Peter Schiff is calling for a sudden and violent crash in the U.S. dollar sometime in 2016.

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Alexis Blair
5 years ago
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2 Peter Schiff is calling for a sudden and violent crash in the U.S. dollar sometime in When the collapse inevitably hits, the presumed safety of the U.S. dollar and Treasuries will disappear overnight. The dollar s downward revaluation has the potential to do more damage than a terrorist attack a thousand times bigger than 9/11. The ripple effects will be felt across the entire economy. No American will be safe. Since it s unlikely that your dollars will ever be worth more than they re worth this very moment, it s of utmost importance to strategically trade your overvalued dollars for other assets ready to explode in value. And that s exactly what Peter Schiff covers in his book, The Real Crash. Not only does Schiff show readers how to avoid getting blindsided by the coming dollar meltdown, but in Chapter 13 Investing for the Crash he also shows readers how to profit from the inevitable chaos. Your hardcopy of The Real Crash will take a few weeks to arrive in your mailbox. I recommend flipping to Chapter 13 as soon as your copy arrives. But since Armageddon is approaching at an alarming pace, I need to make sure that everyone has access to Schiff s top strategies right away. That s why I decided to conduct a thorough analysis and critique of the most important chapter in Schiff s book, Chapter 13. I even marked up some of Schiff s hardest-hitting points with my own highlighter pen. I m confident that my analysis and critique will give you a much needed head start for the crisis. When it comes to protecting yourself and your family from the carnage, every second counts!

THE ULTIMATE SURVIVAL STRATEGY: STRIKING THE PERFECT BALANCE Since the United States will no longer be the center of the economic world once Armageddon strikes, Schiff s overarching strategy calls

The deception behind the current U.S. economic expansion must be understood. Peter Schiff The Real Crash Chapter 13, pg. 368 But that doesn t mean randomly buying up foreign assets.

3 THE ULTIMATE SURVIVAL STRATEGY: STRIKING THE PERFECT BALANCE Since the United States will no longer be the center of the economic world once Armageddon strikes, Schiff s overarching strategy calls for avoiding American investments. That s the core of his survival strategy, which I believe is a prudent approach. Especially considering that the American consumer is virtually dead. The deception behind the current U.S. economic expansion must be understood. Peter Schiff The Real Crash Chapter 13, pg. 368 But that doesn t mean randomly buying up foreign assets. Tried-and-true portfolio principals, like diversification, still apply during a crisis. When diversifying your portfolio, be sure to do it across three main areas: 1. Quality dividend-paying foreign stocks (in the right sectors) 2. Liquid, less volatile investments like cash and foreign bonds 3. Gold and gold mining stocks Here s my brief analysis of each component, along with some specific points for you to consider. SURVIVAL COMPONENT #1: DIVIDEND-PAYING FOREIGN STOCKS Since Schiff is adamant that the epicenter of the coming collapse will be the U.S. dollar, investing in companies that have little to do with the American consumer is vital for the future success of your new Armageddon portfolio. But don t just settle for any foreign stock. 2

4 CANADA THE NETHERLANDS NORWAY SWITZERLAND HONG KONG SINGAPORE AUSTRALIA NEW ZEALAND First, Schiff believes that dividends are crucial. By zeroing in on foreign stocks that pay dividends, your portfolio will grow even if shares remain flat. My take? It depends on your investment objectives. Although I also like the income generated by dividends, don t ignore foreign growth stocks. If you can stomach some risk, the gains could be massive as the dollar crashes. Schiff also says you need to focus on the global economies with strong economic tailwinds even after catastrophe strikes in the United States. Here are a few options that Schiff urges you to consider... AUSTRALIA SINGAPORE NEW ZEALAND HONG KONG SWITZERLAND NORWAY THE NETHERLANDS CANADA CHINA 3

