Peter Schiff’s China Infrastructure Stocks, part one

By Travis Johnson, Stock Gumshoe, April 21, 2009

If you haven’t heard about Peter Schiff by now, he’s probably very disappointed. I listen to his podcast every now and then, and read articles that he contributes to websites on occasion, and he is trying so very hard to strike while the iron is hot, and to get new clients when US investors are terrified and most ready to accept his view of a black and white world.

Just to briefly summarize what I hear from his commentary and his broad statements: The number one point is that you MUST get out of the dollar. He predicts that the US dollar must fall, gold and silver must rise up, and that other fiat currencies will also fall, but less than the dollar, and foreign dividend-paying stocks will outperform other investments. He gets a lot of credit from some folks for foreseeing the problem with, well, credit in his “Crash Proof” book, and he’s more than willing to take that credit.

I don’t know whether or not he’s right about the future, of course — he may well be, and I have some sympathy for many of his views, but I’m usually pretty distrustful of anyone who is as certain as Schiff is — about anything. Then again, “on the one hand, on the other hand, this might happen” kind of talk doesn’t get media attention or bring in new clients. That’s not meant to be a criticism of Schiff necessarily, that’s how the business works — he’s a broker, brokers are salespeople, and his product is an opinion and the ability to help you invest in stocks based on that opinion.

His brokerage firm, Euro Pacific Capital, exists primarily to help clients buy and sell recommended stocks on international exchanges — he himself would probably tell you that if you just want to buy ADRs of foreign companies or buy physical gold, there’s probably not much of a reason to pay for his services — the value he or similar brokers might add is in helping you hold your money outside the US dollar or to buy foreign stocks on their home exchanges (you can do that independently, too, though it’s certainly more complex than buying US stocks). The other major investments he typically talks about, aside from foreign dividend-paying stocks, are precious metals, and his firm will also help you buy gold and silver either physically or in certificates (I think they use the Perth Mint).

So that’s the basic rundown on Schiff — I won’t go into the debates about him, or the media efforts to judge his performance (which is pretty tough, since he doesn’t just publish a recommended list, he has a network of brokers who handle client accounts, so I’m sure his clients have had widely varying performance individually over the past couple years). Suffice to say that he is a bit of a lightning rod, attracting both adulation and criticism in large helpings.

I’ve written about some of his “picks for 2009” before … I sniffed out one of his favorites here back in February (turned out to be DUET Group, info is here), and one of them a few months earlier (That was China Skyworth, info is here), and the folks on the forum chatted a little bit about the other three in the list he was teasing back then.

But today, Mr. Schiff has a few more stock ideas to sell you — and he’ll tell you what they are, but first you have to call up and talk to a Euro Pacific Growth broker, and sit through a sales pitch on their services … which you’re welcome to do if you like, but I think I can come up with the three names they’re teasing here for you. We’ll cover at least one of them today …

Here are the clues provided:

These companies are all expected beneficiaries of the big boom in Chinese infrastructure spending — call it a “stimulus” or call it “more of what they were doing anyway,” China is clearly still building like gangbusters on stuff like roads, railroads, water treatment and transport, pipelines, etc. Some of the real estate speculation might have come out of the Chinese market, but the public infrastructure building appears to be accelerating. In Schiff’s words:

“We believe the 3 companies listed below will greatly benefit from the Chinese stimulus plan. They are a sound way to take advantage of these increased government subsidies.”