crises. When the bubble was still inflating it is understandable that those trapped inside viewed me as a stopped clock. However, now that it has burst, it is amazing how many still cannot get the soap out of their eyes.

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