FOMC Minutes Confirm Fed Rate Hike Rocket Not Ready for September Liftoff – Ep. 103

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ Pearl Harbor Day 2018: A Very Interesting Technical Day Today is December 7th, a day that will live in infamy.  Unless you are a Millennial who was educated in the U.S. public school system.  In which case you have absolutely no idea what happened on December 7th 1941. You've probably never heard of Pearl Harbor, you certainly don't know where Pearl Harbor is located.  Maybe you've heard of World War II, but a lot of them haven't.  Even those who have heard of World War II probably have no idea who fought, or even who won. As Goes the NASDAQ, so Goes  the Rest of the Market Today, December 7th maybe won't live in infamy, but it seems to me it was a very interesting technical day in the U.S. stock market, which should give the bulls on the stock market something to think about. I think the action today, particularly in the NASDAQ, (I think as goes the NASDAQ, so goes  the rest of the market) but that action was particularly significant. An "Outside Day" One of the more reliable technical patterns is an "Outside Day". An outside day is when you trade above and below the highs and lows of the previous day, and then close above or below one of those lows. It's an outside day even if you close somewhere in the middle. An "Inside Day" is when you trade within the range of the previous day; you don't take out the high or the low. But the most significant type of an outside day is an outside day where you close above or below the previous day's high or low. That would be called an "Outside Reversal Day".  It' s a positive if you could take out the previous day's low, but then rally and then close above the previous day's high. The Russell 2000 and the NASDAQ Took out Yesterday's Lows What the NASDAQ did today was the opposite of that.  The NASDAQ rallied this morning on, I guess the weaker than expected jobs numbers and took out the highs from yesterday.  In fact, all of the major markets - the Dow, the NASDAQ, the Russell 2000 - they all took out yesterday's highs. But then they came crashing down,  The Dow did not take out yesterday's low - so the Dow did not have an outside day.  But both the Russell 2000 and the NASDAQ took out yesterday's lows. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

8 Joulu 201838min

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ Dow Volatility Started with Huawei News We had another very volatile day today on Wall Street, and it really got started last night with the news of the arrest in Canada of the CFO of the Chinese company, Huawei. Her father is the founder of the company and a very prominent, powerful and influential man in China and this set the mood.  the Dow futures dropped initially, I think about 500 points as soon as the story broke.  Obviously, anything that may throw a monkey wrench in the supposed deal that was made over dinner, mano a mano, down in South America between Trump and Xi.  So this caused some problems. Dow Down About 780 on the Lows The market clawed its way back; I think we were down maybe 200 and change, but then we started selling off early in the morning and when the Dow Jones opened up, we were down maybe about 400-500 very quickly and we sold off almost down to 800 points. The Dow was down about 780 points on the lows.  This is following yesterday's market holiday honoring the memory of the late President George Herbert Walker Bush. That day of mourning, however did not do anything to stop the carnage on Wall Street. Market Clawed its Way Back on Fed "Wait and See" News What it took was an article that came out later in the day in the Wall Street Journal.  That article basically said that the Fed was considering a new "Wait and See" strategy after the December rate hike. And the odds of a December rate hike, which are coming up, the probability is about 75%, which is lower than it was, so there is still a chance that the Fed does not hike in December. But according to the Wall Street Journal doesn't take place immediately.  This is after the December hike. So for 2019, the article suggests that maybe there'll be even fewer rate hikes than the markets believed. Debt Service Costs Creating a Drag Everything was weak until we got this news from the Fed that turned a lot of the tech stocks around and got the market moving higher. I don't think this does anything, because, it doesn't take the December rate hike off the table, and if the Fed raises rates in December, then all the problems that already exist because of higher rates, will be bigger. This means mortgage rates will be going up. Debt service costs will go up. One of the big drags on the economy now is that debt service costs have gone up. So if the Fed adds to that pain by following through with another rate hike in December, it will be just another weight on the economy's back. The Fed is still talking about raising rates in 2019 - they're saying one more, and we're going to wait and see. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

