Gyroscopic Investing

I have been studying Austrian Economics for the last few years (Ron Paul's candidacy introduced me to it).  Recently I have become very interested in monetary theory and free-market economics.  I've listened to Peter Schiff, Ron Paul, and recently Harry Browne.

My question is whether or not Austrian economics says anything about market-timing, stock picking, etc.  Obviously many people on the Austrian side believe they can predict economic events.  Schiff, for example, brags about his economics forecasts on the housing bubble, etc.  He absolutely had great forecasts, but he had been forecasting these things for years.  I think even he would say that you can't predict the timing of these things.  Ron Paul was equally prescient.  And it was just revealed recently that Ron Paul has half of his portfolio in gold and silver mining stocks...Schiff has about the same percentage.

So Harry Browne seemed to be an Austrian...yet he would never do the type of speculating that many Austrians indulge in.  Is there an "orthodox" Austrian position on this issue of speculating?  Or a different question:  I understand that Harry Browne did not believe it was possible to predict the markets, but did he believe that it was possible to accurately forecast the economy on any level?

There is a lot more to Austrian economics than you will hear from Peter Schiff or Ron Paul.

I find Peter Schiff to be a bit of a media hog and his thinking half-baked.

Ron Paul is a good thinker, but he is also captive to a certain view of things.  I wish I had it handy, but in the introduction to one of his books from 1981 or so he basically laid out the case for the collapse of the dollar, the return of the gold standard, etc.  None of it ever happened.  In fact, just the opposite happened for the next 20 years.

I would say that there is no reliable forecasting wing of the Austrian school.

I'm with MT on this one.  I find Peter Schiff and Ron Paul to be interesting speakers and writers - certainly they are "more correct" than most other talking heads you'll see on cable news, but that's admittedly not a very high standard.

Where I think they break down is all the "doom and gloom" about how the US is insolvent, we're going into bankruptcy tomorrow, so start hoarding gold and ammo.

I think it's great to have gold in your PP, but let's be reasonable about it.  When the rest of the world has a crisis, money flows into treasuries.  That would not be happening if we were really at risk of total economic collapse.  A debt crisis may come in the US, but I think it's more likely to be 30-40 years out rather than in the next few years.

Storm wrote: A debt crisis may come in the US, but I think it's more likely to be 30-40 years out rather than in the next few years.

I doubt we have more than a couple of years before the crisis. Exponential curves have a way of sneaking up on you.

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Brad243480 wrote: My question is whether or not Austrian economics says anything about market-timing, stock picking, etc.  Obviously many people on the Austrian side believe they can predict economic events...

An interesting article about this very question appeared in early 2009 on the Ludwig von Mises Institute website:  http://mises.org/daily/3267

To paraphrase the article, the coin of "Austrian investing" has two very different sides:  Investment and speculation.  One of the key insights of Austrian economics is the acknowledgment of the ubiquity of uncertainty in human action.  Roughly speaking, there are two ways to deal with that uncertainty--avoid getting hurt by it (conservative approach), and try to profit from it somehow (risky/aggressive approach).

Interestingly, the PP is a strategy of minimizing risk, and the VP is a strategy of trying to profit from risk.  So I see the PP and VP as the investment approaches that correspond to the two sides of the "Austrian investing" coin.  One "Austrian" approach is to invest in the PP to protect it against all the uncertainty we know is lurking out there.  Another "Austrian" approach is to invest in a speculative VP--based on Austrian economic predictions such as the business cycle--to harness the uncertainty when things might happen to move in the right direction.  And, of course, yet another "Austrian" approach is to invest in a combination of the two--perhaps mostly PP and a small amount in VP, as Harry Browne recommended.

Peter Schiff and other Austrian-leaning investment advisors tend to reside on the speculative end of the Austrian investment spectrum.  I'm a fan of the Austrian school, but I recently discovered I'm much more comfortable residing on the investment end of the spectrum--which is why I converted all of my liquid assets entirely to PP last week after locking in very healthy profits from a BIG recent gamble on silver.  I wasn't sleeping well a week ago--now I sleep like a baby.