Peter Schiff’s Gold and Agriculture Teaser Picks


I cover Peter Schiff in this space from time to time, mostly because he sends out a newsletter every few months and includes some teaser picks that often sound interesting — of course, he runs a brokerage firm, not a newsletter, so he wants you to get a sales pitch from one of his brokers in exchange for the names of the stocks he’s teasing. That’s not my idea of a good time, so I thought I’d again sniff out these latest stocks for you — they’re from yesterday’s newsletter from Euro Pacific Capital.

If you don’t know Peter Schiff, he is credited by many with foreseeing the mortgage meltdown and the stock market crash in his book “Crash Proof” that came out a couple years ago (it’s being updated this Fall). Of course, he’s also accused of being a permabear and of predicting a collapse in the US financial system for a decade or more, and he can be utterly insufferable.

When it comes to investing he’s a long-term, buy-and-hold kind of guy, but his niche is buying stocks on foreign exchanges for US investors. He recommends mining stocks and foreign stocks and gold for his customers … in particular, he focuses on dividend-paying foreign stocks as a way to get out of the dollar, since he believes that the dollar will inevitably crash. He’s not quite as big of a government antagonist as his father, with whom he authored The Great Income Tax Hoax about 20 years ago (dad Irwin is in Federal prison for tax avoidance), and he actually has some political aspirations of his own — Peter Schiff may end up running against Chris Dodd for the Connecticut Senate seat, and the initial polls have him actually possibly being a legitimate contender (or at least, they have people really hating Senator Dodd, probably because of his prominent role in the bailout hearings).

I like listening to Schiff on occasion, but he can become unbearably conceited at times (his radio show includes a lot of “as I said” and “I told you so” statements) — Dennis Gartman, another well-known talking head pundit, recently slammed him a bit in a Canadian newspaper chat session too (“I put no credence whatsoever in what Peter Schiff has to say, for he has been singing the same bleak song for years and was wrong for a decade or more. Plus, Peter is terribly hot headed and is prone to loud, ungentlemanly screaming at debates.”)

Of course, Gartman can drive one crazy with his grammatical idiosyncrasies and his “more genteel than thou” bearing, too, and he’s a short term trader and a newsletter writer, not a broker, so he comes from a very different place than Schiff.

But boy did I get off track, eh? We were going to figure out what Schiff’s new picks are … let’s see what he says.

Schiff opens his newsletter with a good summary of how he feels about the US economy — you won’t be surprised to hear that he thinks the “green shoots” are weeds …

“For all the talk about ‘green shoots’ in the financial media these days, one might mistake CNBC for HGTV. However, what many see as the first promising sprouts of economic recovery are, in reality, the artificially generated, short-term gains from the most massive dose of fertilizer (government stimulus) that the country has ever seen. Few talking heads on Wall Street or in Washington understand the damage that such a flood of chemicals will inflict on the long-term health of our economic soil.”

So no big changes there — he continues to think that even if foreign stocks catch a cold from another crash in the US, you should buy foreign dividend paying stocks and “stay the course” (that’s a simplification, but basically accurate).

And he’s got two stocks for us to look at, both are Australia/New Zealand businesses, and Schiff is positive about the macro prospects for both of those economies (higher interest rates above the rate of inflation support their currencies, despite recent fears, and they are fiscally much stronger than the US and UK). Both are resource-based economies that are close to big Asian markets, and the recommendations both play off of that sector.

So what are they? Here’s the tease:

Company #1:

“This Company is a major global gold producer with operations in Papua New Guinea (PNG), West Africa and Australia. The Company operates one of the world’s largest gold mines and processing facilities on Lihir Island in the New Ireland province of PNG. It is also developing an underground mine and processing plant at the historic gold mining center of Ballarat, north-west of Melbourne in Victoria. The company presently has 2.2 billion shares on issue and a market capitalization of approximately A$7.5 billion.”

Other clues? Of course!

They finalized a merger with a “Perth-based gold producer” last Summer that expanded their operations, and they are producing gold … here are some more specifics from the tease:

“Strong production results of around 1 million oz gold annually. In 2008, the Company produced close to 0.9 million ounces of gold, with production in 2009 expected to exceed one million ounces. The main flagship mining operation produces about 0.8 million ounces of gold. The next largest operation produces around 0.15 million ounces. Mount Rawdon and Ballarat should each produce slightly less than 0.1 million ounces, respectively.

“Potential resource growth with low operating cash cost and a strong balance sheet. The flagship project is a high grade and low cost operation partially reaping full benefit from the flotation circuit, with cash costs of US$303/oz last quarter. More importantly, Bonikro and surrounding area offer great potential for resource growth through exploration. Overall, we expect the Company to produce gold around $350/oz with all operations combined this year. In addition, the Company has a strong balance sheet with a cash positi