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So Much Debt, so Little Concern – Ep. 332

24 februari 2018 · 28 min
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Remembering Irwin Schiff Lees meer

Today would have been my father, Irwin Schiff's 90th birthday. If you're not familiar with my father's story, and I'm sure most of the people who listen to this podcast are familiar with my father but if you're not go to schiffbooks.com and pick up a copy of "The Federal Mafia," which was one of only 2 books banned by the Federal Government. We have a lot of books, "The Kingdom Moltz" a book that really shows off my father's sense of humor. It's beautifully illustrated by an artist named Andy Ice. I always liked that book as a kid. The book is very appropriate now, because it really explains inflation and where it comes from. My dad's old website, paynoincometax.com is still up, which has an archive of his old radio shows that he did weekly from Las Vegas. If you listen to my Dad, you'll know what I'm coming from. My dad talks a lot about economics.

Everything is Great!

But today, everything is great; Wall Street had a huge relief rally today; the Dow Jones was up almost 350 points, pretty much closing right on the highs of the day. The NASDAQ had an even better day, by percentage, up 120 points. The Dow was down on the week until today, but this big gain brought it up for the week.

Down Day in the Bond Market

I think the reason the market was so strong was we finally got a down day in the bond market. The yield on the 10-year treasury went back down. We closed at 2.871. Remember, we got to 2.95, we almost got to 3% and now we're back down to 2.871 on the 30 year. We had gotten up to 3.22 a couple of days ago. I think this took a lot of pressure off the stock market and people came in buying. "Everything is great; nothing to worry about!"

Commodities Strong Across the Board

The commodity market, though, was very strong across the board. Look at the surprise strength in oil. Everybody was talking about oil prices coming down - we're already back up to $63.50 and above. Almost back the the highs. Oil prices are going a lot higher. It's…
Trump Is No Reagan & Powell Is No Volcker – Ep. 331

21 februari 2018 · 29 min
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Dow Down Over 250 Points Lees meer

Today the Dow Jones was down just over 250 points; we're back below 25,000. I think we were down better than 300 on the lows of the day, but we went out pretty low. The dollar was actually quite strong today; the dollar index had one of its better days of the year - +.61. We're back at 89.71. We had gotten back below 89, with an 88 handle. Gold had a bad day today after having had some pretty good days last week. The price of gold down almost $18 now; just below $1330. We got above $1350 last week, but we couldn't hold it. I think we really need to go above $1400 to clear away this overhead resistance.

Bond Market Continues Decline

The only trend that really continued was the bond market, continuing to go down. It's pretty much a daily affair. Yields rising off the highs of the day - we're back below 2.9. We got to 2.915 on the 10-year. We closed at 2.893. But I think it is the back-up in yields that continues to put downward pressure on gold and some upward pressure on the dollar. Now, in the scheme of things, it does not matter because the dollar has been falling all year, despite the fact that rates have been rising all year.

False Narrative That High Rates Are Good for the Dollar

But the narrative that higher rates is good for the dollar still permeates the markets. Traders still have not figured out that they've got this one wrong. Likewise, they still haven't figured out that rising inflation is good for gold, not bad for gold. In fact, I think the catalyst for today's rally in the dollar and the sell off in gold is the news that came out on inflation on Friday.

Bad News about Inflation

We got some really bad news that inflation is picking up. We got the data for import prices and export prices. Export prices were up by .8% but import prices, which were clearly more important, because we have to pay for our imports - our import prices shot up 1%. They were expecting a gain of .6%, so 80% higher than what was expected. Year over…
Is the Powell Put in Play? Ep. 330

15 februari 2018 · 40 min
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St. Valentine's Day Rout Lees meer

I wouldn't really call what happened in the bond market and the U.S. dollar market as a St. Valentine's Day massacre, maybe it was a slaughter; even slaughter was too harsh a word. It was a rout. But this is nothing compared to what is going to come. The daughter is going to get slaughtered a lot more and the bond market is going to get slaughtered a lot more in the days ahead. Maybe not exactly tomorrow, but there will be days ahead that will be much worse than today. This is the tip of a huge iceberg.

Doing the Impossible

Before I get into the tail of the tape today, and all the horrific economic numbers that came out today, I want to take a step back and talk about President Trump's budget, which was released on Monday. Basically, the Republicans succeeded in doing something that you would have thought was impossible. They are making the Democrats look like the fiscally responsible party.

A Farce

First of all, there are some cuts in this budget that are never going to happen. There are a lot of assumptions that are saving money, like they assume a total repeal and replace of ObamaCare, which isn't going to happen. In fact, if it didn't happen when Republicans controlled Congress, how is it going to happen when the Democrats control Congress in 2019? So this is all farcical.

Assumptions...

But one of the biggest farces of the entire budget is the underlying economic assumptions. They're assuming that the very low unemployment rate gets even lower. But, the most farcical of all, is that they assume that the economy grows uninterrupted at an average of 3% for the next 10 years! This so-called expansion is already 9 years old. That makes it the second or third longest expansion in history, and if it continues this year, I think it will be the largest expansion in history. If it continued for another 10 years it would be almost twice as long as the next largest economic expansion in history. What are the odds that that is going to happ…
Republican Hypocrites Embrace Debt to Avert Shutdown – Ep. 329

10 februari 2018 · 30 min
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A Change of Trend Lees meer

Another volatile day of trading ended with the Dow gaining a little over 300 points - 330 points to be exact. The NASDAQ composite was up just shy of 100 points - 97.33 - and the S&P gained 38.5 points. But about 2 hours before the close, the Dow was down over 500. And then, in about 20 minutes, it rallied from down 500 to positive, and then at the close it had that 300-point rally. But it started the day up about 200 points, so between up 200, down 500, up 300… Again, we're continuing massive volatility which, as I said is indicative of a change of trend. We were so long in an uptrend with no volatility, now all of sudden we have this massive volatility.

"Just a Reversal"

Of course there are a lot of people jumping on this:"Oh, it's a reversal, it's a bottom, we rallied 800 points" Look, that's not how you make a bottom. 800 points is nothing. We had 2 thousand point drops, so I don't think the bottom is in. Is it possible that there will be a rally off of here? Of course, anything is possible, but I don't think it is probable. I think it is a higher probability that we are going to re-test that low. If this really is a correction, and not a bear market, I think the low that we put in earlier today is going to have to hold. It is going to have to have some kind of test.

Fundamentals Look Much More Like a Bear Market

But, again, looking at the fundamentals, this looks so much more like a bear market. In fact, when you listen to the talking heads on CNBC, they keep saying, "Relax, don't worry… this is a correction… the market is long overdue for a correction… we haven't had a correction in a long time…corrections are normal, and all that is true. But we also haven't had a bear market in a long time, and bear markets happen. Bear markets are normal. So how do they know that what we're having now is not the long-overdue bear market?

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Deficits Don’t Matter – Until They Do – Ep. 328

9 februari 2018 · 25 min
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Orlando Money Show: 20 Trillion and Beyond Lees meer

I wasn't intending to do a podcast today; I'm in Orlando at the Money Show, I'm on a stock market panel. It's going to be fun: Louis Navellier, Mark Skousen, David Callaway and Chris Gaffney. My big talk tomorrow should be very interesting. The title is 20 Trillion and Beyond: What the Coming Debt Explosion Will Mean to Your Portfolio.

Dow Jones Closed Down 1,032 Points Today

Now, of course, it's already exploding, but I gave them that headline about a month ago because I already knew that the debt problem was percolating and that was going to be what was going to blow up everybody's portfolio. But when the Dow is down 1000 points twice in the same week, I have to come on and do a podcast. If you haven't heard the news, the Dow Jones closed down 1,032 points today. The low of the day. We closed below the intra-day low of Tuesday morning, when the Dow ended up 500.

Successful Test?

Now we're not back down to the lows we hit Monday night, in Asian trading. We'll probably be there by tonight. This market is looking ugly. That was a horrible close, we have to go lower. It's crazy: I was watching CNBC in my hotel room and some guy was on saying, "This might be a successful test if we can just close above Monday's lows!" Successful test? A successful test is when you get a huge bounce off the lows. Even if we had closed above it, that wouldn't have been a successful test - we could have crashed below it the following morning. But we couldn't even hold it. We closed on the lows.

Horrible 30-Year Bond Auction Today

And, you know what? Bond yields rose anyway. 1,000 points down in the Dow wasn't even enough to send bond prices higher and yields lower. The yields on the 10-year and the 30-year rising to new highs for the move. 30-year closed at 3.137. As I said, horrible, horrible 30-year bond auction today. Again, why anybody showed up is beyond me, but obviously not as many people showed up as they expected. Yields on the 1…
Stocks and Bonds Do Dangerous Dance – Ep. 327

8 februari 2018 · 44 min
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Volatility Lees meer

The volatility is really continuing, in fact, today at one point this morning the Dow was up close to 400 points; ended up closing negative. It wasn't a big drop; about 20 points, but I think that's the biggest reversal of a gain to a loss in a little over 2 years. The broader market did worse. The S&P percentage-wise dropped about 13.5 points; the NASDAQ was down about 64 points.

Turnaround Tuesday

Of course the biggest reversal is the one we had yesterday. In fact, when I recorded my podcast on Monday I thought we'd have a big drop on Tuesday, but then I though we could also have a rally - Turnaround Tuesday. I thought we'd have a big drop in the morning and some kind of rally. That's exactly what we did, except we had an even bigger drop in the evening.

Dow Futures Loss

On Monday night, looking at how U.S. stock futures were trading in Asia, the Dow futures were down the equivalent of 1300 points. Now by the time New York markets opened, we had recouped almost all those losses. But if you look at the 5 trading days, from the high, the Dow Futures lost about 13% of their value. That just shows you how quickly the market can go down. The next time it could lose even more. That was a big move. Then we finished the day with a 500-point rally. So, lots of volatility.

Trend is Changing

I will tell you something: When you have a trend, and then all of a sudden you see lots of volatility, generally, that's a sign the trend is changing. The trend has been up, obviously stocks have been trending up for years. And they've been trending up with minimal volatility. All of a sudden you see massive volatility. Does that mean the trend is likely to continue? No. It's more likely a sign the trend has come to an end. Now you're getting all this volatility as people are jockeying around for position. People are buying the dips, now they're selling the rips.

Tail Wagging the Dog

I think the close today is a very weak close. We could start selling off tonight. I …
Fake Financial News Still Clueless About Monday’s Stock Market Mini Crash – Ep. 326

6 februari 2018 · 27 min
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Stock Market Decline Predicted Last Friday Lees meer

I have to warn you up front that I seem to have come down with something last night after the game, and I am having trouble talking today. I normally would not record, but I have to because on Friday's podcast I predicted the decline that we saw today.

I Told You So

Of course, we did not have a Black Monday like 1987; it wasn't a 20% decline. It was the biggest point decline in the history of the stock market by a large magnitude. We were down 1175 points. We were down 1600 points at the low. Although this is not the biggest point decline and in terms of percentage, it is in the top 20 (I think it was number 14). This is a major decline. We rarely see declines this big, and I'm pretty much going to say, yeah, I told you so on Friday.

