Government to Sedate the Economy with More Stimulus – Ep 638

* This is another week of bad economic data that most people have ignored * The stock market was up this week; the Dow closed up 1.8% on the year * I don't know if the Dow was rising in spite the bad news or because of it * The bad news means the economy is weak and corporate earnings are not there, and there are high multiples * But of course, if the economy is weak, that takes the Fed out of the rate hiking game and I think puts it into the rate cutting - QE4 game * So the market is caught between the opposing forces of cheap money and falling earnings on the back of a weak economy * Gold was actually down on the week; it started off the week strong, then Thursday it got hit pretty good and today it recouped some of its losses * But the standout was silver *  Silver was up almost 6% on the week; this is a new high * Silver closed at the highest close of the year * In fact, silver was strong with gold on Monday and Tuesday and when gold sold off on Wednesday and Thursday, silver really held up * That's a good sign for both gold and silver * I was on CNBC.com this week and I meant to say something about silver * They're not even talking about silver in the mainstream media so they're missing an even bigger move * They're acknowledging that gold's going up but they're not even looking at silver * I mentioned on an earlier podcast that a number of people are shorting silver and buying gold because they saw the breakout to new highs on the gold/silver ratio and they wanted to jump on that trad * I thought that was the wrong thing to do * To me, seeing new highs in that ratio in favor of silver made me want to buy silver, since it's as cheap as it's been relative to gold * If you like gold, just buy it; don't short silver because you could turn a winning trade into a losing trade Privacy & Opt-Out: https://redcircle.com/privacy

15 Apr 201628min

* The dollar index traded below 94 for a good part of the day, but it did manage to close up at 94 even, down just .20 * Gold was up another $19 * Silver really shined brightly today, up .54, just below $16/oz. * Mining stocks, of course, were on fire; GDX was up just under 6% on the day, GDXJ up just under 7% * This followed a spectacular day for the mining stocks on Friday * In fact, even though gold itself was down a couple of bucks, we had a huge up day in the gold stocks * Between  Friday and today, I think this is the biggest two back-to-back gains for gold stocks all year * The catalyst was the Atlanta Fed Q1 GDP estimate downgrade all the way down to .1 * If you remember, from listening to my podcasts, the very first time the Atlanta Fed came out with its upward revision, with a lot of fanfare, to 2.7%, I said that that was all political and that they would have to walk that back all quarter long, and now they have eliminated the entire estimated gain * A fair estimate might have been -.1, but President Obama is still saying we have the strongest advanced economy in the world * I don't know what his definition of "strong" or "advanced" is, but we might have one of the weakest of the advanced economies * It's just that nobody wants to accept that fact yet * Here's where it really gets interesting: CNBC was very dismissive of the weak economic numbers * They are characterizing the weak Q1 as similar to previous years' weak Q1, where the weather pushed back some economic activity to Q2, causing rebounds * They said the same thing is going to happen this year.  No it's not. * This year is different from last year * First, let's talk about inventories: February and January Wholesale Trade Inventories have been revised down from +.3 to -.2 * Last year, companies were still building up inventories, believing in the recovery narrative, boosting GDP * The inventory unwind that I have been talking about for the last year is just beginning * It started in Q1 of this year, and this inventory sell-down is going to subtract from GDP * Here's another factor: the weather * The weather for the last two first quarters was very cold, pushing economic activity to Q2, helping Q2 to rebound * That's not what happened this year.  The first quarter of this year was the warmest in over 120 years * So obviously there was no economic activity pushed forward due to weather, if anything, the weather might have pulled some activity from Q2 to Q1 * As weak as Q1 was, it might have been weaker if cold weather had suspended some economic activity * The third difference is the trade deficit, which is rapidly growing this year * I think the growing trade deficit will continue to put a drag on Q2 GDP * The inventory liquidation will continue to be a drag on Q2 GDP * What that means is had the government properly seasonally adjusted Q1 for the unusually warm weather, I think Q1 GDP would be a lot lower * Q1 will be a contraction, and we are going to fall from there * If that is true, then we are in a recession * I think this recession will be longer in duration that the preceding one * The question is: What is the government going to do about it? * There was a meeting today between President Obama, Joe Biden and Janet Yellen * They have to figure out how to throw the economy a lifeline without admitting that it is drowning * The first thing the Fed can do is signal that they are not going to raise rates - change their forward guidance * By just not raising the rates, the specter of a hike remains * The question is what story will they use in order to not damage Obama's recovery narrative and Hillary Clinton's campaign? Privacy & Opt-Out: https://redcircle.com/privacy

