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

* We got a lot of economic data released today, most of it bad, and most of it worse than expected * What I did not expect was that the market shrugged it off * Initially, there was a little reaction; gold jumped $3 but it never gained momentum and it rolled over to -$10 at the time of this recording * The dollar index, which had moved into negative territory immediately following the release, quickly recovered back to positive territory * It's still early in the day, as I'm recording, so this could change as some of this economic data has a chance to sink in * I noticed that the Atlanta Fed just reduced its Q3 GDP estimate from 3.3 to 3% * That' the second reduction in a row * This is the lowest estimate the Atlanta Fed has had in about 2 months, although it is still pretty high * Let's go over the data we got today: * Retail Sales was one of the more significant numbers; everybody looks to retail sales to judge the health of the consumer * Last month's number, relatively weak, it was flat, and they were looking for another flat month, but we were -.3% for August * It gets worse from there - less autos, they revised the prior month from -.3 to -.4 and in August they were looking for +.3, they got -.1 * Less autos and gasoline, we were down last month .1%; they were looking for +.4% and we're down another .1% 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

15 Sep 201627min

* Today was a day of damage control for the Federal Reserve * It almost seems like whenever they discuss the possibility of a rate hike, they're really launching a trial balloon * They want to gauge the possibility of a rate hike and then if the market kind of shrugs it off, or blesses the rate hike the way it did last year nearing December, if the market seems it's OK with a rate hike, then maybe they'd consider actually implementing one * But before they do it, they want to test the waters, they want to see how the market reacts to that possibility * Clearly, the near 400-point decline in the Dow on Friday showed that the market really wasn't very friendly to the possibility of a rate hike * Let alone the certainty of one * Just the mere possibility, however remote, really spooked the market * Today the Federal Reserve had a chance to dial it back * They had 3 Fed presidents speaking today, and not one of them talked about the possibility of a rate hike * Starting with an 8am talk this morning by Atlanta Fed President and CEO Dennis Lockhart * Now Dennis was specifically asked about a rate hike, and whether he thought the Fed would move in September or December * He specifically refused to comment * He said, "Financial markets seem to be very sensitive to the remarks of Fed speakers at the moment" * And so in light of market sensitivity, he refused to answer the question * Why not answer it? Don't you want to prepare the markets for a possible rate hike? * Well they don't want to say what they want to do, because they don't like the way the market is reacting * You'd better believe that if the markets reacted favorably to a rate hike, they would have stayed on script * Because of the the sell-off on Friday, and where futures opened before Lockhart's speech, the Dow was set to open up down 100 points or more * But once he spoke, all of a sudden, people were thinking, "Hey wait a minute, he didn't say anything about a possibility of a rate hike and he's worried about the markets' sensitivity * The only thing he said that could have been interpreted as a rate hike comment was when he mentioned the data over the past few weeks "warrants serious discussion of a policy rate increase" * The data over the past few weeks has all been bad * All he said is, it warrants discussion of a policy rate increase, but he didn't say that we should be in favor of an increase, or against an increase * He just said the data over the past few weeks warrants discussion * To me, what that means is, we should discuss not raising rates because all the data we've gotten recently is weak * It was the data we got a couple of months ago that supposedly let Janet Yellen conclude that the case for rate hike had strengthened * But really, what Lockhart is saying is, "We need to have a serious discussion about a rate increase." * Not that we have to discuss raising interest rates, but maybe we should discuss not raising interest rates because based on the data from just the past few weeks, one would argue against an increase * If he had said, "We need to discuss an increase", he wouldn't have predicated it with, "the data over the last few weeks" * That data, in and of itself, is not friendly to an increase * If he was in favor of a rate increase, he would not qualify it the data over the past few weeks * Also, just suggesting a discussion about a policy rate increase is not the same as actually increasing the interest rate * A discussion to increase rates could lead to no rate hike * Well, I assume they've been having discussions about raising rates for the last several years * What else do they discuss over there? 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 Sep 201626min

