Euro Pacific Bank Ltd. is the parent company of Euro Pacific Intl., Euro Pacific Advisors Ltd., Global Trading Ltd., and Euro Pacific Funds SCC Ltd. The companies were formed in order to provide superior international banking services and better serve Peter Schiff’s non United States investor base through a platform of unique investment products.
Euro Pacific Bank differentiates itself from other offshore banking alternatives by providing excellent client-focused service and support. Although the bank uses convenient cutting-edge online banking technology, they do not subject clients to a web of interactive phone menu systems and online help forms. Euro Pacific Bank clients can easily reach their personal banker via phone, email and Skype or call the bank staff during normal Saint Vincent banking hours.
About the Bank
Peter Schiff, the firm’s founder and Chairman, is known for his vocal and unpopular bearish views of the U.S. economy, voiced prior to the 2008 financial crisis, many of which were outlined in his 5 bestselling books, including “Crash Proof: How To Profit From The Coming Economic Collapse.” Mr. Schiff leads our experienced and diverse team of managers, researchers, consultants and support staff – a team that is literally scanning the globe for investment opportunities – by endeavoring to deliver the highest possible value for our clients.
Our Investment Philosophy
At Euro Pacific Bank, our Bankers are ready and able to provide you with recommendations based on Peter Schiff’s economic analysis and our team’s deep insight into emerging markets and non-U.S. dollar denominated assets. The following topics outline the bank’s investment position on a number of key economic subjects.
In 2008, the economic crash that Peter Schiff had been predicting for much of the past decade, and that was described in detail in his 2007 book Crash Proof, finally began in earnest. The fallout in the financial markets has thus far been enormous.
Stock markets around the world fell nearly 50% from their 2007 highs. Credit markets nearly froze. The U.S. banking system was on the verge on collapse, saved only by massive and on-going federal bailouts. Losses on mortgaged-backed securities and other debt products tied to U.S. consumers have blown gaping holes in the balance sheets of the largest banks worldwide and have even bankrupted entire countries. Unfortunately, Peter believes the pain is far from over. In fact, it is likely just beginning.
We are likely experiencing the rumblings of a global economic realignment that reflects the realities of wealth creation and dissipation that have evolved over the past three decades. Contrary to conventional “wisdom” wealth is not created by consumption, but by its opposite. Savings, made possible only by under-consumption, acts as the seed corn for investment and production, and is the root of economic growth and wealth creation. In contrast, wealth is destroyed by government and consumer borrowing and by spending on goods and services that produce no long-term benefit.
Living standards are supposed to rise where wealth is produced and to dissipate where it is destroyed. Like gravity, these forces can only be overcome through tremendous effort. The accumulation of trillions of dollars in U.S. budget and trade deficits, and a corresponding swell in foreign exchange reserves held by Asian central banks, have been the mechanisms which have, thus far, maintained the status quo. But, given the dangerous imbalances these policies create, the global commitment cannot endure perpetually.
Peter has always maintained that crisis had its roots in the easy monetary policies pursued by the Alan Greenspan-led Federal Reserve, and the strategic decisions of the Asian governments to support the value of the dollar through unlimited lending to the United States. The result was a massive misallocation of resources that inflated bubbles in the U.S. housing and equities markets.
We are convinced that an economic realignment that reflects underlying economic realities will gain momentum in the coming years. We feel strongly that investors who recognize this trend have the ability to position their portfolios in order to maintain their wealth.
Without question, 2008 saw one of the most unexpected rallies in the history of the U.S. dollar. After steadily drifting downward for much of the last decade, and losing more than a third of its value in the process, the U.S. dollar reacted to the sudden credit crisis in the first quarter of 2008 by staging a stunning rally in which all of its losses of the prior five years were erased.
However, we feel that this rally, which largely fizzled out in the first quarter of 2009, is solely based on fear, not fundamentals. Investors around the world reacted to the financial crisis, sparked by the bursting of the housing and credit bubbles in the U.S., by fearfully scrambling for “safe haven” investments. To a large extent, they chose U.S. Treasuries. The resulting fund flows pushed up the value of the dollar by more than 25%. We feel that this trend will reverse in the near-to-medium term, when foreign investors come to understand the relative safety of their home markets and the danger of hyper-inflation in the U.S.
In a world in which fiat money-substitutes are continually debased by governments around the world, we believe that gold remains the most honest and accountable form of money. When financial uncertainty abounds, it becomes increasingly important to hold assets with value that cannot be diluted by government monetary policy. Gold has been chosen as a store of value and unit of exchange since the dawn of civilization due to its inherent properties: rarity, durability, fungibility, divisibility, and portability.
Ultimately, as the current crisis runs its course, the value of a gold-based monetary system may once again gain favor with productive nations looking to safeguard the value of their savings. In such a scenario, gold would spike in value as central banks became net-acquirers of gold, rather than net-sellers.
Gold appreciated steadily for most of the current decade, ultimately breaking $1,000 per ounce in March 2008. Although prices pulled back by as much as 20% later in the year, gold qualified as one of the best asset classes for 2008. We believe that gold is still in the early stages of a secular bull market. Conservative investors are advised to have a portion of their savings allocated to physical bullion, while speculative investors are advised to own shares of carefully selected mining companies, both domestic and international.
Commodities such as metals, grains, and crude oil were driven up relentlessly for much of the past decade due to continued dollar debasement by the Fed and increasing demand for raw materials by the industrializing Asian economies. However, the financial crisis of 2008 fell most heavily on commodity prices, which saw violent price corrections. In many cases, price declines reflected a belief by investors that the global economy would enter a protracted depression which would eliminate demand for commodities. We disagree.
We do not believe that industrialization in Asia will be significantly impaired by the stagnation of the American consumer economy. As a result, we believe that demand for industrial metals, agricultural commodities, and energy staples will push prices back up. For investors, this upward movement will be magnified by foreign exchange benefits as the U.S. dollar loses relative strength against Asian currencies.
Like gold, we believe that commodities in general are still in a major long-term bull market. Therefore, conservative and aggressive investors should seek out respectively appropriate ways to gain exposure to this sector.
As was the case for U.S. equities, global stock markets experienced significant sell-offs in 2008, in some cases outpacing losses seen by the S&P 500. However, despite the precipitous decline in share value, foreign firms show fewer signs of fundamental distress than similarly situated American companies. Although foreign firms that relied heavily upon the debt markets to fund continued operations suffered grievously as credit markets froze, the majority of companies continued to show good earnings.
Combined with the recent declines in local currencies relative to the dollar, we believe that there now exists an exceptional opportunity to invest in carefully selected foreign equities, particularly those that have minimal exposure to U.S consumers or the American economy. In many cases valuations are low, yields are high, and the prospect of earnings growth is favorable. We also believe that foreign stocks, as an asset class, offer potential protection against declines in the U.S. dollar.
To leverage our investment philosophy the bank offers a number of structured products through our mutual fund and managed account programs. Investors of all sizes can gain access to Peter Schiff’s investment philosophy through these products.