Monday, November 14, 2011

Peter Schiff makes bold call

Sentiment for a euro swan dive must stand at a record; it must dwarf any negative reading the U.S. dollar ever had. No fresh data are available on the sentiment for the USD:euro cross, but the chatter everywhere about the imminent demise of the EU is truly deafening.

The Mr. Magoo of Wall Street, Euro Pacific Capital’s Peter Schiff appears to have not noticed.  As the crowd runs from talking nice things about the euro, he just muddles along with his prediction of a renewed U.S. dollar weakness against the euro—and sterling, yen, Swiss franc and the other small-weighted currencies making up the UDX. Sign-up for my 100% FREE Alerts!

“Our short-term target for the euro, maybe by year end, will be up near 1.48,” Schiff told KWN on Oct. 25.  “I think that’s going to catch a lot of people off guard who were writing the obituaries for the euro, to see the euro approaching the 1.50 level.  The dollar index should be headed back down to the 72 level.”

Schiff appears to be completely alone with that call.  Even Jim Rogers and Marc Faber cannot be quoted about the overly negative sentiment in the euro.

That should trouble contrarian investors; it reminds us of similar negatve sentiment of the U.S. dollar prior to Lehman’s death.  At that time, the USDX hovered at an all-time low of 72 in March 2008, scaring the bejesus out of the financial media of an imminent collapse of the dollar.

And like magic, the USDX soared approximately 24 percent to 89 by March 2009—a year latter, amid the Lehman Armageddon and talk of ‘deflation’ of 2009.  Jim Rogers and Marc Faber were among the handful of market savvy observers who warned of too many traders on one side of the boat before Lehman.  Not so today.

So, fast forward to today; it’s the euro’s turn.  And like clockwork, the media’s favorite apologist for the dollar among the gold community, Dennis Gartman, told Bloomberg News on Nov. 4, “The driving force in the gold market is the problems in the euro,” Gartman said in a telephone interview. “Central banks in Europe and individuals will want to lower their euro holdings and buy gold since no one knows what is happening to the euro. The euro is heading towards parity once again.”