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Moral Hazard and Unintended Consequences – Ep. 482

10 juli 2019 · 1 uur 5 min
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More Market News after Powell's Congressional Testimony

The markets have been pretty quiet over the last couple of days, so I really don't feel like spending a lot of time on today's podcast talking about the markets. I probably will have more to say, maybe on Thursday when I'll probably do another podcast because Jerome Powell is making his way up to Capitol Hill tomorrow and Thursday to testify before the House and the Senate. My guess is that some of his comments may move the markets; the currency markets, the gold market, maybe even the stock market. I'll probably have more market-oriented commentary to give you on Thursday.

Laffer Curve for Dummies

But there are a few things on my mind, which is why I wanted to take some time today and record this podcast. One has to do with Art Laffer. Of course, Art Laffer gained fame back in the Reagan era. He came up with the "Laffer Curve" that he supposedly sketched out on a napkin one day and showed it to Ronald Reagan. The Laffer Curve basically says that when you reduce taxes, or lower marginal tax rates, you actually end up collecting higher tax revenues because you incentivize people to work more, they earn more, and then they pay more taxes even if they are paying taxes at a lower rate. Obviously, the Laffer Curve bends at some point, because if taxes are zero, you collect no revenue and if taxes are 100%, you also collect no revenue. Because if you're going to tax somebody 100% of their income, they're not going to work at all. Nobody is a complete idiot - they're not going to work for nothing. So at a 100% tax rate and a 0% percent tax rate the government collects exactly zero taxes. So somewhere along that curve is an optimal point where you would have the tax rate that generates the most amount of revenue.

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Holiday Markets Overreact to Jobs Report – Ep. 481

6 juli 2019 · 48 min
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Markets Up on Low Volume

A lot of people on Wall Street probably took today off; after all yesterday was the Fourth of July, the market was closed. On Wednesday they closed the markets early in preparation for the July Fourth holiday. So when you have a Friday where the markets are open, but you have a Thursday when they're closed… most people probably left for the Hamptons on Wednesday afternoon, and so were not in their offices or down at the stock market when we released the nonfarm payroll numbers today.

ADP Disappointing Number Teed Up Low Expectations

The June number, highly anticipated, as always, especially with a rate cut on deck now by the Fed. Most of the people who were probably handicapping the jobs number thought that it would probably come out weaker than expected. After all, most of the data we've been getting has been weaker than expected. In particular, the jobs numbers, including the ADP report that came out on Wednesday, on that holiday-shortened trading session. We got a disappointing number. The consensus for private-sector employment for ADP was 140,000, and we ended up with 102,000. So we had a significant miss in the ADP numbers.

Back-to-Back Declines in Small Business Jobs

But also, look at the employment components of some of the other numbers that also came out weak on Wednesday, like the ISM non-manufacturing index. It printed 55.1 versus an estimate of 55.8. The employment component of that index was notably weak, especially for small businesses which had major reduction in jobs, no only in this month but the previous month. In fact, I read a tweet by Dave Rosenberg who pointed out that he hasn't seen back-to-back monthly declines like this since February/March of 2008. That was the year of the Financial Crisis. He basically said that small business job growth is the weakest it's been in over 9 years.

Bigger Decli…
Monday’s Gold Drop Flushed out Weak Longs – Ep. 480

3 juli 2019 · 46 min
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Recorded July 2, 2019 Lees meer

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Markets Worried About Slowing Domestic Economy

If you just looked at the U.S. stock market averages, you would conclude that not much happened today, but you would be wrong. Even though the S&P and the Dow and the NASDAQ were only up about a quarter of a percent, or maybe .3% - pretty small days. Although, as has been typical recently the Russell 2000 was down .6% and the Dow Transports down .8%. So the market, contrary to all the hoopla that you hear about how great the U.S. economy is, the markets are more worried about the slowing domestic economy than they are the global economy.

Strongest Economy in U.S. History?

In fact, the Cheerleader-In-Chief, for how strong the U.S. economy is, of course, is Donald Trump. He is constantly up there tweeting about how strong the U.S economy is. In fact, today, he proclaims that we currently have the strongest U.S. economy in history. Now, I remember, when he used to tweet about h0w strong the economy was, that we had the strongest economy in history, he would say, "Oh it's probably the strongest economy in history…" I mean he would qualify it a little bit. But now, no more qualifiers. He is emphatic. Without a doubt, this is the strongest economy is U.S. history.

Fake News

Of course, I don't like hypocrites. One of the things that Trump does, is he calls out the media for spreading fake news. The problem, is, he spreads fake news, too. When he is talking about how we have the strongest economy ever, that's fake news! So you can't live in a glass house and then throw stones and that's what the President does.

More Weak Numbers

In fact, if you look at the economic data that came out this week, the data was weak! The ISM manufacturing number and the PMI number were weak . In fact they weren't as weak as they were expecting, but they were expecting weak numbers and we got weak numbers. Ju…
Political Reality Could Sink Stocks in 2nd Half – Ep. 479

29 juni 2019 · 55 min
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Recorded June 28, 2019

Dow Jones Had Best June Since 1938

U.S. stocks finished a down week on an up note, but the gains were not that large today. But of course, they were very big for the month of June. In fact, the Dow Jones just had its best June since 1938. That was during the Great Depression. S&P, not as big a record; you only have to go back to 1955 to find a June where the S&P did better than June 2019. So these are big moves up. Percentage-wise, though, I think it's about 7%, approximately, maybe a little bit less.

Stock Market Actually Lost Value In Terms of Gold

Now the price of gold was up 8% during the month of June. In other words, while the price of stocks went up in terms of paper money - dollars - in terms of real money - gold - stocks actually lost value during the month. Now, the first half of the year also comes to an end today, as does the second quarter, and this is the best first half of the year in 22 years. the S&P was up about 17.5% or so, the Dow about 14%. I think I'm counting dividends - I'm just talking about the appreciation, so the total return would be a little better when you throw in the meager dividends that you can collect on U.S. stocks. NASDAQ was up about 20% - not much in the way of dividends there. Russell 2000 was up about 9%. This is on the first half of the year.

Stocks Recovering From Worst December Since Great Depression

I'm sure you're going to read a lot of tweets from Donald Trump about how great the stock market is in 2019; how great the month of June is and why we should thank him for this spectacular performance in the stock market. But the only reason that the market has done so well this year is because it got destroyed in the 4th quarter of last year. Remember, we had the worst December since the Great Depression, as well.

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The Fed Has Served Government Well, Not America – Ep. 478

26 juni 2019 · 56 min
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Gold: Six-Year High Overnight

Overnight the price of gold rose to a six-year high. We almost got to $1440. I think the high I saw was maybe $1438 - 39… we were up about $19 at the high point. Then it became a very volatile session overnight into the wee hours of the morning. But I think by the time we got into the New York time zone, gold was still up about $10-$12-$13 dollars on the day and it was up about that amount when the U.S. stock market opened for trading.

Before Today, Gold Stocks Up 20%

Gold stocks initially had a small rally, but nothing big. Then they spent most of the day on the downside. Obviously the gold traders are still very cautious. As I have been saying, this gold breakout, even though we did see pretty big moves in gold stocks, I think the GDX, not counting today's losses, (the GDX was down about 2% today) but not counting today, we were up 20% in the month of June. So, still, a very big rise. But really not nearly as big a rise as it should be, considering, I think, the significance of this gold breakout. Except, of course, if people don't believe it. If they're cautious about it, so they're reluctant to bid up the price of gold stocks.

Investors Still Reluctant on Gold and Silver - Why?

The same thing with silver. In fact, silver never had much of a rally today, and it actually settled down, I think 8 cents on the day, even though gold ended up finishing up $4 - well off the highs. But it didn't close negative. At one point during New York trading, the price of gold was negative on the day, but it managed to bounce back for the close. Silver, I think, ended at 15.33. The gold/silver ratio that I spoke about on the last podcast now, I think is close to 93:1. Again, I think investors are reluctant to buy up silver because they are expecting the price of gold to roll over.

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Gold Breaks out but Investors Remain Cautious – Ep. 477

22 juni 2019 · 49 min
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Recorded June 21, 2019 Lees meer

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S&P Record High: Why?

U.S. stock market averages finished an up week on a down note. In fact, the S&P 500, before closing negative on the day made a new all-time record high. The S&P is the only major index that did make a new record high this week, in fact Donald Trump tweeted about the record high in the S&P twice yesterday. As soon as the market gapped open at a record high, Donald Trump tweeted out a reminder that the S&P opened at a record high, and then when it closed at a record high, he sent out a second tweet to remind everybody that the stock market closed at a record high.

Fed's Lower Rates Behind Stock Market Highs

The idea is that he's taking credit for it. The stock market is doing so well because Donald Trump is President, and if anybody else were President, the market would be collapsing. That's the impression that Donald Trump is trying to convey. But, of course, the reality is the opposite. The reason the market made a new high is because investors are relieved that the Fed is going to cut interest rates. So, it's lower interest rates that is behind the record high in the S&P - not anything Donald Trump has done.

Low Interest Rates Needed to Bail out Economy

Now, Donald Trump is saying, "Hey I've been telling the Fed to cut rates!". So maybe he can claim credit for the fact that the Fed is cutting rates because he beat them up so much, but that's really not what he is trying to claim. He's trying to claim that the rising stock market is indicative of how great the economy is under his presidency. But, it's not because the economy is great that the Fed is cutting rates, it's because it's lousy!

Heading for Recession

The Fed is cutting rates because the economy is headed for recession. So if that's the only reason the stock market is going up, that the economy is so bad that the Federal Reserve has to abort t…
Fed Readies Markets for July Rate Cut – Ep. 476

20 juni 2019 · 1 uur 8 min
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Fed Tweaking Language to Officially Adopt Easing Bias

Keeping with its tradition of having a tendency to act incrementally, the Federal Reserve Open Market Committee today announced that it was leaving interest rates unchanged - which was the consensus. There was an 80% probability that the Fed would leave interest rates unchanged. The other 20% was that they would cut rates. So there was a zero percent probability that the Fed would increase rates. But before delivering an official rate cut, what the Fed wanted to do was to prepare the markets in advance and take one step in that direction, which was to tweak its language to officially adopt a bias toward easing, which is exactly what the Fed did.