Stocks Rising for All the Wrong Reasons

I have been seeing this coming for a while. I know a lot of Peter Schiff critics say, "he's a stopped clock, he says the stock market's going to crash every day, except I don't do that. Anybody who actually listens to what I say, realizes that I rarely call for the stock market to crash, let alone even go down. I have been saying the stock market was going to go up for all the wrong reasons during most of the time it was rising. I said it was a bubble as a result of cheap money.

Big Drop in Bond Market Signaled Crash

It wasn't until very recently that I began talking about a crash. In fact, on the way up, one of the reasons I thought the market wouldn't crash, was because I thought the Fed would save it. It would reverse course, and take back the idea that it would raise rates or shrink its balance sheet. But, recently, as it became obvious that the Fed was not giving up and the market was increasing its expectations of rate hikes and I saw a big drop in the bond market, (which I had been warning about for the last several weeks) I've been saying, "Hey wait a minute! This stock market's going to crash!"

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Will Black Monday Come Early This Time? Ep. 325

3 februari 2018 · 41 min
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666 Point Drop Lees meer

Today the Dow finished off its worse week in 2 years with a 666 point drop. That is the third largest point drop in the history of the Dow. The last big drop that was larger happened during the 2008 financial crisis. Percentage-wise, though the 666-point drop today is only 2.5% so it's really not that big, as a historic decline.

3% Drop from All-Time Record High

It's large in a sense that we haven't had a one-day 2.5% decline in the Dow in quite some time. In fact, I'm not even sure when we last had a 3% correction. Now, that's what we had. the dow is now 3% below the all-time record high that it hit last week. Now, a 3% correction is pretty normal, except we haven't had one in a long time.

Is this Ominous?

The question is: is this the something of something more ominous or is this just a small correction? I think there's a lot of evidence that this is the start of something much bigger. Part of the evidence is that nobody is concerned! There's maximum complacency. Even the superstitious aren't concerned that the Dow fell exactly 666 points. People are so complacent that they're not even being superstitious.

1987 All Over Again

Casting that aside, think about this: 1987 was the year that we had a stock market crash. January was the best month for the U.S. stock market since 1987. The dollar just had its weakest January since 1987. So far, this year seems to have a lot in common with 1987. We know what happened in 1987: Black Monday. That didn't happen until October, but maybe this year it will come early. Maybe, next Monday. Now, obviously, the probability is not that we will have a crash on Monday, but it is a possibility. I would say the possibility is much higher than it has ever been, because of where we are, and what's going on.

Rates are Going Up

Also, the NASDAQ and the S&P were not down quite as much as the Dow, but they were both down about 2%. The catalyst for the sell-off was the continuation of the increase in long-term interest …
Obama & Yellen Strand Trump & Powell in Dodge – Ep. 324

1 februari 2018 · 35 min
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Janet Yellen Got Out of Dodge Lees meer

As expected, earlier today, the Federal Reserve decided not to raise interest rates; they left them unchanged. The next rate hike is likely to come when Powell takes the reins at the Fed. Janet Yellen got out of Dodge! This is the second Fed chairman to be able to pull this off. Bernanke inherited a disaster, and he got out of Dodge, and so did Janet Yellen.

Greenspan as Dr. Frankenstein, Fed Policy as Monster

I don't think Powell is going to be as fortunate as his two predecessors. In fact Alan Greenspan was on CNBC today talking about the bubble in the bond market, the bubble in the stock market, how we're coming to stagflation, how we don't have any productivity growth. I believe that Alan Greenspan knows exactly how bad this is. He is like the Dr. Frankenstein who created a monster, except neither Yellen nor Bernanke nor Powell even realize that it is a monster. I don't think any of them know enough about economics.

Passing the Baton Full of Dynamite

Alan Greenspan is an Austrian-schooled, Ayn Rand guy. He's a smart guy; he certainly knows more about economics than I do. Obviously he can see this. He created this thing, yet the Fed Chairs who succeeded him do not understand it. Greenspan understood all the chemicals and he made this bomb that he handed off and it's been moving like a baton (or maybe like a stick of dynamite!) from one Fed Chair to another. Yet only Alan Greenspan realizes that the baton is made of dynamite.

Keynesians are Blind

Greenspan's successors kept expanding the policy, putting more explosives in the baton because they believe in this Keynesian nonsense. Greenspan doesn't believe any of that! So they had no idea what they were dealing with. Like in the original Frankenstein movie - you got that blind man who could not see that Dr. Frankenstein's monster is actually a monster. Yellen, or Powell are blind to how the economics are working and can't see the policy for what it is.

Not Going to End Well

G…
Do Rising Interest Rates Finally Matter? – Ep. 323

30 januari 2018 · 34 min
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A Rare Down Day Lees meer

The U.S. stock market finally had a rare down day today. The Dow Jones was down almost 180 points. We did have a little bit of a rally off the lows. NASDAQ closed down 39 points. But still, it's rare to see the U.S. stock market going down. Supposedly, the catalyst for the sell-off today was the increase in long-term interest rates. Long-term interest rates have been rising steadily all year, so the market hasn't cared about rising interest rates at all this year, so I don't know why today is any different. The yield on the 10-year bond moved above 2.7% This is not quite a 4-year high in yields; the high was 2.725%.

Why Buy Treasuries at All?

That's the 10-year. The yield on the 30-year is at 2.943. Why would anybody buy a 30-year treasury for 2.93%. You could just buy a 10-year for 2.7. Twenty extra years of interest rate and inflation risk? Why would somebody assume that for a 20 basis point in yield? To me, it doesn't make sense that anyone would buy any Treasury, regardless of the duration.

Why Hasn't the Yield Curve Already Blown Out?

But if you are going to buy a long-term Treasury, why on earth would you go for 30 years? Just buy a 10-year. The yield is almost the same. But if we get a big increase in interest rates, the collapse in the value of the 30-year is going to be much bigger than the 1o-year. In fact, that seems to be a pretty good trade for a spread trader. Buy the 1o-year and short the 30-year. That spread has got to widen. That extra 20 years of inflation risk and interest rate risk is going to come back to bite anybody who is buying a 30-year treasury. So it doesn't even make any sense to me why the yield curve hasn't already blown out. It's going to happen. It's only a matter of time.

If Anyone Cared, The Drop Would Have Bigger

I don't think the markets are worried about higher interest rates. The Dow is down 170 points. That's nothing. If anyone was actually worried about higher interest rates, we would have had a much b…
Economic Alice in Wonderland – Ep. 322

27 januari 2018 · 30 min
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Alice in Wonderland Lees meer

I spent a lot of time today watching CNBC's coverage of the World Economic Forum in Davos. I feel like I'm in the Twilight Zone, or Alice in Wonderland or something like that. Everybody is so optimistic. At least all the Americans who are interviewed. I put up on my Facebook an analyst from Morgan Stanley Asset Management. She's unquestionably bullish on every front. Everything is bullish - there's nothing at all to worry about. In fact, the only thing that she said that everybody says there's nothing to worry about. Things are so good, they're wondering, "What are we missing? Maybe we should be a little worried that nobody is worried.

There Are So Many Things to Worry About

The reality is that there are so many things to worry about. They're not worried about any of these things. I watched an interview - Donald Trump did an interview with Joe Kernen on CNBC. Joe Kernen is like a schoolgirl with a crush. He seems so enamored by Donald Trump. He's basically kissing his ass on anything he has to say. Everybody has gone insane. I talked about this on Alex Jones. Alex Jones is saying, "Everything is great under Trump! Obama never had an economy that was going at 3%".

Evidence of "Roaring Economy"

Obama never managed to achieve 3% growth - as if Donald Trump has! But everybody believes that the economy is growing rapidly. In Donald Trump's speech today - I'm not making this stuff up - this is what he said: "We're experiencing a roaring economy. After years of stagnation, we finally have strong GDP growth. Finally, after waiting all these years, the economy is booming, thanks to Trump.

2017 GDP not Roaring

Everybody is eating this nonsense up. Everybody believes it, except none of it is true. We actually got the GDP numbers out today - not that I believe all the numbers we get from the government - they are overstating the real GDP growth because they are understating how much inflation really is - but the media generally accepts these numbers.…
Clueless Mnuchin Embraces Weak Dollar Policy – Ep. 321

25 januari 2018 · 31 min
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Dollar Getting Hammered Lees meer

Gold and oil are breaking out, the dollar is breaking down, bonds continue to break down, and no one cares! Nobody is worried. The Dow was up today, although it finished up closer to the lows it was up a lot more earlier in the day although the dollar was getting hammered before the stock market opened and they still bid it up, but the S&P, the NASDAQ and the Russel 2000 all finished in the red, but the losses weren't that big. It's based on the fact that nobody even understands what's going on - what it means.

Bass Ackwards

In fact, they actually got it bass ackwards. You actually have people who think that a weak dollar is good and that rising inflation is a sign of economic growth. So, there's nothing to worry about! First, let's look at what happened. Dollar index; that was, I'd say the star of the day - or not the star because it did horrible, do you wouldn't give the dollar a star. But it was down about 1 full percent. It closed at 89.25 on the dollar index. We cut through 90 like a hot knife through butter. I think the next stop is a moving average at around 85, and we could be there pretty quickly. We are headed lower quickly on the dollar.

Mnuchin: "A Weak Dollar is Good for America!"

In fact, one of the things that helped the dollar fall today (I think it would have fallen anyway) was Treasury Secretary Mnuchin's comments that he made to day over at Davos; he's trying to encourage foreigners to invest in America. So he said, "A weak dollar is good for America, it's good for business, we're open for business, so he said he welcomes the weak dollar. This is supposed to make foreign investors feel better about investing in America? You're telling foreign investors that if you invest in America, you're going to lose, because you're going to lose on the foreign exchange.

Anybody Who Invests in the U.S. Today Will See Losses

My clients know what that feels, because we were investing in foreign stocks during years when foreign curr…
Unfortunately, the Federal Government is Open – Ep: 320

23 januari 2018 · 32 min
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The Government is Back in Business Lees meer

The government is officially re-opened! Apparently, the government shut down, maybe it was on Friday. Earlier today Congress voted to re-open it! The good news that the government is back in business sent the stock market to record highs. The Dow, the NASDAQ, the S&P all rallied on the good news.

When the Government Shuts Down, it gets Bigger

Of course, the good news was the government shutdown. Except, it's not really shut down. If they actually shut the government down, that would be great news. The bad news is that it's not shut down. It's open for business. If they really shut down government, people would like it. At least a lot of people. The problem is, in the past, when the government shuts down, normally government gets bigger during the shutdown.

The Problem is not Government Shutdown; It is Government Regulations

Let's say they close a National park. They have more government workers making sure nobody uses the National park because it's closed than they had when the park was open. So the whole thing is a farce. I remember reading an article one year, during the government shutdown, that there were businesses that needed permits, but the permit office was closed, so they couldn't get the permits they needed. The media covered the situation as, "See how bad it is when government is shut down, when people can't get their permits." Well, if government is shut down, you shouldn't need the permit. If government shut down, you can do what you want. You don't need a government permit. The problem was not the government shutdown, it was the government regulations.

