Will the Trade War Prick America’s Bubble Economy? – Ep. 369

* This is another big week for economic data; it is a holiday-shortened week * On Friday we get the big Non-Farm Payroll report * If it's a good number, somehow Donald Trump will try to take credit for it, as he has for the rise in the stock market * But I think that the job numbers, while maybe not bad just yet, but I think we will have a lot of problems with the non-farm payroll numbers in 2017 as the air starts coming 0ut of the part-time job bubble while Trump is in office *  But we did get some economic news today, most importantly, the minutes from the last Federal Open Market Committee Meeting and * What do you know? The members of the FOMC are concerned that maybe, they're not optimistic enough when it comes to growth * Because of the stimulus packages that may be passed by Donald Trump, that they may be wrong, and that the economy could grow faster than they think * They also were worried that they might overshoot on the downside on unemployment * Unemployment could actually get even lower than what they thought * And therefore that ultra-low unemployment may put some upward pressure on inflation * Of course, this is all the Keynesian/Phillips Curve myth * That low levels of unemployment are what cause inflation * Ironically, it is the Federal Reserve that causes inflation and there is going to be * Consumer price increases that are the consequences of the inflation that the Fed has already created and that the Fed is going to create * In fact, if we do have a stimulus package that gets through Congress early in 2017 * That includes tax cuts and government spending increases which results in a larger deficit * The inflationary forces are not going to be the debt itself, but the Fed's willingness to accommodate those deficits with more aggressive monetary easing * In fact, the complexion of the FOMC is actually going to get more dovish next year as some of the so-called hawks, and of course, none of them are actually hawks, it's all degrees of dovishness * Some of the less dovish members will be leaving and will probably be replaced by members that are just as dovish as everybody else * So I think the Fed will be willing and able to accommodate these deficits * That is what is going to cause inflation Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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 Tammi 201725min

* The Dow 20,000 party is going to have to wait until 2017 * Although I wouldn't necessarily buy a ticket for January * The selloff that started this week may resume in the first week of the new year * The dow rang out the old year with a 57-point loss to cap a losing week * Probably the first down week since the Trump victory * The Dow now at 19,762 - the close on the Dow for the year *  Most people think it's just a matter of time; we can easily rally early on in the new year * But again, there should be a lot more selling pressure in the new year * I mentioned this on the last podcast * A lot of people who had gains didn't want to take them in December because hopefully the taxes will be lower next year, so why pay higher taxes sooner, when you can pay lower taxes later? * We'll see what happens in early January * If we ring in the new year like we rang out the old,  it could be a long time before we get to celebrate Dow 20,000 * I'm sure eventually we will, even if we don't do it right away * Everything goes up when you're measuring in terms of U.S. dollars, so it is inevitable that the Dow will get to 20,000 * The question is, what will Dow 20,000 be worth in purchasing power - that's a whole different story * It's easy to go up in nominal terms, it's a whole different thing to go up in real terms * The Dow actually had a pretty good gain this year; it was up about 13-13 1/2 percent * Almost all those gains happening post-Trump * Although the problem for Donald Trump, is that he is claiming credit for this rally * What he should be doing is saying * "This is a bubble, I said it was a bubble when I was a candidate, it's still a bubble, now it's even bigger" * But he owns this bubble now; he has embraced it * Donald Trump has come out and said, "The market is going up because of me." Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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

31 Joulu 201641min

* The Dow 20,000 party is going to have to wait - at least for another day * The Dow was down a little bit today - 23 to 19,918 * The broader market was a bit weaker than the Dow * The markets continue to shrug off very weak economic news that came out throughout the day * We got bombarded with all sorts of negative pieces of news that ordinarily, maybe before the election of Donald Trump, would have weighed down the market * Certainly it would have weighed on the currency markets * The dollar would have been very weak and gold would have had a big rally * Instead, gold was down a little bit, and the dollar rose a little bit despite very weak economic data that I will get to * I want to start off by focusing on the stock market and the optimism which is really quite ridiculous and unfounded * Part of the reason for the rally, though, is a lack of selling * We have a lot of people mindlessly buying the markets, but you don't have a lot of selling * One of the reasons is that people would rather sell in January than in December * People are enthusiastic about Trump's presidency because he will cut taxes * If you have a gain in the stock market, why realize that gain now in the waning trading days of 2016 * If you sell now, not only do you have to get your check into the IRS by April of next year * But also, you've got to pay the current tax rate * If you wait until the firs week of January, you don't have to pay taxes until a year from this coming April * You have all that time to use the money and the tax rates may be a lot lower * So why sell now? A lot of people are being given that advice; don't sell now - wait until January * Who knows - this market could ring in the new year with a major sell-off Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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