11 Apr 201624min

* Today is the Wisconsin Primary but Donald Trump has been getting a lot of flack in the media over the last couple of days about his comments about the U.S. economy, particularly in the financial media because Donald Trump has now predicted a "very massive recession" in the U.S. * He didn't just say a recession, he's predicting a massive recession * Most of the pundits on television don't see any recession at all - not even a mild one * So here you have Donald Trump saying, not only is the recession going to be massive, it's going to be very massive * The media is all over Trump: "What is he talking about? The economy is in great shape! He's peddling all kinds of fiction! We have this massive economic growth!" * the President television today taking credit for this great economy with all these years of jobs * Of course what the President doesn't admit to, is, it's not job creation - it's job destruction * We're destroying full time jobs, the by-product of that destruction is that we create a bunch of part-time jobs that people don't really want but that's all they can get * Yet the President is taking credit for that * It's like setting a fire and taking credit for putting it out * That's what the Federal Reserve did with the 2008 Financial Crisis * Let's look at some of the economic news that came out over the past couple of days that resulted in the Atlanta Fed reducing its Q1 GDP estimate - yet again - to .4 * In last Friday's podcast I said that I thought they would be revising it down, and based on the numbers that just came out, they did * One if the reasons the Atlanta Fed cited for the revision was yesterday's release of February Factory Orders * They were expected to be down 1.6; instead it came out as -1.7, which was not that big a miss unless you consider the previous downward revision, which means it dropped from a lower level * That took something out of the GDP numbers as did the very bad auto sales that I did mention in Friday's podcast * Apparently the worse-than-expected trade deficit that came out today didn't even factor into their thinking, and I don't know why, because we were expecting $46.2 billion and instead we got $47.1 billion * That's a pretty big miss, and they took January's estimate which was originally $45.7 billion and raised that to $46.2 billion * We are still expecting the March number which will be factored into Q1 GDP, so I think the Atlanta Fed is still not low enough * Remember, too, one of the things that's helping the Q1 GDP is that most of the country had an unseasonably warm winter, because bad weather is factored into the estimate * Privacy & Opt-Out: https://redcircle.com/privacy

5 Apr 201632min

* Well, it's April Fool's Day today and there certainly were a lot of fools out on Wall Street buying all the nonsense about the better than expected Non-Farm Payroll numbers * Many of those fools were also fooled into thinking that these supposedly good jobs numbers puts a June rate hike back on the table * In fact, these April Fools were out in force in March when several Fed officials were talking about the possibility of April being a live meeting, and they bought it; Janet Yellen potentially set them straight a few days ago, but then again they hear some numbers that they think are better than expected, and they think, "Aha! The Fed is about to raise rates." * When are they going to wake up and realize that none of these numbers matter - it doesn't matter what they are, better than expected, worse than expected, the Fed can't raise rates * If the Fed could raise rates, they would have already done it. * Yes, they did raise rates in December, they didn't want to raise rates, they did it anyway, and look what happened * Maybe you can think of that rate hike as a trial balloon, but it was the Hindenburg of trial balloons, it blew up, and there's no way the Fed wants to launch another one * The first quarter came to an end yesterday and the U.S. stock market actually managed to gain * It was up about 1%, but the year started off as the worse year in the history of the stock market * Back in February, U.S. stocks had the weakest beginning of the year in the history of the stock market - going all the way through the great depression * That happened because the Fed raised rates * Do you think they want to take that chance again? * Why did the market recover?  Because people then believed that the Fed was not going to be raising rates, in fact, the weakness in the market is one of the reasons they believe that * So the market going down helped the Fed to change its tune, enabling the market to go back up * Now they're not going to take another chance to have to save it again * Next time it goes down, it keeps on falling * Beneath the surface, there was a lot of carnage in the market - there were a lot of stocks that got taken out and shot * Some big hedge funds had horrible results in the first quarter * Hedge funds were on the wrong side of so many macro trades this quarter * For example, the U.S. dollar had its worse quarter in over 5 years * You remember, that was one of the most crowded trades out there at the end of last year * Everybody with a hedge fund was long the dollar and short the euro, short the yen, short the aussie, short the Canadian, you name it they were short * Some of these guys were short the Chinese yuan - the yuan had a pretty good quarter - the strongest quarter in 2 years * Everybody who was long the dollar and short another currency got killed in the first quarter * The only people who lost more money than the ones shorting were the people shorting gold Privacy & Opt-Out: https://redcircle.com/privacy