All Federal Taxes Don't Count during the Shutdown

Let's say during government shutdown, "No one has to pay any taxes." All Federal taxed don't count during the shutdown. How many people would be anxious for the government to be open? So, a real government shutdown, where all taxes and regulations are suspended during the time of the shutdown would be great.

Go…
Bonds & Dollar Down, Stocks Up – Ep. 319

20 januari 2018 · 36 min
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January 19, 2018 Lees meer

Traders Still Ignoring Ominous Warning Signs

We closed the week with more gains on Wall Street as stock traders continue to ignore all the ominous warning signs that have been flashing. The S&P Composite and the NASDAQ both hitting new record highs today. The Dow, not a record high, but positive on the day, closing above 26,000 for the week for the first time ever.

Important Warning Signs in the Bond Market

But most importantly, what the market is ignoring is what is happening in the bond market. The bond market fell again; the yield on the 10-year rose. The high yield was 2.46, we closed at 2.639. These are the highest yields that we've had on the 10-year since July of 2014.

The stock market has gone up a lot since then, I think about a 45% increase in the S&P 500. Earnings are only up around 6%. So you had a massive increase in the stock market. And a lot of the justification for that valuation, because obviously, valuations have risen sharply, have been based on lower interest rates. Well, they're not lower anymore, they're back exactly were they were in July of 2014.

Take a Look at the 10-Year Treasury

But what's more ominous is not where they are, but where they are headed. That's the thing. These rates are still very low; 2.639. We're very close to breaking a key number. I think the bond market looks like it's going a lot lower. To me, this looks like it's it. So I think we're going to break through 3% on the 10-year relatively soon, maybe by next month. I think if we take out 3.75%, it's a quick move up to 4%. Now the last time we had a 4% yield on the 10-year was before the 2008 financial crisis. Basically, that was the yield that broke the camel's back.

Interest Rates vs Treasury Yields

Remember, the financial crisis was triggered by rising interest rates on the debt that had been accumulated in the prior years as a result of Alan Greenspan keeping interest rates at 1% for a year and a half. And then, slowly raising them back up o…
Possible Top in Stocks and Breakdown in Bitcoin – Ep. 318

17 januari 2018 · 28 min
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January 16, 2018 Lees meer

Buying Stocks with Both Hands

When I recorded my podcast on Friday, just looking at the technical action in the dollar and I was getting nervous that maybe we could have been setting ourselves up for some kind of holiday surprise; a big drop over the 3-day weekend that could have led to some real fireworks on Tuesday; and when the market started, everybody ignored the new low in the dollar and they were buying stocks with both hands, out of the gate.

The Market Could Not Hold the Gain

The Dow gapped up, and it kept going up; I think it opened up almost 200 points and the was up almost 280 points in the first half hour of trading. We went above 26,000. It was just 12 days ago we were at 25,000. That was the fastest 1,000 point move in the history of the Dow. Of course, 1,000 points doesn't mean as much when you're going from 25,000 to 26,000 as when we went from 1,000 to 2,000. Or even from 10,000 to 11,000, but still, it was very quick. In fact, if you look at the trading days, it was just 6 days, because one of those days was Martin Luther King Day, and we didn't trade. So in 6 trading days, the Dow rallied 1,000 points. Well you know what? It couldn't hold the gain.

Almost a 400-Point Swing

The Dow actually sold off, and at the low of the day it was down 100 pts, so almost a 400-point swing. We closed negative on the day. The Dow was actually the best-performing index. It was only down about 10 points; percentage-wise it was barely down. But the NASDAQ was down .5% and the S&P 500 was down .25%. So we'll see if we get some followthrough tomorrow, to this potential reversal. It wasn't a massive reversal (we didn't close way down, but we did close down).

Technicals are Looking Worse and Worse

Meanwhile, the dollar did close out on another new low. We didn't take out the overnight lows of Martin Luther King Day, when we were closed, but we closed very near the lows. The dollar index went off at 90.45; I think the low over the holiday weekend…
Everything That Can Go Wrong, Will – Ep. 317

13 januari 2018 · 38 min
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January 12, 2018 Lees meer

Obvious Negative Factors Hiding in Plain Sight

This Friday ahead of the three-day holiday weekend, all three markets are ignoring the ominous warning signs that are building by the day. They're registering new highs, the Dow up better than 200 points, 228, closing over 25,800; S&P, NASDAQ both hitting record highs today. To me, this is very reminiscent of 1987, in that the stock market is rising despite the fact that there are very obvious negative factors that are building and are hiding in plain sight.

CPI Number is About to Go Up

The CPI came out today and the headline number was in line, +.1%. Year over year, though that's still a 2.1% increase in headline CPI. But, unless you're asleep, you have to realize that the number is about to go up. Look at what is happening in commodity prices. Oil prices are up big today, over $64/barrel. This is the highest oil prices have closed since November of 2014. And, if you go 4 months earlier than that, we were over $100. So, if we re-trace that move, we could actually hit $80-$100 this year. This is an ominous sign for inflation and it's also going to be a big problem for the U.S. economy. That means that headline number is going up.

Poor Trade: Dump Gold on Higher Inflation Numbers

Now the Core CPI, which everybody seems to look at, year over year, that one's only up .8%. That's not going to last either. We're going to be over 2% on the Core, I think, in a couple of months. The number was up .3 for the most recent month - they were looking for +.2. In fact - this is funny - right before the number came out, gold was up about $10 and the dollar index was down about .50. Then the CPI number comes out, and the traders immediately see this inflation number that is higher than expected on the Core. What is their initial reaction? They dump gold, gold lost half its gains, and they bought the dollar. The dollar gained about 2/5 of its losses.

Why Aren't Higher Rates Bad for the Stock Market?

Why is that?…
China Rings a Bell – Ep. 316

11 januari 2018 · 33 min
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January 10, 2018 Lees meer

Bells are Ringing but Nobody is Listening

They always say that nobody rings a bell at the top. And that saying relates to the stock market, investors; there's never a clear warning sign, supposedly, of when to get out. My experience is actually the opposite. I think many bells ring, not necessarily at the very top, but certainly close to it, it's just that they're ignored; or if they are heard, they are rationalized away.

China says No to More U.S. Treasuries

Another such bell was rung overnight. We had a Bloomberg report this morning coming out of China that the Chinese government is going to stop buying U.S. Treasuries. This is potentially an ominous sign because a) China is the largest buyer and owner of U.S. Treasuries in the world, but, b) we just cut taxes! We cut taxes and not spending, so we are financing these tax cuts by borrowing more money, bu running bigger deficits, by selling more bonds.

Who is Left to Buy?

And if the largest buyer and owner of those bonds, is saying "No mas!", well that is a big problem. Who is going to step up to replace the Chinese? Also, if the Chinese aren't going to buy, who else is not going to buy? Why would anyone want to buy U.S. Treasuries? Even if you did not prescribe to the gloom & doom type perspective that I do, if you're just a typical investor looking at historic bond prices, Why would you want to buy U.S. Treasuries now? Aren't there other assets you'd rather own than extremely low-yielding U.S. Treasuries?

Will China Sell?

So if the Chinese don't want to buy, it stands to reason a lot of other people don't want to buy either, especially if they know the Chinese are not buying, does that mean they're selling? If they don't think Treasuries are worth buying, are they worth owning? You would think if they don't want to buy any more, they might want to start selling. In fact, when Wall Street puts a hold on something, that means sell, right? So, if China is putting a hold on U.S. Treasuries, t…
2017 GDP Growth Looks like Obama 2.0 – Ep. 315

9 januari 2018 · 38 min
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January 8, 2017 Lees meer

Atlanta Fed's Q4 2017 GDP Estimate at Record Low

The Atlanta Fed did downwardly revise its estimate of Q4 GDP as a result of the numbers that were released on Friday. The downward revision took their estimate from 3.2% down to 2.7%. 2.7% is the lowest the estimate has been since they began estimating 2017 Q4. In fact, earlier on, in October or November the Atlanta Fed was up to 4.5% for their 2017 GDP. So as the U.S. stock market was rising to an all-time record high the Atlanta Fed was downwardly revising its forecast for Q4 of 2017 to its record low.

Déja Vu All Over Again

Let's assume that the Atlanta Fed is accurate at 2.7%, maybe they're still being too optimistic, but let's say they hit the nail on the head and we get 2.6%. Then the entire year of 2017 would see about 2.5% GDP growth. Now, how does that compare to Obama?

Half of Obama's Second Term Beats Trump's Economic Numbers

Everybody is talking as if the economy is rip-roaring now; it's so much better not under Trump than it was under Obama's second term. I'd rather look at the second term because a) it's closer in time to where we are right now, and b) his first term includes the Great Recession that he inherited. So if you look at Obama's second term, GDP growth averaged 2.2% for the entire 4 years. If that's the case, 2.5% is a little bit better, but if you take 2 of those years, 2014 and 2015, GDP grew by more than 2.5%. I think we were at 2.56 and 2.9%. In other words, half of Obama's years as President beat the first year of Trump as far as GDP.

Economic Growth Hasn't Happened

So to me, 2017 just looks like another year of Obama's presidency. Nothing's really different. 2.5% fits in nicely with Obama's economic numbers. Everybody is talking about all this great economic growth that's taking place - it hasn't happened!

Market Soaring in Spite of Lukewarm GDP

Granted, there are people saying, we haven't really had the tax cuts yet; the tax cuts don't take effect until next y…
Twin Deficits May Doom Stock Market Boom

6 januari 2018 · 26 min
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Schiffreport: January 5, 2018 Lees meer

Trump: We Will Win on Trade

Earlier this morning the government released the December Nonfarm payrolls report, AKA the Jobs Number. But rather than start with that, I want to talk about another number that was released at the exact same time. It unfortunately gets very little attention in the media, in fact nobody has really paid attention to this number since the late 1980's - early 1990's. Of course, I am talking about the trade deficit. In fact when Donald Trump ran for office, he actually made the trade deficit an issue in his campaign, which was quite rare. In fact, Donald Trump said that we were losing on trade and he was correct. He promised that if he was elected, we would be winning on trade.

Biggest Trade Deficit in almost Six Years

Well we just got the number for November, and it was the biggest trade deficit in almost 6 years. $50.5 billion. What's more important than that number, look beneath the surface of the number that's bad and it gets a lot worse. If you take out oil, and America is still a net importer of oil - but if you just focus on the rest of the trade deficit, it was an all time high.

Oil Headed Higher

The biggest monthly trade deficit ever. We finally broke the record that I believe was set when Bush was President. But think about this: oil prices were pretty low in 2017. We just started to rise, in fact we closed the year above $60/barrel for the first time in 4 years. So imagine how much higher these trade deficits are going to be if the price of oil returns to $80-$100, which it was earlier in the year when it dropped below $60/barrel. In fact, I think that's exactly where it's headed.