Fed to Sustain "Expansion"

The Fed basically acknowledged that the economic data had been weakening and that they wanted to do what was appropriate, or that they were willing to do what was appropriate to sustain the expansion. Now, they didn't come right out and say that the economy is headed for a recession; even though that is exactly what is happening. They said they wanted to see more data before they moved. But after they failed to cut rates, the probability for a rate cut in July, which is the very next time the Fed meets, rose to 100%. So they took the 20% probability for the cut in June, since we didn't get it, the markets added that to the 80% probability of a cut in July.

Looking Toward Negative Data

Which means the markets are convinced that whatever data the Fed sees between now and the July meeting in going to be bad. It's not going to be good (positive) data. Of course, it IS going to be bad data. The data has been bad. The economy has been weakening. We've been seeing a series of weakening economic data. The economy is not just slowing down, it is headed to a recession. That is something that the Fed will never admit.

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Trump Is Keynes on Steroids – Ep. 475

15 juni 2019 · 1 uur 5 min
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Recorded June 14, 2019 Lees meer

Gold: Up Today

When I recorded my podcast last Friday, I speculated that the price of gold might gap up the following Monday above $1350/oz., but that didn't happen because over the weekend Donald Trump managed to tweet out a face-saving way in which to not impose the tariffs on Mexican products that may have gone into effect on Monday. The markets breathed a sigh of relief. So, instead of gapping up. the price of gold went the opposite direction and gapped down.

Fourteen Month High

This morning, we got the gap. It was on the last day of the week, not the first day of the week, but gold gapped higher on the day. It was actually trading as high as $1356 or $1357 earlier this morning. That was a 52-week high in the price of gold. In fact, it was a 14-month high. We were actually up even before we got any economic data. I think the high of the day might have been before the U.S stock market opened, when we were up about $15 or so.

The Key is Above $1350

What happened was, at 8:30, prior to the opening of the U.S. market, we got some economic data that was a bit stronger than expected. And that stronger than expected data rained on the gold rally parade, sending the price of gold down on the day. It only closed down about a buck or so, but we did not hold above $1350. Now the key level is not really $1350 - it's a little bit higher up, because the price of gold has been above $1350 twice before, I think, in the last six years, not counting today. But it wasn't able to hold. That's the key. We need to see the price of gold get higher. Maybe close above $1375.

Gold the Favorite Trade for the Next 12-24 Months

There's a lot of noise. That's where all the resistance has been coming in - between $1350 and $1375. But nonetheless, I think, as I said in the last podcast, the more times we knock on this resistance door the more likely it is that the door is going to open. In fact, the buyers continue to come in to the price of gold. I was listenin…
Trump Defuses His Own Bomb – Ep. 474

11 juni 2019 · 58 min
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Recorded June 10, 2019 Lees meer

Tariffs Off, Gold Gapped Down

On Friday's podcast, I speculated that potentially we could see a gap up in the price of gold, gapping above the $1350 resistance level that has capped every gold rally for the past 6 years. But gold actually gapped in the other direction. It gapped down about $13 and it was down all day - never filled that gap.

Catalyst for Sell-off

The catalyst for the gold sell-off was Donald Trump calling off the tariffs that were supposed to go into effect today. The five percent across the board tariffs on Mexico. That announcement came out on Friday, pretty much right after I finished recording my podcast, we got the news. So I immediately knew that that forecast probably was not going to come to fruition, or that speculation, potentially. Because I knew the markets would react positively to this news. After all, everybody was rightly worried about the negative impacts that those tariffs would have on the U.S. economy, in particular. They weren't as worried about Mexico, at least when it comes to the gold market, but they were worried about how it would impact the U.S. economy.

One Less Thing for the Fed to Worry About

And of course, one of the reasons (of course there are many) that the Fed is talking about cutting rates is because of all the uncertainty that is being created because of tariffs. If there aren't going to be as many tariffs, if the Mexico tariffs aren't going to actually happen, well then that's one less thing to worry about, and maybe that's one less reason for the Fed to cut rates.

Mexican Tariffs are a Sideshow

Of course, cutting rates is part of the reason that people have been buying gold; the reason we had that big 8-day rally, which came to an end today. What's been powering the gold rally is the talk of Fed rate cuts. Now I don't think today's sell-off is going to be significant. It's just one more time we knocked on that resistance door and it didn't open, but it is ultimately going to open…
Game over for the Fed – Ep. 473

8 juni 2019 · 45 min
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Recorded June 7, 2019 Lees meer

Dow Finished the Week with a 4.7% Gain

The Dow Jones soared 263 points today, although at one point the index was up better than 350 points. But it managed to finish the week with a 4.7% gain. That is the best showing for the Dow Jones Industrials in 6 months and in fact we snapped a six-week losing streak this week. All of the major averages had positive weeks. The NASDAQ - the best gainer on the day; up 1.7% - not quite as strong on the week because it took a shellacking on Monday with the FANG stocks leading the way down - but up about 3.7% on the week. Similar gains for the Russell 2000, the Dow Transports, the S&P 500 not quite as strong as the Dow - I think up about 4.2% on the week.

What was the Catalyst?

But why? What was the catalyst for this big move up in the U.S. stock market? Was it better than expected earnings? Not really. Some companies beat estimates. Take a look at some of these recent IPO's like Zoom Video. Zoom Video was up 18% today because it earned 3 cents a share instead of the one cent that Wall Street was expecting. Now, 3 cents per share is not a lot of earnings when you're a $94 stock, but that's where the stock is.

Beyond Meat to Infinity and Beyond

Even more ridiculous is Beyond Meat, which is beyond sanity as it's going to infinity and beyond. Now, Beyond Meat was up almost 40% today, $138.65. The high was $149.46. This stock is already more than tripled its IPO price - or quadrupled, I can't really tell. Now they're still not making money at Beyond Meat, so they still haven't moved beyond losses. The company lost $6.6 million on the quarter; that's 95 cents per share. But it is an improvement, because a year ago, in the same period, they lost 98 cents a share. If you adjust it, if you back out a lot of other stuff, like stock-based compensation and things that nobody likes to count, then they only lost 14 cents per share, which was better than the 15 cents a share loss that Wall Street was expecting. So cl…
ZIRP and QE Are Now Conventional Monetary Policy – Ep. 472

6 juni 2019 · 55 min
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Recorded June 5, 2019 Lees meer

Volatility Led by NASDAQ

There's been a lot of volatility in the stock market since I recorded my last podcast on Friday. In fact, on Monday, the tech stocks in particular got beaten up. The NASDAQ dropped by better than 150 points, led lower by the so-called FANG stocks (Facebook, Amazon, Netflix, Google). Google and Facebook, the biggest drop - I think it was something like 6-8%. Part of that had to do with the Justice Department investigating Google.

Enlisting the Power of Government in the Marketplace

Of course, I don't think that we should be involved at all in anti-trust. Almost all of the companies that have been broken up or that had been put through the ringer by the U.S. government achieved whatever type of market dominance they had based on just being good competitors, delivering the best quality at the lowest price. And government just came in and really what they were doing was advocating for competitors that were having a problem competing. It wasn't because the consumer was getting ripped off; in general the consumer was being rewarded with low prices and high quality. But companies that couldn't compete, since they couldn't win in the marketplace, enlisted the power of government to work for them. So government, really is not about preventing monopolies - they create monopolies. The government comes into a market and legally gives a company a monopoly and uses the power of government to make sure that nobody competes. This is all a bunch of nonsense that we need government to "keep the markets free".

Moving Away from Risk

But, in general, if you look at what was happening to the markets on Monday, there was a huge movement from growth stocks, momentum stocks, speculative stocks, riskier stocks, to defensive stocks - value oriented stocks. The Dow Jones was actually positive on the day - it wasn't up a lot, but it was up, even though you had a 150 point drop in the NASDAQ. I think that is an important key, because this is …
Ep. 471: Mexico Won’t Pay for the Wall or the Tariffs

1 juni 2019 · 58 min
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Sell in May and Go Away Lees meer

U.S. stocks closed out the week and the month of May with heavy losses; the DJIA down 354.84 points. Pretty much going out near the low of the day. That's a drop of 1.4%. NASDAQ also getting killed - 114.57 down - that was a 1.5% decline on the day. The Russell 2000 continues to melt down. That index falling 20 points - down 1.35% on the day. But the biggest losses continue to be in the Dow Jones Transports. That index was down almost 2% - 1.9% - 188.4 points. This is the worst May for U.S stocks since 2010. The Dow is down about 7% just in the month of May. Remember, "Sell in May and go away"? Well it hasn't worked in a while, but this was a great time to sell May first!

Russell 2000 and Dow Transports Weakest Indexes

Again, I told everybody that I thought the bear market rally was over based on the Fed not being as dovish as the markets expected, and it's been down hill from there. If you look at the Russell 2000 and the Transports, these two indexes did not make new highs. Remember the Dow and the S&P, the NASDAQ made new highs. Now, they're all down considerably - the Dow is 8% off those highs now. But the Russell 2000 and the Dow Transports did not make new highs, and now they are the weakest index and now the Russell 2000 is down just under 16% from its peak, and the Transports - over 16%. So both of those indexes are about 4% points away from being officially back in bear market territory, which means 20% from the highs. We could easily be there next week, on these stocks.

