Markets, Rate Hikes, and Student Loans – Ep. 60

* What a difference a day makes * Between Tuesday evening, when the markets first began to realize that Donald Trump was going to win the election and the predictions of collapsing stocks and soaring gold prices appear to be taking hold * Because at one point the Dow was down about 800 points and gold was up about $60 * All of a sudden, the sentiment started to shift and by the time the U.S. markets had opened for trading * Gold had lost its rally, the stock market had recovered its losses * And we began a huge rally, in fact, the Dow was up about 1,000 points this week * This was one of the biggest up weeks in the Dow since 2011 * Also the gold market ended up down, I think it was down about $70 on the week * Better than $100 below the high it hit on Tuesday night * Silver also down about $1 * Gold & silver stocks down closer to 20% * The opposite was going on in the bond market, it had its worst week since 2013 * It looks like a lot more carnage can come if we really start to break down; yields are still low * The yield on the 10-year is just above 2.1 and on the 30-year it's just above 2.9 * These are still low yields, but they're not nearly as low as they were * What's more important is the momentum in this move and how much higher interest rates could potentially go * As this bond bubble deflates * What is responsible for this change of heart? * Everybody was so convinced that the markets would tank if Trump was elected that we had a 300+ point rally on Monday, the day after the FBI decided that they weren't going to do anything about the Clinton email scandal * And the market rallied because people thought, "Oh, OK, this means that Hillary is a shoe-in." * And then Trump became President and the market rallied even more * And the opposite on gold; gold sold off when it looked like Hillary would win, and it had a big rally when it seemed that she wouldn't * After we got Trump, the metals went the other way * What is responsible for this change of heart? * Remember, I always said if didn't make sense that people thought Hillary was good for the stock market * What did Hillary mean for business? * More regulation, more government, higher taxes * What was Donald Trump promising? * He was promising tax cuts, tax reform, repatriation, regulatory reform, repeal Dodd-Frank, repeal Obamacare * So he's saying, we're going to take away the regulation, we're going to take away the taxes * That has got to be good for the economy, so why were people so excited about Hillary * When Trump was talking about a pro-growth, pro-business agenda? 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

12 Nov 201645min

* It is Wednesday, November 9, 2016, one day following one of the biggest political upsets in U.S. political history * As Donald Trump shocked everybody by defeating Hillary Clinton * Hillary Clinton was supposedly the most qualified person ever to seek the U.S. Presidency, and Donald Trump had no experience whatsoever * And the establishment had already sworn in Hillary Clinton; it was pretty much a foregone conclusion that she was going to win * I think she was almost a 10:1 favorite even on the day of the polls * Even the early exit polls were predicting a Clinton win * All the while, I felt in my gut that Donald Trump was going to win this election * Why did I think he had such a strong probability of winning? * I understood what almost no one in the mainstream media got, and that is the phony nature of the U.S. recovery * The entire time President Obama was congratulating himself for having gotten us out of the mess created by his predecessor, and bragging about the strength of the recovery * And labeling all critics as "fiction peddlers" * I understood that the "fiction that was peddled" was in fact, reality * And the real fiction peddler was the Commander in Chief * Not only President Obama, but the Federal Reserve - Janet Yellen and the rest of her cronies at the Fed * Constantly talking up the U.S. recovery and how the strengthening recovery would somehow result in higher interest rates * Of course, Wall Street had a vested interest in peddling that fiction * So everybody believed that the economy was strong, and therefore the voters would want to sign up for 4 more years * After all, if Obama was responsible for the recovery voters would want to continue that recovery under Clinton * They would not want to go back to the supposed failed policies of Bush that somehow would be adopted by Trump * I knew that the entire recovery was an illusion * And it simply existed in the minds of the people who fabricated it 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

10 Nov 201628min

* It's not going to be a new record as far as the consecutive days of declines for the U.S stock market * The 9-day losing streak ended today in a huge pre-relief Clinton victory rally * The markets had been factoring in a higher probability of a Donald Trump victory ever since the FBI announced that they were re-opening the email investigation * Thanks to a treasure trove of 650,000 emails on Anthony Wiener's (a.k.a. Carlos Danger) laptop computer * Apparently they have now gone through all 650,000 emails in under a week and yesterday, on a Sunday afternoon Comey made the announcement that the FBI had completed their investigation of these additional emails and that nothing had changed with respect to the FBI's original recommendation * Which was, if you forget, that despite recklessness and carelessness on the part of Hillary Clinton to have set up this private server, and to have used it to send out classified emails * That they found no evidence of deliberate wrongdoing, that Sec. Clinton just made an "honest mistake". * That she had no idea that it was a bad idea to send classified emails out of a private server * I remember at the time, I said, if this is true, she's too incompetent to be President, if she's really that naive * If she really thinks that she doesn't have to handle classified data with any kind of care * Then she's not competent to be President * Either she is incompetent or she's dishonest * Of course there is plenty of evidence that Hillary Clinton lied about the fact that she did, in fact send classified information out of her private server * She claimed that she did not and then the FBI found them * Also, she engaged in a cover up, obstruction of justice * As soon as she knew that she was under investigation, she destroyed evidence that she was ordered to preserve 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

