The Peter Schiff Show Podcast

* The U.S. stock market opened the first trading day of 2016 with a bang, but not the type of bang the bulls were hoping for * The Dow was down 276 points-it was down as much as 450 points in the last hour of trading * In fact,we opened down 300 and change and we hung around the down 350 - 400, in fact down 276, at the close was about the best level of the day * The NASDAQ closed down around 104 *  The Dow Jones transports continues to get crushed - the weakest index on the day, down 156 points * We're now down more than 20% from last year's high, officially in bear market territory in the Dow Jones transportation - and don't blame this on weak oil prices because transports benefit from weak oil prices * This is all about weakness in the economy * A lot of the carnage was blamed on China because China was down 7% overnight, the worst first day of the year in the history of Chinese stocks * Supposedly the catalyst was a weaker than expected PMI in China - I don't believe for a second that the market was down 7% based on that report * First, there were two PMI's released, and one was slightly better than estimates and the one that was slightly below came in at 48.2 vs. expectation of 49 * I think the Chinese market would have gone down regardless of the PMI numbers * The irony of it is that our own recently-released Chicago PMI on New Year's Eve and our number was way worse than the Chinese number * We were expecting 50, an improvement from 48.7 - instead we went down to 42.9 * Bad economic news in China creates a terrible response, but bad economic news in the U.S. and no one even cares! * Why, because the Fed tells us everything is awesome and we can ignore all the evidence that the economy is far from awesome * Singapore reported a 5.7% increase in GDP for its 4th quarter, yet that number is being discounted * Yet no one wants to believe the good news from foreign governments, and no one believes bad news from the U.S. because the Fed's narrative is still out there * We got more bad economic news today: We got another PMI manufacturing number expected to be 52.8, it came in at 51.2 * Even worse was the December ISM number - last month was 48.6 - it was expected to improve to 49.2-  instead, it dropped to 48.2 * That's a bigger miss than China, yet no one here cared * Also, construction spending was a huge miss: the consensus was for a gain of .7; instead we lost .4 * It gets worse, because last month the gain was expected to be a full point * The numbers that came out today were so bad that the Atlanta Fed, who recently revised down its Q4 GDP forecast from 1.9 to 1.3 a week or so ago and today they went down to .7 * In my last podcast, I said that soon the Atlanta Fed is going to take their Q4 GDP estimate below 1 and that is just what they did * We have a lot more bad economic data that is going to come out between now and the end of the month when we get the first estimate of Q4 GDP and there's a pretty good chance that it will be negative, which is halfway to a recession * With a negative GDP in the 4th quarter, we have a better than 50/50 chance of having another negative GDP in the first quarter and that would put us officially in a recession * Just in time for the Fed to raise interest rates again - Not! * More people are coming to the same conclusion I have for a long time now, that the Fed had backed themselves into a corner and felt they had to raise rates regardless of the fact that the data didn't meet their criteria * I knew that if the Fed raised interest rates that they would regret it because they would have to reverse their direction based on the weak economy combined with a weak market *  Interestingly, there has only been one year ending in "5", Privacy & Opt-Out: https://redcircle.com/privacy

