Bull Moves in Bear Markets, by Peter D. Schiff

Review by W. J. Rayment / ConservativeBookstore -- We know where the market has been, but where is it headed? My Calc professor in college had been a meteorologist for the Air Force. He said "The most accurate way to predict the weather is not to look at all the data, but to simply predict for tomorrow what is happening today. You will be right two thirds of the time." I get the feeling that the stock market is kind of like that. If things are bad now, they probably will only get worse.

Peter D. Schiff, in his book with the long title, "The Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market Is Down", tells us that the current market is trending down. But unlike my college professor, he does not simply rely on the current trend to tell us where the economy is headed. Since he has been uncannily correct in the past, his predictions and analysis are well worth reading.

Schiff tells us that the root of all of our problems is mounting debt and the nation going off the gold standard - making U.S. currency a fiat currency. In other words, the once almighty dollar no longer has a value in relation to anything meaningful other than that it can be used to pay taxes to the U.S. government. In the past I have scoffed at the gold-bugs. As far as I could see, reading the papers and watching television, the dollar had been doing just fine ever since we went off the gold standard in 1971. With regard to debt, it seemed like we could keep borrowing forever. People keep handing us money, which we use to go out and buy foreign products. The debt continues to build, our industries go overseas, our debt continues to increase. No problemas, we just keep doing it...right?

But all good things must come to an end. This book has awakened, or rather reminded me of some fundamental rules of economics, propounded by the master himself, Adam Smith. Money is only worth as much as the goods and services it will buy. The wealth of the nation is not in how much money it has but in the value of the goods and services it produces. If we do not produce anything anymore, we have nothing to sell. Who is going to want our money? If no one wants our money then what happens to the value of that money? It is pretty obvious the value of the money goes down, which is another way of saying, "INFLATION"!

Here is a concrete illustration: It is a well known fact that the Chinese have kept the value of their Yuan artificially low in relation to the dollar. The effect of which is to sell us goods and services at artificially low prices. This has made Chinese goods cheap in the US. Yes, the cost of buying a toaster at Wall-Mart is far below what we could produce it for in this country considering the labor laws. This has sucked even more industry out of this country. Yet there comes a point when the Chinese will not wish to continue taking our dollars for manufactured goods with no prospect of getting any value from those dollars. Since they don't really want much of what we produce, they will dramatically raise the price of the goods they ship to us.

Mr. Schiff not only uses the word "inflation", he goes a step further and says the country will soon be experiencing "hyper-inflation". The only things that will be cheap are the goods and services that are actually produced in this country, most of which will be in low demand. "Bull Moves in Bear Markets" then goes in-depth to tell the average person and investor how this is going to effect his or her daily life. Better yet, he gives practical advice on how to deal with the coming economic crisis.

There is little doubt in my mind that Schiff is correct in much of his analysis. We are headed for tough economic times largely due to a glut of self-indulgent spending over the last twenty or thirty years. The government is likely to react by raising taxes to fund make-work projects. It will increase the money supply and try to micro-manage the economy. All of which will simply exacerbate the nation's problems. But we just may find salvation eventually; as foreign goods cost more and more, it will actually end up being less expensive to make goods and services in the good ol' US of A. As long as we don't have too big of a talent drain to other countries before this happens, we may have a resurgence of industry. But this will be a long time coming and will partly be dependent on people in government being smart enough to implement policies that will encourage domestic manufacture.

In all "The Little book of Bull Moves in Bear Markets" is a timely work. It reveals to the average reader what is happening in the economy right now and why. At the same time it carries timeless ideas that will serve any investor faced with bear markets in the future, and as long as humans live together in societies there will be markets. Some will be bulls, and indubitably some will be bears.

The Little Book of Bull Moves in Bear markets: How to Keep Your Portfolio Up When the Market Is Down, by Peter D. Schiff, is available at Amazon.