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

Summary:  President Trump's campaign promises are falling by the wayside one by one.  First the backfire on the replacement for Obamacare, and then, just as talk of tax reform heats up, the administration seems to be gazing toward the Democrats for a bi-partisan solution to tax reform.  No good can come from bi-partisanship.  When the Republicans and the Democrats are working together, that's when you really have to watch your pocketbook.  That's when the most damage gets done. The stock market initially rallied on the jobs number, but sold off by the end of the day; normally, you get a print this low the dollar index would tank and gold would take off. That didn't happen because the night before Donald Trump decided to Make America Great Again by bombing Syria. * Well, I am back on dry land, I was away for a week doing a cruise with the Real Estate Guys Summit at Sea * One of the presenters was senior vice-president and chief economist of Fannie Mae Doug Duncan * I thought my presentation would be a big contrast to his, I thought he would present the usual government unrealistic estimates, but * I was very pleasantly surprised, as I listened to his presentation, I found I agreed with him * And after a private conversation with him after his presentation, we had a great discussion and we didn't desagree on anything! * He is very bearish on the housing market, very much against Fed policy * He's against the minimum wage * We had a long conversation and we really disagreed on nothing! * I was quite surprised to find a government insider who showed such economic insights * So it's just not Peter Schiff who sees these problems looming on the horizon * In the bond market, in the real estate market * The is a minority of government economists, just like I'm in the minority of Wall Street or investment economists * But it's good to know that there are some good people working within the government * But I wanted to get into topics of this podcast; a lot to talk about * Let's start with the Non-Farm Payroll report * The jobs report that came out on Friday is usually the most highly anticipated release of the month * Everybody was enthusiastic about this report * Earlier in the week we got the ADP number, the private sector number which is normally a precursor to the official government number * and that number was way ahead of estimates, so there was a lot of enthusiasm that we would have a beat for the official government March number * They were looking for 175,000 jobs which was going to be a reduction from the 235,000 jobs reported for the month of February * The actual number of jobs that were created was not 175,000 but 98,000 * Big miss on the headline number * In fact, they actually revised downward the previous month * So they took that down from 235,000 to 219,000 and now we got 98,000 versus 175 * And the private payrolls were even worse; they were looking for 170,000 and we only got 89,000 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

11 Apr 201731min

Summary: President Trump needs to lead, not oppose.  He is opposing the very forces who put him in office.  By aligning with the mainstream Republican Party, he vacates the opportunity to lead the economy successfully through the inevitable consequences of the Obama Administration's failed economic policies. Investors are jumping on the bandwagon of hype surrounding the Trump Presidency.  Abandoning safe havens and emerging markets, they are buying into the American stock market at high valuations, which is the equivalent of abandoning the lifeboat and swimming back onto the Titanic just because the band is playing. * As I suspected, we now have a bit of a civil war breaking out in the Republican Party * On the one side, you have the Freedom Caucus, and then you have everybody else, or the mainstream of the Republican Party * It seems like Donald Trump is the general of the mainstream * One of the battlefields is Twitter * Where you have President Trump calling out even specific Congressional members of the Freedom Caucus by name * And blaming them for the failure of the Republican agenda * Remember: we don't want the Republican agenda * Donald Trump ran on a platform of "Making America Great Again" * One of the reasons America is not great is because of the Republican agenda * Republicans have played a role in destroying this economy * It's not like the Republicans are all good and the Democrats are all bad * That's not the case * The difference, in terms of the economy, between Republicans and Democrats, is like the difference between Coke and Pepsi * They're all politicians! * Their business is perpetuating their own careers and their own power base * What do they need? They need votes and they need money * How do you get votes? Promise something for nothing. * Give out freebies.  Take advantage of the fact that the average voter is a moron, and they're just voting for free stuff from the government * Sometimes there is a difference between the way the Democrats and the Republicans wrap it up * Who said, "Let's wrap up Obamacare in a Republican bow."? * Republicans like to wrap up socialism in different packaging * That's how they get votes - they're afraid to engage the electorate on an intellectual level * Because they really don't have one 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