7 Joulu 201848min

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ No Relief As I said on yesterday's podcast, I did not we had a "Wall Street Relief Rally", based on the stand down or truce in the trade war following the backtracking by the Fed on the potential number of rate hikes and the distance we were from neutrality. Interest Rates Anything But Neutral By the way, yesterday I referred to the rate hikes as normal; I should have said neutral - obviously what we have now is not even close to being normal. The Fed is trying to convince us that the new "neutral" rate of interest is now lower than what was considered neutral in the past. Why is that? Because we have such an enormous amount of debt now, the Fed has to keep interest rates much lower in order to achieve neutrality.  But, of course, if the Fed needs to keep interest rates low, it's not neutral. Those low interest rates are actually stimulative. What the Fed is trying to do is use artificially low interest rates to prop up the economy and then claim that those artificially low rates are neutral. They're anything but neutral. They are accommodative.  This is cheap money, this easy money, and ultimately it is going to set off massive inflation. A Terrible Day, Technically Nobody seems to understand that yet, but that's what's coming. People are continuing to be complacent despite today's substantial drop in the value of stocks. Today the Dow was down just shy of 800 points - 799 points.  At the lows, it was down over 800. We didn't close on the exact low; maybe they're going to somehow claim that that was a rally or something - the fact that we closed slightly off the lows.  This was a terrible day, technically, and in fact I mentioned again on yesterday's podcast, the fact that the market made the highs on the open - it did not trade very well, and it looked to me that we would fall down. I did not know that we would drop this much this quickly, but it doesn't surprise me. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

5 Joulu 201843min

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ Interest Rates and Trade War The two things that everybody seems to agree were weighing down the markets were the Fed's relentless drive to normalize interest rates, and figure out where "normal" was, and, of course, the trade war - the threat of additional tariffs overhanging the markets.  So I think it was pretty clear to President Trump who is hanging his hat on the stock market, has decided that the stock market performance is the best barometer of his Presidency. So the fact that the stock market was falling was really a big problem for the President so he had to do what he could to try to get the stock market to go back up. Fed Restated "Normal" The first part of the two-pronged attack was the interest rates. Whether he was able to convince Powell to change his tune or whether Trump just got lucky and the Fed decided to backtrack, as I mentioned in my last podcast, the Fed has now said, "We are just below normal." Meaning that we only need one more rate hike before we get to normal, whereas in the past the Fed had said that normal was quite a ways away, and that the Fed would have to raise rates many, many more times in order to achieve normal.  And of course, anybody who knows anything about the history of interest rates would have to agree that where we are now, at 2% is historically abnormal. It obviously could not be considered neutral based on any kind of past precedent. So the fact that the market was able to backtrack so quickly really threw a bone that the market and Donald Trump badly needed.. Trade Tensions Weighing Down the Market But the other factor that was weighing down the market was all the trade tensions, and all the talk about the tariffs that were going to be imposed in less than a month. The first of next year we were going to get these 25% across-the-board tariffs. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

