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

* 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 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

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 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

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 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

19 Okt 201647min

* It's another week where the dollar remained relatively firmly bid; the dollar index closing just above 98 * Gold prices seem to have a lid on them; they closed down today about $7 * Gold's not really going down, but it's not really going up, either * What are going up are bond yields, long-term bond yields are rising today to about a 4-month high * 30-year Treasury yield to about 2.5% * The 10-year just below 1.8 * This despite the fact that the economic news, during the week, on balance, was generally weaker than expected * Obviously the numbers are worse because the Atlanta Fed reduced again their Q3 GDP estimate down to 1.9% * This is the first time it has been below 2 * It is not half of what it was just over a month ago, when they were at 3.8 * I still think their estimate is too high * I do think that Q3 is going to be a stronger quarter than Q4, which will probably be another 1% or below * The last 3 quarters averaged 1% * This is the weakest 3 consecutive quarters of this entire so-called recovery * Yet now the Fed is supposedly raising rates? * In fact, we got the JOLTS report on Wednesday, supposedly Janet Yellen's favorite indicator of the labor market * Not only did we have a slight downward revision to the prior month, but we had a 7.3% collapse in August * That was the biggest drop since December of last year * Everything about that report was weak * If this is Janet Yellen's favorite number, and if the Fed didn't raise rates in September because they wanted more data on the job market, and now they just got the JOLTS number, which was much worse than expected, * Why is every Fed governor talking about rate hikes in interviews? * Another one was out on CNBC, talking about how rate hikes would be appropriate * Yes! It would have been appropriate to raise them a long time ago * It would have been appropriate in June, in September, in March, in January, last year, 2 years ago, 3 years ago * It would have been appropriate a long time ago to raise rates - they didn't do it * You know what was inappropriate? Cutting them to zero * That was not appropriate - they did it anyway * The Fed is not about doing what's appropriate 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

15 Okt 201640min

* The most highly anticipated presidential debate in history is over and to me, the anticipation was more like a highly-promoted professional boxing match * Right away, as soon as the debate was over, CNN comes out with its poll, showing Clinton badly beating Donald Trump * And I thought that, if this were like a prize fight, the ref's would have stopped the fight in the first 20 minutes * That's how badly Donald Trump beat Hillary Clinton in this debate * And then you see this poll coming out saying supposedly that Clinton clobbered Trump * What debate were these guys watching? * Like you see a fight and the decision goes totally against what you saw, and you think, "Aha, the fix is in". * I think for CNN, the fix was in * They badly wanted Hillary Clinton to win this debate, and so  I think Hillary was going to win this debate according to their poll, regardless * I think anybody who watched the debate objectively is going to conclude that Trump won * I was pretty critical of Donald Trump's performance in the first debate * And while, I didn't think this one was perfect, I think were a couple of things I would have liked for him to have said * But I am armchair quarterbacking this, from my living room; he's there, live * But I think he did as good a job as possible and I think he advance his standing * But before I even get into the debate, I want to talk about the elephant in the room, which was the 2005 Access Hollywood tape that everybody is talking about * In fact, it really let Hillary Clinton off the hook from issues that should have been addressed on her end * Regarding leaks from her Wall Street speeches, that Bernie Sanders kept demanding that she release, and, if she had, Bernie Sanders would be the Democratic nominee at this time, and we would have a very different debate *  I want to address this topic in a way that no one else is addressing it * I've mentioned my position on Facebook and I have noticed that I have lost some fans as a result of my candor * But I am going to elaborate on my defense of Donald Trump * I am not defending what he said * His words were indefensible, and I do not condone his crude language * I am putting this conversation into its proper context * This is being portrayed as a revealing hidden contempt for women and that he is abusive to women * No it doesn't * This is a private conversation that Donald Trump had in 2005 with a much younger guy, Billy Bush - about 33 at the time and Donald was 59 * He is having a private conversation, not knowing that his mic was live nor recording * He was doing a cameo for "Days of Our Lives", and this conversation was not meant for public consumption * More importantly, look at the scene that Donald Trump was there to shoot * This is a scene where the actress is throwing herself sexually at Donald Trump * She comes onto him in a major way * Trump is standing there, ignoring it * This is the scene Donald Trump is about to shoot 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