5 Jan 201623min

* Let me begin my final podcast of 2015 by wishing all of my listeners a Happy New Year * It certainly wasn't a happy New Year's Eve Day on Wall Street * Normally the last day of the year is a positive one; you normally have a Santa Clause rally and it continues on to New Year's Eve * That wasn't the case today.  The Dow Jones finished its first down year since 2008 - down 178 points * The S&P also negative on the year, the NASDAQ managed to gain about 5% or so * I'm hearing a lot of people blaming the weakness on oil prices * The transports were the weakest index of the year, I think they were down about 17% and this index stood to gain the most from low oil prices * So clearly, if transports are the weakest index, the overall weakness can't be solely because of oil prices * It has to be another reason, and I think it has to be the economy * Oil is being affected by weakness in the economy * Another interesting observation about today's selloff - the market not only closed on the lows, but made its lows on the close * We've been seeing this volatility - all of this selling into the close says that something big is going on here * You get more professionals selling when you sell market on close, and I think this is what is going on here * People are bracing for a very weak 2016 * The Fed had interest rates for all of 2015 - it didn't raise rates until the waning weeks of the year * Imagine how the Dow will contend with the threat of rising interest rates as 2016 continues * But the other problem for 2016 is the economy and we got more evidence of an extremely weak economy * I mentioned before the the Atlanta Fed GDP Now has Q4 GDP estimate down to 1.3 * Based on the numbers we got today, they are going to ratcheting those estimates down again * First, we got the weekly unemployment numbers, which have been low for a long time - We got the biggest unemployment claims numbers in one week in 10 months * The 4-week moving average is also the highest it has been in 5 months * Remember, when Yellen raised interest rates, the basis for the decision was supposed to be the strength in the labor market * No sooner did the Fed raise rates based on the labor market, but now the labor market is rolling over. * Unemployment is a lagging indicator * What is more indicative of what is coming, is the Chicago PMI number which came out a little later in the morning, which was abysmal * One of the worst economic reports of the entire year * Last month, we got 48.7, which was below expectation * They were looking for a December bounceback to 50 * Instead, the index crashed down to 42.9 * This is the lowest number since 2009 * Order backlogs has been down for 11 months in a row, and this is the worst performance since 1951 * The only time we've been at this level is during a recession * It is possible that we are in a recession * It is possible that they will originally report Q4 GDP as positive and then go back later in the year and revise the data to show we were in a recession * That's what they did with the Great Recession * Another reason I believe the economy is weaker than the numbers suggest is because the inflation rate is being under-reported * If the inflation rate is higher than the GDP deflator, then obviously we are in a contraction during most of this recovery * I am looking at what is happening in the economy not in what the government says about the economy * As bad as the numbers  were, it did not promote any reaction in the the markets * My guess is that if we had had a big drop in unemployment claims or a really good PMI number the dollar would have spiked up and gold would have sold off, Privacy & Opt-Out: https://redcircle.com/privacy

31 Des 201526min

* Recording this podcast on Monday afternoon; the stock market closed about an hour ago, and the stock market was up over 100 points today, but the more dramatic days happened on Thrusday and Friday * Despite the initial euphoric increase in the stock market that greeted the Fed's highly anticipated quarter-point rate hike on Wednesday the market tanked on Thursday and Friday, down over 600 points * The most significant part of the sell-offs is that on both days the markets closed on the lows for the day * The Fed is getting dangerously close to losing what remains of its credibility * The Credibility Bubble might be the first to deflate in this recession * The Fed has been saying that the economy would be strong enough for a rate hike by the end of the year, so if they did not raise rates in December it would have been an admission that they were wrong * The Fed raised rates even though the economic data showed that, based on their own criteria, they should not have done it * More and more people are questioning whether the Fed has made a policy mistake * Look at the data that came out since the rate hike: * On Friday we got the PMI Flash Services Index came out at 53.7 - last month it was 56.5 * The Kansas City Fed Manufacturing - last month was +1 and December was -8 * Today we got the Chicago Fed National Activity, expected to be +.15 for November, instead it came out at -.3 and they revised down the prior month to -.17 * With all the horrible economic data, horrible retail sales, horrible corporate earnings it is obvious that the U.S. economy is heading toward recession * As the economy slows and the Fed is forced to admit it was wrong, there goes it's credibility * This coming collapse is the culmination of decades of bad monetary policy * Where we really went off the rails was in the Greenspan era, which sent us off on this trajectory of loose money * Yellen admitted in her recent press conference that they will still roll over all the maturing bonds and re-investing all the interest on those bonds so the Fed's balance sheet will continue to grow * The bubble economy will blow up in her face, though, because the market will not be able to withstand a sustained correction and it will require unprecedented quantitative easing that will result in failure * I wanted to discuss on this podcast an Sunday eening article on CNBC, "The Peter Meter"  that really took me to task on my gold predictions * They did not look at any of my many accurate predictions; they focused on the ones that haven't worked out * They singled me out for criticism on an 2012 interview I did with them when gold was at $1,700 and I said it could go to $5,000.  I never put a time horizon on my prediction, but this was labled as one of the worst * Back in 2005 I did an interview with Mark Haynes when gold was still below 500 and it more than tripled from that price * You can see articles I wrote recommending gold back in 2003 when gold was even below 500. * It is true that I did not see the near 40% correction in the price of gold because I thought the market would see past the bubbles * CNBC claims my prediction to be among the least prescient ever made * Twice in the last 15 years the U.S. stock market lost more than half its value * Anybody who was on CNBC in 1999 and recommended the stock market, which was about every guest, made a worse prediction than that * Every guest on CNBC in 2007 and 2008 and recommended the stock market made a worse prediction * What about all the dot com stocks that went to zero? * Obviously, CNBC is singling my gold prediction out above these other significantly less prescient predictions * If you look at all the predictions on CNBC over the years, Privacy & Opt-Out: https://redcircle.com/privacy