All-Time Record Low against the Yuan

Also, look at what's happening with the dollar. The dollar fell last year for the first time in 5 years. It was he largest annual decline in 14 years, measured against the dollar index. But look at the Chinese yuan. the dollar fell by the most against the yuan in 9 years. In fact,…
Those Expecting Low Inflation Are in for a Surprise – Ep. 314

4 januari 2018 · 35 min
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Market Ignoring Economic Realities Lees meer

All three of three of the U.S. stock market indexes are ringing in the New Year with new record highs. The market was up on the first trading day of the year; up again today. NASDAQ composite is the star, 7065 today up another .84% - a new record high. The same thing with the S&P and the Dow. The Dow is now almost at 25,000; it closed at 24,922. Of course, everybody is ignoring, though, the economic reality.

What Do Oil Price Increases Imply for the Economy?

Look at the price of oil, up again today - 61.77 is the close, up 1.40 - we were up yesterday. This is the highest oil has closed in over 2 years. If we get above 62.75 that would be the highest close since December of 2014. It was all between July and December of 2014 that oil prices collapsed from above $100/barrel to below $40. I think this year we have clear sailing to $80 - $100 oil this year. Nobody is talking about what this implies for the U.S economy. This is a gigantic tax hike for consumers. Doubling the price of oil over a 2-year period is going to have a major impact on the cost of everything.

Watch Commodities Prices

It's not just energy costs. Commodities in general are strong. Gold was up $15 on the first trading day of the year; we were down about $4-5 today, getting back some of the gains, so gold is off to a good start. Some of the gold stocks were very strong yesterday. Across the board, the resource sector is going up. In fact the ironic thing is that we got the release of the FOMC minutes today and as soon as the minutes came out, gold actually sold off, and clawed its way back to down a little bit on the day.

Fed Expectations of Low Inflation

If you look at those minutes, the only concerns that the FOMC minutes expressed about inflation was that it was still too low. They are worried that inflation expectations are still too low, that the public, or investors still don't expect enough inflation, which shows you how clueless the public is. If they …
Investors Whistle past the Mother of All Graveyards – Ep. 313

30 december 2017 · 35 min
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2017 Optimism Lees meer

This is my final podcast for 2017. I just watched the U.S. Stock Market ring the closing bell for the final time in 2017. Everybody is excited; everybody is optimistic. I spent most of the day watching the financial coverage, mostly on CNBC to see the attitude and the types of coverage the market has received.

The Dow Gained 5,000 Points in a Single Year

Of course this is a record year in the stock market; an all-time record high in the Dow. I think this is the first year that the Dow has ever gained 5,000 points in a single year, in fact the Dow was up every month of 2017 - that's never happened before in history. I think we've gone 14 consecutive months without a decline. Not only were we up every month, but 2017 represented the year ever of the lowest stock market volatility. So as the market was going up, it barely ever went down. So no one was nervous.

Unprecedented Rise Occurs at the End

To me, this type of unprecedented rise does not happen at the beginning of something. It happens at the end. Anybody who believes that 2018 is going to be more of the same is in for a rude awakening. I think the final minutes of the trading day set the tone for next year. Even though the markets were up every month of this year, they were not up in the final week. The Dow and the S&P were both down this week. The entire decline for the week happened today, actually in the last 10 or 15 minutes. The Dow was down about 30 going into the last 15 minutes and it ended up -118. The Dow was never really positive today, same with the S&P.

Last Year Optimism was all about the Dollar

The NASDAQ was the biggest gainer of the year with well over a 30% gain. The Dow up about 25%, the S&P up about 19%, so certainly a big year, but to me, this is the end of this big bull market. The action in the final minutes may be an indication of what is to come. I have not seen this much universal optimism on an asset since last year at this time with respect to the U.S. dollar. Ev…
Republicans Take Complete Ownership of the Bubble – Ep. 312

23 december 2017 · 38 min
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Trump's Economy Lees meer

Today President Trump signed into law the Tax Cuts and Jobs Act. The biggest problem that the President will have with these tax cuts is that he now owns the economy. That is going to be a big problem, because this is now Trump's economy. This is now the Republican economy.

It's All Bullish

Now, Trump now already owns the stock market, and that has served him well so far this year. But you know what? The stock market could be getting ready to enter a big bear market. I've never seen so much bullishness, so much unfettered optimism on the market in my life. Not only on the market, on the economy - it's a no-brainer! Guest after guest on CNBC, "There's no way the market is not going to continue to go up!" "The only question is, how much higher is it going to go?" One bull after another - nobody is bearish. The networks are not even willing to allow my point of view to be expressed on the air, in spite of the fact that I was good for their ratings. I don't think CNBC wants an investment professional to come on and be bearish. To talk about the problems that underlie the economy, to talk about problems with the stock market, it's all bullish.

Trump Will Own the Bear Market, Too

This crazy optimism; everything is great, nothing can go wrong, oh yeah? How about inflation pushes up bond yields. How about corporations end up having to spend more on debt service payments, some of which is no longer deductible. How about inflation causing an increase in raw material costs? How about the consumer being so strapped with rising prices, no savings and record debt, that earnings go down? There are so many things that can go wrong when you have an overpriced stock market where everybody is in, and there is no money on the sidelines. So if we go into a bear market, Trump owns it.

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Is It Time to Sell the Fake News on Tax Reform? – Ep. 311

20 december 2017 · 30 min
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Calling Tax Cuts Reform is Fake News Lees meer

Earlier today the House of Representatives passed the Tax Cut Bill. Of course, the Media keeps referring to it as "Tax Reform". That's fake news, for you, calling these tax cuts reform is a perfect example of fake news. Donald Trump is not going to complain about this fake news. When the fake news works in his favor, when he prefers the fake news to the real news, he's going to be quiet about it. It's only when he doesn't like the fake news that he calls the media out.

Loopholes will Reduce Taxes from 39.6% to 29.6%

This has nothing to do with reform. There are definitely tax cuts in this bill. In fact, there are substantial tax cuts. The tax cuts are a lot deeper than what people are saying, because the real reduction in the top rate is not from 39.6% to 37%, it's from 39.6% to 29.6%. It's a much bigger reduction because of the ability of so many people who are now paying 39.6% to use the loopholes to reduce their tax to 29.6%. Now, of course, the top rates are actually higher than that, because no one talks about the 3.8% Medicare and Obamacare taxes that are not repealed. The mandate, the penalty for not buying insurance is repealed, but the taxes to fund Medicare and Obamacare, they're still there. So the marginal rates are higher than the media is talking about. The reductions, however are actually much bigger for the top end.

No One Gets Government Relief

Normally, I'm all in favor of lowering the top end. I would just like to do it in a fair and honest way, not through gimmicks and loopholes. But yes, I want to lower the top rate of tax, but I also want to make government smaller. I want to reduce government spending so we no longer need all that tax revenue. I have said over and over again, that this bill will provide some people with tax relief, but no people with government relief.

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Swamp 2, People 0 – Ep. 310

16 december 2017 · 36 min
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Everybody Joins the Party Lees meer

All 3 of the major U.S stock indexes closed out the week at new record highs as it became apparent that the new tax cut deal was pretty much done. Marco Rubio, who had been a hold-out, caved and even Corker, the one Republican who was going to vote against the bill becase it was going to increase the deficit, decided to join the party as well. He's now a yes, so the bill is going to pass.

Plan Riddled with Loopholes

We didn't get the compromise details until later Friday afternoon so I am recording this podcast Saturday morning. The new top rate: 37%, bottom rate: 10%. But of course, that 37% rate is probably not going to be paid by nearly as many people as the government thinks, because this plan is riddled with loopholes. In fact, I believe, if this plan passes, we will have a tax code that is more game-able where more people are doing more things to rig the system or exploit the loopholes - not that there's anything wrong with that - that's every American is going to do. No American is under obligation to pay more taxes than what is owed. And to the extent that you can re-arrange your affairs, such that you pay the lowest possible tax, that's what everybody is going to do.

Reduced Deficit Projections is Nonsense

And that is why the Republican projections that this is going to add just $1.5 trillion to the deficit over next 10 years are a bunch of nonsense. I'm sure that it will add more than twice as much over the next 10 years above how much the deficit is going to grow anyway during those 10 years. Now, the Republicans try to claim that even though on paper this bill will add $1.5 trillion to the deficit, it won't really be that big, because these tax cuts are going to create all this extra economic growth, which will result in additional tax revenue. So if you factor in that additional revenue, some kind of dynamic scoring, then the impact will not be as large. That is all a bunch of nonsense.

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Yellen Proclaims It’s Different This Time – Ep. 309

14 december 2017 · 37 min
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Expected Rate Hike Lees meer

Today the Federal Reserve did exactly what everybody expected them to do, they once again raised interest rates by just one quarter of one percent. This is the third rate hike of the year; this is the fourth rate hike since Donald Trump was elected President and the fifth time the Fed has raised rates since the 2008 financial crisis. The Fed raised rates only once from Obama's election to Trump's election eight years later.

Extraordinary Amount of Excess Stimulus

We now are at 1.25% on the low end to 1.5%. So if you take the midpoint there, 1.35%; we're barely above 1%. Despite five rate hikes over the course of more than 2 years. Remember the first rate hike was in December 2015, so it has been exactly two years. It has taken the Federal Reserve two years to move the rate from zero to 1.35%. This is an extraordinary amount of excess stimulus. To say that the Fed has been successful in normalizing rates is complete nonsense. Two years ago, when the Fed raised rates for the first time, nobody in the mainstream believed that two years later, we would still be this low.

FOMC Press Conference

The most interesting part of the Fed's announcement is always the press conference that follows. The most interesting thing about is, whenever Yellen was asked about inflation; whenever she opined about inflation and what the Fed's concerns might be, the only concern that she ever expresses is that inflation may stay too low. In fact, that's the only question she gets about inflation. Nobody asks her, "What if inflation is higher than you think?" It's always, "What if it doesn't get to 2%?" Even though, of course it's already well above 2%, but everybody wants to pretend it's not, the questions are;"What if it takes longer to get to 2%? Are you concerned it might not get to 2%>

What Happens if Interest Rates go Too High?

And the answers are, "Well, we think it will get back there, but yes, we recognize it's a risk that maybe it won't." It never dawns on a…
CNBC Becomes Crypto News BitCoin – Ep. 308

12 december 2017 · 34 min
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Bitcoin Week Lees meer

I'm going to devote today's podcast to bitcoin; I might as well just talk about bitcoin because that's all anybody else is talking about. On CNBC that's pretty much all they are talking about; they said it is "BitCoin Week". It sure sounds like it. I think they should just rename the network: Crypto News BitCoin Network. I would be a good guest on that network because I know either side.

Swallowing Hype Hook, Line and Sinker

But just like in the dot com bubble in the 1990's and the housing bubble in 2007, they are swallowing the hype hook line and sinker. they drank all the Kool Aid. When they look back at those manias, they like to laugh, but they did not laugh at them back then - not at all. The only people they laughed at were people like David Tice, he would come on and they would laugh at him just like they laughed at me when I talked about the bubble leading up to the Financial Crisis. Nobody at CNBC had any idea that there was a dot com bubble. All they did was laugh at people who pointed it out.