10 Okt 201648min

* This morning the government released the most important, the most highly-anticipated economic release of the month * At least that's what everybody who trades in just about any market believes * And that is the Non-Farm Payroll Report; the official scorecard on job creation and unemployment * This time it was for the month of September, the final month of Q3 * We're still waiting for the GDP estimate for Q3 * By the way the Atlanta Fed, which continues to do the interest rate limbo, lowered the bar again today on the Q3 GDP, which was 3.8% a month ago, when Janet Yellen talked about how the case for a rate hike had been strengthening * As of today, the Atlanta Fed is down to 2.1% * Politically, they are still trying to keep the estimate above 2%, although by the data, I expect it to be south of 2% * The important news today was the jobs number; * People were looking for a strong report, I think the consensus was around 170,000, but most people were talking 190 - 200,000, some people were looking for a number north of 200,000 * We got 156,000 jobs, which was below expectations, but a little better than the prior month * Originally reported at 151,000 but was revised up to 167,000 * So now, based on the revised number, it's actually worse than the prior month * Even though they revised the prior month up, they revised the month prior to that down, so the net effect of the revision was a decline * The unemployment rate, expected to hold steady at 4.9 actually ticked back up to 5% * Average hourly earnings, expected to rise by .3, following a small increase of .1 the prior month came in at .2 * Not quite the gain everybody thought * This is not a good report, and anybody who thought the Fed was going to hike rates in November, they clearly don't think it anymore * In fact, even WSJ reporter Jon Hilsenrath said that today's jobs report took a November interest rate hike off the table * I would suggest that a November rate hike was never on the table * To the extent it was there, it was only in the imaginations of people like Hilsenrath * Hilsenrath says now, if the Fed is going to move, it won't be until December, but it's not a sure thing * The fact is, the Fed is more likely not to raise rates in December * Once again, you need to know the rest of the story, as Paul Harvey used to say, when it comes to the jobs numbers * Because the headline doesn't really tell the story * You always have to look beneath the surface, which nobody wants to do, except for myself, and a few guys over at Zero Hedge * They always do a good job of pointing out what's really going on in the jobs market * Number one: The big news was the net creation of part-time-jobs * I've been saying this for a long time that the big story is that we are replacing full-time jobs with part-time jobs * Employers need more part-time workers than full-time workers because each one works fewer hours * We're always going to have net job creation when you are transforming the economy from full-time to part-time employment * That was clearly the case this last month * According to the Household Survey, we lost 5,000 full-time jobs in September and added 430,000 part-time jobs * I would venture to guess that pretty much all of the net increase from August to September, 150,000 or so jobs, is in part-time work * If you look at the large jump in employees holding down multiple jobs - the government reports that * There was a big jump in September in the number of Americans who have more than one job * So obviously what's happening is that people with one job are getting a second job and peop... 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