22 Des 201528min

*  Yesterday, the Federal Reserve finally met market expectations and increased interest rates to .25% * Actually, the official rate was 0 - .25 and now, the official rate is .25 to .5 * The actual rate was always in the middle between zero and .25 * Assuming the Fed tries to keep the rate closer to .25 than .5, the actual increase in rates could be less than 25 basis points * The initial reaction to this rate hike is to proclaim the end of the era of "cheap money" * .25% is still cheap money.  Alan Greenspan never went below 1%. * Some people are saying "Peter Schiff was wrong" because the Fed did raise rates * Actually, in a recent podcast I noted that the Fed changed their narrative away from "data dependent" to an expression of faith in the economy, opening the door to a symbolic rate hike unsupported by data * I was alone throughout the year believing that the Fed would not raise rates prior to this change in narrative * The Fed was afraid that to not raise rates this year, it would be a vote of "no confidence" in the economy * Ultimately, the Fed felt that even though the data didn't justify it, they had to raise rates because of psychological damage to the markets * If the economy were really sound, we would not need Janet Yellen to express confidence in the economy - a strong economy creates its own confidence. * We don't need propaganda in the form of a symbolic rate hike * The Fed did not even have the last recession in their forecast until we were well into the recession, so who cares about the Fed's level of confidence? * In an earlier podcast, I referred to Ben Bernanke's comment that he felt he was a representative of the administration * Janet Yellen is creating a sense of confidence in the economy for the same reason * The Fed is now pretending that we will have more rate hikes in the future, forecasting 4 more hikes during 2016 * I believe the economy is not strong enough to accommodate these rate hikes and neither does Janet Yellen * The ultimate irony is the data that came out the morning of the rate hike * Industrial Production: they were forecasting a drop of .2, which is still bad, instead, we got a drop of .6 * The PMI Manufacturing Index was the lowest in many years, 51.3 down from 52.6 * More bad news: The Philadelphia Fed last month showed an increase of 1.9, so 1.2 was forcasted - instead we dropped 5.9 * These numbers show an economy that is decelerating * If you look at a chart, these numbers are about to crash even lower * These numbers are flashing recession, recession, recession * If you're a Keynsenian, the prescription for the condition this economy has would be stimulus, not an interest rates * The air was coming out of this bubble anyway, all the Fed did was increase the hole for the air to come out * The market was up just before the hike, which was interpreted as a green light to raise rates. I said in an earlier podcast that that would be a mistake, because the market would then tank, and that is what happened today * Transports have been the weakest of all, despite oil prices * We continue to see weakness in the high-yield bond market as the air is coming out of that bubble * It is probable that the stock market is going to get a lot worse between now and the time the Fed is supposed to hike rates again * But the problem for the Fed now, is if the market starts to tank now, they can't do anything until the jobs numbers begin to show weakness * Janet Yellen actually referred to this move as "ahead of the curve", meaning that if she waited any longer, she would overshoot on her objectives: * One was unemployment.  How can that get too low? Especially with so many people out of the labor market, Privacy & Opt-Out: https://redcircle.com/privacy