5 Although Schiff doesn t list any specific stocks in his book, I recommend checking out the Survival Portfolio that came with your American Armageddon Survival Kit. Plus, I found a great website that lists stocks of various countries that trade on U.S. exchanges. Now, once you decide which country to invest in, your next step is up to you. You could continue to dive deeper to invest in a particular sector or stock in that country. Or you could take the easier route and buy country-specific exchanged-traded funds (ETFs) or mutual funds. Just be sure to review the funds holdings before you buy to confirm that all positions are aligned with the respective country. Although Schiff doesn t suggest them in his book, I recommend also looking at inverse dollar funds like the PowerShares DB US Dollar Bearish ETF (UDN). SURVIVAL COMPONENT #2: LIQUID AND LESS-VOLATILE INVESTMENTS CASH AND FOREIGN BONDS In a standard economy, Schiff asserts that Treasury bonds or blue-chip corporate bonds are usually a safe bet. But since runaway inflation and interest rates will be your biggest enemy in the coming years, he warns that long-term bond values will get crushed. So to achieve high liquidity with less volatility, Schiff says it s important to scoop up bonds with short-term maturities. Plus, since the bigger risk to the value of a bond is the value of the underlying currency, steer clear of dollardenominated bonds. When I spoke to Schiff offline, he told me that the only thing worse than owning the dollar is owning an asset that promises to pay you a future dollar, which is exactly what a dollar-denominated bond does. I agree with Schiff wholeheartedly. That leaves us with short-term foreign bonds to focus on. And a good place to start would be the list of countries on pg. 3. 4

Now, buying foreign bonds is more difficult than purchasing U.S. bonds. So it s important to have a broker who can execute these trades for you. Mutual funds are also an option in this case.

In addition, holding foreign currencies directly is also a great way to maintain liquidity once Armageddon strikes.

6 Now, buying foreign bonds is more difficult than purchasing U.S. bonds. So it s important to have a broker who can execute these trades for you. Mutual funds are also an option in this case. But if you go this route, Schiff recommends avoiding funds that hedge to the U.S dollar. And double check that its portfolio has a short duration. In addition, holding foreign currencies directly is also a great way to maintain liquidity once Armageddon strikes. This will keep you safe from the coming dollar collapse, and give you dry powder to use on new opportunities as they arise. SURVIVAL COMPONENT #3: GOLD AND MINING STOCKS The importance of holding gold can be boiled down to a single question that Schiff asks in his book: Which would you expect to hold its value more: something that can be printed at near-zero cost, or created out of thin air with some computer keystrokes at the Federal Reserve or a rare element that must be mined at substantial cost? That key distinction between fiat currencies and gold is why the yellow metal is often thought of as a safehaven asset in times of trouble. Now, some analysts think that any rise in gold is simply the result of a bubble. Schiff encourages you to ignore them, since the gold-bubble talk has been going on since gold was trading for $500 an ounce! According to Schiff, for a bubble to exist, we would need to see rampant greed in the gold market. Which is simply not happening. Ultimately, Schiff asserts that any uptick we see in gold merely reflects a reduction in value for fiat currencies, and the expectation of greater losses in the near future. So Schiff encourages you to own physical gold. And if you can, store your gold in multiple locations even out of the country. To make it easier, you could also invest in exchange-traded funds or diversified mutual funds in the sector. 5

7 Now, I agree that gold is an absolutely crucial component when building your Armageddon portfolio. However, as I explain in The Aftershock Report, I also project that we ll see another leg down for gold in the coming months before the true rebound occurs. Once that happens, I suggest investing in undervalued gold miners. Schiff agrees. And he recommends building your gold mining portfolio like a pyramid. The base the main portion of the portfolio should include senior producers with plenty of proven reserves. He says add mid-tier and junior producers after that. The top of the pyramid should include exploration companies. These companies don t generally pay high dividends. But Schiff says that once gold prices rise, these companies would be positioned to initiate or raise dividends in the near future. DON T DITCH ALL OF YOUR DOLLARS As long as you re living in America, many of your expenses are likely fixed in dollar terms. That s why Schiff thinks you should keep some greenbacks on hand to pay your mortgage, car insurance, and other bills. Plus, this will allow you to spend your dollars while they re still strong. Having a diversified basket of currencies over the long term allows you to use the most valuable currency (at any given moment) to make purchases. PROFIT EVEN IF ARMAGEDDON IS DELAYED Schiff concludes his final chapter with these final words of wisdom: The bottom line is that a major economic event looms on the horizon. Knowing about it is one thing being prepared is another. And I have no doubt that using his three-pronged strategy will help True Alpha readers generate profits in the event of a U.S. dollar collapse. The beauty of Schiff s strategy is that it should still outperform in the coming years even if the collapse takes longer to hit than Schiff and I project. This balanced approach essentially helps you diversity your holdings outside of the United States. So it s a sound investment strategy no matter what direction the American economy heads in

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