Commodities in, cash out for Tea Party wealth advisers as debt deadline looms

July 29, 2011

Just because some financial advisers associate themselves with the Tea Party doesn’t mean they can read tea leaves. Ultimately, they don’t know what’s going to happen in Washington any more than wealth managers at Fidelity or Merrill Lynch, but they have a pretty good idea of the long-term effects regardless of what happens.

“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,” says Bob Bennie, a certified financial planner  in Lincoln, Nebraska, and a leading state Tea Party organizer

So what are Bennie and his fellow Tea Party brethren telling clients to do differently as the August 2 deadline draws near?

Nothing.

That’s right: No hunker in the bunker. No massive selloff. 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 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 cash: “I’ll avoid anything with U.S. currency,” he says.

Schiff, the CEO and chief global strategist of Euro Pacific Capital in Westport, Connecticut, 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 rejiggering strategy. Not Schiff: “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 [financial experts] 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 slashing debt.”

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 teller 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, New Jersey, 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 here.”

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.”

Meanwhile, one 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 metals. “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 spending.

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 few.

“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.”

 

2 comments

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I wonder which advisers are better over time. Is it Democrats, Republicans, or Libertarians? That would make for interesting article as well.

Posted by M.C.McBride | Report as abusive

The US is not too big to fail. The tea party is mostly naive. Changing anything in politics is like changing the direction of a supertanker. It takes quite a distance and a deft hand. It does not happen by bullying and intransigence. They are reinforcing the dire polarisation of America on a daily basis.

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[…] Commodities in, cash out for Tea Party wealth advisers as debt deadline looms – Reuters.com Just because some financial advisers associate themselves with the Tea Party doesn’t mean they can read tea leaves. Ultimately, they don’t know what’s going to happen in Washington any more than wealth managers at Fidelity orMerrill Lynch, but they have a pretty good idea of the long-term effects regardless of what happens. “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,” says Bob Bennie, a certified financial planner in Lincoln, Nebraska, and a leading state Tea Party organizer So what are Bennie and his fellow Tea Party brethren telling clients to do differently as the August 2 deadline draws near? Nothing. […]

Posted by Monday 01.08.11 | The Inner Circle Group | Report as abusive

[…] Commodities in, cash out for Tea Party wealth advisers as debt deadline looms – Reuters.com Just because some financial advisers associate themselves with the Tea Party doesn’t mean they can read tea leaves. Ultimately, they don’t know what’s going to happen in Washington any more than wealth managers at Fidelity orMerrill Lynch, but they have a pretty good idea of the long-term effects regardless of what happens. “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,” says Bob Bennie, a certified financial planner in Lincoln, Nebraska, and a leading state Tea Party organizer So what are Bennie and his fellow Tea Party brethren telling clients to do differently as the August 2 deadline draws near? Nothing. […]

Posted by Tuesday 02.08.11 | The Inner Circle Group | Report as abusive