8 Nov 201630min

* Today U.S. stocks extended their losing streak to 9 consecutive days * We haven't had a losing streak this long since 1980 - that was 36 years ago * 8 consecutive down days last took place in the financial crisis year of 2008, so we had tied that yesterday * Now we one-bettered it and we're back to the longest streak since 1980 * The record for consecutive down days is 12 * The last time that happened was in 1966 * And if you don't know what the significance was of 1966 - that was the peak of the bull market * And the bear market that ensued went on for 16 years in nominal terms and much longer than that in real terms * The Dow hit 1,000 in 1966 and it didn't get above 1,000 until 1982! * Of course, adjusted for inflation, 1,000 in 1982 wasn't even close to 1,000 in 1966 * Certainly in terms of gold; gold was $35/oz. in 1966 and in 1982 it was probably about $500 * In terms of gold, the Dow was slaughtered during those 16 years * Even adjusted for the CPI, I don't think we got back to 1,000 until toward the end of the 1990's stock market bubble * We'll see - we may well be down on Monday, so that would make it 10, and if we're down on Tuesday, 11 * And if Trump wins, then we'll probably be down on Wednesday, so we'll see if we can set this rather dubious record * Gold, on the other hand was going in the opposite direction * It managed to finish the week with a small gain, but nonetheless closing above $1300 * Closing out the week at $1304, that's the highest weekly close in some time * Silver also eked out a small gain of 8¢, at 18.41 * The dollar continued its losing streak of late, with the dollar index closing below .97 with a .96 handle - 96.89 * As stocks are weakening, so is the dollar, and gold is strengthening * What does this portend for the presidential election? * Typically, when the incumbent party wins, which in this case would be Hillary, the stock market rises prior to the election * Normally, when the stock market is falling, it's an indication that they are going to oust the incumbent party * Based on the stock market, one might think Trump is heading for an upset win * Is the stock market falling because it is worried about a Trump presidency, or is it simply falling because it doesn't matter? 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

4 Nov 201627min

* Today the possibility of a Fed rate hike in December rose about 10 points * We're now at about an 80% probability, at least the way the markets assess the odds * That the Fed will raise rates in December after failing to raise rates today * If you remember, after they didn't raise rates last time there was some probability of a November rate hike * But by this morning, the probability of November had pretty much been reduced to about zero * With everybody believing that the Fed would raise rates in December * And now, as a result of their failure to hike in November * The probability apparently is now higher based on the language of their non-hike * This, despite the fact that there were only 2 dissenters when the Fed didn't raise interest rates the last time they met * Three members voted to hike and six voted not to hike * This time it was 7 to 2 in favor of not hiking * So what happened between meetings that caused the one guy who wanted to hike rates last time to decide he doesn't want to hike rates now? * Is it possible that some data came out over the course of those weeks that caused him to re-assess his feelings about the strength of the economy * And if so, why is that member going to flip back to "hike" in December, after just flipping to "no hike" * Is it pure politics? 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

3 Nov 201629min

* Yesterday we finally got the release of the initial estimate for Q4 GDP * The Atlanta Fed had originally come out with an estimate of about 3.8 and had steadily reduced their estimate * They got down as low as 1.9 before ratcheting it up a couple of times and their estimate was at 2.1 when we got the official release * And the number came out at 2.9; not only much higher than Atlanta Fed's estimate, but much higher than the consensus forecast at 2.5 * I am very suspicious of this number * This is the strongest number in over 2 years and it comes out less than 2 weeks before the election * Of course one of Donald Trump's issues has been the weak GDP growth, which has averaged just 1% for the last 3 quarters * All of a sudden it's 2/9? * Does anybody really believe that suddenly the U.S. economy in the fall of 2016 was 3 times as strong as the last 3 quarters? * I dont' think so.  I don't believe that for a second * I do believe that after the election when we get the revisions we will get a downward revision to this number * But, even if this number were real; even if it holds up * If you average the last 4 quarters to get the entire year, looking back, you're just below 1.5% for the entire year, which is still extremely weak growth * Once you look beneath the surface of this 2.9, it's very easy to see how they rigged it, to use Donald Trump's expression * Not that it's some kind of a conspiracy * Look at these numbers - there was a 10% spike in exports - this the biggest gain in exports in 3 years * It's not in manufactured products that we're exporting, where you've got some high-paying jobs * It was primarily let by a one-time surge in soybean exports 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