18 Des 201532min

* The U.S. stock market finished up its worst week since August, when everybody though a rate hike was just around the corner * Substantial triple-digit losses across the board * The Dow Jones closed down 309 points - almost 4% * Similar percentage decline for the S&P 500 * The NASDAQ dropped 111 points, over 4% decline for the week * The media is blaming this decline on oil prices, and yes, oil prices are weighing on some stocks * Some stocks benefit from lower oil prices - case in point: transportation * Dow Transport was weaker than any other index - down more than the markets on a percentage basis * The truth is that oil prices and stock prices are going down for the same reason * The reason is a slower growing global economy, including the U.S. economy, and the fact that the Fed is threatening to slow it down further with an interest rate hike * Some of biggest losers are not even in the stock market, but in the bond market * The high-yield bond market is getting obliterated * A chunk of the high yield market is energy companies * Two things are hurting them: the fear of rising interest rates and the slowing of the U.S. economy * We are heading for a recession, if we are not already in one * This does not bode well for the high-yield bond market, because in a recession these companies will have more trouble servicing their debt * The Fed's monetary policy of zero percent interest rates forced a lot of Americans into these high-yield bonds - people are hungry for yield * A lot of risky companies who did not have access to credit, were able to borrow all sorts of money because of this hunger for yield * This is the same thing that happened in the sub-prime market * Customers all over the world needed yield, and the mortgage market was where they got it * There was so much demand for mortgage debt on Wall Street it was easy for non-credit-worthy customers to get a loan * The same thing is happening in this high-yield market. Carl Icahn was on CNBC on Friday morning, referring to the present situation as a "power keg" * It is a powder keg that the Federal Reserve created and in theory they will light the match if they raise interest rates next week * In fact in my last podcast I mentioned that for the first time, the Fed might actually raise rates, and I received quite a few comments asking me if I was ready to admit that I was wrong * The Fed is trying to change the nature of a rate hike - alter the narrative away from normalization to a one-and-done scenario * Markets anticipate future events and they price them in, so the beginning of the tightening - "liftoff" I felt markets would look toward the eventual destination and start pricing that in. * None of the markets can handle that * So the Fed assured the markets that liftoff didn't matter because the first hike will be small and the trajectory will be very low * That's why I called it a trial balloon.  The Fed wanted to see how the markets would respond to a tiny, symbolic rate hike just to prove we can do it, and then a long period of time, before another one, if there is another one * Initially it looked as if the markets was buying the idea, but remember I kept saying there is time, and the markets could decline - in fact that is already happening * Maybe the Fed's trial balloon is not going to go over very well * We had a "Black Monday" in August prior the potential September rate hike * We have another Black Monday coming up - the technicals on the market look awful * We could have a huge decline on Monday, and you'd better believe the stock market is going to be high on the Fed's agenda * When the Fed called off the rate hike last time and we got a huge bounce in the stock market<br... Privacy & Opt-Out: https://redcircle.com/privacy