* We had widespread selling in the markets today; it was real carnage across the board * Everything went down except the U.S. dollar * The Dow Jones was down 394  points - about 2% * That wasn't bad compared to what happened in other indices and other sectors * In fact, when it comes to the Dow Jones averages, the utilities were the weakest, they were down 3.7% * The NASDAQ was down 2-1/2%; the composite down 133 points * Various sectors were hit very hard; particularly the interest rate sensitive sectors; * Home builders got crushed * Emerging markets got obliterated * Gold stocks were down big - almost 6% on the day * That's on basically a .6% decline in the price of gold; gold was down only about $10 * Silver dropped about 50 cents * What's going on? It has just been 2 days when I did the last podcast * Gold was soaring, the dollar was tanking, the markets were going up * Why? * The economic data we got for August confirms that we have the weakest economy, maybe in 6 years * If you remember, what caused the markets to be concerned was the Janet Yellen/Jackson Hole statement that the case for a rate hike had strengthened based on the economic data that came out in June and July * Based on the data released since she made that speech, this is data about August, that case has now weakened considerably * The August data shows that the data that we got in June or July that might have been positive was a one-off event * Now we're back in weakening mode, and so, if the Fed really were really data dependent, according to Janet Yellen * Now the data is awful * So why would they hike rates? That's exactly what happened * The markets started to take those rate hikes off the table * I never thought they were on the table, but there were many people who bought into it * When they saw this horrible data, and they knew the Fed was data dependent, the markets reacted * Now, in the last couple of days, particularly today, people are now questioning whether or not the Fed is actually data dependent, and they're thinking they're going to raise interest rates, even if the data is bad * Now what would make them jump to such a conclusion? * We had several Fed officials, both yesterday and today, who continued to talk about the possibility of rate hikes and nobody has acknowledged the recently-released weakening economic data * I have said many times they don't want to acknowledged that data * That plays into Donald Trump's campaign * They'd be peddling fiction! * They don't want to talk about a weakening economy, so they have to ignore the data * But the fact that they are ignoring the data while continuing to talk about the possibility of rate hikes * That's got everybody scared * All these guys say is that there is a possibility of a rate hike * A possibility is not a probability * It's certainly not a certainty * But the markets are acting as if the Fed is about to raise rates, and that's why everybody is so scared * It's not just the Fed; yesterday in Draghi's press conference was asked about his plans when the QE program ends (it is scheduled to end Q1 of 2017) * He basically said he doesn't have any plans to do more QE 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 Sep 201633min

* Last week on Thursday we got that much weaker than expected ISM Manufacturing number, which didn't get a lot of attention because it came out a day before the jobs number which cast a pretty big shadow on all the economic data * The number came in very weak, as I pointed out, it was 49.4, which is contraction mode * Anything below 50 in the ISM numbers indicates a contraction and a recession * But of course, no one cares about manufacturing because it is such a small part of the U.S. economy, which in and of itself, is a major problem * The fact that it is such a small part of the economy should be very concerning, because without manufacturing you really can't have a service sector * The way the U.S. gets away with it is to just import with everyone else manufactures and we run enormous trade deficits, which is an unsustainable model * It's a great gravy train while the ride lasts, but when the rest of the world figures out that we can never pay our debts, then the gravy train comes to an end * The trade deficit represents an artificially high standard of living, but in the long run it's unsustainable because our creditors will not let us get away with this forever * I want to get to the ISM Non-Manufacturing number which came out yesterday; this represents the service sector of the economy * They were looking for 55, which was not a great number; last month we got 55.5, so there was some optimism around that number * They were looking for 55 even and, instead, the number came in at 51.4 * The lowest number in better than 6 years * And if you look beneath the surface and all the various components; new orders, back logs, hiring - horrible numbers consistent with recession * The complete opposite of what everybody was looking for, and when you combine this with the 49.4 we got from manufacturing that is a very bleak picture * The fact that we are at 6+ lows in the service sector does not bode well for the future * The trajectory is down, and how much longer is it going to be before the ISM Non-Manufacturing breaches the 50 mark? * Just when they start talking about these rate hikes - everything before this number came out questioned a September or a December rate hike - foregone conclusion * We had the same discussion in September a year ago * They punted and raised rates in December - will they do it again? * Given the bad news to date, there is really no way the Fed is going to raise rates in September * But just when the Fed officials are talking up a rate hike, everything changes with some bad news * The Fed never admits the data is bad they just don't raise rates and you've got to figure it out for yourself * When the ISM Non-Manufacturing number came out, gold took off * It continued to rise throughout the day and closed up better than $20 * Gold got back above $1350 after having just tested the $1300 level * Silver had a big up day; it went back above the $20 mark * We had a strong move up in the gold stocks again following Thursday and Friday's strong move in gold stocks * The markets were very surprised, and when this number came out, all of a sudden all the bets were changing * The odds for a September rate hike were way down * But not that much for December, because people are just assuming they can't go in September because we got this bad news, but, of course, by December, we may get some good news * The reality is that by then, there will be even more bad news * The Fed is not going to be raising rates; they are just talking about it, politically * In fact, John C. Williams, President and CEO, Federal Reserve Bank of San Francisco late last night ignored the bad financial news entirely in his statement, 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