Even Less Legitimacy

Same thing is going on now, although they do refer to the bubble. But to me, this bubble is the most irrational of any of the bubbles I've seen. I there is a less legitimate case for BitCoin than any of the dot com stocks that went to zero, or buying sub-prime mortgages.

Total Market Cap: $460,355,182,968

But let me talk a little bit about the whole origin of this thing, in case you don't know. When Bitcoin first came about, it was the only crypto currency out there. Now there are over 1300 crypto currencies. The market cap is over $450 trillion. Bitcoin is trading today at over 17,000. That's a new record high on bitstamp.net. That did not take out the $19,000 record set on coinbase.com last week. We're up about 15-20% today. Futures trading debuted on Sunday night and Saturday, in advance of that, we had a pretty decent sell-off. Bitcoin sold off to about $13,000 and then it skyrocketed, it turned around on Sunday night and…
Trump Continues What He Once Called the Biggest Hoax in American Politics – Ep. 307

9 december 2017 · 40 min
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A Nonfarm Payroll Beat Lees meer

Today the labor department released the November jobs report - Nonfarm Payroll - of course Wall Street always highly anticipates this number; all the politicians, Donald Trump was ready to tweet as soon as the data was released. The expectation was for 190,000 jobs and we beat, with 228,000 jobs.

An Even Bigger Hoax

The unemployment rate held steady at 4.1%, which prompted President Trump to tweet, "The unemployment rate remains at a 17-year low of 4.1%. Now remember, when Trump is running for office he called 5% unemployment "The biggest hoax in American history", claiming that the rate was really 30, 40, 50%. Well if 5% was the biggest hoax in American history, what's 4.1?%? It's an even bigger hoax.

Disappointing Numbers

So THIS is the biggest hoax in American history, except that the difference is now Trump is the purveyor of that hoax. He is no longer calling it out, he is now participating in the same hoax that he criticized in order to get elected. The numbers that missed were the average hourly earnings, which, again, everybody keeps talking about how earnings are going to go up; they were looking for a .3% increase in average hourly earnings following flat earnings the previous month. Not only did they not get .3%, they got +.2%, but they revised last month's 0% to -.1%. So really, very disappointing numbers on the wages.

Labor Force Participation

Labor Force Participation rate held steady at 62.7%; that's near the lowest it has been in this cycle. And again, if you look at where the jobs were, we did manage to create 31,000 manufacturing jobs. We have had a boost in manufacturing jobs, despite the fact that we are not seeing it in the trade balance, because we have the worst trade deficit in five years, so I don't really know what everybody's manufacturing, if we're not exporting it, or if it is not reducing our imports.

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Another Trump Flip Flop – Ep. 306

7 december 2017 · 28 min
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Trade Deficit Moving Higher as Economy Slows Down Lees meer

Yesterday we got the release of the October monthly Trade Deficit and we got a trade deficit of $48.7 billion dollars. That was a little bit North of the $47.4 billion expected in the consensus forecast. In fact, the prior month, which was $43.5 billion was revised upwards to $44.9 billion. The larger number did cause the Atlanta Fed to shave down its estimates for Q4 GDP from 3.5% to 3.2%; my guess is that they will be revising it lower. Most of the numbers I have been seeing show the economy slowing down, at least measured by the GDP.

Candidate Trump Promised Lower Trade Deficit While Calling Stock Market "A Bubble"

What's significant about this trade deficit it is the largest trade deficit in 5 years, and it is the biggest trade deficit in the Trump Presidency. If you remember, candidate Trump made the trade deficit a big part of his campaign. He wanted to lower it. He said the trade deficit was too big, and the fact that it had been allowed to get so big; all these countries were taking advantage of us; and he was going to fix it! He was going to "Make America Great Again" in part, by getting rid of these trade deficits. So we were going to start operating at a profit again. He's not talking about trade deficits anymore. Does he want to accept responsibility for the increasing trade deficit, just as he claims credit for the rising stock market?

Trump Now Takes Credit for the Stock Market but not the Trade Deficit

When Trump was a candidate, he never promised, "Vote for me and I'll make the stock market go up!". He said the stock market was a bubble. Part of the problem was that the stock market was the only thing going up. The economy was actually getting worse, despite the fact that we had a stock market bubble. So a higher stock market was not part of his stump speech, yet that's all he talks about now is how high the stock market is.

Trade Deficit is Not Shrinking

What was part of his stump speech was …
Senate Passes Its Version of Fake Tax Reform – Ep. 305

5 december 2017 · 52 min
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Market Rallies on News of Passing Tax Cuts Act Lees meer

Late Friday night, or I guess early Saturday morning, the Senate passed its version of the Tax Cuts and Jobs Act. Last week the market, as it became more apparent that the Senate was in fact going to pass the bill, the market was rallying, and continued to rally and, in fact rallied again today. This was the first chance the market had to react to the Senate actually passing their version of the bill.

DJIA Up, NASDAQ Down

At one point today: the DJIA was at 24,534, that's the new record high. It had surrendered most, if not all the gains by the close. The Dow closed up only about 58 points - still, a new record close at 24,290. The NASDAQ, on the other hand was down as the correction, and maybe the beginning of a bear market (we don''t know yet). The correction in the technology sector continues. The NASDAQ was down 72 points today. Although, even when the Dow was up 250 points earlier this morning, the NASDAQ was still down about 50 points. So the tech stocks are weak. The S&P ended up negative on the day, although it hit a record high intra-day.

Who Benefits?

Part of the justification for the markets rallying is the tax cuts. If corporate taxes are going down, then your after tax earnings are going up, and since stocks' value is in theory a function of their after tax earnings, if your after tax earnings goes up, then all else being equal the stock is going to be more valuable. But clearly taxes that are not earning money will not benefit from lower taxes.

Republicans Abandon Any Pretense of Smaller Government

I wanted to get into an analysis of the Senate version of these tax cuts. There was one Republican senator who voted the Tax Cuts and Jobs Act, of course all the Democrats voted against it, but Senator Bob Corker, who voted against it on the principle of adding to the debt. There were some interesting rumors floating around last week that in order to get Corker to vote yes, they considered adding an auto…
No Such Thing as a Permanent Tax Cut-Ep. 304

28 november 2017 · 37 min
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Buy the Rumor Sell the Fact Lees meer

One of the things that could de-rail Wall Street enthusiasm is if Republicans are not able to deliver on the promised tax cuts. Of course, even if they are able to deliver, it will be a, "buy the rumor, sell the fact". Especially since the fact is not going to deliver the promises of the rumor, which is more economic growth. These tax cuts are not going to grow the economy because they do not shrink the size of government.

When the Fed Loses Control of the Bond Market

Government continues to grow, despite the tax cuts, meaning that government will have to find an alternative source of revenue, and that alternative source will be deficit spending and money printing, which will be negative for the economy. Ultimately, it will also be negative for the markets - maybe not in the short run, because money printing has not proven to be a negative for the markets thus far; it will only be a negative when it backfires and the Federal Reserve loses control of the bond market and when it can no longer pretend that inflation does not exist.

No Slam Dunk

When you look at the prospects for the tax cuts, I think the Senate is going to vote on Thursday, whether or not to pass its version, of course, if it doesn't make it through the senate, then it's done. Even if it makes it through the Senate, it needs to go through a reconciliation process so that the differences between the Senate and the House versions can be ironed out. Then they have to hope to get everybody to vote for the reconciled version, which is no slam dunk. Apparently, there are about 6 senators who are not fully on board with these tax cuts, who have expressed some reservations. So they have to get most of those 6, otherwise it is not going to work.

Individual Tax Cuts Expire in 2025

One of the more interesting discussions has to do with the fact that in the Senate's version, the individual tax cuts, most of them, anyway, expire in the year 2025. So that's not even a full 10 year…
Frankenfed Finally Fears Its Own Monster – Ep. 303

23 november 2017 · 41 min
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Fed Fears Inflation Is Not High Enough Lees meer

Fed statements drove the markets today; particularly the foreign exchange markets and the precious metals markets. First we got a quote from Janet Yellen early this morning in which she was talking about inflation. Her concern is that inflation isn't high enough. Here's and exact quote from Janet Yellen:

“It can be quite dangerous to allow inflation to drift down and not to achieve over time a central bank’s inflation target,”

Dangerous? Dangerous to whom? She also says that one reason it is dangerous is because inflation expectations are likely to drift down, too. So she's not only worried that inflation isn't high enough, but she is worried that people won't be worried about inflation. Why is low inflation dangerous?

What's so Bad About Low Inflation?

First of all, it's not even negative. She's not saying we are going to have deflation, which I don't think is bad anyway. She is just saying it is dangerous if we don't have enough inflation, meaning that if we have 2-2.5% inflation, we're out of the danger zone, but if we have 1.5% inflation, we're in this danger zone?

What is so dangerous about prices not going up? This is all a bunch of nonsense that the media just accepts. Now, I'll tell you why it is dangerous and for whom it is dangerous: The reason the Fed wants high inflation is so the next time they cut interest rates, they can create a negative rate. They know that the bubble is so big that just low interest rates are not going to do anything. This addict is so hyped up on this "sauce" that we have to get rates negative. Low interest rates are not enough. They've got to be negative.

Major Ramifications for the Reserve Currency

So the Fed has got to be able to get the Fed Funds Rate below the inflation rate, and they need it to be way below, because, let's say inflation is only 1% and they go to zero interest rates, well they have -1%! That's not enough! They might think we need -3% or -4%. Well, if zero is the…
Financial Conditions Easiest Since 1994 – Ep. 302

18 november 2017 · 34 min
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Financial Conditions Are Loosest Since 1994 Lees meer

I was reading an article today that the Chicago Fed released their National Financial Conditions Index (NFCI) and according to their research, financial conditions in the United States are the loosest since January of 1994. Of course, that was early on in the dot com bubble, before it even "bubbled up", it was just at the beginning of that bull market, yet the Federal Reserve has been tightening; raising interest rates for a couple of years. They've been talking about shrinking the balance sheet - why is it that financial conditions are looser now than they were when the Fed was still at zero?

Fed Behind the Curve

I have been talking about this the whole time. The Fed is so far behind the curve. Yes, they have raised interest rates, but it is too little too late. Even the official inflation rates have risen as much if not more than the rate hikes. Meanwhile, the stock market keeps going up and now that you have the dollar going down, a weakening dollar actually adds to the loosening of financial conditions which are obviously going to get a lot looser if the Fed doesn't really start jacking up rates faster, which I don't think they are going to do.

Relapsing Back into Recession

In fact, I think they are going to get ready to cut rates again and loosen financial conditions even further as the economy relapses back into recession, which I said in my last podcast, would have already been here had Hillary Clinton won the election. Since Donald Trump won, all this false optimism is delaying the onset of that recession for a year or two, but it's not preventing it. So if financial conditions are this loose now, when the Fed is tightening, imagine how much looser they're going to get when the Fed is easing.

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Lies Republicans Tell to Sell Tax Cuts – Ep. 301

16 november 2017 · 42 min
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Faltering Expectations Lees meer

The U.S. dollar and the stock market continued to be a little bit under pressure this week as anxieties are rising over the fate of the tax cuts with so many investors are putting so much expectation into the proposed tax cuts.