Debacle du Jour: Gap

Now the other indexes have further to go, I mean the NASDAQ is only down about 9% from its peak. So 1% away from what Wall Street would officially call a "correction". The retailers continue to also be hammered. The Debacle du Jour was Gap, which gapped down by about 15% on the day on weaker than expected sales. The stock managed to rally most of the day, so it only closed down a little over 9%. But still, it closed better than 47% below it…
Bond Buyers Correct About Recession But Bet Won’t Pay Off – Ep. 470

30 mei 2019 · 51 min
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Recorded May 29, 2019 Lees meer

The End of the Bear Market Rally

Back on May 1, when I did my podcast, I officially called for the end of the bear market rally that so many people had confused for a new bull market, and the impetus for that call was the Fed coming out and not living up to Wall Street's expectations for just how dovish the Fed was. Remember, the market was starting to factor in rate cuts, not just an end to the tightening cycle, but the beginning of the next easing cycle. And Jerome Powell basically threw cold water on that by talking about how low inflation was transitory, and how he expected it to go back up, and all of a sudden the markets were starting to think that the Fed wasn't going to cut rates and the market went down a bit.

The Fed Giveth and the Fed Taketh Away

I thought that given that the rally was built based on the Fed, that what the Fed giveth by being more dovish than the markets expected the Fed had finally taken away by being more hawkish. Even though I didn't believe that the Fed was as hawkish as the markets believed, I believe the Fed is far more dovish than the markets believe. But once Powell dashed those hopes, that was enough, I thought, to take the wind out of the sail of the rally.

Throwing Down the Gauntlet on Trade

And then, of course, Donald Trump, himself, pulled the rug out from under the market when, the following weekend, he basically threw down the gauntlet on the trade war; tweeted out that he was going to be imposing 25% tariffs across the board on Americans who want to buy any Chinese products. And then the markets really started to fall. Although, I said at the time, that if the markets really perceived how great the threat was, they would have been down quite a bit more. But we now have two back-to-back better than 200-point declines in the Dow.

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Will Tesla Crash the Corporate Bond Market? – Ep. 469

23 mei 2019 · 58 min
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Recorded May 22, 2019 Lees meer

Low Inflation is Transitory

Today we got the release of the most recent minutes of the Federal Open Market Committee, and I guess it was a bit of a mixed bag for people who were looking for whether the Fed was going to be more hawkish or more dovish with respect to its next move on interest rates. One thing that was revealed in the minutes that the governors still maintain, they are still saying that they feel that this "low inflation" that we've been experiencing is transitory. What that means is that it's temporary and the low inflation is going to go back up toward their 2% target. This is supposedly a hawkish statement, because if the Fed were worried that low inflation was going to persist, then they would do something about it to save us from the horrors of not having the cost of living rise at a fast enough clip.

When It Comes to Inflation Fighting the Fed Is All Bark and No Bite

But, as far as I'm concerned, none of this even matters, because a) they are right, inflation is transitory, and b) it's not even as low as they think because the CPI is not accurate. So inflation is already higher than what the official numbers reveal. But even if it is transitory, which it is, and even if the numbers go north of 2%, which they will, the Fed is going to do nothing. People still don't get it, that when it comes to inflation fighting the Fed is all bark and no bite.

"For Some Time" Means Forever

But then if you look at what the Fed said in the same minutes with regard to their "patience" with respect to the next rate hike, remember, the Fed went from pretty much auto pilot - they were raising rates, they were tightening - to being "patient", and being "appropriate", and now, if you read what they said, they said that it is going to be appropriate to remain patient "for some time". Now what does that mean - "for some time"? Basically, it means forever. What the Fed is basically saying by saying that it is appropriate to be patient for some …
Ep. 468: Consumer Confidence Begins with a Con

18 mei 2019 · 58 min
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Don't miss the movie, "The Housing Bubble" premiering June 26, 2019 Lees meer

Back in Puerto Rico

I am finally back in Puerto Rico, after having spent 8 long days in Las Vegas for both the SALT conference and The Las Vegas Money Show. I really do enjoy coming back to Puerto Rico, I miss it quite a bit while I'm away. A lot of people who are thinking about making the move to Puerto Rico to take advantage of the tax benefits that exist here… One of the reasons that people are reluctant to come down here is that they don't want to uproot their family and move to a place where they really don't know anybody, they leave their friends, they leave their family members… I'll tell you, for me, personally, probably the best thing about being here, other than the tax breaks and the beautiful weather are the people that you meet when you come down here. It is an incredible group of people that have moved here. I think we're building a great community of quasi-ex-pats here in Puerto Rico. So, if you're worried about not having enough friends and not having enough to do, that's the least of your worries. So I certainly would recommend that more people would consider making the move to Puerto Rico.

Visit Me at the Freedom Fest in Las Vegas July 17-20

But I am also looking forward to going back up to Connecticut, I'm going to be spending most of the summer there. We'll be leaving the weekend of Memorial Day. By the way, if you didn't have an opportunity to come to any of the events in Vegas, I will be back in Vegas again in mid-July for the Freedom Fest.

Appearing at the Premiere of "The Housing Bubble"

I will also be in New York City on June 26 to attend the premier of the movie, "The Housing Bubble" on June 26. You can buy tickets at the website letusdisagree.com. The movie is a documentary about the 2008 housing bubble, but it features a lot of people who were predicting or warning about the bubble before it popped, and warning about the financial crisis. Of course, I am one of tho…
Of Course You Know, This Means War – Ep. 467

14 mei 2019 · 56 min
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VISIT PETER AT THE LAS VEGAS MONEY SHOW Lees meer

May 13 – 15, 2019

https://conferences.moneyshow.com/…/4532d84bf…/peter-schiff/

As Noted on My Last Podcast…

As I suspected on Friday's podcast, the 400-point reversal that saw the Dow move from down 300 points + to up 100 points on the close was in fact, reversed today, and the Dow Jones actually closed below the Friday low, which is a huge negative, technically for the index. The Dow was down 617 points; that's about 2.4 %. But the real carnage was in the NASDAQ. That was down 3.4%. The Russell 2000 also down better than 3% - 3.2%, showing that domestically focused stocks are actually getting hit harder than the multi-nationals.

Lyft and Uber Still Sinking

More trouble again for the recent IPO's, in particular, the ride-hailing companies Lyft - down again, another 5.8% off the lows of the day - the lowest $47.17, closed at $48.15. The Uber disaster continues. Uber was down almost 11% today. At one point, it was down 12% - the low was $36.08. We closed at 37.10. Remember we came public Friday. This is only the second trading day. Uber came public at $45, and now it is at $37.10, and as I said again on last week's podcast, these types of stocks are going to get particularly hit hard if the market carnage continues, which I think it will.

China: No Deal

I think the bear market rally is over - I've been saying that, "Long live the bear market". The Bear market rally is dead. We are going a lot lower. The catalyst today was also something that I was pointing out on my podcast last week, and that was the fact that we are not going to get a deal with China. I've been saying for a long time, that even if we got a deal, it would be, "buy the rumor, sell the fact". But I also said that it was becoming obvious that Trump had so over-promised the "great deal" that it was almost impossible to have a deal without disappointing the markets. So, I think Trump made a calculated decision that no deal is better than a deal that disappo…
The Fed Created an Uber Problem – Ep. 466

11 mei 2019 · 49 min
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Recorded May 10, 2018

Why Escalate Trade War If Negotiations Are Going so Great?

The U.S. stock markets finished off the worst week of the year with a gain despite the fact that, as expected, the trade talks between the United States and China broke down today, and no deal. The new tariffs went into effect at 12:01am this morning. Despite the fact that Trump is now retaliating by escalating the trade war, he still claims that the discussions are going well, that they are making a lot of progress. None of that makes any sense. If things are going well, and you're making progress, you don't escalate the war. That makes no sense. All that is going to do is piss off the Chinese. So, if everything is going so well, you would not want to do that.

Maybe Trump Would Rather Have the Tariffs

This shows that things are breaking down, that there is some desperation and Trump feels he has to turn up the pressure in order to try to force the Chinese into a deal. Although, I am not even sure Trump believes a deal is actually better than the tariffs. First of all, I don't believe that Trump is going to be able to deliver the type of substantive, game-changing great deal that he has been promising. So, from that perspective, if Trump actually believes that tariffs are good for the U.S. economy because it means we're going to get some kind of windfall, that the Chinese are going to be sending us all this money, well then maybe he prefers the tariffs to a deal that does not live up to the hype.

Tariffs Are Simply Another Tax on the American People

But, of course, Trump is wrong if that's what he believes. The tariffs simply represent taxes on the American consumer. They are just one type of tax. You can have a sales tax, you can have an income tax, you can have a tariff. All the taxes are paid by American peop…
Did Trump Tank Stocks to Force Rate Cut? – Ep. 465

8 mei 2019 · 24 min
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Market Volatility

I just arrived in Las Vegas, where I will be spending the next 8 days - I actually have 2 conferences heres; I have the SALT Conference (SkyBridge Alternative Asset Conference) that really kicks off tomorrow, though there is a welcome reception tonight, and then I do the Las Vegas Money Show, which kicks off on Monday. So I'm here for quite some time. I haven't even unpacked my bags, though. I wanted to record a short podcast to comment mainly on the market volatility.

Buyers Bought Dip on Monday

The stock market was way down on Monday morning. Of course, the selloff started in the futures market on Sunday night, where the Dow futures was down over 500 points at one time. But by the time we opened, the Dow was only off about 450 and the dip buyers came in, and they bought the market all day, and we closed near the highs. It couldn't close positive - I think the Dow was only off about 70 points. So the buyers came in as they are trained to do. They bought the dip.

Trump's Tariff Tweets

What caused the initial selloff was a pair of tweets; the two tweets were related. A lot of times, when Donald Trump sends out a tweet, he has a lot of stuff in there. or he will send out 2 tweets to make the same message. And, what happened is he basically said that he was going to impose more tariffs on China. He tweeted that, by this Friday, he is going to "up" the 10% tariffs to 25%. So Americans who are now being taxed 10% for buying some Chinese goods, if they buy those Chinese goods starting on Friday, they will have to pay a 25% tariff on those goods.