12 Des 201528min

* We are just about a week away from the Federal Reserve's first rate increase in about 10 years * Everybody believes the stage is set for liftoff based on the most recent better than expected Non-Farms Payroll report * The idea is that the only thing preventing the Fed from liftoff would have been a horrific jobs number * In fact the markets estimated 190,000 jobs added and we got 211,000 * We did beat estimates, and in fact they revised last month's number up to 298,000 * The unemployment rate held steady at 5% * This was not a strong report, any way you look at it * The labor force participation rate: 62.5% is just one-tenth of a percent from the lowest level since the mid-1970's * That is still going in the wrong direction * We had the biggest surge in involuntary part-time workers - 300,000 new workers really wanted full time employment - the biggest jump in more than 3 years * Janet Yellen has consistently stated until recently that before moving up interest rates she wanted to see improvement in the job market, specifically in participation and full-time vs part-time jobs * Thus far that has not happened * So why does everybody believe that the Fed is about to raise interest rates regardless of its stated criteria? * I believed that the Fed had no intention of raising rates and I believe they did not, except one thing has changed: they have backed themselves into a corner * They have floated some trial balloons as a litmus test * One change of rhetoric occurred during Yellen's press conference last week as she switched from waiting for the data to improve to confidence that it will improve some time in the next year * Another change is the idea that a rate hike would trigger a series of hikes with the goal of normalizing interest rates * That's why they were calling it liftoff * Now, since the markets tanked after September did not deliver a liftoff, the Fed Chair has changed her tune - liftoff does not matter, the trajectory does * She may be saying, don't worry, if we raise rates, there won't be another one any time soon, meaning it would be the end of the tightening cycle * The beginning of tightening during the taper, and if we get a rate hike it will end that process * If this is just a trivial rate hike, why raise rates at all, considering the fact that the data is still bad? * Manufacturing is already in a recession * The ISM number that came out last week hit a 6-year low and even the service sector ISM missed estimates * Retail sales and consumer confidence have been disappointing, indicating the end of this weak recovery which is actually a bubble * The Fed now feels their credibility is on the line - it is a symbolic gesture to show confidence in the economy * If they were truly confident, they would not assure everybody that the rate hikes are not likely to continue * In 2016 we will be in a recession unless the Fed does something to delay its onset, and it may be too late for them to put out the fire they have already lit * Why does Janet Yellen not say she believes the economy is still weak? * A window into Yellen's perception is an interview that Ben Bernanke gave on Freakonomics yesterday.  It's entertaining, but it doesn't tell you anything new about Ben Bernanke * The most important revelation occurred about halfway through the interview when the interviewer played some clips of Bernanke on television in 2005-2006. * During those clips, Bernanke was talking about the great shape the economy was in, minimizing the housing and mortgage market troubles * The interviewer asked how he felt listening to himself now, Privacy & Opt-Out: https://redcircle.com/privacy

8 Des 201530min

* Mario Draghi of the ECB sent shockwaves through the foreign exchange and currency markets today * He didn't deliver the stimulus traders expected * The big question is, will Janet Yellen surprise the market by failing to raise rates? * The ECB did slightly lower interest rates, and extended QE if it will be needed * Draghi's goal is inflation * He equates 2% inflation to "price stability", when prices in Europe are stable now * The big divergence that everybody is trading on a tightening in the U.S. at the same time Europe continues to ease * The reality is more likely to be the reverse * If anything, the European recovery is just getting started, and the U.S. recession is just getting started * As a result of Draghi's decision to hold off on stimulus, the euro was up more than 3% on the day * The dollar was weak across the board * The stock market, including the DAX, fell accordingly * Both U.S. stocks and bonds experienced a selloff * Cheap money has been fueling rallies all over the world and when the ECB did not deliver it triggered a selloff in the U.S. assets * The Dow rallied over 2000 points off its September low based on rate hike expectations that did not materialize * We also got a key reversal in gold * Overnight it made a new low, but closed substantially above that level * The euro is still weak, it is just not as weak as the market expected * The best environment for gold when the weakest currency is the dollar * I wanted to address Janet Yellen's testimony today responding to questions * Yesterday, Yellen referred to Q4 GDP forecast consensus as 2-1/2% * She did not even realize that on that same day the Atlanta Fed reduced their forecast down to 1.4% * I think the real shocker will be that the Europea Q4 GDP will realize greater growth than the U.S. * Yellen was asked about Citibank's recent projection that the U.S. will experience a recession in 2016 * Obviously, she can't agree with the projection, as this runs contrary to the Fed's rhetoric * Asked as a followup, what tools the Fed would use in the event we did experience a recession in 2016, Yellen responded that the Fed would all the tools it has always had * She said, if we did raise rates, then we would lower them * Plus, she said it could use the asset purchase program (QE) that "has worked so well in the past * If QE worked so well in the past, we would not experience a recession in 2016 * You can't call QE a success until rates are normalized and the balance sheet shrinks back down to pre-crash levels * If the Fed finds that it has to launch QE4 in 2016 because it failed to reach "escape velocity" * How many QE's does the Fed have to initiate before it admits that it doesn't work, and is actually impossible to end without a great deal of pain? * This loss of credibility in the Fed will precipitate a dollar crisis * Anther thing that was ignored by Janet Yellen and the press was the six-year low in the ISM number * The market is focusing on the service sector, yet the most important jobs are the goods producing jobs * Lat month, we got a higher than expected jump in the non-manufacturing number:59.1 * This month we wend all the way down to 55.9, which is dangerously close to contraction * If we get the service and the manufacturing sectors both in contraction, that will be a total recession, supporting Citibank's 65% probability forecast may look optimistic * Since 2016 is an election year, a recession will not bode well for the Democrats' economic success narrative Privacy & Opt-Out: https://redcircle.com/privacy

