Instead, he tells Kitco News that investors should focus on foreign markets in 2019.
It is week 4 of our popular Invest Like The Experts series and this week, we are featuring Euro Pacific Capital CEO Peter Schiff.
Kitco's 2019 Outlook continues so be sure to check the Expert series every Friday to find out where the experts will be investing this year.
Where do you see value in financial markets in 2019?
Schiff says he is getting away from U.S. markets this year.
“[V]aluations in foreign markets are far more reasonable and sustainable. This creates tremendous opportunity in undervalued gold and non-dollar stocks,” he explains.
“If we finally see the dollar start to fall, which has not occurred consistently since the early years of this century, these sectors should deliver tremendous performance.”
Schiff adds that foreign markets and gold may rise when U.S. markets fall so, “investors should take advantage of the current mispricing to liquidate U.S. stocks and allocate the proceeds to gold and non-dollar stocks.”
Which sectors/industries are likely to boom in 2019?
“Gold, gold mining stocks and dividend paying non-dollar stocks,” Schiff says.
What are the first steps one should take before making any investment?
Beware of stock brokers, he says.
“Don’t listen to the typical stock broker, who doesn’t question the dominant narrative, no matter how absurd that story may be. Such blind faith can be costly in the end.”
What is the biggest red flag for you when it comes to considering a new investment?
“Investors should avoid stocks and investments with no real value, or with valuations that have lost connection with reality,” Schiff says.
As an example, he highlights the “implosion” of cryptocurrencies and “high-flying” U.S. internet stocks.
“In touting these investments, many advisors suggested that when sectors are hot, valuations don’t matter. As it turns out, they do. Bitcoin is down more than 80% from its high in December of 2017,” he explains.
Will 2019 be the year of the active or passive investor?
To Schiff, passive investors may likely “get hurt” if they continue to maintain exposure in the U.S. stock market and other “overvalued” investments.
“Active investors, who make well-timed moves into underappreciated sectors, should do well,” he adds.
Looking back, what was the best investment you think you made in 2018?
Schiff explains that an “aggressive” position he did in a Brazilian electric utility company is paying off.
“For years, the Brazilian markets have suffered through a series of political, economic and financial setbacks that had pummeled its stock market. Despite healthy natural resources, and the potential for huge reversals, most international investors stayed away,” he explains.
“When valuations for this particular company became too good to resist, we increased our position. The company’s shares rose more than 50% thus far in 2018.”
What was one missed opportunity for you in 2018?
Schiff’s missed opportunity of 2018: Shorting the Nasdaq.
“With the benefit of hindsight, it would have been a great idea to short the Nasdaq at the end of third quarter of this year,” he says.
“Through September, the tech heavy Nasdaq was up more than 17% on the year. But all those gains have virtually disappeared in the final three months of the year. A well-timed shorting strategy would have paid off.”
What was the biggest market surprise for you in 2018?
“That the U. S dollar rallied despite the growing trade tensions and the exploding U.S. budget deficit,” Schiff says.
What is the best investment advice you ever received?
“Don’t confuse short-term performance with long-term results.”