1 Apr 201624min

* All the talk last week in the financial media was the fact that several Federal Reserve officials had given speeches somehow putting April back on the table as a live FOMC meeting, where the Fed might raise rates * In fact, even earlier this week, even yesterday, an official from the Federal Reserve Bank of San Francisco commented that the Fed should continue with rate hikes because the economy is strong and the data is on target * I did not buy those comments for one second - my last podcast was titled, "Fed Bankers Bark But Won't Bite", and my commentary was titled, "Two Down and Two to Go" meaning that the Fed had already dispensed with two of the 4 rate hikes telegraphed for 2016 and they would take the other 2 rate hikes away * So, as everybody else was anticipating rate hikes, I was saying, not only are they not going to raise them in April, they are not going to raise them at all in 2016 * What happened today? Janet Yellen gave a speech to the Economic Club of New York, one of the most dovish speeches, if not the most dovish she has ever given * As a result of the speech, the price of gold was up about $20 on the day; we closed above $1240 * In fact a couple of days ago, we had gotten nearly down to $1200 * That shows you the strength of this bull market in gold, despite the talk of a rate hike in April, and despite the rally in the dollar, gold held its position above $1200 * To me, that's very bullish, the question when will all the bears throw in the towel? * Goldman Sachs is still looking for gold to hit $1000 - $900 * They're still looking for a strong dollar and a bunch of rate hikes * Although Goldman Sachs is not as bearish on gold as Harry Dent * Harry Dent called for $700 gold when I debated him on Friday's Alex Jones show * That was a good debate, and you can check it out on my YouTube channel * The dollar was down across the board today * The dollar index barely held on to the 95 handle, it closed at 95.15, off not quite a full percentage point on the day * Aussie dollar very strong on the day, up 1.4% * New Zealand dollar was the big winner on the day; that currency was up a full 2 percentage points on the day against the U.S. dollar * The Dow Jones liked the dovish news coming from the Fed; up just under 100 points * One of the reasons it wasn't up more is because of the financials in the Dow weighing it down * The NASDAQ was up 79.8 - that's a 1.7% increase * The NASDAQ was standing still compared to the gold stocks - the GDX up 5.77% * The GDXJ, the juniors, were up even more - about 6.3% today * That's where the action was and I think it will continue to be, based on Janet Yellen's Dovish remarks * I still don't think the conventional wisdom appreciates the extent of these dovish remarks * Let me go over her remarks; she started with a pretty upbeat assessment on the economy * She said the labor market is looking good, consumer spending is looking good, the housing recovery continues - she went over all these positives * She did list some minor negatives: Manufacturing and Net Exports, but she blamed all that on the strong dollar * She did also mention that capital spending and business investment was lackluster, noting in particular weakness in layoffs in the energy sector * But overall she was still upbeat on the economy * In fact, she admitted that the Fed's assessment of economic growth, inflation, and unemployment were exactly the same on December 2015, when they raised rates, and in the March meeting, Privacy & Opt-Out: https://redcircle.com/privacy