New Additional 25% Tariffs

He also tweeted that he was going to apply the 25% tariff to goods that right now aren't paying any tariffs. So there are still a lot of Chinese goods that Americans could buy without being subject to tariffs, but now Trump is saying that now that is going to go awa…
Job Headlines Still Mask the Real Story – Ep. 464

4 mei 2019 · 1 uur
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Recorded May 3, 2019 Lees meer

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Jobs Surge in April, Unemployment Rate Falls

Today is Jobs Friday; the first Friday of the month, that we get the nonfarm payroll number. I don't know if the markets anticipated more or Donald Trump, because of course he's ready to send out a tweet when we get a better than expected number. That's what happened today; we got another number that was better than expected. Certainly the headline number - they were looking for an increase of 180,00 jobs, which would have been a bit of a reduction over last month's 196,000 jobs - which was revised down slightly to 189,000. We ended up getting 263,000 jobs, so another number with a 2-handle - a much bigger number than had been anticipated, and the unemployment number, also surprisingly dropped. Two tenths, from 3.8% to 3.6%. Hispanic unemployment actually hit an all-time record low. I expected Donald Trump to tweet about that, because obviously he's being accused of being a racist. Clearly, if he can show that, "Well, look, Hispanic unemployment is at an all-time record low, how are my policies racist, if we have a record low in unemployment among Hispanics?" He did tweet about the jobs numbers and the low unemployment numbers.

Which Numbers are Fraudulent Now?

But again, I reminded Trump (not that he actually ever reads my tweets, he gets so many) that when he brags about how low the unemployment rate is, the official rate, I always remind him, "Wait a minute, you are the person who accused these numbers of being fraudulent, fakes, phonies, a scam - Donald Trump as a candidate was very critical of Barack Obama's phony recovery mainly because Obama was hiding behind (what Trump said were) fraudulent statistics. Well, these are the same statistics that Donald Trump is embracing - the same statistics that he criticized. So, I guess the President no longer about all of the discouraged w…
The Fed Is Far More Dovish Than It Admits – Ep. 463

2 mei 2019 · 52 min
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Recorded May 1, 2019 Lees meer

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Market Looking for Validation of Expectations

Today was the conclusion of the FOMC meeting in which the Federal Reserve left interest rates unchanged, and that is exactly what the market was expecting. Nobody expected the Fed to hike, and nobody expected the Fed to cut. But apparently, a lot of people expected the Fed to be more dovish with respect to its outlook for a potential future rate cut. Remember, the Fed Fund futures are showing that the next move is likely to be a cut and that maybe the Fed will cut by 50 basis points by the end of the year, so the markets are probably looking for some reassurance from the Fed that the market's expectations of lower interest rates are valid, and that's not what they got today from Chairman Powell.

Inflation Below 2%. Who Cares?

'In fact, he was actually asked, point blank, by CNBC's Steve Liesman - it was one of the first questions asked, maybe it was the first - whether or not the Federal Reserve was going to do something about persistently low inflation, because, after all, the official inflation rate is slightly below their target. I mean, if the target is 2%, we're at 1.7%, 1.8%… Who cares? But somehow this is an emergency, this is a disaster - we're not hitting our 2% target, even though we're pretty damn close. But, is the Fed going to do something about it? And instead of saying, "Oh, yes, we're going to do something about it, we're going to cut rates to make sure that we have 2% inflation", what Powell said was, "Well, yes, we acknowledge that inflation is lower than we would like and its lower than our goal, but we're not worried, because we expect it to be transitory." In other words, we're not worried about inflation being too low, because we believe the inflation rate is going to rise, and so there's nothing to worry …
Q1 Likely the Strongest Quarter of the Year – Ep. 462

27 april 2019 · 52 min
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Recorded April 26, 2019 Lees meer

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Q1 GDP Expected at 2.3%

Today we finally got the first estimate for the U.S. GDP in the first quarter of 2019, and typically the first quarter of the year has been rather weak. That has been the experience pretty much going back through the Barack Obama administration. And the consensus was for a 2.3% rise in Q1 GDP, that would have been just a slight improvement over the 2.2% number that we got for the 4th quarter of 2018.

Expectations Were Low

If you remember, way back, a couple of months ago, everybody was really low. You had a lot of people who were looking for Q1 GDP to come out with a zero handle. But they had been ratcheting up those expectations now to a consensus of 2.3%. A lot of it had to do with the fact that the trade deficits had come in a lot smaller than people thought. I think the reason for that is because the trade deficit really ramped up in the last couple of quarters, probably because businesses were trying to front-run the tariffs that were supposed to come in at the end of last year. That might have caused extra imports to try to get things in under the gun before they were subjected to the tariffs. So because we pulled all that forward, imports weren't as much in the first quarter, so they did not subtract as much from the GDP.

Inventories Continued to Build

Also, the inventories continue to build, but most importantly, because they weren't selling. Goods weren't selling as much - inventories were building. That ended up helping. We ended up getting a number that was much bigger than consensus. We actually got 3.2% GDP growth for Q1.

Delaying the Day of Reckoning

Now, before you get all excited, "Aha, Peter, you were totally wrong on this, you were looking for a weak number…" - first of all, a lot of people were looking for a weak number. It…
Raise the Voting Age, Not the Smoking Age – Ep. 461

23 april 2019 · 52 min
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Easter and Passover

I hope everybody enjoyed their Easter holiday, in fact, today is Easter Monday, so many parts of the world are still celebrating, including here in Puerto Rico. We are still in the holiday of Passover, so hopefully everybody who celebrates Passover, myself included, is still enjoying that holiday. In fact, this year, the first night of Passover coincided with Good Friday; a rare occasion that unites the two religions. We generally end up celebrating both.

Removal of Sanction Exemptions Drives Oil Prices Up

The markets have been quiet around the holidays. The big story today in the markets was the price of crude oil - up about $1.60/barrel. We're now at $65.71 per barrel. This is a new high for the year. Today, the catalyst was the Trump administration announcing that they would be withdrawing the exemptions that allow certain countries such as Japan, India, China - a number of countries currently buying oil from Ira. Now we're saying no more exemptions. They're saying, if you buy oil from Iran, then you're going to get sanctioned. Generally, what that means is the U.S. is going to shut you out of access to the dollar-based financial system - wiring and using the resources of the Fed. Considering that most of the world still transacts internationally in U.S. dollars is a very very serious punishment that the U.S. is able to dole out to any nation that does not do its bidding.

Effect on our Trading Partners?

Now, of course, this angers our trading partners who do not like being dictated to by the United States, they do not like the United States being able to tell them who they can and cannot do business with, and to punish them if they do not do what the United States says. Of course, this is all a function of the U.S. dollar being the reserve currency, which certainly give…
April’s Fools Day Comes Late – Ep. 460

17 april 2019 · 38 min
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Recorded April 16, 2019 Lees meer

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Tax Day

Yesterday was April 15th - Tax Day, or as my father, Irwin Schiff used to say, "April Fool's Day". My father thought it was April Fool's Day because he believed that that was the day on which Americans basically voluntarily paid a tax that no law required them to pay and voluntarily filed a 1040 tax form that no law required them to file. Of course, my father ultimately went to jail and died and jail because of those beliefs. I have been paying my taxes, although now that I live in Puerto Rico it's not nearly as painful as it used to be when I lived in Connecticut.

16th Amendment

A lot of people don't realize that April 15 was not always Tax Day; a little bit of trivia. When the income tax first passed, or reared its ugly head in 1913 - although that's not the first time we had an income tax. We had an income tax during the civil war. The North imposed the tax and when the war ended, the income tax went away. It came back again, and it was declared unconstitutional, correctly, by the Supreme Court in the Pollock Decision. Then they resurrected it with the 16th Amendment, and following the 16th Amendment in 1913, the original Tax Day was March 1.

Income Tax

Why is that? Because the income tax is a tax on your income for an entire year. So, we are now in 2019 and we're paying our income taxes for 2018. But you don't know what your income is in 2018 until the year is over. You may have earned a lot of money early in the year - you could lose it all back on the last day of the year and end up with no income at all - end up with a loss. So the idea was, if you're going to tax your income, then we have to wait until the end of the year, and then we have to give you some time to add up your income and figure out what you owe and then pay the tax.

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Political Theater of the Absurd – Ep. 459

11 april 2019 · 52 min
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Recorded April 10, 2019 Lees meer

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Lyft Sinking

I began yesterday's podcast by pointing out the weakness in shares of the recent IPO of Lyft. In fact, I mentioned that Friday's close above the IPO price (the first time it closed above that price since the day of the IPO) the fact that it couldn't hold on to that rally, I thought that meant the stock looked even weaker, technically. And we got a big follow through today. Lyft sank about 11%, it closed near the lows of the day, 60.12. In fact, we did trade as low as 59.75 on the closing minutes of trading. We're now down about 32% from the opening print, after it went IPO on that day. We're 17-18% below the IPO price. If you happen to get the IPO price and you still have the stock, you're almost in a bear market from that purchase price.

Catalyst: Uber News

The catalyst today was the news that it looks like the Uber IPO is going to happen sooner than everybody thought. Maybe they will be filing as early as this week, and the IPO is going to be bigger than people initially thought, as far as how much stock they're looking to unload on investors. Although, they're taking the valuation down from maybe $90 to $100 billion. I think initially they were talking $110-120 billion, and they're going to look to unload about 10% of the company - $10 billion. Now, you would think, "Wait a minute, if Lyft is doing so poorly, what is the rush to bring Uber to the market? Doesn't it seem like a bad time?" But if you think about it, I think what Wall Street is worried about, is if they wait even longer, the price of Lyft will sink even further. So it's a mad dash to get this thing out there before it really hits the fan, because this is showtime for all of these unicorns.

