The Little Book of Bull Moves in Bear Markets | Peter D. Schiff

Summary of: The Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market is Down
By: Peter D. Schiff

Introduction

In his book, ‘The Little Book of Bull Moves in Bear Markets’, Peter D. Schiff offers an in-depth analysis of the declining U.S. economy and the consequences of this on a global scale. Schiff illustrates how America has moved from an economic powerhouse in the 1950s to the world’s biggest debtor with an unsustainable trade deficit. The book delves into the subprime crisis, consumer credit meltdown, and airline industry struggles as a few of the many symptoms of America’s economic woes. Schiff also discusses government strategies and their impact, such as economic stimulus packages and the inflationary pressures they create. In the face of these challenges, the book provides keen insights and actionable investment strategies to help readers protect their portfolios and thrive during these uncertain times.

America’s Economic Doomsday

The American Economy is in shambles, and the country is facing a crisis of epic proportions. The government’s inability to manage debt, fuel, and food prices, along with a reliance on printing more money have ruined the economic growth of the nation. The manufacturing and trade sectors have crumbled, while the increasing debt has made America the world’s biggest debtor. The government’s economic stimulus packages have only created inflation, making it a bad place to invest in. The plummeting housing market, airline industry, and consumer credit meltdown only amplify America’s economic woes. The solution is to invest in a money market fund denominated in a nondollar currency or foreign stocks, or even selling American bonds. The current scenario is similar to the stagflation period of the 1970s, uniting runaway inflation and economic stagnation. It’s high time to act prudently and take charge of our investments.

Investing in Times of Inflation

Inflation poses a significant threat to US investors, and the government downplays its severity. To gauge the real impact of inflation, one should monitor gold pricing instead of relying on government statistics. Investing in nondollar money market funds or foreign equity portfolios is recommended. The expansion of the money supply by American authorities and the accumulation of dollars by foreign interests also contribute to inflation. By unloading bonds and TIPS while rates are low and prices high, investors can protect themselves. However, the Federal Reserve has a difficult dilemma of balancing economic stimulation and inflation control. Additionally, productivity and unemployment statistics are misleading due to the use of hedonics and exclusion of long-term unemployed individuals.

The Deceptive World of Investments

The world of investments is filled with deception and conflicts of interest. The term “Wall Street” encompasses all traditional fiduciary institutions, including brokerages, mutual fund companies, investment banks, and hedge funds. Investment banks have a serious conflict of interest since they underwrite stocks for corporate clients while providing advisory services to investors. This conflict of interest can lead to fraud where they sell stocks that don’t deserve to be purchased. Mutual funds are no better, as active fund managers take inappropriate risks to outperform other managers, often at the expense of long-term investors. Hedge funds are secretive, and their managers get paid well even when investors lose money. Investors should also be skeptical of industry statistics as they are often compiled by the very same companies in that industry, who have an incentive to paint a rosy picture. The book warns readers not to take everything they hear about investing at face value, but to be skeptical and do their own research.

Investing in Commodities

Protect your portfolio against inflation by investing in commodities, which tend to move inversely to the stock and bond markets. As building capacity to produce more commodities takes a long time, a rise in demand for commodities with India and China on the rise will lead to a short supply, resulting in increased prices. The demand for commodities presents a bull market and six strategies for making money in commodities are discussed in the book, three for skilled investors and three for regular investors. Skilled investors can make decisions in a non-discretionary or discretionary individual account or through a commodity pool, while regular investors can consider funds, futures or options. Investors need to be cautious, however, as commodities involve high risk, so it’s essential to understand the market, to own a diverse portfolio and to have a clear exit strategy. The ability to capitalize on low commodity prices can present opportunities by investing in resource companies that will benefit from higher prices in the future.

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