29 Mars 201641min

* The markets are closed on Good Friday, the markets are closed, but I did want to take time to record this podcast * Some people were wondering why I didn't do a podcast on Wednesday, the day we had a big drop in the price of gold * Believe me, I love doing podcasts, when the price of gold goes down, because I know a lot of people who are interested in gold want to know what my thoughts are on a day that it happens to go down * As it turns out, I did have an interview on CNBC Fast Money, and my comments are available on that interview, posted on my YouTube channel * Gold was down about $30 on that day and declined further yesterday * Silver was down as well * Gold is still holding above $1200 and gold is still positive on the year, not so for the U.S. Stock Market, which slipped back into negative territory this week * Not only was gold weaker but the dollar was considerably stronger, and commodities in general, like crude oil, copper - also went down * So what was the catalyst? * You might say maybe it was because gold failed to rally on the news of the terrorist attack in Belgium * News of this kind often triggers a knee-jerk reaction to buy gold, but the rally really wasn't that big, and when a market doesn't rally on good news, it generally means it is over bought, or  it's ready to go down * To me, however, that was a non-event, as far as gold is concerned * I don't buy gold because of geopolitical instability - that has nothing to do with my strategy * The real reason to buy gold has to do with inflation, and the central banks creating it, artificially low interest rates, negative interest rates and Quantitative Easing * It has nothing to do with terrorism, except to the extent that terrorist attacks lead to more government spending that is not supported by taxes which means more money printing, more inflation and bigger deficits * In the long run, it is good for gold, but in the short run, it is just a bunch of noise, but traders can certainly jump on these events as a reason to buy or sell and read things into a lack of movement, assuming there is a fundamental reason in the gold market, when there's not * The more significant factors that hurt gold were comments by several Federal Reserve officials, to the extent that April is now considered a "live" meeting, meaning that they still might raise interest rates * These comments are coming less than 2 weeks after the official March meeting, where the Fed could have raised interest rates, but didn't * Not only did they not raise interest rates, they went out of their way to diminish the markets' expectations of future rate hikes * So that after the March meeting, people who thought the Fed was going to raise rates 3 more times, revised expectations to at most 2, but a lot of people are starting to expect no interest rate hikes at all * It was a very dovish press conference following the release of their statement * So now, a week later some of the same guys on the FOMC saying, "We might raise rates in April" * If you're thinking about raising rates in April, why were you so dovish last week? * And if you are going to raise them in April, why not raise them in March * None of this makes any sense, especially looking at the economic released since the Fed decided not to raise rates in March, and in general, it's been weaker expected * So if the Fed is being given weaker than expected economic news, after they said they wouldn't raise rates, why would they now be raising the spectre of a rate hike coming up next month * Is this some kind of trial balloon? * I think the Fed is losing even more credibility when they're so schizophrenic: t... Privacy & Opt-Out: https://redcircle.com/privacy

25 Mars 201628min

* Before I get into the economic news of the past couple of days, the big event today was the terrorist attacks in Belgium and I want to offer my condolences to the people of Belgium and also on behalf of my listeners from the U.S. and all over the world * This will probably work to the benefit of Donald Trump, who didn't waste much time in capitalizing on the event * We do have a couple of primaries today, Arizona and Utah * In Arizona, Trump is well in the lead - it's a winner take all state and today's news will probably solidify Trump's lead there * The wild card will be the Utah primary where Donald Trump is in last place. Mitt Romney didn't endorse Cruz, but said a vote for Cruz is a vote against Trump.  If Cruz gets less than 50% of the votes, however, the delegates would be divided proportionately. * Not much action in the market - Gold spiked up on the news of the Brussels attacks, and closed up just under $5 * Silver was up earlier this morning, but there's a lot of support building in the silver market * I had noticed that there were some traders shorting silver and buying gold * When gold gets this expensive relative to silver, I wouldn't want to bet that that trend continues * I would say, if you like gold, just buy gold, don's short silver, because you could turn a winning trade into a losing trade * The big action in the currency markets was in the British Pound * The Aussie and the Canadian dollar continue to rise against the U.S. dollar * European currencies were a little bit weaker, but the main weakness was in the British pound * One would think, wouldn't the euro be hurt more than the pound, by the terrorist attack? * Traders believe that the attacks will increase the refugee problem, which is at the core of Great Britain's possible exit from the European Union, and the pound is falling on that speculation * Most of the economic data that came out yesterday and today was weaker than expected * They were expecting a bounce in the Chicago Fed National Activities Index and instead of a +.25, we got a -.29 * They did increase the positive number from +.28 to +.41, so the February decline is actually more dramatic * Bigger miss that came out was in Existing Home Sales; it was a 7.1% drop * That's the biggest drop in 6 years, and the 3rd consecutive month of declines * The problem they're pointing to is high prices * Imagine what would happen if the Federal Reserve were to raise interest rates 2 more times * If the Fed were to raise interest rates, what does that do to mortgage rates? They go up also * When home sales are falling sharply because they're unaffordable even with record low mortgage rates, what happens to affordability when mortgage rates go up? * How does the Fed increase interest rates when they are already not low enough to sustain the market, even at rock bottom? * They're also pointing to lack of inventory as a culprit, but there are no buyers at these prices * The only thing keeping these overpriced homes affordable is the artificially low interest rates, courtesy of the Fed, and the government, through Fannie Mae, Freddie Mac and the FHA *  Another problem is the lack of viable jobs in this economy * Also this morning we got the PMI Manufacturing Index - expected to improve on last month's 51, dangerously close to the borderline between expansion and contraction * We did improve but only to 49.5, a full one point below expectations * The one outlier of the week, was the Richmond Manufacturing Index - last month, February, was -4 and the consensus expectation was 0 for this month * We ended up getting +22 - this was the biggest beat ever and the highest number going back to 2012 * The number is so high it looks suspicious to me - i... Privacy & Opt-Out: https://redcircle.com/privacy