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Democracy has Failed, Not Capitalism – Ep. 458

10 april 2019 · 1 uur 5 min
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VERY IMPORTANT PODCAST! Please share with everyone you care about. Ray Dalio: Please start at 29:52 Lees meer

Extreme Inequality Is Not a Function of Capitalism

I agree that wealth inequality is a problem, but it is a problem that is created by government - created by the Federal Reserve. I was warning years ago, when the Federal Reserve first launched Quantitative Easing, that this was going to happen! This policy would only benefit assets at the expense of the overall economy. I've been warning about this for years. The government is doing this, not the market. So, yes, I want the government to do something about wealth inequality by getting out of the way. I want Capitalism to do something about inequality. Now, of course, there's always going to be inequality - that's part of capitalism. People are not going to be equal, because peoples' contributions are not equal. What is not normal right now is the extent of the disparity. That extreme inequality is not a function of Capitalism. if we enjoyed Capitalism, there would be less inequality.

We Need to Embrace and Re-Discover Capitalism

Ray Dalio recently replied to a recent Tweet of mine, referring to his appearance on 60 Minutes, stating that if the only solution Ray Dalio has is to raise taxes on the rich, and to hope the government spends the money productively, then he has no solution. So then he referred me to his article, which I read, word for word: Why and How Capitalism Needs to be Reformed, parts 1 and 2. Again, Capitalism does not need to be reformed. What needs to be reformed is Democracy. We need to embrace and re-discover Capitalism and what needs to be reformed is all of the Socialism that has been interjected into Capitalism.

Government Makes It Difficult for Small Businesses to Hire Young People

I told Ray Dalio that I would read his article and I read it and made some notes and I'm going to go over my thoughts now. Number one, right off the bat, Dalio talks about all the jobs he had by the time he w…
Trump Puts QE4 in Play – Ep. 457

6 april 2019 · 51 min
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Rebound Expected in Jobs Report

Stock market in the U.S. continued to grind higher today, although I still believe that this is a bear market rally. The Dow added a little better than 40 points; the NASDAQ up about 47, so a bigger percentage gain there. The S&P was up about 13 points. This was following the release of the March Nonfarm Payrolls numbers - aka the Jobs Report. There was a lot of hope that we would see a rebound in the month of March. Remember, in February, they initially reported just 20,000 jobs created, which was well short of what had been expected. It was probably something close to 200,o00 jobs. And the consensus for March was for 170,000 jobs and we actually got 196,000 jobs.

Pretty Weak Number

That's the first look. So that is, what, 26,000 jobs better than had been expected. The February number was revised upward, but just to 33,000, and I think I remember when this number first came out, that there were a lot of naysayers who were saying, "This is crazy, there is no way this is true, let's wait for the revisions". Well, we've got a revision, and all we did is revise it up to 33,000. So it seems like the number was legitimate. We did have a rebound in the month of March, but 170,000 is not a lot of jobs, considering how few jobs were created in February. In fact, if you average the two months, it's a pretty weak number.

Weakness in Labor Force Participation Rate

The official unemployment rate, that held steady at 3.8%, but the labor force participation rate, which I know a lot of people have been encouraged by, because they see that number notching higher, it dropped back down .o2, from 63.2% to 63%. So that's some weakness there. Also, if you look at the manufacturing jobs, they were looking for a gain of 10,000 jobs. Instead, we got a loss of 6,000 jobs. They took the…
AOC Right for the Wrong Reasons – Ep. 456

3 april 2019 · 57 min
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Recorded April 2, 2019

February Durable Goods Order Declined Slightly Less Than Expected

We had a quiet day in the U.S. stock market today. Not much reaction from a slightly weaker than expected February Durable Goods Orders number that came out before the market opened. They were looking for a weak number; the consensus was for a decline of 1.8% - we got a decline of slightly less than that: 1.6%. They revised the prior month down from +.4% to +.1%, so we declined less, but from a lower number. Overall, slightly weaker. In fact, the Core Capital Goods number was also slightly weaker. They were looking for a rise of .2%; instead, we had a drop of .1% - although they revised the prior month up from .8% to .9%. Still a little weaker on the day.

Lyft Hitting Lows

But the market still seems to be oblivious to the weak data, in fact later in the day we did get the auto sales numbers that were disappointing, as well. A lot of bad news is being routinely overlooked by Wall Street. Lyft, the company that went public on Friday: I discussed the lackluster performance of that IPO on Friday. In fact, most of the commentary that I listened to or saw was positive. They were describing the Lyft IPO as a big success… everything went great… the stock went up… But what concerned me about the stock was not how it went up, but how weakly it closed. It pretty much closed on the low of the day. It had sold off pretty much all day, following the pop on the open.

Lyft Sank into Bear Market on Day 2

The stock came public at $72 and it immediately traded as high as $88.6, but closed the first day of trading at $78.29. Still above the $72 opening, but anybody who bought the opening print was down. Then it got clobbered on Monday and it fell again today. It only closed down slightly. It closed relatively near the highs…
Fed Gives Stocks a Q1 Lyft – Ep. 455

30 maart 2019 · 56 min
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A Gift from the Federal Reserve

The Dow Jones closed out its best quarter since 1998 with a 211 point gain: 25,928.68 was the close. The Dow, on the quarter up 10.3% - the broader averages doing even better. The S&P 500 rose 12.3% on the quarter. The Russell 2000 - 13.8%, and the NASDAQ 15.6% gain on the quarter. of course, the entire rally was a gift from the Federal Reserve. Had the Federal Reserve stayed on its course, indicating that more rate hikes were coming; 3 or 4 this year; had the Fed continued with its planned auto-pilot reduction in the size of its enormous balance sheet, the stock market would be considerably lower. In fact, we probably would have added to the losses experienced in the 4th quarter of last year with additional losses this year. But the Fed, as I had been predicting for many years, reacted to the weakness in the stock market and the weakness in the economy by reversing course.

Bigger Cuts Ahead then the Market is Currently Pricing In

Now the Fed hasn't actually cut rates yet, although the markets are already anticipating rate cuts and not additional rate hikes. Where the markets got it wrong is that there will be much bigger cuts than what the market is currently pricing in. I think the market is looking at maybe 25 or 50 basis points of cuts. In fact, we're going all the way back to zero. A reduction in interest rates of 25 basis points or 50 basis points would do absolutely nothing.

Quackery: Substituting a Bubble for the Illusion of Economic Growth

I think the Fed, again, is going to have to go all the way down to zero once it decides that's what it's going to do. But had the Fed not changed course, the markets and the economy would be quite a bit weaker. Although not weaker - more air would have come out of the bubble. That's all the Fed has been doing with it…
Fear Is Not a Factor – Ep. 454

27 maart 2019 · 52 min
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Recorded March 26, 2019

Feigned Attempt to Shrink the Balance Sheet

I am finally back on land, having spent 9 days at sea, at the Investors Summit at Sea. I've been doing this annually now, this is my 7th time doing that. I am now back, technically one calendar year older. I want to catch up a little bit on what happened in the market later last week. I did do that one podcast from the ship following the complete capitulation on the part of the Federal Reserve, basically calling off all of the rate hikes that anybody thought may have been coming for the remainder of the year. Also calling off their feigned attempt to shrink the balance sheet - quantitative tightening. The balance sheet will barely shrink between now and the end of the summer, when it will stop shrinking altogether; if they can even keep up the pretense for that long.

Nobody Appreciates What the Fed Has Done

If you remember, when I was forecasting that this was going to happen, at the very beginning, in fact even before the Fed began to shrink its balance sheet, before the Fed raised rates for the first time, I said that if they ever tried to normalize interest rates, if they ever tried to shrink the balance sheet, they would ultimately abort the process - that they would fail in their mission. They could not complete the journey. It would create a huge problem for the Fed, which up until this point, it hasn't happened yet. Nobody really appreciates what the Fed has done.

There Will Be an Excuse

A lot of the people in the investment community are still buying at face value what the Fed is saying. But remember, when I said the Fed was going to announce that it was going to stop the rate hikes or call off quantitative tightening, I said at the time, that they were going to come up with an excuse. That the Fed was not going to t…
Fed’s Actions Speak Louder Than Its Words – Ep. 453

21 maart 2019 · 27 min
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Recording Today's Podcast from Willemstad, Curaçao

I am recording today's podcast from my cabin on a cruise ship, which is right now docked on the Dutch island of Curaçao, which is about 35 miles north of Venezuela. I've never actually been to this island, even though I live in the Caribbean now, in Puerto Rico, there are still many places in the Caribbean that I have not visited. I really wish I'd come here sooner. I had no idea how beautiful this island was. Not really the beaches, so much, although I'm sure they are equally spectacular. I didn't go to the beach. I just spent the day walking around town. But it's probably the most charming Caribbean island I've been to, as far as the architecture and the way the town is laid out - how beautiful the streets are, and the buildings and how clean they are. It really seems like a nice place to live. I think there is a permanent population of about 160,000 people.

The Fed's Decision

I want to spend my limited time on today's podcast talking about the Federal Reserve's decision today and the press conference. I did get back on the boat in time to watch the press conference live, and I do want to limit today's podcast to that discussion.

Before the Fed announced its decision on interest rates - nobody expected a rate hike, and we did not get a rate hike, but before the Fed announced today's decision, the markets were on the defensive. Earlier in the day, Donald Trump had mentioned that he now thinks that the tariffs on Chinese imports, or on Americans who want to buy Chinese imports, may remain in effect for a much longer period of time; indicating that maybe this great trade deal is not as close as the President was letting on in the past.

Unexpected Dovishness

So the markets sold off. I think the Dow, maybe at the lows was down about 170-some od…
Powell Tells Nation There’s Nothing to Fear – Ep. 452

14 maart 2019 · 54 min
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Recorded March 13, 2019 Lees meer

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Big Drop in Boeing: Opportunity to buy into Dip

The Dow is continuing to rebound this week, up 148 points today - 25,702 was the close. In fact, the Dow would be higher if it weren't for an about 11% decline in Boeing so far this week. I am going to talk on this podcast about the controversy surrounding Boeing and their 737 Max 8 aircraft. But for now I want to talk just about the markets. I actually think that it was the big gap down on Monday morning, where Boeing first reacted to the news of the plane crash in Ethiopia and the Dow was down better than 200 points - all of it the big drop in Boeing. I think traders looked at that news as an opportunity to buy into the dip. I think you saw people rushing in at that point. That kind of marked a short term bottom in the market and now we're back up around the highs of this bear market correction.