4 Joulu 201854min

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ The Fed's Game of Chicken The big news was yesterday, when Fed Chairman, Jerome Powell, basically flinched. I've been talking about the game of chicken that the Federal Reserve has been playing with the markets. The way the game of chicken goes, is the markets keep moving lower and the Fed keeps talking about how great the economy is and how many rate hikes are coming in the future. Somebody has to flinch - somebody has to blink. It's like you have these two automobiles driving toward each other, and there's going to be a major crash unless somebody turns the wheel.It seems like it was Jerome Powell who turned the wheel first, and, in fact, was chicken. The Fed Is Worried About All Asset Prices, Not Just the Stock Market As much as the Fed wants to pretend they don't care about the stock market - they absolutely care about the stock market. They are tremendously worried about a weakening stock market.  Remember the goal of quantitative easing was to lift the stock market - to create a wealth effect and it was that stock market-created wealth that was going to drive consumption and the economy. And it wasn't just the stock market; it was also the real estate market.  So the Fed is worried about all asset prices, not just the stock market.  Clearly the real estate market is in even more trouble than the stock market, but both of these markets were headed lower, and I think that is what really prompted the Fed to blink - to swerve in this game of chicken. Powell Suddenly Dials Back the Narrative Now, of course you also had President Trump pressuring the Fed, you had Mnuchin putting some pressure on the Fed, which I think should also be a worrying factor.  We don't really know. There was a lot of speculation about what was behind the Fed's change of heart - change in policy.  After all, up until yesterday, even when you had the Vice Chair speak, the tone was very hawkish: "Yep, we've got lots of rate hikes coming." And now all of a sudden, Powell dials it all back.  Basically, what Powell said that convinced people that maybe there will not be as many rate hikes in the future, is, "We're just below neutral. We're almost there, maybe one more rate hike ought to do it." Is 2.25% to 2.5% Neutral? First of all, we're still at 2%, so that would imply neutral is 2.25% or 2.5%. That really shows you how low the neutrality bar has been lowered given the enormity of the debt bubble that have.  Once upon a time, and not too long ago, a 2.5% Fed Funds rate would have been considered highly stimulative. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

30 Marras 201834min

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ 25% Tariffs Will Inflict Rather Substantial Damage to the U.S. Economy The Dow Jones managed to finish the day up just over 100 points - I think that was about the high of the day, and we erased a loss that at one point was better than 200 points.  I think a potential catalyst was a talk given by Larry Kudlow earlier in the day in which Kudlow raised some optimism over the possibility of a deal with China that would, of course avert the 25% across the board tariffs that are going to go into effect at the beginning of the new year. Of course, there is always the possibility of a resolution, and I still thin that there is going to be some type of face-saving resolution on both sides to avert these 25% tariffs.  I do think that they will inflict rather substantial damage to the U.S. economy, which is already rapidly decelerating, despite everybody's refusal to admit that (including the Federal Reserve, and I'll get to some comments later in the podcast). Trump Is Pulling the Strings But I don't think the President can risk the 25% tariffs as much as he wants to posture that the U.S. economy is in great shape, and we are in a better position than China to weather any kind of short-term damage that might be created by the tariffs.  I don't think the President is eager to test that hypothesis.  I think he would rather take credit for averting the crisis, even if the crisis was a matter of his own doing. He throws out the potential for the crisis, but of course, the only reason why the crisis is dangling in front of us is because Trump is pulling the strings. It's Impossible to Consume What Has Not Been Produced To the extent that the Chinese can produce all these products, they don't need America to consume them; they can consume the products themselves. Once the products are produced, consumption is a foregone conclusion. It's easy to consume what's been produced; it's impossible to consume what has not been produced. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

28 Marras 201847min

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ Dow Could Not Hold Onto the Gain After yesterday's, I think 550 point drop in the Dow, the market bounced back a bit today.  I think at one point earlier in the day the Dow managed to gain over 200 points, but it could not hold on to that gain.  It closed down just under one point.  Very weak technical action for today's pre-Thanksgiving bounce. Normally, the markets are up on the day before Thanksgiving, and in general, they were.  The other indexes all managed to close in the black, although considerably off their intra-day highs. Decline in Retail Touted as Excuse, But It's Just a Bear Market The XRT, which is an index of retailers (I talked about that on this podcast before) snapped an 8-day losing streak.  More bad news came out from retailers yesterday; that was part of the reason that you saw the big sell-off in the Dow.  That was the excuse; I don't think the market needs a reason to go down. It's a bear market, and that's what bear markets do - they go down. Of course people who don't know that they're in a bear market make excuses to try to rationalize why the market is going down because they don't want to admit that they are, in fact, in a bear market. Dead Cat Bounces All Around Everything bounced today, I guess dead cat bounces all around. Even Bitcoin managed a rally. In fact yesterday, Bitcoin got as low as $4,050.  So it held $4,000.  Of course, you have people saying, "Ah Ha! $4,000 is the bottom!" I doubt it. It makes sense that there'd be some support at a round number. I doubt that this is THE low. It may not last more than a day or two, given the momentum in this decline. Malinvestments are a Classic Part of Every Bubble Remember I have talked about all the malinvestments that are taking place. When a lot of people argued with me about why Bitcoin was going to succeed, they pointed out that all this capital was going into the industry; all this infrastructure was being built up, and so therefore Bitcoin was going to work because it had all this infrastructure behind it. My argument was always that  infrastructure represents malinvestment. That is a classic part of every bubble. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