23 Joulu 201630min

* On Wednesday, the Federal Reserve did exactly what they did last year * They waited until the last possible meeting to nudge the Federal Funds rate by 1/4 of 1% * So now, after 2 years of tightening, the lower bound of the Fed's range has gone from zero to 1/2 of 1% * Now Janet Yellen said the Fed made this decision to lift rates because of its confidence in the U.S economy *  That is complete nonsense * If the Fed were confident in the U.S economy, rates would be much higher than a half of a percent * The Fed would have raised rates a long time ago and by much more than this * In fact, they could have lifted rates by more than 25 basis points on Wednesday * Yet, they had so little confidence in the economy that this is what they did * In fact, I believe that the only reason the Fed raised rates this December * Is the same reason they did so last December: they did it despite having no confidence in the economy * But they didn't want to send a message that they were that worried, so they raised interest rates by the smallest possible amount * And they also did it to try to preserve their credibility when it comes to talking about future interest rates * Think about one half of one percent * When Alan Greenspan slashed interest rates in the aftermath of the September 11 disaster and the bursting of the dot com bubble * When the stock market was plunging and the economy was in recession, he was so worried about the economy that he lowered rates down to 1% * Now Yellen is so confident in the economy, the highest she's willing to raise them is 1/2 of 1%? * This is half of where they were lowered in panic by Greenspan? * So the fact that rates are only 1/2%, what does that tell you about the true confidence that Janet Yellen and the rest of the Federal Reserve have in the U.S. Economy? Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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

16 Joulu 201637min

* It's been a while since my last podcast and I've gotten quite a few emails from people wondering what happened to me * I was out of the country for about a week, and I did manage to get one podcast off from my hotel room * But when I got back, I was backed up with work, and by the time I caught up, I came down with a case of laryngitis, which has still not completely gone away * I want to start off by talking about the stock market * The Dow hit a new record high today; inter-day we got to 19,824 - we closed at 19,796, getting closer and closer to the 20,000 level * NASDAQ, on the other hand was down to day * But one of the interesting things about this is that the rally is predicated on Donald Trump and all of the great things that are going to happen as a result of his election * And of course, the very people who are buying this Trump rally are the same people who are telling us what a disaster it would have been if Trump won * He won - but now they've reversed course * I'm sure if Hillary had won the market would be rallying now with a different spin - we dodged the bullet of Trump * The markets were looking for an excuse to rally, and there were a lot of shorts in the market, so now, we're rallying * But the interesting thing about this is, if you remember when Donald Trump was running for President * He kept talking about the "big, fat, ugly bubble" * He was talking about the stock market * Now, if you listen to Trump talk, he loves the stock market - he's taking credit for the gains in the stock market * He wants us to judge him based on when he was elected, not based on when he is inaugurated because he is trying to claim credit for the gains in the stock market * Wait a minute - if the stock market was a big, fat, ugly bubble before Trump was elected * And if now the stock market is much higher * Isn't it bigger, isn't it fatter, isn't it uglier now? * If that's the case, why doesn't Donald Trump still call it a bubble? Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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

13 Joulu 201633min

* The Trump fantasy rally continued today, of course the big irony here is that all of the stock traders who were so worried about a Donald Trump presidency * Now, he's Ronald Regan re-incarnated * They're partying like it's 1983 - when Regan first stepped in the market had a very difficult couple of years * We went through a recession before we got that Regan Rally - we're going to skip all that * It's amazing that people believe you can have reckless monetary policy for 8 years * You can have zero percent interest rates, you can have all this quantitative easing * You can have this gigantic bubble, and we can magically go from a bubble economy to a real economy * Without any pain inbetween * If that really were the case, the Fed would have tried to raise interest rates a long time ago * The fact that they've been stuck at zero is proof that they really can't go up * Now everybody seems to dismiss all these concerns simply because Donald Trump will be President * Even though this is the exact same guy who scared the bejesus  out of everybody right up until the moment that he was elected, and now, of course everything is going to be great * It's not going to be great - this fantasy is going to come crashing into a wall of reality * Meanwhile, the stock market rally did fizzle out today, the market was up most of the day * The Dow managed to eke out about a 2 point gain * Although the NASDAQ was down about 50 points * Most of the action was in other markets * Oil prices up about 10% on the day * Crude up just under $4/barrel - just below $49/barrel at close * The catalyst for the surge in oil prices was an agreement by OPEC to restrict output * Finally OPEC getting their act together - the Saudis, the Russians working together to reduce production and increase the price of oil * Of course, with the dollar continuing to strengthen, that means oil prices are rising even faster for everyone outside the U.S. * Bond market getting clobbered again today; higher oil prices not good for the bond market * We also got some stronger than expected economic data out today * A lot of it having to do with the euphoria surrounding the Trump win * We did get the ADP jobs number today the precursor the official number the Labor Department puts out on Friday * This one was better than expected by about 50-60,000 jobs * They revised downward the prior month by more than was expected * Because of the recent change in methodology, these numbers are not too reliable Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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