Smarter Money Selling into this Rally

I do believe that we're going to be running into resistance again at this area - but that was probably an opportunity for some people, they saw that dip and they rushed in and they bought other stocks. Typically there's some kind of news event that would coincide with some type of inflection point in the market. I don't think it's a significant low; I just think it is a low in an ongoing process, this bear market rally, this correction in the bear market is not ending quickly, but I do believe it is ending. I think the smarter money is selling into this rally.

Retail Sales: December was not a Fluke

The economic news - a couple of items that came out this week were a little better than estimated. But look at the Retail Sales number that came out on Monday. That one, to me, still confirms that the numbers that we got in December were not a fluke. A lot of people initially dismissed the weak n…
Whistling Past the Stagflation Graveyard – Ep. 451

9 maart 2019 · 55 min
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Market Down Before the Bell

A late-day rally wasn't enough to bring the U.S. stock market indexes into the black on the day. In fact, this is the first down week that the U.S. stock market has had in 2019. Something tells me it's certainly not going to be the last. The market was down from the bell this morning. Even before the bell, if you look at the futures, even before we got the jobs number - the February jobs report (which I will get into a little later in this podcast) the markets were already down. The Dow Futures, I think were off about 125, 135, something like that. Normally, the markets are not making a big move in either direction before the jobs report comes out, because people don't know what the number is going to be, and generally it's a market-moving number, so the markets are typically pretty flat before we get the number.

Trade Deal Up in the Air

This time, the markets were down. Based on rumors that the trade deal with China may be delayed. People were talking about this Mar-a-Lago Summit that was going to take place later in the month, and now I was reading about how there may not be a deal in time, and the Chinese may not want to go to Mar-a-Lago, and so the whole thing is up in the air. So people were getting a little nervous about the trade deal. So that's why the markets were already selling off, plus, I think the Chinese markets had been weaker overnight. Trump or someone else Tweeted out that Trump had said, as soon as we signed the trade deal, the markets are really going to spike. Apparently, nobody has explained to Donald Trump how the stock market works. Buy the rumor sell the fact. Maybe the President has more experience in the real estate market, not understanding how the stock market generally anticipates news, and sells off on the realization of that news.

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America’s Twin Deficits Hitting Record Highs – Ep. 450

7 maart 2019 · 36 min
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Wall of Overhead Resistance

It looks like the correction in the U.S. stock market, and by correction I am referring to the rally, the first correction in what I believe is a new bear market - but it's looking like that correction may have finally run its course as the stock market has run into a wall of overhead resistance. In fact, the technical action on Monday was quite telling, because early in the morning we opened quite a bit higher - 100 points or so higher, and then had a 350-point reversal to the downside. The catalyst for the initial rally was yet another rumor of an impending trade deal with China. And it seems to me that we've basically run out of the ability to continue to rally the market by regurgitating the same news story over and over again.

Now They've Sold the Last Rumor

Remember I was saying that, when we actually have a trade deal, with China, my thinking would be it would be a "buy the rumor, sell the fact"? Well the problem is, traders have already bought that rumor over and over again and that they may have already sold the last rumor. They can't wait for the fact. They've just had so many rumors, that now they've sold the last rumor, and it doesn't even matter if we get a deal - the market is going to sell off. Of course, if we get no deal at all, then the market could sell off even more, because a great deal has already been priced in to the market. But there isn't going to be a great deal. There will be a deal, there will be nothing great about it; there will probably be nothing substantive about it. Expectations have been raised so high, which is another reason that I don't think Trump is as good a negotiator as he pretends.

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Are Debt-Laden Consumers Finally Tapped Out? – Ep. 449

2 maart 2019 · 1 uur 4 min
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Market Keeps Rallying on Regurgitated News

The Dow Jones started off the final day of the week with a pretty strong rally; we were up a little better than 200 points earlier in the day. Then we got some weaker than expected economic data which I will get to a bit later, and the market sold off. The Dow never quite went negative, and then we rallied back and the Dow managed to end the week back above 26,000 with a 110 point gain. In fact all of the major indexes were positive on the day. What caused the early morning rally was optimism, once again, that a trade deal with China is about to be signed, and it's kind of amazing how often the markets can bite on this and keep rallying on regurgitated news, because, we've heard this before.

According to Trump the Chinese Are Going to Pay, but According to Economics, Americans Are Going to Pay

As I have said on this podcast before, we are going to get a trade deal. A trade deal with China is inevitable. The only positive about the trade deal is going to be that it takes the prospect of a self-inflicted wound off the table. That's the only good thing. If we have a trade deal, then Trump is not going to increase tariffs on American businesses and on American consumers. That is the empty threat that is out there: "Hey, we're going to force China to the negotiation table because, if they don't, we're going to erect these tariffs, which, according to Trump the Chinese are going to pay, but according to economics, Americans are going to pay. That's one of the reasons that we can't afford to actually use this weapon that we are threatening the Chinese with.

Promising the Moon

In fact, one of the reasons that you had all this optimism about this new deal was Larry Kudlow was out talking about how great the new deal is going to be - how this is going to be a huge win for America, it's a fantastic deal, it's a boon, it's better than we cou…
Powell Puts It to Congress – Ep. 448

28 februari 2019 · 1 uur 2 min
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Jerome Powell Wades into the Deficit Debate

This year Fed chairman Jerome Powell made his obligatory visit to Capital Hill, where he spoke to Senators and Representatives about monetary policy. Of course, this really just amounts to a press conference for Democrats and Republicans to either talk up the economy or talk down the economy, depending on who's got the White House. Trump is the President, so you have a lot of Democrats trying to talk about why the economy is actually weak and trying to get the Fed Chairman to say something negative about the economy, or negative about President Trump. And, of course you have the Republicans trying to get Powell to validate how great the economy is, and how Trump's policies are helping the economy.

Republicans Aren't Willing to Recognize Problems

The biggest problem with all this is that the biggest promoters of how great the economy is are the Republicans. These are supposedly the defenders of capitalism and they're saying everything is great, everything is booming, and you have the Democrats, particularly the Democratic Socialists saying that there are a lot of problems. And the Republicans are saying that these problems don't exist.

Democratic Socialists Have no Idea Why the Economy is Screwed Up

Unfortunately, when it hits the fan, when we end up in a recession, and I've been making this point over and over again, Capitalism is going to be thoroughly discredited because the people who advocate it were oblivious to the problems. They said everything was fine. Now the Socialists will appear to be the ons who had it right - even though they were right for the wrong reasons. They have no idea why the economy is screwed up, and their plans to solve the problems will just screw it up even more. But the voters aren't going to know that. They're going to say, "Oh, these Republicans who talk about Capitalism, they were wrong. They did…
Fed Indicates Tolerance for Higher Inflation – Ep. 447

23 februari 2019 · 53 min
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Another "Greatest Deal Ever"

'The Dow rose a little over 180 points today, closing above 26,000 -26,031.81, to be exact, for the first time during this bear market rally. I still believe that we are in a bear market rally, not a new bull market. the catalyst for today for today's stock market strength, and it was across the board; the markets were strong from the opening bell to the closing bell. I think the high in the Dow was maybe just above 200; we sold off intra-day. But the NASDAQ, the Russell 2000 were also higher on, again, optimism that there is going to be a trade deal between the U.S. and China. Donald Trump is saying that he is negotiating the greatest deal ever, which is something that I have been saying, regardless of what the deal ends up being, Trump is going to say "It is the Greatest Deal Ever".

What Helps China Is an Appreciating Yuan

But there was a lot of attention being paid to the deal, a lot of stories coming out that were close to a deal. In fact, I read that they do have a agreement on exchange rates. Currencies, obviously the U.S. likes to accuse China of being a currency manipulator, and so maybe there's some type of deal that says they won't manipulate their currency - they won't use their currency as a weapon. Which is something China wasn't going to do, anyway. To the extent that we win any concessions from the Chinese, where they agree not to weaken their currency, that basically amounts to nothing. In fact, a weak currency is bad for China. What helps China is an appreciating Yuan.

Today's "Fedspeak" on Inflation

More important than the talk about the trade deal was a lot of "Fedspeak" today. You had a lot of Fed officials that were talking; James Bullard, Clarida, John Williams - they were all talking. The real common theme today was inflation. I have been talking about this for years. How was the Federal Reserve going to basically respon…
QE is Officially Debt Monetization – Ep. 446

21 februari 2019 · 1 uur 1 min
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FOMC Minutes Describe Abrupt About-Face

This afternoon we got the minutes from the last Federal Open Market Committee meeting which took place a few weeks ago. This was the meeting where the Federal Reserve did what is now being described as probably the biggest policy shift in the history of the Fed. This was really an abrupt about-face, where they went from "Everything is great; we're going to keep on raising interest rates, and we are on auto-pilot - we are going to let the balance sheet continue to decline." All of a sudden, now they're "patient", meaning they're not going to raise rates at all in the foreseeable future, and not only is the balance sheet reduction program no longer on auto pilot, but it is now going to end prematurely sometime this year.

Fed Balance Sheet North of $4 Trillion

Of course, the balance sheet is still north of $4 trillion, and if the reduction program comes to an end this year, you're still going to be talking about a balance sheet $3.5 to $4 trillion in size. This would mean that almost all of the mortgages and treasuries which the Federal Reserve purchased in the aftermath of the 2008 financial crisis as part of its Quantitative Easing Programs, 1,2&3. Almost all of that debt will remain on its balance sheet after the Fed has finished shrinking it. Also, FOMC officials are now talking about Quantitative Easing once again as just another tool in the Fed's tool box. It's no longer something that will pulled out for an emergency, it's just going to be a normal policy tool for the Fed to deal with recession. Of course, that's going to be their main tool, given that this next recession is going to start when interest rates are at 2.25%. So there is not a lot of room for the Fed to try to artificially stimulate the economy when it hardly has any room to reduce rates.