Tax Cuts Do Not Reflect Smaller Government

I have gone over many times on this podcast why I do not believe the tax cuts are going to help the economy. Tax cuts are good for the economy to the extent that they reflect smaller government. If you are going to make government smaller, and government is going to be less of a burden on the economy, if government is going to take fewer resources out of the economy, it will be freeing those resources up for the private sector. If you are lowering people's taxes because you relieve them of the responsibility of paying for a larger government, that is a big positive!

Government Will Have to Print or Borrow

Any time we can take resources out of the government sector and put them back into the private sector, those resources will be used more efficiently and more productively, the economy will be better off. But if we simply cut taxes, and allow government to get bigger and bigger, that is not good for the economy. All that is happening is that the government has to find and alternative source for paying for the resources it is consuming. And if it is not going to collect it through taxes, then it is going to have to borrow it or print it. Those other ways of sucking up those resources do more economic damage than what otherwise would have been the case if they had just left taxes alone.

So Everybody is Wrong

So everybody is wrong in believing that these tax cuts are going to be good for the economy. They are not going to be good for the economy, and they are certainly not going to be good for the dollar. They will hurt the dollar because, by definition, instead of removing dollars, the government is going to print dollars out of thin air and spend that. So they are debasi…
Senate Rearranges the Deck Chairs – Ep. 300

11 november 2017 · 58 min
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No Real Tax Relief Lees meer

Yesterday the Senate released their version of the Tax Cut and Jobs Act, and it is not that different from the House version. There are some differences, some of which I will get into, but the main problem is not the difference, but the similarity. The plans don't deliver any kind of substantial tax relief, in the manner that President Trump refers to as, "the biggest tax cuts ever". It's not even close. For most people, there will be minor tax cuts and for other people there are actually minor tax increases.

Democrats: "I'll Give You Something You Did Not Earn!"

The real problem, again, is that Republicans can't really be Republicans, given how much debt we have. They like to talk about lower taxes - that's how they get elected: "We're going to lower your taxes!". The Democrats are generally the party of, "I'm going to increase your benefits! Vote for me and I will give you something you did not earn." What the Republicans used to say is, "Vote for me and I'll let you keep more of what you did earn." That was really the difference between the Democrats and the Republicans. The Democrats were about taking things from other people and the Republicans were about keeping your stuff.

You Can't Take Away an Entitlement

The problem is, too many Republicans are really Democrats or they're afraid to cut any government spending. At this point, the deficits are so big that you can't really have big tax cuts unless you're willing to cut government spending. Most Republicans are not willing to do that. Sometimes they will vote not to create a new government entitlement, but they will never vote to take something away, which is why they didn't really want to take away Obamacare. A lot of Republicans didn't vote for it, but they are not going to vote to kill it.

Small Government Everywhere but in the Military

The problem is, if you really want to cut spending so you can have tax cuts, where's the money? The defense budget is big, and most Republicans do…
Trump’s “Surprise” Win One Year Later – Ep. 299

9 november 2017 · 34 min
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Conventional Media Was Surprised Lees meer

It's hard to believe has been a year since Donald Trump shocked everybody, at least everybody in the conventional media, Wall Street, all the pundits, professional politicians, anybody who has anything to do with Saturday Night Live... Nobody believed that Trump a snowball's chance in Hell of winning the White House. Hillary Clinton had already picked out her china patterns, she had this big glass ceiling that she was going to shatter in her victory party. So everybody believed that Trump was going to lose and Hillary was going to win even after the polls closed. It took about an hour or two for reality to set in.

Conventional Media Was Surprised

So now it has been a year. Of course the stock market has gone up a lot during that year, in fact, the market was up just under 21% in Trump's first year. Of course, Trump never lets you forget this because he constantly talks about it, but he says this stock market rise is unprecedented - and that is a lie! Why do you have to go out of your way to lie when 21% is still a big move. In fact if you go back to Eisenhower, which is almost 70 years, this is the fifth biggest rally for a President's first year. That's still not bad, it's fifth place. The guy in last place is George W. Bush.

Not Unprecedented

Unfortunately, Bush was elected in 2000 and the market tanked that year, it was down 20.4%. That is the worst performance of any President. Trump is #5, but let's look at #1; Number one was Bill Clinton - Democrat, 1996, his second term, the market was up 31.7%. So that's a 50% greater rise than Trump's first year, yet Trump is claiming that this is unprecedented. Kennedy, first term, 1960, the market was up 28.4%. In third place, Barack Obama's second term the market rallied 23.9%. Then George Bush (41), in 1988, the stock market rallied 21.7%. So Trump is certainly in the top third, but his first year is not unprecedented.

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Obama Employment Trends Continue Under Trump – Ep. 298

4 november 2017 · 32 min
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High Expectations for Jobs Numbers Lees meer

This morning we got the release of the October jobs report, and it followed the hurricane-related very weak report that we got in September. This time, the reason actually was weather-related. Remember, they originally reported a decline of 33,000 in September. No one cared, though, because it was all about the hurricane. This month everybody was very optimistic; the consensus for October was 325,000 jobs.

Numbers Fell Flat

I was watching CNBC this morning and they were all trying to guess the jobs number. Everybody ended up being over. Rick Santelli's estimate actually was 401,000, but most guys were somewhere between 350 - 400,00, so everyone on CNBC was more optimistic than the consensus. And then the number came out at 261,000. Everybody went over, so they all lost by the Price is Right rules.

Lowest Unemployment Since Dot Com Bubble

But beneath the surface, this is a weak report - even weaker than the 261,000 jobs that were reported. The unemployment fell to 4.1. That's a new low for this cycle. You have to go all the way back to the dot com bubble to get an unemployment rate this low. I don't know if Trump tweeted about it yet, but I'm sure he's going to talk about it: "Oh this is great!" He's going to take credit for the drop in the unemployment rate. But the problem is, the reason that the unemployment dropped was because so many people left the labor force

Largest Labor Force Exodus

We had 968,000 people leaving the labor force in October. This was the third largest monthly exodus ever, causing the number of Americans currently exiled from the labor force to hit a new record high - 95,385,000. The labor force participation rate plunged back down to 62.7% from 63%.

Obama Revisited

This is the exact same type of jobs numbers we were getting under Obama, where you'd have a falling unemployment rate because so many people were leaving the labor force and so many people were working part time. Candidate Trump was extr…
The Swamp Wins on Taxes and the Fed – Ep. 297

3 november 2017 · 46 min
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No Change in the Fed Swamp Lees meer

The announcement of the new Fed Chair, Jerome Powell, represents a commitment to the status quo at the Fed. President Trump has nominated the person most likely to do exactly what Janet Yellen did for President Obama. Powell has voted in lock step with Janet Yellen for the entire time she has chaired the Fed. The only real difference between the two is that Yellen is a Democrat and Powell is a Republican, even though he was nominated to be on the Fed by President Obama.

Politics as Usual, Rather than Change

Powell does not have an economics degree. Initially you might think that's a plus; Bernanke and Yellen have Ph.D.'s in economics, but they know nothing about economics because they learned from Keynesians. But Powell has hung out with these folks for such a long time, I assume he has all the same failures when it comes to understanding economics. More important than that is the politics of this. Jerome Powell embodies everything Candidate Trump criticized about the Fed and about Janet Yellen. President Trump accused Janet Yellen of being political, keeping interest rates artificially low to make Obama look better and to help Hillary get elected, and all of that was true. This is why many people voted for Trump, they voted for change. They thought that he was going to drain the swamp. Well the water level at the swamp is not going down at all with the nomination of Jerome Powell. Trump interviewed John Allison, who would have represented a change; he is a free market guy, and Austrian economist, Ayn Rand fan, he would have been a market change in direction at the Fed

Cut, Cut, Cut Plan

Now let's turn to the sham that is the Tax Cuts. Donald Trump wanted to call the plan the Cut, Cut, Cut Plan. Instead, they named it the Tax Cut and Jobs Act. This plan will definitely create jobs for the accountants. I skimmed through the 450-page outline of this plan, and what I can tell you is I believe that taxes will be much more complicated if …
Tax Reform Trial Balloons Keep Popping – Ep. 296

31 oktober 2017 · 34 min
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Trial Balloon #1: Backpedaling on State and Local Tax Deductions Lees meer

All this talk about tax cuts is all a fraud, because government is getting more expensive and the taxpayers are going to be stuck paying the bill one way or another. They keep on launching these "trial balloons. I was reading over the weekend that they are backpedaling, talking about the idea of eliminating the deduction for state and local taxes, but not for property taxes. So everybody can deduct their property taxes because everybody pays property taxes, whether you're in a red state or a blue state, whether you have state income tax or not. In fact, some states without state income tax have higher property taxes to compensate. So they still are going to allow the property tax deduction. That's the latest trial balloon that I have heard about.

Housing Lobby Against Tax Reform

But we still a lot of Republicans from high-tax states to allow the deduction for all taxes, including income taxes. The housing industry is still pushing back because they want people to deduct property taxes because that reduces the cost of owning property and makes it easier to sell at a higher price because one of the features of the property is a tax deduction. They also want to preserve the home mortgage deduction. I was reading that the housing lobby is trying to get something in there. Because if you double the standard deduction, that means far fewer people will itemize and they won't need the tax break associated with home ownership and that is a problem for the housing industry, that is really selling tax shelters. They are lobbying to get Congress to put back in a "homeowner's credit". Even if you don't itemize, you could still get some kind of tax benefit for being a home owner, which, if we were really reforming the tax code we would not want to do.

Trial Balloon#2: 20% Corporate Tax Rate "Phased In Over 4 Years"

Another trial balloon that came out over the weekend, obviously the market is not liking it, is …
Republicans Won’t Even Consider Cutting Spending to Pay for Tax Cuts – Ep. 295

24 oktober 2017 · 41 min
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We're getting a tax cut! Lees meer

There is one thing now that that has the potential to cause a short-term decline of more than 3% in the stock market, and that would be: no tax cut. If the Republicans announce that they're at a deadlock, and we're not going to have any tax reform or tax cuts, it seems to me the stock market will get hit. Washington and Wall Street both agree that if we don't get this tax cut, the market's going down. So what does that mean? We're getting a tax cut!

Making the Stock Market Great Again

After all, the market is now the barometer of the success of the Trump Presidency, and by extension, the Republicans in the House and Senate. If House Republicans want to get elected in 2018, the Dow Jones had better be higher than when Trump was elected. This is not about making America Great Again, it's about Making the Stock Market Great Again. Not that it wasn't great before Trump was elected, but now the greatness of the stock market goes hand in hand with the greatness of America.

Accelerating the Growth of the Budget Deficit

So we are going to get a tax cut, but that pretty much assures that we are going to get an increase in deficits and the National Debt. They've already cleared the way now in the Senate and the House is about to rubber stamp it someway that the Republicans are allowed to reduce revenue to the Federal government by $1.5 trillion in the tax cut bill - over 10 years. So it's not $1.5 trillion a year, it's only $150 billion a year, over 10 years. Remember, government spending is going to rise substantially over those 10 years, so the government actually needs a lot more revenue in order to cover all its spending. So when you reduce the revenue you just further accelerate the growth of the budget deficit and the resulting National debt.

