The Fed’s Medicine Makes the Economy Sicker – Ep 556

* It's Friday the 13th and it is a Friday before a 3-day holiday weekend * Monday, of course is Martin Luther King Day * The stock market will be closed in observance of the holiday * Once again, I guess Friday the 13th was bad luck for those hoping for Dow 20,000 * In fact, the Dow finished the day Down, it was a slight decline for the Dow * But not so for gold; gold was up again * The Dollar was actually down again * In fact, this year is already shaping up to be a mirror image of what everybody expected when the year began * The Dow is up slightly, about a half a percent; the S&P is maybe up about 1-1/2 percent * But look at the dollar; the dollar index is down 1% * In terms of foreign currencies, the Dow is actually down * The dollar index is mostly the euro * If you take a look at some of the other currencies, the Canadian Dollar, for example, is up 2.5% so far in 2017 * The Australian dollar is up 4% * These are some pretty big moves early in the year * Remember, everybody was bullish on the dollar * That was the trade, it was so crowded, everybody was in it * Every strategist that I saw on financial news at the end of last year and early this year * Was long the dollar, short the Aussie, short Canada, short the euro, short the yen * Meanwhile, all these currencies are going up * I think they're going a lot higher and I think the shorts are going to lose a lot of money * Take a look at gold stocks * Gold stocks are up about 10% so far in 2017 only 2 weeks into the year * This is already a much stronger start for gold stocks than we had last year * And of course, last year was a great year for gold stocks despite the fact that they sold off toward the end of the year * Based on all the hype surrounding Donald Trump and all the great economic growth that we are going to get * And how the Fed is going to be raising rates even faster and the dollar was going to be even stronger * I knew all that was a bunch of nonsense * People still believe it, but the markets are already showing it to be a false paradigm * And most of the Wall Street strategists are going to once again miss out on these opportunities Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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

14 Jan 201736min

* The NFIB Index of Small Business Optimism in the month of December, so this is post the election of Donald Trump * Shot up from 98.4 in November to 105.8 * This is the highest level in 12 years - since before Obama was President * And it's the biggest monthly jump in 37 years * You have to go all the way back to 1980, the election of Ronald Regan to find a moment in time where you saw this big an increase in optimism, in confidence among small business owners * Remember, it was Michelle Obama not too long ago * Saying, "This is horrible, there's no hope anymore in America!" * Well, small business owners haven't been this hopeful since I was in high school * Why are they so optimistic? * Well, first of all, it's more a testimony to how horrible things have been over the last 8 years * People are just hopeful that now there's going to be some relief, that Barack Obama is gone * Because the lat 8 years have been very, very difficult for small businesses * First of all, if you're running a small business, you can't take advantage of zero percent interest rates * You can't just show up at the discount window and borrow from the Fed * Also, you can't sell bonds into the bond market, like big corporations can * If you're a small business, and you need credit, you've got to go to a bank and get a loan * But the banks don't have any money - there's no savings - nobody's putting money into the bank * And no banker wants to carry a risky loan on his books * When he can just own U.S. Treasuries * The regulators are all over you, if you actually make a loan to a business * So businesses haven't gotten capital * Meanwhile the cost of doing business has gone up because there's been all sorts of regulations that have been added to the burden of business * Over the lat 8 years Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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 Jan 201737min

* Yesterday we got the final jobs report of the Obama era, * We got the December Non-Farm Payroll. * Now technically, when we get the January number, the first Friday of February, * Half of that would have been during the Obama presidency, * But because we won't get the official news until the Trump presidency, * I'm sure that Donald Trump is going to take the credit, or maybe have to deal with the blame, * Depending on how that number ends up being received, whether it beats the consensus or misses, * But this is really the final jobs number for Obama. * The number came out O.K. * It missed the consensus estimate, which was 175,000 jobs, * And the actual number, at least until they revise it next month was 156,000 * So that was below what was expected. * Now they did revise upward the prior month from 178,000 to 204,000 * And the month before that was revised down a bit * So I guess, when you take all the revisions, it was probably about a push on the number. * This report should have been seen as not so good, * Most of what I was reading was about how strong, not only this report was, * But the entire job-creation legacy of Barack Obama * This is what you get from the mainstream media * That peddles all the fake news * About what a great economy President Obama is handing off to Donald Trump; * That we have really low unemployment - * The official unemployment rate kicked up from 4.6, but still 4.7, * So, low unemployment, all these jobs being created, * Forgetting about the fact that once again, you're talking about low-paying, part-time jobs that have been created * In fact, the number of Americans not in the work force grows again; * It wasn't a big jump, but it was still a jump * To a new all-time record high. * So labor force participation has been eviscerated during the Obama years. Our Sponsors: * Check out Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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 Jan 201738min

* 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 Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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 Jan 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 Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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 Dec 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 Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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 Dec 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 Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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 Dec 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 Aeropress and use my code GOLD for a great deal: https://aeropress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * 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 Dec 201633min