Quantitative Easing is Debt Monetization

Of course, what does that mean about…
The Real National Emergency is the National Debt – Ep. 445

16 februari 2019 · 56 min
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Market Rallies on Old News

The U.S. stock market continues to rally on basically the exact same news story that keeps on getting replayed. Today, it was the absence of another government shutdown. I guess now, this is final when it comes to no more government shutdowns, although that should have been obvious to everybody when Trump caved the last time and decided to pay everybody and temporarily end the shutdown. I said on my podcast at that time that that was it; that there was no way that there was going to be another government shutdown - yet the market continues to celebrate when they think that the shutdown's not going to happen.

A National Emergency for the Wall

Well now they know for sure it's not going to happen. Everything's signed, it's a done deal and Trump is getting his wall anyway because he has now declared a national emergency, and so now because it's a national emergency, we are now going to pull these funds from other parts of the budget and we are going to build the wall.

The National Debt is the Real National Emergency

Of course, the real national emergency is not the lack of a wall, the failure to build the wall, but building up the national debt. The $22 trillion national debt. We eclipsed that dubious milestone earlier in the week. And again, when you talk about the national debt at $22 trillion, we're talking about the tip of a huge iceberg. This is just the funded portion of the debt. This is where the U.S. sells a bond and somebody owns that bond.

The Tip of the Iceberg

It doesn't include liabilities like what the government owes for Social Security, or guaranteed bank deposits, or mortgages or student loans - that's not there. Those are contingent liabilities. They're just as real. They're not even part of the national debt. So, when you look at all the liabilities that the U.S. government is on the hook for, you're talking about well over $10…
GND Plus MMT Equals a Marriage Made in Hell – Ep. 444

13 februari 2019 · 45 min
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The 7th Best Start Ever for the S&P 500

The Dow was up 372 points today, continuing the bear market rally. In fact, this is the best start for a year in almost 30 years - 28 years to be exact. I think it is the 7th best start ever for the S&P 500. Now I think the other 6 starts that were better; 3 of those happened during rather dubious circumstances. Two occurred during the Great Depression, and one of them happened in 1987, and we all know how that year ended up. So sometimes getting off to a good start doesn't necessarily mean that the year is going to finish strong, or the year, itself, is going to be a prosperous year. Again, I think the main reason that the market is so strong early this year is, A) because of the sharp decline we had at the end of last year and B) because the Federal Reserve came in to save the market precisely the way I had forecasted for many years.

How Many Times Can the Market Rally on the Same Good News?

We had a lot of news today that was supposedly good news which provided the extra catalyst for the market. The question, of course, is, "How many times can the market rally on the same good news? One of the pieces of good news was the fact that it looks like maybe there is some kind of compromise on the border that will avert a second government shutdown, and that is supposedly good news. Of course, we've been having this type of good news over and over again.

Also, on the trade front, there were some rumors that the negotiations were going well (some of these rumors started by Trump), so when the market hears that, and that they will probably extend the deadline. If the negotiations were really going great, they wouldn't have to extend the deadline.

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The Socialist Insanity of a Green Utopia – Ep. 443

9 februari 2019 · 51 min
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Disguising "Red" Goals in Green Wrapping

I'm still here in my hotel room in Orlando at the Money Show, but before I went downstairs on this Saturday morning, I wanted to record a podcast to address the issues raised by Alexandria Ocasio-Cortez, AOC, as she is now being referred to - I guess I'm just going to call her the bartender for simplicity. Well, anyway, the bartender-turned-congresswoman has released the laughable details of her "Green New Deal". Of course, the Green New Deal really lays bare the smokescreen that I have always believed existed with respect to extreme environmentalism. I've always thought that it masked a real desire for socialism; that the real goal of some of these radical environmentalists was socialism: nationalizing the means of production, getting government control. But they couldn't come out and say that. They had to disguise their "red" goals with green wrapping.

This Bartender is Advocating Fascism

They had to approach it as an environmental issue;"Hey, we have to save the planet!" and, yeah, who isn't in favor of that? Everybody wants clean air and clean water. So the way the Socialists really try to wedge their way into the mainstream was with this veneer of Environmentalism. But when you actually read the "Green New Deal", it blows all the smoke away. It really lays bare the Socialist agenda of environmentalists. Really, that's what the Green New Deal is all about. It's Red. It's all about turning America into a Socialist economy, or more particularly, a Fascist economy, because Fascism is really the form of Socialism that best describes what this bartender is advocating.

The Government Taking over the Means of Production

I have said from the beginning when Ocasio-Cortez ( the bartender) describes herself as a Democratic Socialist - "I'm not a real Socialist, I am a DEMOCRATIC Socialist - putting the word "Democratic before something ba…
Misstate of the Union – Ep. 442

6 februari 2019 · 1 uur 4 min
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State of the Union Not Addressed

Last night President Trump delivered what purported to be a State of the Union address but really, Donald Trump talked about a lot of things, but he didn't really speak at all about the State of the Union. Bernie Sanders recorded his own response. He didn't do the official Democratic response; that was done by Stacey Abrams, the woman who ran for and lost the Governorship of Georgia in 2018. She was a Democratic candidate. I think the Democrats are grooming her probably to run for Senate in 2020 so they wanted to put her up on that stage and shine the spotlight on her.

Bernie Did a Better Job of Laying out Economic Problems

But Bernie Sanders delivered his own response on YouTube, and Bernie Sanders did a much better job of describing the problems in the U.S. economy, that Donald Trump ignored in his State of the Union address. He spoke a little bit about the economy; he said we're having an "economic miracle" here in the Unites States, that we were the envy of the world, the hottest economy in the world. Everything is great, and theoretically the only thing that could screw it up is if the Democrats keep going after him with this ridiculous investigation, but everything is doing great, which, of course is a bunch of nonsense.

Socialism, However, Won't Work

Bernie Sanders did a much better job of presenting the facts. He pointed out that maybe, if Donald Trump is talking about his rich friends at Mar-a-Lago Country Club - for those guys, the economy is great. But for average Americans, the economy is lousy and Sanders describes some of the problems that Donald Trump overlooked or ignored when he gave his address. This is going to be the problem for the Republicans in 2020 when they run for re-election, talking about how great the e…
Truth Is the Real Victim – Ep. 441

2 februari 2019 · 47 min
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Stronger than Expected Jobs Number

We actually got a bunch of economic data released today; apparently the shutdown no longer is affecting some of these newer releases, although we still have a bunch of old data that has yet to be released. I have a feeling that there is a lot of weak economic data that has yet to come out. Today we got some stronger than expected data including the January jobs number. They were looking for 158,000 jobs to be created, which would follow the 312,000 number that we got for December, which was a surprisingly strong number. So the consensus was that we would have a weaker number in January; but we ended up with 304,000 jobs allegedly being created in January.

December Jobs Number Revised Down 90,000 Jobs

But they now tell us that we didn't create 312,000 jobs in December - we only created 222,000 jobs, which is still a pretty big number, but it's 90,000 less. That's a huge revision, to think that they were off by 90,000 jobs. Maybe they're off by 90,000 jobs in January. I guess we'll have to wait another month to find out. But that number was much bigger than what was expected; and of course, even if you take into consideration the revisions, it was still a better net number than what the markets were looking for.

U6 Went from 7.6% to 8.1%

The official unemployment rate rose to 4%. Part of that was because the Labor Force Participation Rate continued to notch up. It went from 63.1 to 63.2, and since more people are now looking for work, those people are now officially unemployed. But a bigger story than the official rate is the U6 rate, which is far more accurate if you want to get a real look at the U.S. labor market. Of course, it's not 100% accurate because it only includes discouraged workers who have discouraged for under a year. So it doesn't capture any of the long-term unemployed, which are a big part of the American labor …
Powell Pause Won’t be Enough – Ep. 440

31 januari 2019 · 48 min
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Monetary Drug Pushers

Earlier today, the monetary drug pushers at the Federal Reserve gave the addicts on Wall Street exactly the fix that they have been craving. In fact, not only did Powell deliver exactly what the doctor ordered with respect to interest rates, saying the Fed was going to remain "patient", probably indefinitely, with respect to another rate hike, but Powell also made it clear that the balance sheet wind-down, otherwise known as quantitative tightening, was off of auto-pilot. In fact, based on what Powell said, I would be surprised to see any significant reductions in the Fed's balance sheet from here. Not surprising, the market rallied as a result of getting what they wanted out of the Fed. At one point, I think, the Dow was up better than 500 points, but it did close up 434 points - back above 25,000 - 25,014.86, to be precise.

Quantitative Easing and a Return to Zero

But, you know, just like any addict, they can never get enough. I think that soon the markets are going to be demanding a lot more from the Fed than just a cessation of rate hikes and a commitment not to shrink the balance sheet. I think what the addicts are going to require is going to be more quantitative easing and a return to zero, and that is exactly what the Federal Reserve is going to provide, once it realizes that that's what's necessary. Of course, I don't think that is going to work; I think that is going to deliver the overdose that I have been warning about since the Fed first went down this mistaken policy road. I knew that we would ultimately end up exactly where we're headed. It's just that the markets still haven't figured this out.

Markets Need to Focus on the Why

The markets really need to be focusing on the Why. Not just looking at what the Fed is doing, but why the Fed is doing it, and what it actually means about the underlying health of the U.S economy …
Government Shutdown Ends, Fed Capitulation Continues – Ep. 439

26 januari 2019 · 59 min
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Downwardly Moving Expectations

The record-breaking partial U.S. government shutdown looks like it has now come to an end. Donald Trump today announcing that he is going to be re-opening the government for three weeks, and during that time we will have negotiations regarding funding for the border wall, the barrier, the smart wall - whatever it is being called now. Donald Trump seems to be downwardly moving his expectations of what that wall would constitute, how much terrain it would cover, but at the end of the day, I don't believe that whatever compromise we get 3 weeks from now is going to include any type of funding for the wall.