Republicans Don't Care About the Deficit

We've got a number of Republicans who were very hawkish about the debt and when Obama was President, "We're going to shut down the government…" "We're not go…
30-Year Anniversary of the 1987 Stock Market Crash – Ep. 294

20 oktober 2017 · 39 min
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Black Monday 1987 Lees meer

Today marks the 30th anniversary of the 1987 stock market crash. It's hard to believe that it's been 30 years. I still remember where I was when the crash happened and my reaction to it. It happened just after I had graduated from the University of California at Berkeley. By the time the crash happened, I had already accepted a job in Newport Beach, California. I was going to be working in the commodity options market, but I hadn't started yet.

Lesson: The Market Goes Up

The crash began a few weeks before I was on the job, but I do remember when I first got there, I met a guy who had a lot of S&P 500 puts for clients and for him, anyway the crash was a great thing because he was able to make a lot of money on those puts. Of course the S&P was a fraction of its current value. The market is up dramatically since the 1987, which is the lesson that everybody hope that you learn: "Hey don't worry about the market. If it ever goes down, it's going to come back up."

Trade Deficit Tiny Compared to Now

I remember some of the catalysts that were weighing heavily on the stock market leading up to the crash of '87 was the fact that the dollar was weakening as a result of a increase in the trade deficit - trade deficits that are tiny in comparison to the enormous one that we run today. Yet nonetheless, people were rightly worried about it back then. They couldn't care less about the trade deficits now.

Interest Rates at 9%

Also interest rates were rising. The yields on the 30-year bond (nobody really talked about the 10-year back then) were 9% and they were going up. So you had 9% interest rate, interest rates rising, the dollar falling, the trade deficits getting bigger and the stock market had pretty much ignored what everybody agreed was bad news at the time. The stock market kept going up anyway, despite all of that. Eventually it all came crashing down in 1 day.

Good Company

One of the things I remember about that was how Alan Greenspan reacted. …
U.S. Inflation Is Bullish for Gold and Bearish for the Dollar – Ep. 293

18 oktober 2017 · 42 min
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Inflation Higher Than Expected Lees meer

Today we got the hotter than expected news on prices - on inflation. We got the import/export prices. Import prices were supposed to be up 0.5%, which in and of itself is a pretty big jump, but they were up 0.7. Export were also up; (we would want export prices to go up, because that means we are getting more for what we export) they were expected to rise 0,4%, and instead they rose by 0.8. Double the expectation.

Import/Export Index Methodology More Accurate

Year over year, import prices are up 2.7%. As of last month, the year over rise was just 2.1%, so that's a pretty big jump in the year over year gain. Export prices were up 2.9% year over year. Averaging these out, you get 2.8% as the average increase in 1 year of the price of the stuff we import and export. That's a broad based increase - well above the supposed 2% level the Fed is looking for. They are looking for consumer prices, measured by the CPI, but the Import/Export index represents things the consumers consume, and I would think these numbers are going to be more accurate than the CPI because there is less subjectivity in there. I think the methodology is more accurate than the methodology on the CPI. I think soon we're going to see year-over-year increases import and export prices with a 3 handle.

Markets Working Counter-Intuitively

When this news came out, the immediate reaction was to buy the dollar and sell gold. Why? Why is higher inflation bad for gold? The main reason to buy gold is as an inflation hedge. If you think there is going to be more inflation, then you buy gold. Perversely, the way the markets work now, you sell gold if you think there's going to be more inflation, in fact, you buy the currency of the country that is experiencing more inflation, which is counter-intuitive. Inflation by definition, is the currency losing value. If the currency is losing its purchasing power, why would you want to buy more of it? You would want to get rid of it to a…
Record Confidence in U.S. Stocks Means Trouble Ahead – Ep. 292

14 oktober 2017 · 34 min
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Optimism Rules the Day Lees meer

Friday the 13th was not an unlucky day for the U.S. stock market; all three of the major stock market averages closing at all time record highs. Optimism is ruling the day. In fact, there was a consumer confidence number that came out today revealing confidence in the economy - the University of Michigan Consumer Confidence - and this is a measure of the belief that the U.S stock market will be higher 12 months from now than it is today. By that measure, consumers have more confidence in the U.S. stock market than they have ever had in the past. That would include where we were just before the '08 Financial Crisis and where the market was at the peak of the dot com bubble.

Complacent Investors

In fact, there are other measures of investor sentiment that have never been this high. Look at the VIX, for example, which is really a measure of risk, of investors' need to hedge their portfolios. If you look at that, the VIX is at all time record lows. Investors have never been this complacent about the U.S. stock market - ever! And all of those measures of fear, confidence, are at the lowest and highest readings, respectively, that they've ever been, even though the U.S. stock market is extremely expensive.

Not a Bubble?

The U.S. stock market has only been this expensive near the peaks of previous bubbles. But what's different about this bubble is a) it's bigger, and b) people are even more confident now that it is not a bubble. You have less fear, less anxiety and investors are more convinced that they can't lose than at any prior time, despite the fact that we actually probably have more risk now than during any of the previous bubbles. Of course, it's not just the investors who are confident. Consumer confidence is high, in fact the consumer confidence number came out much higher than expected today.

Government Inflation Numbers Real? Not.

The dollar rallied on that today. Initially, down because of the lower than expected CPI, which is se…
Middle Class Tax Hikes Put Trump Tax Cuts in Jeopardy – Ep. 291

11 oktober 2017 · 32 min
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Congress May Not Deliver Promised Economic Growth Lees meer

I think part of the renewed weakness in the dollar may be due to the feeling that all the tax cuts are not going to pass. The Trump/Republican plan outlined some days ago will be difficult to to get through Congress. Even if it does get through Congress it is not going to deliver the economic growth that is being advertised.

Tax Cuts Masquerading as Reform

Go back to the origins to the Republican dialogue about tax reform. They actually wanted to do reform. All the reform is out the window now. All we have is tax cuts masquerading as reform. But the initial concept that the Republicans had was to try to move toward a consumption-based tax system. They tried to do that through the back door with the BAT (Border Adjusted Tax), which is the opposite of what the Republicans are now promising, which was tax relief for the middle class. That's not what they are delivering.

Getting Around Elimination of State & Local Tax Deductions

A lot of people are going to get tax increases. Part of the problem, though is the elimination of the deductibility of state and local taxes. I mentioned on an earlier podcast that the states can get around this by shifting the tax to a payroll tax that will be fully deductible for the employers. Any resulting reduction in salary would be offset by the elimination of state and local taxes. If the states react the way I think they will to the loss of the deduction, the governments will not reap the tax windfall that they expect, causing much bigger deficits.

Big Deficits Ahead

At the end of the day the bill may not pass because Congress may not be willing to sign on to anything that raises taxes. They want everybody to get at tax cut. How are you going to do that? How are you going to cut income taxes and not cut spending on anything without having a huge increase in the deficit - which of course is what is going to happen.

Recession Ahead

You can try to assume that some of that increase…
Government Costs More When Paid for with Borrowed Money – Ep. 290

7 oktober 2017 · 38 min
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Government Is Not Measured by What It Taxes, It Is Measured by What It Spends Lees meer

Democrats promise free stuff; Republicans promise free tax cuts. What's a free tax cut? That's a tax cut that happens even though you don't reduce government spending. In a recent panel discussion with Steve Forbes, I made the point that government is not measured by what it taxes, it is measured by what it spends. So, if the government is spending money, there is a cost associated with that, whether or not we pay for it through taxation, we're still going to pay for it.

Cutting Taxes, but Borrowing and Printing the Difference Is Worse

We're going to pay for it through more debt, higher inflation, and ultimately higher taxes in the future to not only repay the debt, but to pay the interest on the money we borrowed to finance the tax cuts. So cutting taxes, but borrowing and printing the difference is worse. I would rather pay for government with taxes than debt and inflation and higher taxes in the future. That is the argument I made with Steve Forbes is: If the Republicans are going to tell their constituents that they can get tax cuts even though the government continues to grow, they how do they have the political ability to generate the swell of public opinion to shrink government?

You Can't Have Big Government and Low Taxes

What I want the Republicans to do is make it all about less government. I want the Republicans to say, "You've got a choice. You can have big government and high taxes, or you can have small government and low taxes." That's it. You can't have big government and low taxes. That's what the Republicans want to sell and that's what Steve Forbes was advocating, but if people think they can have their cake and eat it too, they they will vote for that. But if you put it in those terms: "You want lower taxes, you need less government. If you want to pay less for government, then government has to cost less. Yes you can have a big tax cut, more take home pay, but the…
More Gun Laws Will Not Prevent Mass Killings – Ep. 289

3 oktober 2017 · 36 min
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Gun Laws Do Not Prevent Crime Lees meer

The answer to preventing mass killings is not more gun control; Stephen Paddock would have been able to get those guns regardless of whether or not owning them was illegal. He would have found a way to get those guns. Heroine is illegal, cocaine is illegal - there are all kinds of things that are illegal - it doesn't stop people from getting them.

Criminals Will Break Any Law

If you are a criminal, you are going to break the law, and clearly, if you're willing to murder, you're willing to break the law about gun ownership. Had the police not found him when he did, who knows how many people he would have indiscriminately murdered? He still had a hundreds of unused bullets that he was intending to fire at the crowd. He didn't even know who he was shooting; he did not care who he hit. So clearly, someone who is willing to commit that kind of murder is willing to break the gun laws.

Another Person With A Gun Could Prevent the Murder

So gun control would not have prevented him from committing this crime. Maybe if someone with a gun in the hotel had found him earlier they could have shot that guy in the back of the head before he had the chance to shoot as many people as he did.

Beware of Overreaction

What really scares me, though, too, is what kind of backlash we might have, what kind of overreaction for additional security at hotels. Will it be confined to just Las Vegas hotels, or hotels all over the country? I get visions of checking into a hotel being just like the TSA lines at the airports. There is no way to be sure that a hotel can keep guns out of a hotel room. They don't have cameras inside hotel rooms. Is it possible that if they had had extra security at check-in Stephen Paddock would not have been able to get his guns up to his room? He might not have, but this was obviously a premeditated act that took days of preparation, and he could have found a way around the safeguards, or devised another way of killing.

Our Sponso…
Stock Indexes End Q3 at Record Highs – Ep. 288

30 september 2017 · 38 min
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Record Highs in the Markets Lees meer

This is the last day of the third quarter; S&P 500 and NASDAQ ended at record highs. I am not sure what made the Dow miss an all-time record - it was close but no cigar. Other broader measures did hit record highs to close out the quarter, in fact, Donald Trump was tweeting about the record highs in the stock market earlier this morning. Of course, when we were having record highs under Obama, it was a bubble and it didn't matter, but now that it is his bubble, it's now a bull market and it simply shows what a great job he is doing as President.