29 Okt 201636min

* The odds of a  December rate hike continue to ratchet up above 70% * We had a parade of Fed officials, most recently again today coming out and talking about why a December rate hike is a good idea, probable, possible, appropriate * You name the adjective, some Federal Reserve president, governor is discussing it * The markets are ratcheting up their expecations * The dollar index continues to move higher, we hit about a 9-month high today * We got above 99; but we didn't close there, in fact the dollar index managed to close down a notch * Interestingly enough, gold had a pretty strong day today, we had about I think we're at $12.73 * Even to the extent the FOREX traders are worried about a December rate hike, the gold traders don't seem to care about how a rate hike might impact the price of gold * This says either the gold traders don't believe that a December rate hike is coming, or they've correctly concluded that even if the Fed does raise interest rates in December, it's no big deal * It's too little too late to be a negative for the gold market * The Fed is going to deliver far less than it promised when it comes to rate hikes * In fact the most interesting comment from a Fed official came last week from St. Louis Fed President James Bullard * He said that the Federal Reserve only needs to nudge interest rates up by 25 basis points * Right now, the official rate of Fed funds is between .25 and .50 * It used to be between 0 and 25 * I think where we actually are right now is 38 basis points * So if we moved up 25, at least these are the numbers Bullard is throwing out, we'd move up to 63 basis points for the Fed Funds Rate * Which is just barely above a half point * He says that's all we need to do is nudge it up to 63 basis points, and that's it - we're done * He said, "We need to do it in December, but then that's it, interest rates are going to stay really low for years." * He's talking 2 or 3 years or maybe even more of ultra low interest rates, despite whatever is happening in employment, and inflation * This is all we need * Nudging up by a quarter basis point and we're done * I was surprised, to be honest, that we didn't get more of a reaction to this admission by Bullard that the next hike, if it comes in December is the end of it * If that's it and then we're on hold for years * Sometime, during that period of time, we're going to find ourselves back in recession * Even if we're not in recession now * Even if this so-called recovery is in its twilight * Remember this is the 3rd longest recovery of the post-war era and it is the weakest recovery - ever * And, of course, it has the most stimulus * So despite having the most stimulus, it's the weakest * Clearly, it's going to run out of steam * So if the Fed does in fact raise rates ever so slightly in December and then say: * "That's it for now, we're just going to wait" * What's going to happen is, we'll be back in recession * If Hillary Clinton becomes the next president, and it's looking more and more likely that that nightmare will become a reality * If she is, she will try to stimulate the economy * Look what happened with George Bush * When George Bush was initially elected the first time, he inherited the bursting of the dot com 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

25 Okt 201647min

* The official probability of a December rate hike continues to diminish over the last several days * The markets had the rate hike at about a 70% probability; now we're down to about 60% * Personally, I think the odds are closer to zero, and over time, as we get closer and closer to that December meeting, the odds will steadily move down * Just like the Atlanta Fed keeps moving down its estimates for Q3 GDP; most recently down to 1.9% * I expect the Atlanta Fed to move lower again this week on more weak economic data * As the potential for a rate hike diminishes, gold's appeal improving, gold prices now back above $1260 today * We've had a couple of back to back strong days in the gold sector * Maybe the catalyst for the recent correction in the price of gold was the renewed expectation of a November and now December rate hike * As those expectations are realistically dialed back, you'll see more money moving into the metals * The dollar, though, continues to trade firm * It's not moving higher, but it's not really surrendering much of its gains * Maybe some of this has to do with weakness particularly in the pound * Why is the pound so weak? * The Bank of England was very forthright, they wasted no time in warning voters not to vote for Brexit as it would be a disaster for the British economy * Well, sure enough, the people voted for Brexit, and so now, it is a self-fulfilling prophecy * The central bankers in Britain had convinced themselves that the economy would require stimulus, and therefore announced an increase in their QE program 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

19 Okt 201647min