Democrats Trying to Teach Trump a Lesson

And I think that the President talking about potentially shutting the government down again in 3 weeks if the wall money is not there, I think that's an empty threat; I think that is a bluff that would be easily called by the Democrats. If you look at the Democratic press conference that followed the Trump announcement, Chuck Schumer basically said,"I hope the President learned his lesson." I'm surprised he even said that because it is admission that the Democrats were trying to teach Trump a lesson. That is, in fact, probably what they did.

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Socialism’s Slippery Slope – Ep. 438

24 januari 2019 · 1 uur 3 min
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Broader Averages Up

The Dow Jones rose 171 points today recovering a little better than half of yesterday's 300 point decline, helped by some better than expected earnings in both IBM and Proctor and Gamble. The broader averages is also up, but not nearly as much, because of the impact from those stocks; obviously not as strong. In fact, the NASDAQ, and even the S&P 500 all took out yesterday's lows intra-day, but still managed to eke out small gains - actually the Russell 2000 was down slightly on the day.

Dow Transports Down All Day

But the Dow Transports were down all day. They didn't even recover; they closed off the lows, adding about 48 points to yesterday's decline. But everybody in the financial media, in fact everybody at Davos (I'm going to talk about that in a minute) but everybody seems to be completely forgetting the bear market. Ignoring the fact that we went into a bear market and pretending that either we're back in a correction of the bull market or we've actually left correction territory, as if the bull market is still intact, and that bear market that we had never even really took place.

I Wouldn't Bet on the Fact That the Bear Market Is Over

Now, it is possible that the bear market is over. I am not saying it's impossible. It seems to me again that it is extremely unlikely that the longest bull market in history is going to be followed by the shortest bear market in history. I guess it could happen but I wouldn't want to bet on it. A lot of people seem to be betting on it. To me, again, the rally that we had made a lot of sense. After all, the Fed came in and did exactly what I have been saying it is going to do since before they raised rates for the first time.

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Lies of the Left – Ep. 437

21 januari 2019 · 28 min
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High School Students Smeared by Mainstream Media

I am still out in Vancouver, British Columbia at the Resource Conference. I will be back in Puerto Rico on Wednesday. But I wanted to take a little time out to record this podcast here in my hotel room to address just one topic. And that has to do with this viral video that was making the rounds early yesterday that purported to show a group of high school students taunting an elderly Native American. As soon as this thing went out, spreading throughout the internet, the conduct of the high school students was condemned by everybody.

Fanning the Flames

All the celebrities and the media, everybody on the left we out there condemning the actions of these kids. In fact even the school - they were from an all-boys Catholic high school. Of course, there is nothing racist about the fact that the high school was all boys; there are all-girl Catholic high schools. The idea being that maybe you can educate kids better if they are concentrating on their studies, rather than members of the opposite sex. But even the school administrators or the principal came out and said they condemn the conduct of their students and they're going to look into this and that this does not reflect their values. Of course they're very tolerant, they're not racist, they don't discriminate. Maybe they will even expel these boys. Of course, that comment actually helped fuel the fire.

This Whole Thing is Made Up

I really wish that people would not be so quick to throw people under the bus when confronted by this feigned outrage from the left. This whole thing is just made up. If the government had been skewing this with would be called propaganda. But it is not the government; it is the media elites, it is the left that has concocted a fake story. They have altered the facts to conform to their agenda.

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In Bear Markets Rallies Are Corrections – Ep. 436

19 januari 2019 · 51 min
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It Is Not a New Bull Market

The U.S. stock market averages continued the bear market correction - the correction actually extended for another week. We capped a strong week with a strong gain today across the board. But this is a correction. It is not a new bull market. But of course, if you watch stations like CNBC you wouldn't know that. All day today all they kept talking about on CNBC was that the market is now out of correction territory, meaning that it is no longer down 10% from the highs, and so we're no longer in a correction.

We Entered a Bear Market

First of all, we didn't enter a correction - we entered a bear market. Now, bear markets have corrections, too. They're called rallies, except people at CNBC don't get that. They think the only correction is a move down in a bull market. Now this bull market went on for 10 years, so a lot of these guys don't remember the last bear market, and it wasn't even that long. A lot of these bear markets have been very short. They decline 40-50% and then the Fed was able to come in and save the day. But people don't get that we are in a bear market now. We haven't made new highs, so any rally is a correction. Certainly a rally of more than 10% - that's the same definition for the downward correction in a bull market. So if you want to apply that definition to an upward correction in a bear market - we are in a correction. This is a pretty big correction, helping the bear market fall a slope of hope.

Russell 2000 Had Best Annual Start Since 1987

The Dow was up around 330 points today, back up to 24,706.35. In fact, if you look at the Dow Jones year to date, we're up almost 6% so far this year. Strong move. We're not even finished with the month of January. Of course we have a holiday weekend, s the markets will not be open on Monday celebrating Martin Luther King Day. But there are still quite a few days left in January. The …
The Eye of the Financial Hurricane – Ep. 435

16 januari 2019 · 56 min
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The Eye of the Financial Hurricane

U.S. stock markets continue to bask in the eye of this financial hurricane. Remember, we ended the hurricane following the September rate hike, and if you recall I titled my podcast, "The Hike that Broke the Camel's Back", and that's what really began the sell-off in the market. We had this horrific fourth quarter, the worst December since 1931. It may have ended up being the worst December ever had it not been saved by that last-minute Santa Claus rally - the biggest Boxing Day (Day after Christmas) rally ever, which followed the worst Christmas Eve in stock market history.

The Fed's New Dovish Outlook

But we entered the eye when the Federal Reserve came out and rescued the markets by backtracking on their previously indicated path of continued rate hikes and quantitative tightening. In fact, we had a lot of people come out this week from the Federal Reserve today, again, reiterating their new dovish outlook. Everybody is a dove. There are no more stock market hawks. Like there are no atheists in a foxhole - in a bear market there are not hawks, there are only doves. That included people who are no longer on the Federal Reserve. Fmr. Federal Reserve Chairperson Janet Yellen came out yesterday, and she said that she thinks it is very possible that the December rate hike is the last rate hike in the cycle. She's right about that. It's not just very possible, it's probable. Yesterday we had Fed Vice Chair Richard Clarida said that the Fed is going to raise rates fewer times than they had indicated in their most recent press conference. Of course, by then, they had indicated two rate hikes. Now he is saying they are going to raise rates fewer than two, which could be one, but it could also be zero.

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Blind Fed Leading Blind Investors over a Financial Cliff – Ep. 434

12 januari 2019 · 1 uur 2 min
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Everything up on the Week Except Treasury Bonds and the Dollar

The stock market ended a positive week on a little bit of a down note; all of the major averages had small losses today - well off the lows of the day. The market tried a couple of times to sell off but the dips were bought on each occasion and we ended up closing near the highs of the day, even though we were down on the day. Pretty much everything was up on the week except treasury bonds and the dollar. The dollar fell, long-term interest rates rose. Gold was up. Oil was the big winner, even though it was down close to a dollar a barrel today, we closed right around $52; up better than 8% on the week.

All Fed - No Change in Fundamentals

But what has been driving the rally has all been the Fed. There's nothing fundamental that has changed about the U.S. economy or about the U.S. stock market other than the "Powell Put" is now back in play. In fact, it's not just Powell putting that out there, he has been joined by a chorus of central bankers who came out today, yesterday, all throughout the week - they're all now reading from the same dovish playbook. They've got their marching orders and they are talking up the market. Now talking how the Fed has to listen to the market, be careful and take its cues from the market. It used to be that the market didn't matter. The Fed was going to do its thing and the markets are going to do what they are going to do. And it didn't take long for that to change.

The Fed Can Not Allow the House of Cards to Fall

Of course, I've been saying that all along; that the Fed was not going to allow this house of cards that they deliberately inflated to just fall apart. Now they had to pretend that they didn't care about the markets but, of course the whole time, they were hoping the markets actually didn't go down because they didn't want to have to reverse policy. They wanted to talk …
Markets Running out of Good News to Anticipate – Ep. 433

10 januari 2019 · 46 min
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The Peter Schiff Show Podcast - Episode 433 Lees meer

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A Bear Market Correction

U.S. stocks continue their correction by moving higher yet again today. Remember, when you have a bull market, the corrections are down, because you're correcting the upward trend by moving backward. In a bear market, it's the opposite. You correct a downward trend by retracing upwards. That's what we're doing now. I think this is the first rally in this bear market, so this rally is, in fact, a correction.

Powell is now "Super Dove"

I think the U.S. stock market is off to its best annual start in about a decade; certainly the NASDAQ is up I think not quite 5% - 4.7% on the year. Of course, what got the correction going was the complete 180 by Powell in that round table discussion, where he basically reversed everything he was saying and became the "Super Dove" when it comes to rate hikes. So the market is now pricing out many rate hikes it had probably priced in and that was the catalyst to really get the market going.

Markets Have Not Priced in End of Quantitative Tightening

Of course, what hasn't been priced in yet are the rate cuts or the end of the quantitative tightening program and the re-launching of quantitative easing. All that is coming. The markets just aren't there yet. They just can't see beyond where we are now. They're looking at this mountain and they don't see the valley on the other side.

Interest Rates High Relative to Mountain of Debt

Again, it's not the rate hikes in the future that were going to cause the recession, the rate hikes from the past have already guaranteed a recession, even though interest rates in absolute terms and relative to where they've been historically are still very low, they are not very low considering the enormity of the debt that we now have; that we didn't have historically. So when you have this mountain of debt, a historically large amount of debt, you need a historically low rate. Even though the…

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