1 Joulu 201631min

* The Dow Jones is in record territory, closing above 19,000; they're already starting to talk Dow 20,000 now * The markets are euphoric * All the traders who were so convinced that President Trump would be a disaster for the stock market, now think it's a boom for the stock market * It shows you how fickle investors are, but also how quickly the narrative can flip * Personally, I don't think it has anything to do with the fundamentals * I think traders are trying to push the markets in a particular direction, and they're just grasping for reasons to justify it * Obviously, what they're talking about now is all this extra economic growth and inflation (supposedly inflation is a good thing) * This is going to result from the the massive fiscal stimulus that we're going to get from the Trump administration * Of course, everybody is ignoring the monetary drag that is already evident from the bloodbath in the bond market * And this is going to continue, in fact if you look at the trend lines * We've broken some trend lines now, which were down in yield and up in bond prices that have been in existence since 2007 * So we have done some serious technical damage to the bond market * The 10-year yield, right now, is at 2.357, which is still low * But it has moved up by 32% in the last 2 weeks * That is a huge percentage increase in long-term interest rates * First of all, this is already decimating the commercial real estate market, which is the bulk of Donald Trump's net worth * He's going to be running his business from the White House while he is running the country; he says that's perfectly legal * Clearly he doesn't want to see a continuation of the collapse in the commercial real estate market * But believe me, these cap rates are moving up rapidly Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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

24 Marras 201640min

* The stock market continues to ride the Trump wave to new highs, in fact the Russell 2000 hit an all-time record high today * The enthusiasm for stocks not being dampened by the carnage in the bond market * We now have the yield on the 10-year treasury up at around almost 2.3 * And the yield on the 30-year now, just below 3% - 2.99 * Yields are still low, but nowhere near as low as they were * And of course, nowhere near as low as they're headed * It's not just the fact that bond yields are rising, but the rapidity with which they're rising * And the technical damage that is being done * This again, as I said in an earlier podcast this could be the beginning of an explosive move up in interest rates * And right now, nobody seems to care, least of all Janet Yellen * She testified today - her supposedly hawkish testimony is one of the reasons that gold sold off today and the dollar rallied * Before she spoke, gold was positive on the day * She did say it would likely be appropriate to raise rates "soon" * And everybody interprets "soon" as, the next chance they get, which is less than a month from now * Although, if the Fed is really determined to raise interest rates in December * Why not just say it? * Why say it may be appropriate to raise them soon? * Just say, "It's appropriate to raise them in December" * They still want to leave themselves plenty of wiggle room * Even though the markets are saying it's a 95% probability * The Fed is still being very coy and data dependent * I think what's more important for the markets is the fact that Janet Yellen acknowledged * That if we get a fiscal stimulus - which she doesn't even think is needed - * She pointed out that we have a growing economy, everything is good, the unemployment rate is very low * And that stimulus now in the form of tax cuts or extra government spending could overheat the economy * And that she will have to adjust her monetary policy based on what Congress and President Trump ultimately decide to do * That's what's scaring the bond markets, because what Yellen is saying, is that * If Congress and  Trump want to step on the gas, she's going to have to tap on the breaks * To prevent this thing from overheating, meaning that with unemployment already so low * Any stimulus now, risks making inflation too high * Meaning that the Fed would have to act to rein it in * Even though she still suggests that the pace of rate hikes will be slow * She's implying that the pace will pick up if need be to offset the stimulus effects of tax cuts and spending increases * And that is what is rattling the credit markets * But what Janet Yellen or nobody else seems to understand is that any significant rise in long-term interest rates will crush this bubble economy Our Sponsors: * Check out FRE and use my code LISTEN20 for a great deal: https://frepouch.com * 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

18 Marras 201622min