(Corrects amount of assets under management by Richard Schiff,
adds amount under advisement in 18th paragraph)
By Lou Carlozo
NEW YORK, July 29 Just because some financial
advisers associate themselves with the Tea Party doesn't mean
they can read tea leaves.
Ultimately, they concede they don't know what's going to
happen in Washington any more than wealth managers at Fidelity
FIDIN.UL or Merrill Lynch (BAC.N). But they have a pretty a
strong view of the long-term effects of U.S. fiscal policy
regardless of what happens in Washington's 'high noon'
At the close of trading Friday, financial markets ended in
turmoil and uncertainty as the nation neared a deadline next
Tuesday to borrow more or run out of money. Tea Party
supporters in Congress showed clout by derailing proposals to
raise the borrowing cap until their steep deficit-cutting goals
"This so-called crisis will all be over in a week or two or
three, and when it's over, the stock market will go right back
to where it was," predicted Bob Bennie, a certified financial
planner in Lincoln, Neb., and a leading state Tea Party
organizer in the state. The Dow dropped 4 percent in the week
-- the worst in almost a year.
So what are Bennie and his fellow Tea Party brethren
telling clients to do differently with their money as the
deadline draws near?
That's right: No hunker in the bunker. No massive sell-off.
No Wall Street equivalent of a Hail Mary play.
On the surface it might seem like the same wait-and-see
attitude other wealth managers espouse. But while some non-Tea
Party people talk of converting assets to pure cash at a
moment's notice, for example, you won't hear anything like that
from this set. No sir.
"If someone came to me with cash today, I would invest it
in domestic equities and commodities tomorrow," says Bennie,
who manages about $85 million in assets. "I don't believe this
market is going to take a big tank tomorrow: no way, no how."
He's investing in gasoline, gold and silver.
To say Bennie is no big fan of Democrats and the White
House is putting it mildly. Financial Advisor magazine reported
last month that Bennie sued the Nebraska Department of Banking
and Finance, alleging the department sanctioned him because he
made a public statement calling President Obama a Communist.
Peter Schiff, a Republican candidate last year for U.S.
Senate in Connecticut, goes a step further in his distaste for
U.S. government financial policy.
"I'll avoid anything with U.S. currency," he says.
Schiff, the CEO and chief global strategist of Euro Pacific
Capital in Westport, Conn., has long been bearish on the
dollar, but especially in the current climate. "I tell my
clients to avoid all U.S. dollar-denominated debt, because I
know default is inevitable," he says. "The question is what
form that default will take. We're at default because we can't
borrow anymore, and people will not lend us anymore."
You might think the words "default is inevitable" -
especially in conjunction with the nation leading the free
world - would imply that the fellow speaking them is
"None of this is changing my investment advice," he
stresses. "Put [assets] in Switzerland, buy commodities, buy
gold, buy silver, invest in China. Avoid all dollar-denominated
assets, avoid Treasuries, avoid munis. The only way the U.S.
will avoid default is if we print more money, and if they do
that, everybody loses."
Schiff pounds those words home with the force and bluster
you'd expect from a former Tea Party candidate. Yet to dismiss
him as a crank would be a big mistake; in 2006, he was one of
the few to accurately predict both the financial crisis and the
plummeting of real estate prices.
"I said real estate prices were going to fall, and they
said I was stupid," says Schiff, who has $600 million in assets
under management and $3 billion under advisement. "Now look at
what's happening. Gold is at a record high; the U.S. dollar is
at an all-time low against the Swiss Franc, the Australian
Dollar, the New Zealand dollar. This is just reinforcing my
clients' decision to invest with me. We'd only have to hold
their hands if the leaders did the right thing and started
PATRIOTISM VS THE U.S. DOLLAR
Some might see a decided paradox in Schiff backing foreign
investment and dumping U.S. dollars when so many in the Tea
Party pride themselves on their patriotism. Here's how he
rationalizes it: "I'd love to invest the money in America. If
our leaders did the right thing I'd tell investors, 'We
prepared for Armageddon, but our leaders made substantial cuts
in entitlements. They cut the debt.' Then I wouldn't be holding
anyone's hands. We'd be clapping. And I'd bring the money and
investments back home."
Even within Tea Party set - known for being a vocal and
unified lot - you'll find honest differences of opinion. Adam
Puff, principal of Puff Wealth Management in Haddonfield, N.J.,
agrees with the party line that federal debt and regulation are
out of control. "But I just can't buy into the pessimism," Puff
says. "It's true that if you look around the world, there are a
lot of interesting places and instruments to put your money
into, a lot of emerging markets. But if you look at America, we
have a lot of great minds here; we create a lot of great things
Patriotism only goes so far, though, and Puff is still
advising clients to steer clear of the U.S. dollar. "They say
cash is king, but you have to be able to protect yourself," he
says. "The longer the dollar is devalued, the more you have to
be somewhere else to protect yourself."
Another financial adviser who describes himself as a "Tea
Party sympathizer" thinks the anti-cash bias is overblown,
especially when coupled with a bullish outlook on precious
"I realize there are a lot of gold bugs really pumping gold
right now," says Thomas "Kee" Haskins, president of Americap
Wealth Management LLC in Lewisville, N.C. "But I think gold is
high, and a lot of the worry is pumping prices up. It's part of
that bubble mentality you hear so much about. I expect once
they resolve the debt crisis, you'll see a large correction in
gold prices. You might want to take some of those profits right
now. But I would not put new money in it."
Like many in the Tea Party (though he's not a member),
Haskins believes in a "strong America," one that will empower
business, put people back to work and revitalize the economy
from the grass-roots level rather than through government
Yet in at least one aspect of his financial philosophy,
Haskins doesn't sound like your typical wealth manager, let
alone the typical Tea Party member. In fact, his views harken
to a time when financial success wasn't just for an entitled
"Someone needs to start thinking long-term instead of
short-term," he says. "When everybody prospers, America
prospers. But when only a few prosper, America suffers."
Lou Carlozo most recently served as the managing editor at
WalletPop.com, AOL's personal finance website. He also wrote
and created "The Recession Diaries" column at the Chicago
Tribune, where he served as an editor and staff writer for 16
years. The opinions expressed are his own.
(Editing by Beth Gladstone and Richard Satran )