23 Mars 201628min

* Happy St. Patrick's Day everybody and to those of you who have been waiting since yesterday for this podcast, you won't be disappointed * Yesterday I did an interview with Liz Claman at Fox Business News and I did respond to the Fed's decision.  That video is up on my YouTube Channel. *  The Fed did not raise interest rates, which didn't surprise a lot of people, but what did surprise a lot of people was the the Fed indicated, based on their Dot Plot, the consensus is that the Fed now sees two rate hikes coming in 2016 * If you recall, at the end of last year and earlier this year, the Fed was still projecting 4 rate hikes in 2016 * What I said from the very beginning is, "No chance." * In fact I still thought it was more likely that we'd get a rate cut * Now it's two down and two to go, because now the Fed is only pretending that they will raise rates twice this year instead of pretending that they're going to raise rates 4 times * What's really interesting now is how the Fed is starting to lose credibility that it never should have had * Steve Liesman asked Janet Yellen a good question: He said, what about your credibility - you said you would raise rates 4 times and now it's 2 times, and you said you were data dependent and unemployment is below 5%, creating 200,000+ jobs per year and the core CPI is up 2.3% * He said, if you're not raising rates now, under what circumstances will you raise rates? * Janet Yellen didn't really answer the question, but I thought she was thinking, "Don't you understand, we never intended to raise rates." * I pointed this out from the beginning: The Federal Reserve never said that they would raise rates 4 times. They said, based on our economic forecasts, this is what we think is going to happen - BUT if we're wrong, it's not going to happen * Janet Yellen said to Steve Liesman, "Look, these dots don't mean anything - this is what we're thinking at a moment in time, but it's not a promise." * For some reason, everybody assumes that if the Fed thinks the economy is going to get better it will get better, in fact, if anything, since the Fed's track record is so horrific, if the Fed thinks the economy is going to get better, it's probably going to get worse, and so they are not going to raise interest rates the way they're pretending * One of the reasons the Fed is pretending that the economy is good is because that's the official line of the Obama Administration: "The economy is good, and if you say it's not good, you're peddling fiction." * Yellen probably wanted to say to Liesman,"Steve, we're not raising rates because the economy is lousy." * The fact that they don't raise rates is the proof that they know that the economy is lousy, but they don't want to say it, so Janet Yellen is saying "Read between the lines" * When I'm listening to all the coverage about the fact that the Fed didn't raise rates, the reports say,"Janet Yellen chickens out", "Janet Yellen gets cold feet" * That's not the point.  Her feet were always cold. The Fed never intended to raise rates. * If they were planning to do it they would have done it * This is all part of the extend and pretend charade * In fact, in my Fox Business News interview with Liz Claman, I was debating Andy Brenner who holds that the Fed will raise rates 2 or 3 times this year * I said, "If the Fed was going to raise rates, they should have raised them yesterday." * Brenner responded that the market wasn't prepared for it * I said the Fed is not supposed to be market dependent, it is supposed to be data dependent * The market may never be prepared to raise rates - look at what happened the last time, the market got off to the worse start in the history of the market Privacy & Opt-Out: https://redcircle.com/privacy

17 Mars 201629min