4 Des 201530min

* The price of gold was down another $15 today, a 6-year low * Selling began early this morning following a better than expected jobs report from ADP * This is private payrolls released a couple of days before the official government Non-Farm Payroll number, coming out on Friday * Last month's ADP report was 182,000 jobs, which was below expectations * But the government reported better than expected jobs numbers * Today's number was not significant enough to have triggered a sell-off in gold within seconds of the release of the news * So far, ADP has missed 8 of the 12 expectations this year * By the way, hedge funds are the most short they've ever been in gold * We'll see what happens between now and the end of the year if we get a lot of hedge funds that want to book those profits * Paper profits may be difficult to realize if everyone needs to take them at the same time *  In the physical world, demand for gold continues to hit records * 98-99% of the gold market is people selling gold they don't actually have to people who don't actually want it * It's interesting to me the difference between the market reaction to positive economic news versus negative news * The November PMI number, although slightly better than expected it is still a 2-year low * Where the news went from bad to horrific was when we got the November ISM number. Manufacturing is considered insignificant now because it is a smaller part of our economy, but the last time it was almost as low as this, the Fed immediately launched QE3. * Now with ISM number nearly as weak as it was when we launched QE1, the Fed is hinting at a rate hike, which is absurd if you believe that the Fed is data dependent. * If the Fed does raise rates in December it proves conclusively that they were never data dependent and that they were using it as a delay tactic *  Had the Fed raised rates years ago, it would have pushed the economy into recession that much sooner, but they've now waited so long, that the economy is already going back into a recession on its own * If the Fed now raises rates even slightly, we will go into recession that much more quickly, causing credibility loss. * Also, yesterday we got motor vehicle sales numbers, and we did 18.2 million, beating the expected number of 18.1 million; however this is the second or third month in a row that domestic sales have declined * This is all a product of the auto bubble. Contrary to comparisons to the housing bubble, where people bought homes for investments, the bubble exists in automobile financing * Also contributing to the weakness in gold, were Janet Yellen's recent statements containing the strongest indications yet that interest rates may raise in December * She did, however, go out of her way to insist that the Fed has not made a decision, based on data coming in prior to the December meeting * Yellen admits to improvements in the labor market, but acknowledges that there is underemployment and low labor force participation * She did say, however, that she is confident that over the next 1-2 years, the economy will show real improvement in full employment and labor force participation * She also believes that the economy is indicating enough momentum that inflation will also reach or exceed the 2% benchmark * Paradoxically, economic data over the last 6 months show no such momentum * If the manufacturing sector is already in recession, as data indicates, what makes Yellen believe that the service sector, which has shown modest growth, can sustain any growth? * The only problem Yellen does address is overseas markets * Ironically the worst thing that can happen to the U.S. economy is for markets to have more confidence in overseas economies, Privacy & Opt-Out: https://redcircle.com/privacy

3 Des 201528min