Weak Dollar Boosts International Markets

Of course, U.S stock markets were overshadowed by international markets, thanks in large part to the weakness in the U.S. dollar. The dollar did recover some of its losses in this closing week of the quarter (I believe, again, a bit of a dead cat bounce). I think the dollar is going to have its weakest quarter of the year in the fourth quarter, so we'll see if I'm right on that. But even with a little bit of a bounce, the dollar index back up to 93.o7. Despite that, foreign markets still well out-performed the U.S. stock markets in Q3 as did gold stocks. If you bought gold stocks, they did better than the S&P in Q3.

Gold Seeking Key Level

I think the divergence between the gold stocks and the S&P is going to accelerate in Q4. Obviously 1300 was not really the breakout; gold got all the way up to $1350 before turning back, and it's now back below $1300; it was off another few bucks today. So I think maybe $1300 wasn't the key level. It's probably $1350 or higher before we get the breakout. I think we're at $1280 right now.

Personal Income and Spending Weak

More bad economic news: the big number was personal income and spending. It met expectations, relatively, except they did revise July down. It was originally reported at +1.4% and they revised it to +1.3%, so, weaker than they had originally reported. For August it was up .2% and consumer spending …
Pros and Cons of the Trump Tax Plan – Ep. 287

28 september 2017 · 34 min
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Estate Tax is Out Lees meer

Today President Trump announced some of the details of his highly-anticipated tax reform, which is really not tax reform, it's more of a tax cut masquerading as a reform. I would say the best part about it is the elimination of the estate tax. That, in and of itself is a very substantial improvement. That tax should not be there; it raises very little revenue but does tremendous damage to businesses. It impedes the ability of a family business to be passed down from generation. It leads to the destruction and dismantling of businesses, the loss of know-how, ingenuity and jobs.

Fewer Tax Brackets

As far as the rest of the plan, I like lower taxes, I like fewer brackets (I'd like to have just one bracket - I'd like to flatten it all the way down to zero). Under the President's plan, the brackets are 12, 25 and 35%. I'd just as soon it would be one bracket of 25%. If we are going to have an income tax let's let everybody pay the same rate. The new plan is an improvement over the number of brackets we have now. But again, remember, some future President can just expand on these brackets. In fact they're already talking about a fourth bracket because the highest bracket, 35% represents a reduction of the current top rate of 39.6%. Of course you have to add the 39% Obamacare tax and, of course a lot of people have to add the state income taxes.

State and Local Taxes No Longer Deductible

By the way, if this version of the bill passes, state taxes will no longer be deductible. That was the one deduction that they were willing to give up, state and local taxes, but they preserved the home mortgage deduction. Personally, I'd rather see it the other way around: get rid of the home mortgage deduction and allow people to deduct their state and local income taxes. I have a problem on taxing people on money they never got. If the state taxes you, you never get that money. Why should the Federal government tax you on the money the state took from you before …
Did Yellen Push the Envelope Too Far? – Ep. 286

22 september 2017 · 37 min
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Yellen Putting On an Optimistic Front Lees meer

Everybody is watching Janet Yellen this week; the Federal Reserve met and did not raise interest rates - no one expected them to raise interest rates. But Yellen did offer a more optimistic assessment on the economy than most people were expecting. In fact, she shrugged off all these hurricanes and did not mentioned all the money that will have to be borrowed to repair all the destroyed infrastructure.

No Rate Hike

She's not worried at all about the impact of the hurricanes on the economy, and based on how upbeat she is, the markets are convinced that we are going to get another rate hike between now and the end of the year. Most likely December - and I think the markets had already started to price out a December rate hike and now they are pricing it back in.

Shrinking The Balance Sheet

But what everybody was waiting for was the plan on quantitative tightening. They are afraid to use that language, but they're just talking about winding down their balance sheet. Janet Yellen did say that they would begin in October or November. They will not roll over $10 billion per month. Now, if they earn $15 billion in interest, they are still going to re-invest $5 billion. So it is possible that even though they are doing this "taper", that the balance sheet could still be getting bigger.

$10 Billion a Month Forever

If they stay at $10 billion a month it will take forever to actually shrink the balance sheet - which they won't do, because long before we get to forever, we're going to get to the next recession and then they will have to crank up the balance sheet.

Fed is in a Box

The Fed is in this box, they've boxed themselves in. They have kept rates so low for so long, they've allowed so much debt to accumulate it is impossible to allow interest rates to rise, but they can't admit that. So they have to pretend, they have to talk as if everything is going to be fine, they will be able to normalize rates, they will be able to shr…
Fed Minutes More Show Than Substance – Ep. 285

19 september 2017 · 38 min
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Market Anticipates Quantitative Tightening Lees meer

The market continues to rise; people are excited about the Fed meeting that start tomorrow and concludes on Wednesday. Nobody expects a rate hike and there's not going to be a rate hike, but what everybody is looking forward to is the Fed outlining its strategy for quantitative tightening.

Shrinking the Balance Sheet

The Fed hasn't actually used those words yet; I use that term because what they are going to do is they are going to shrink their balance sheet. Right now, it's pretty much as large as it's ever been ever since it has done QE: just over $4.5 trillion. The idea is that the Fed is going to lay out a timetable or a roadmap for shrinking this balance sheet.

Upward Pressure on Interest Rates

I don't know why the markets are so excited about the prospect of a plan to shrink the Fed's balance sheet; if the Fed actually shrunk the balance sheet the markets would not like it. This would put dramatic upward pressure on interest rates, which is not good for stocks.

GDP Estimates Down

Also, GDP forecasts are coming down, we had big reductions late last week. Much of the reductions came from bad economic data we received before the hurricanes. Now, in the aftermath of hurricanes, that bad economic data is going to get even worse. They are already tallying up the damage from Irma and Harvey and it is enormous.

Real Estate Under Water

Speaking about real estate, there are many people who did not have flood insurance. The question is: What are they going to do with their houses? Are they going to borrow more money with low interest rate government loans and be deeper under water? Or are they going to walk away from their homes and just give these underwater housed back to the bank? Also, if Maria hits Puerto Rico and does a lot of damage, the U.S. government will have to pay for some of that.

Government Spending Increase

With all this bad news about the economy, why is the Fed going to try to make it worse by shrin…
Tax Deal With Dems Won’t Stimulate Growth – Ep. 284

15 september 2017 · 42 min
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President Trump Courts Dems on Tax Reform Lees meer

I think the catalyst for the rise in the stock market today is enthusiasm over President Trump's announcement that he is working with the Democrats and is close to a deal on tax cuts. So that if he can't get something done with the Republicans, he will get it done with the Democrats and, one way or another, he's going to accomplish this major tax reform.

Major Shift to Make Economy More Productive

But of course, it's not going to be tax reform; it's going to be tax cuts. Based on what the President is saying, we're not going to reform the tax code, we're not going to have a major shift that will make the economy more productive. The President has already said that the "rich", however he is going to end up defining rich, and I have feeling that "rich" might be a lot less income than people might believe, but he is saying that the rich are not getting a tax cut at all. They may even have a tax hike!

Growth Comes When You Lower Marginal Tax Rate

If you're not going to lower the top rate, if you're not going to reduce the marginal rate of tax, you're really not going to get any economic stimulus, because that's where the growth comes from. Growth comes when you lower the marginal rate and people have the incentive to work harder and product more taxable income, so that maybe the government can actually collect more taxes at a lower rate because there will be more income subject to tax. The reason is, the higher income workers need an incentive to continue to work harder in order to promote savings and investment. if the cost of working harder exceeds the cost of not working, people will choose leisure over productivity.

More Government Spending, Less Revenue

Now if the middle class tax bracket gets reduced a little bit, they probably will not have the incentive to work harder or generate more income or productivity. They will just pay a little less tax. I'm all for lower taxes, but only if we shrink government; only if w…

Alle afleveringen

So Much Debt, so Little Concern – Ep. 332

Trump Is No Reagan & Powell Is No Volcker – Ep. 331

Is the Powell Put in Play? Ep. 330

Republican Hypocrites Embrace Debt to Avert Shutdown – Ep. 329

Deficits Don’t Matter – Until They Do – Ep. 328

Stocks and Bonds Do Dangerous Dance – Ep. 327

Fake Financial News Still Clueless About Monday’s Stock Market Mini Crash – Ep. 326

Will Black Monday Come Early This Time? Ep. 325

Obama & Yellen Strand Trump & Powell in Dodge – Ep. 324

Do Rising Interest Rates Finally Matter? – Ep. 323

Economic Alice in Wonderland – Ep. 322

Clueless Mnuchin Embraces Weak Dollar Policy – Ep. 321

Unfortunately, the Federal Government is Open – Ep: 320

Bonds & Dollar Down, Stocks Up – Ep. 319

Possible Top in Stocks and Breakdown in Bitcoin – Ep. 318

Everything That Can Go Wrong, Will – Ep. 317

China Rings a Bell – Ep. 316

2017 GDP Growth Looks like Obama 2.0 – Ep. 315

Twin Deficits May Doom Stock Market Boom

Those Expecting Low Inflation Are in for a Surprise – Ep. 314

Investors Whistle past the Mother of All Graveyards – Ep. 313

Republicans Take Complete Ownership of the Bubble – Ep. 312

Is It Time to Sell the Fake News on Tax Reform? – Ep. 311

Swamp 2, People 0 – Ep. 310

Yellen Proclaims It’s Different This Time – Ep. 309

CNBC Becomes Crypto News BitCoin – Ep. 308

Trump Continues What He Once Called the Biggest Hoax in American Politics – Ep. 307

Another Trump Flip Flop – Ep. 306

Senate Passes Its Version of Fake Tax Reform – Ep. 305

No Such Thing as a Permanent Tax Cut-Ep. 304

Frankenfed Finally Fears Its Own Monster – Ep. 303

Financial Conditions Easiest Since 1994 – Ep. 302

Lies Republicans Tell to Sell Tax Cuts – Ep. 301

Senate Rearranges the Deck Chairs – Ep. 300

Trump’s “Surprise” Win One Year Later – Ep. 299

Obama Employment Trends Continue Under Trump – Ep. 298

The Swamp Wins on Taxes and the Fed – Ep. 297

Tax Reform Trial Balloons Keep Popping – Ep. 296

Republicans Won’t Even Consider Cutting Spending to Pay for Tax Cuts – Ep. 295

30-Year Anniversary of the 1987 Stock Market Crash – Ep. 294

U.S. Inflation Is Bullish for Gold and Bearish for the Dollar – Ep. 293

Record Confidence in U.S. Stocks Means Trouble Ahead – Ep. 292

Middle Class Tax Hikes Put Trump Tax Cuts in Jeopardy – Ep. 291

Government Costs More When Paid for with Borrowed Money – Ep. 290

More Gun Laws Will Not Prevent Mass Killings – Ep. 289

Stock Indexes End Q3 at Record Highs – Ep. 288

Pros and Cons of the Trump Tax Plan – Ep. 287

Did Yellen Push the Envelope Too Far? – Ep. 286

Fed Minutes More Show Than Substance – Ep. 285

Tax Deal With Dems Won’t Stimulate Growth – Ep. 284