8 Okt 201632min

* This is my 200th  podcast and I looked back to the date of the first one and it was just over 2 years ago, September 2014 * I began this podcast shortly after I ended the Peter Schiff Radio Show * I hope everybody is enjoying these podcasts and if you like what you're listening to, help turn on other people to the same information * Statements early this morning by Richmond Fed President Jeffrey Lacker certainly sent tremors through the precious metals markets * Gold tumbled over $40/oz; closing $1268 and change * This is the first time we've actually been below $1300 in the last few months * Silver down just over a buck; 17.78 * It wasn't that long ago that we'd gotten above $20 * It was even worse for gold and silver mining stocks; this was the worse day of the year for those stocks * The markets closed right near the lows of the day * There was a big sell-off right after those statements came out and there was no reprieve * The dollar was stronger on the day, although not against the euro * There were some rumors that the European Central Bank may begin to taper its QE program * That held the euro steady against the dollar * The weak currencies were the yen and the pound which was "pounded" again to about a new 35-year low * On concerns that we might have a hard Brexit rather than a soft Brexit * This is more a matter of the yen and pound weakness today than dollar strength * The bond market was weaker on the day, closing near the lows * The Dow, though, only off about 85 points * If the markets really believe that a rate hike is coming, which is clearly what the metals traders seem to believe * I think the stock market should be even weaker * Although probably what's helping the stock market is the strength in the financials * Because as I have said before, people actually believe that higher interest rates are good for the financials * So the fear of higher rates actually lifted the financials, which helped support the market * But people who think the Fed is going to raise rates, and that higher rates are good for the financials * They're wrong twice, because the Fed's probably not going to raise rates and if they did, it would be horrible for financials * They might get lucky, though because they'd be wrong on the rate hike and would not then lose as much had the Fed actually raised rates * I want to go over the Lacker's statement that started all the turmoil: What did this guy say that caused everybody to jump to the conclusion that the Fed's about to hike rates? * The probability of a rate hike had been rising; it didn't just start today, but the probability did notch up a bit * They're now looking at a 60% chance of a December rate hike, but there's a 25% chance now of a November rate hike * The November meeting is one week before the election why would people think the Fed would take a chance on an adverse market reaction to a rate hike a week before the election? * 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 Okt 201635min

* It looks like the U.S. stock market is going to close out the 3rd quarter on a positive note * The catalyst for the rally today is the big rally in Deutsche Bank; shares are up better than 14% * They were in danger of going below $10 yesterday * There were nervous about maintaining accounts with Deutsche Bank * People were re-living memories of Lehman Brothers all over again * I think the Obama Administration was beginning to get concerned * The Dow was off about 200 points on the close yesterday * When worries about contagion spilling over from European banks into U.S. Banks * It wasn't good with these Wells Fargo Congressional hearings * I am going to chime in on that later in today's podcast * I think the Obama administration was getting nervous about precipitating another financial crisis before the election * I think they gave a nudge to the Department of Justice which had been talking about a $14 billion fine on Deutsche Bank * The rumors this morning are that they are nearing a settlement with Deutsche Bank for a much lower number; maybe around $5.5 billion * Which is below the amount that Deutsche Bank had set aside to settle this * So from $14 billion down to about $5.5 billion - this is causing a big rally in the shares of Deutsche Bank and in fact that is returning confidence to the entire sector * I don't think that this means that the European banks or the American banks, for that matter, are out of the woods * I still think there are a lot of problems in the financials, because as I said in a previous podcast,"They're damned if the Fed raises and they're damned if they don't" *  Negative rates are bad for the banks but rate hikes are also bad for the banks, based on their balance sheets * I think there are still a lot of problems percolating beneath the surface for the financials * As far as the Obama Administration is concerned, the key is to get everything through the next election without a crisis * So I think that having the Department of Justice settle with Deutsche Bank for a much smaller number... * You know that $14 billion fine was very close to what the Europeans were looking to fine Apple * But I think the Department of Justice is more concerned about elections than the symbolism regarding Apple's fine * So coming to an agreeable solution with Deutsche Bank that was lower than the markets had feared serves the Administration's purpose right now * So that's where the rally is coming from today and of course the traders like to paint the tape a little bit going into the end of the quarter * It's not just the markets that had a strong quarter - crude oil ended the day about $49 * We have some kind of agreement among OPEC nations for production cuts * And while that might be good for oil stocks, it's not going to be good for the U.S. consumer, who is already struggling * In fact we did get a mixed bag on economic numbers out today * The disappointing number was consumer spending, which for the month of August was flat; the anticipation was for an increase of .2% * Personal income did manage to meet expectations with a .2% increase * But that was about half the increase we got in the prior month * Spending went down from +.4 (which was upwardly revised from the original +.3) to flat * Higher energy prices, gas prices at the pump are simply going to eat into that consumer spending number * 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

30 Sep 201631min