Many investors are hopeful that Donald Trump will be a pro-growth president and keep U.S. markets moving higher, but don't tell that to Peter Schiff. He's convinced the post-election rally will fade, the U.S. dollar will crash and American stock markets will underperform the rest of the world. "Things are not going to end well," he says.
Schiff's fears about Trump add to his long-standing worries about U.S. weaknesses. He's been called a "perma-bear," and he was an adviser to iconoclastic former Republican presidential candidate Ron Paul. Schiff has been investing defensively for years, including buying gold and focusing on emerging markets instead of U.S. stocks. "I've been following this game plan for a while," he says.
Within those markets, Schiff is a disciplined value investor. He searches for unloved companies that are attractively priced and, in many cases, offer good dividend yields. He tends to do well in years when value is in vogue, like 2016. His firm manages more than $800 million (U.S.), and its EuroPac International Value Fund posted an 11.7% return last year.
Schiff is still avoiding U.S. stocks. Under Trump, he says, budget deficits will balloon, and inflation will rise. The Fed will respond with quantitative easing, and won't be able to raise interest rates. All of that is negative for the U.S. dollar, but positive for gold and emerging market stocks. "The American economy has been living beyond its means for years," he says. "Things will have to change."
Cia Energetica de Minas Gerais (NYSE: CIG)
The Brazilian electric utility and natural gas distributor will do well as the country's economy improves. Brazil's stock market was hot in 2016, but Schiff says it was so beaten down that it has more upside. As for CEMIG, at recent share prices, it also offered a fat 6.1% dividend yield.
Goldcorp Inc. (TSX: G)
Schiff owns many gold producers, and he thinks this Vancouver-based company, which has fallen 55% over the past five years, is ripe for a turnaround. Goldcorp has suffered through CEO changes, lower production and dividend cuts. But Schiff likes out-of-favour operations, and "it's been looking better," he says.
Samsung Electronics Co. Ltd. (KRX: 005930)
Yes, the South Korean manufacturer recalled the Galaxy Note 7 smartphone last year because of fire risk, and the son of its founder has been mired in a corruption scandal. But Schiff says Samsung is eating into Apple's market share—and that's all that matters. "It's gaining and it's a good name," he says.