7 Sep 201638min

*  On Friday we got the Non-Farm Payroll report and, of course, this jobs report is the most important ever * Because it was going to determine whether the Federal Reserve would raise interest rates at its September meeting * Of course, I didn't think the Fed would raise interest rates in September regardless of what this jobs number was * It's just that so many people were convinced that it was going to happen just because several Fed officials said it was possible 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 Sep 201631min

*  On Friday we got the Non-Farm Payroll report and, of course, this jobs report is the most important ever * Because it was going to determine whether the Federal Reserve would raise interest rates at its September meeting * Of course, I didn't think the Fed would raise interest rates in September regardless of what this jobs number was * It's just that so many people were convinced that it was going to happen just because several Fed officials said it was possible 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 Sep 201631min

* The price of gold continues to retreat * Gold was down about $12 today; it closed around $1310 * The dollar index up again as more and more people begin to contemplate the possibility of a rate hike in either September or December * Or maybe even both, because the odds of a rate hike, either in September or December have now increased to about even money * If you go back to June, the odds were practically zero * What has changed in the last couple of months? * The only thing that has really happened is that you've had various Fed officials going out of their way to mention that a rate hike is still possible * Why would they do that? * Obviously, a rate hike is possible * Usually they are asked the question and they mention the possibility * If the Fed had no intention of raising interest rates, I doubt they would admit it at this juncture * They want people to believe that a rate hike is possible because if you admit that it's not possible, * That opens a can of worms that the Fed isn't interested in opening just yet 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 Aug 201644min

* Earlier today Janet Yellen delivered her much-anticipated and way over-hyped speech at the annual Jackson Hole Symposium * It wasn't as irrelevant as I thought it was going to be, but the actual relevant part of the speech was lost on just about everybody * Instead they keep focusing on whether or not the Fed is going to raise rates by another .25 in September or December or maybe both * In reality, whether they do or do not is irrelevant, given the nature of where we are and where the U.S. economy actually is * For a small person, Janet Yellen certainly casts a large shadow over the financial markets * Everybody was on pins and needles, all the traders were there with their fingers on the buttons waiting to react to anything that Yellen said * I mentioned on an earlier podcast that there had already been a sell-off  on gold stocks a couple of days ago on the anticipation of Yellen's hawkish comments * The rest of the market seemed to ignore the possibility that Yellen would be a hawk * Before I discuss what she said, I want to examine whether anyone on the committee could be considered a hawk * A hawk is predatory; is to be feared, reflecting a tough central banker who believes in sound money * On the other hand, a dove is cute and fluff; doesn't really hurt anybody * A dove wants cheap money - keep interests low so as not to harm anybody - nothing to fear * When it comes to hawks with respect to the Federal Reserve, the bird is extinct * They are all doves and the only difference is the degree of dovishness * The hawks are gone and are probably never coming back * Yellen was not a hawk, and neither was Stan Fischer 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

27 Aug 201634min