22 Marras 201852min

RATE AND REVIEW this podcast on Facebook. https://www.facebook.com/PeterSchiff/reviews/ FAANG's Took a Big Bite Out of the Market Another Monday, another big down day for the U.S. stock market, it is turning out to be one hell of a quarter; not all of the declines happening in October. But as I said earlier, it doesn't have to be in October for the market to crash. Today wasn't a Black Monday; certainly the percentage decline wasn't out of the ordinary.  Although the FAANG stocks, in particular, there was a big bite taken out of those stocks, and it wasn't just the bite that was taken out of the Apple, which was some of the news that precipitated today's decline. A big down day nonetheless. NASDAQ Having one of the Worst Quarters Ever The Dow Jones down just shy of 400 points - 395, or 1.5%. On the lows, we were down better than 500 points.  The Russell 2000 closed down just over 30 points - that's a 2% point drop.  But the big drop was the NASDAQ - down 219 points, just over 3%, pretty close to the lows of the day. The NASDAQ is now down 12.5% so far this quarter - probably one of the worst quarters ever. I think the only thing that may slow down the decline is if the Fed skips the December rate hike. Although, even that may not be enough. If the Fed doesn't hike in December, the markets might get worried that the Fed knows something and that the economy is much weaker and therefore earnings will be much weaker, so, to me, i think if the market's going to get a stay of execution from the Fed, it's actually going to have to be a rate cut. Homebuilder Sentiment Lower Than Expected There are plenty of other data points that are coming out, both corporate news and news about the overall economy,  In particular, today, that I think weighed heavily on the markets. The first one being the Homebuilder Sentiment for November.  That came out at 10am. So the markets were already trading based on another piece of news which I will get to. Last month, Homebuilder Sentiment's number was at 68. Now anything above 50 is supposedly O.K. It still means they're optimistic. And the consensus was for Homebuilder Sentiment to stay at 68. Instead, it plunged all the way down to 60. In fact, the range of forecasts went from a low of 66 to a high of 69. That drop, from what I've read, that is bigger than any drop we've had during any month of the last bust that led to the 2008 Financial Crisis. We've never seen a rate of decline like this. Obviously that scared the market. This is just one of the first sentiment indicators that is giving way. Obviously, home sales are imploding so you might expect builders to be a little bit nervous about this, even though they are still somewhat optimistic. But remember, this whole rally is built on confidence and the confidence is going to start going everywhere, In addition to the Homebuilders, you're going to see business confidence, particularly small business confidence, which was at a record high. Apple Now in a Bear Market But there was some other particularly bad news that came in before the opening bell, and that one was from Apple. They said they will be cutting production because of lower sales. That decision trickles down, effecting a lot of companies who count on those orders from Apple. The price of Apple is down by 4% on the day. But if you now look at the total drop - just over 20% - and that means the way Wall Street scores it, Apple is now in a bear market. Facebook Led the Market Down Of course, not just Apple, the FAANG's in general, the market took a bite out of those guys today. Facebook leading the market down - down another 5.5% on the day. That brings the total decline for this bear market to 40%. In second place is NETFLIX, that was down 5.5%, today so pretty much neck and neck with Facebook. But since its peak, NETFLIX is down 36%. Our Sponsors: * Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD * Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.com Privacy & Opt-Out: https://redcircle.com/privacy

20 Marras 201850min