31 Mar 201742min

* On Monday the market got its first opportunity to react to President Trump and the Republican Congress' failure to repeal and replace Obamacare * With something more palatable * And as a result, the market declined * At the lows, the Dow was down approximately 200 points * Although the "Buy the Dippers" came out, and by the end of the day, the Dow was UP about 150 points * But it was the 8th consecutive down day for the Dow * Which I think was a tie for the longest losing streak since 2011 * Had the Dow been down again today, it would have been the longest losing streak since sometime in the 1970's * So it wasn't that surprising that the Dow rallied * We were up about 150 points, so we more than wiped out yesterday's losses * On the other hand, the dollar sold off yesterday and actually traded with a 98 handle * For the first time since just after the election * Almost all of the Trump-related dollar rally has been eviscerated * The dollar rallied back today closing at 99.71 today * The pound was weak; the Scottish are getting ready to have another referendum * Whether or not they want to leave the U.K. * Remember, the Scots did not want to leave the EU * They narrowly rejected an independence referendum before and now that there is going to be another vote, the market is nervous * Maybe that helped push the dollar down, but we're below 100 on the dollar index right now * Gold got back up to $1260 yesterday; at one point it was up about $17 * I didn't see it hit $1261 * That was about the high for the year * Gold still closed today above $1250 * Silver was actually up again * Adding to yesterday's gain, we're now holding above $18 * So gold and silver going up; the dollar going down * We did get a rally in the bond market yesterday; gave back some of that today * I think today's rally was more of a technical bounce on the "Buy the dip" mentality 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

29 Mar 201730min

*  Earlier I talked about the Trump honeymoon, and  my belief that it wouldn't last long, in fact I thought it might have ended before the marriage began with the inauguration * It did carry on a bit after that, but it seems to me that the honeymoon is ending now * Today, the attempt to repeal and replace ObamaCare went down in flames * That's something I had predicted a while ago; I said that I doubted that they would be able to repeal Obamacare and it turns out that I was right * They didn't do it * In fact, President Trump threw a Hail Mary late in the negotiations by threatening the Republican holdouts: "Pass this bill or else." * He basically said, it's this or nothing - If you don't replace ObamaCare, you're stuck with the consequences * I think that was a bad gamble for the President to have made, in fact as soon as he issued that ultimatum * I thought that was going to be a problem because I didn't think the conservatives were going to buckle as a result of that threat * And they didn't * Now, not only has the bill been pulled, President Trump is in a very awkward position because he's already said * Take it or leave it * And Republicans left it * Now how does he come back to the negotiating table? * Now, if he comes back, he doesn't have a lot of credibility * I still think it would be better if he went back to the negotiation table * I think it was a bad tactic for Trump to say, "It's my way or the highway *  I think that if this bill doesn't succeed, they should try again * They should recognize the problems in the replacement bill and work harder to fix them * The problems is a lot of Republicans don't have the stomach for real reform 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

25 Mar 201731min

* U.S. stocks ended the week with marginal gains * In fact, the Dow Jones was up only about 12 points on the week * The real action happened overseas * Foreign markets were strong, particularly emerging markets * They continue to smoke the performance of the U.S. stock market, confounding the experts * The experts thought making America Great Again would be great for U.S. stocks, but it would be a problem for emerging markets * And thus far, emerging markets have been the beneficiaries of the rally to a much greater degree than have domestic stocks * Although the action this week was not really in the stock markets but in the currency markets, in the gold markets * The dollar dropped by over 1% despite the fact that the Fed raised rates * In fact, this was one of the worst weeks for the dollar in about 4-6 months * Gold was up about $25; up 2% on the week * "Hey! I thought gold was supposed to fall, when the Fed hikes rates * Instead, the Fed hiked rates and the price of gold rose * Buy the rumor, sell the fact, gold sold off on the anticipation of this rate hike and it rallied on the realization of what the market had anticipated, so that is not really surprising * But if you go back to the very first rate hike * That really marked the bottom in gold; ever since the Fed started hiking rates * Gold has been rising * The decline in gold took place when people anticipate those rate hikes * By the time they realized the rate hikes, gold began to rise * I think what will really accelerate the prices of gold * Is the fact that rates are not going to nearly as much as the market anticipated * So what has been built into the gold prices for rate hikes is not going to materialize * The rumors were exaggerated * The fact is not going to bear out the rumor 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

