Gold bug Schiff counters Goldman on first drop since 2000

Independent Reading

While Schiff acknowledged his radio show is a way to promote his brokerage, he said it’s not only about making money for himself. He wants to give people an alternative to mainstream media and economics.

Schiff, who was born in New Haven, Connecticut, studied finance and accounting at the University of California, Berkeley, and began his career as a financial consultant with Shearson Lehman Brothers. He said his independent reading, on history and economics, was more influential than his formal education.

He started Euro Pacific Capital in 1997, and the company now oversees more than $2 billion in eight funds. Schiff rose to prominence a decade later because of his predictions of looming economic collapse. His notoriety grew with his Senate bid and radio show. In November 2011, Schiff visited Occupy Wall Street protesters in Manhattan’s Zuccotti Park to “represent the 1% [and] see if I can have a dialog with the other 99%.” The debate, recorded by the libertarian journal Reason, lasted almost two hours.

Father’s Influence

In the dedication to the 2009 revision of his book “‘Crash Proof: How to Profit From the Coming Economic Collapse,’’ Schiff credited his father ‘‘whose influence and guidance concerning basic economic principles enabled me to see clearly what others could not.’’ Irwin Schiff has long advised people that they didn’t have to pay income tax, and is serving a 13-year sentence in the Federal Correctional Institution in Fort Worth, Texas, for tax evasion.

Peter Schiff says he admires the Austrian school of economists including Friedrich Hayek and Ludwig von Mises, who held that the purposeful actions of individuals explain economic phenomena. Mainstream thought is self-interested: politicians get to spend money they don’t have, academics get recognized with prestigious government appointments, and Wall Street makes commissions on easy money, he said.

Schiff was often a guest on cable television shows in 2006 and 2007, when he predicted the housing bubble and global recession. Fox Business Network host Neil Cavuto once invited him to continue with his exposé on Santa Claus. Instead he published ‘‘Crash Proof” in February 2007.

9,300 Square-Feet

Four months later, U.S. housing prices fell for the first time in 13 years, according to data from the Federal Housing Finance Agency. In November 2008, a fan produced a video compilation of Schiff’s appearances called “Peter Schiff Was Right,” which has been viewed on YouTube 2.2 million times.

Schiff was so confident properties were overpriced that he rented until age 46. In 2009, he bought his 9,300 square-foot house in Weston, Connecticut, for $2.4 million. He added a pool house, tennis court, pavilion and sun room, and the home is valued at $3.1 million on real estate website (Schiff disclosed assets of at least $64.7 million during his Senate run.)

Even as Schiff predicted the housing bust, his advice in “Crash Proof” to buy gold and international currencies and stocks would have lost money in the bubble’s immediate aftermath.

‘They’re Lying’

While gold rose 32% from the time of the book’s release to the end of 2008, the MSCI World Index excluding U.S. equities fell 41%, more than the 36% loss in the S&P 500. The U.S. dollar strengthened during the period against 10 of 16 major currencies, including the British pound and Brazilian real.

“If I say this is going to happen and then it all happens that way, but the markets react differently because they don’t really understand what just happened, that was my mistake in overestimating the intelligence of everybody else to figure stuff out,” he said.

Why does Schiff, presented with the same publicly available information as everyone else, draw the opposite conclusion?

“Because I understand what I’m looking at,” he said. “Either they don’t, or they’re lying.”

After finishing the radio show, Schiff leaned back in his chair, put his MacBook Air in his lap and played an almost seven-year-old Fox Business News clip, in which his younger reflection warned of people buying houses with no documentation, no money down and interest-only mortgages. “So what?” other guests interrupted. So real-estate values would vanish like dot- com stocks, the brown-haired Schiff said, over laughs. The gray-haired Schiff, watching, shook his head.

“When I say something new, they still laugh at me and make fun of me as if I’ve never gotten anything right,” he said. “Everything that I’ve ever predicted is going to have to come true, and then some people might still say he’s a broken clock.”

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