18 Mar 201737min

* Today the Federal Reserve raised interest rates for the third time in 10 years * Of course, the tightening cycle began with the first rate hike in December of 2015 * Followed by the second rate hike in December of last year * And now, breaking from tradition, rather than waiting an entire year for the third hike * We got the hike in March * Of course the Fed had allowed market expectations to rise to 100% in anticipation of this rate hike * When the Fed raised rates for the first time they talked about raising rates for an awfully long time before they actually got around to doing it * Ironically, though, about 2 hours earlier than the rate hike announcement, the Atlanta Fed revised down again its projection for Q1 GDP  to .9 * Remember - at the beginning of February, not even 6 weeks ago, the Atlant Fed was at 3.4% for Q1 GDP * They're down to .9%!  That is a huge collapse in estimates for economic growth in the first quarter * And I'm sure it portends ill for subsequent quarters * And remember - Janet Yellen has always said that the Federal Reserve is not on a preset course * And that rate hikes that they are forecasting will only happen to the extent that their economic forecast pans out * That all of their rosy expectations of economic recovery has come true * Yet none of it has come true * If anything, you've had a collapse in growth estimates since the last time the Fed met, yet * The collapse in GDP forecast has done nothing to alter the Fed's path, because they've ignored all the data * And they raised interest rates yet again * That doesn't mean that interest rates are high, I mean they're still very low * Remember, we're still not at a range between .75% and 1% so the average of that range, the midpoint, is still below 1% * 1% was the emergency level that Alan Greenspan slashed rates to, after the dot com bubble bust and after the September 11 terrorist attack sent the U.S. economy into recession * At that point, in a recession, the lowest rates got was 1% * The Fed would have to hike rates again to get back up there 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

15 Mar 201733min

* I guess you could say a good jobs report is all in the eye of the beholder * And when it comes to President Trump's eyes, he is now beholding an excellent jobs report * Whereas a candidate, similar reports were described by Trump as phony, a hoax * I have a lot more sympathy for Candidate Trump than I do for President Trump * Now President Trump is trying to pretend that the jobs numbers that he used to be so critical of * Are now reflecting what a great job he is doing as President * When there's really no difference between the metrics of this job report and the ones we got under Obama * With probably one exception * And that is in the number we got is better than expected, though not as good as some had hoped, given the very strong ADP number we got earlier * We got a surge in manufacturing jobs there was also a bump in construction jobs * But I am very suspicious of the manufacturing jobs * I know a lot of American manufacturers are really trying to curry favor with Donald Trump early in his Presidency * And this could all be some Trump-related window dressing * This is a long trend of hemorrhaging manufacturing jobs * And I don't think this one blip necessarily means that trend has changed * I wouldn't get too excited; it is a good thing to be creating goods-producing jobs, manufacturing jobs * I'm not criticizing that * But the question is, is it sustainable, is it real, or is it simply some smoke and mirrors * Orchestrated selectively to make Trump look better early on * So certain companies can get what they want from Trump when it comes to tax reform, or other issues where these companies may have a vested interest * Let me go over the actual February Non-Farm Payroll numbers: * The consensus was 200,000 jobs; 227,000 was the number created in January * Most of that was prior to Trump becoming President, though subsequent to his election * So we did 227,000 jobs in January and they actually revised that up to 238,000 jobs * We did 235,000 in February, so actually slightly less, at least based on the initial estimate of jobs created in the prior month * Unemployment rate did fall slightly from 4.8% to 4.7% and labor force participation inched up from 62.9% to 63% as more Americans re-enter the labor force * Average hourly earnings, though, which were expected to rise .3% only rose .2% * But they did revise the prior month from .1% .2% * So I guess that was about a push * .2% is not much of an increase in wages, especially when prices are rising 2-3 times as fast * Remember January CPI was up .6 - triple the rate that wages are up * The average work week remained the same at 34.4% * As I said, what was a little bit different, though was the complexion of the jobs * We did create jobs in manufacturing, for a change 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

11 Mar 201738min

* It looks like the Republicans on Capitol Hill, with the blessing of Donald Trump, are trying to repeal one big healthcare program and replace it with another big government entitlement * They're calling it TrumpCare * First they were calling it ObamaCare Lght, but now they're embracing the term, "TrumpCare" * Whatever it is, it is not going to work * It's just going to be another disaster wrapped up in a different package * But before I get into explaining this, I want to talk a little bit about the GDP numbers and the Atlanta Fed * In my last podcast, I mentioned that even though the Fed was getting closer to the point at which it was going to raise interest rates again * Even though it was talking tough on raising rates, the GDP estimates were collapsing * Well, they collapsed again today * Now the same Atlanta Fed that was at 1.8% for Q1 GDP is now at 1.3% as of today * When we began the month of February - * February 1st - they were looking for 3.4% GDP for the first quarter * If you go back and listen to my podcast, at the time I recorded it * I said, they're kidding. They've got to be crazy - there's no way we're going to get 3.4% * They're going to have to come down, and that's all they've done * And now we're at 1.3% and falling * Now maybe part of that is because we got the worst trade deficit today in 5 years * Although, I think the numbers were highly anticipated so I don't know why that would have come as a surprise * And we got Consumer Credit for December and it was a huge drop in the increase of credit card debt * Meaning that consumers took on a lot less credit card debt than Wall Street expected * Now that's a good thing * I don't like it when Americans go deeper into debt to buy stuff * You've got a bubble economy that's 7%, people buying stuff they can't afford 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 Mar 201731min