Government to Sedate the Economy with More Stimulus – Ep 638

* The U.S. stock market finished out this holiday-shortened week on an upnote with the Dow Jones up just over 100 points * This was the best week the market has had since March * The dollar was softer on the week; the euro ended solidly above 113 * Gold was under pressure throughout the day but closed only off about $3.00 * Gold stocks earlier this morning were at the lowest I've seen in this cycle but then had a sharp reversal finishing much stronger on the day * The markets are looking forward to no rate hike in September * Michigan Consumer Sentiment Numbers may have been the catalyst to turn the market * They were looking for 91 - slight below last month; instead we got 85.7 - a huge miss * This is the biggest miss in the history of the index * The bigger number was the Wholesale Trade Number, which was expected to reflect inventories to rise .3% * Instead, inventories declined by .1% * This will notch a little off of Q3 GDP * More importantly, inventories went down, but sales also declined by .3% * This means the inventory to sales ratio rose again * It is not at the highest it has been since the 2008 financial crisis * This level has only existed twice in the last 15 years and both of those times, the economy was in recession * Another interesting chart is inventory to sales in the Auto sector * Auto inventory to sales level has risen to 1.73% - the highest since 2009 * Today's inventory to sales ratio is even higher than the recession of 2001 * This is a sign that the Auto bubble is bursting * If the Fed were going to raise interest rates in September, wouldn't we already know by now? * The longer the Fed waits to raise rates, the less likely is is to do it * If the Fed does rates and then has to go back to zero, it will look like the Fed was wrong about the economy * It would be better now to keep rates at zero, indicating they understand the weakness in the economy * The other risk of raising rates, and weakening the economy is that it may become evident that the Fed can never raise rates * The driving force behind the dollar rally is expectation of normalization of rates * The Fed has severed the legs of the economy and higher rates will expose this * The Fed has plenty of excuses not to raise rates, but now that they started zero percent interest rates, they will not be able to stop * The balance sheet has not shrunk at all * There is no way out * How can people think that we can keep interest rates this low for this long and not have problems? * Artificially low interest rates causes mis-allocation of resources * Those mistakes are corrected when interest rates go up * The next economic downturn is going to leave the Fed with no other recourse than QE * Fiscal stimulus will roll out during the election year to cover the bigger deficits caused by Keynesian stimulus package * Also the emerging markets are just starting to unload U.S. Treasuries because they no longer need them to keep their currencies from rising * When they realize that the dollar has peaked and a new bear market has begun, the Fed will have to not only stimulate the economy and monetize the growing deficit, they will also have to monetize the treasuries that are being sold by foreign central banks * QE4 for will be bigger than QE1, QE2 or QE3 * The question is, when are people going to figure this out? * When is the dialogue going to turn from when will the Fed raise rates to how big is the next stimulus package be and how soon will it be here? 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 Sep 201522min

* Another day, another 450-point swing in the Dow Jones * The market opened about 250 points higher off the back of overseas markets * Japan was the standout; it was up about 7% on the hope of more money printing * All overseas markets were stronger and the U.S. followed that lead, but at the end of the day, the market was down about 240 points, a lot of selling coming in the final hour * Huge swings almost daily over several weeks generally indicates a change in trend * The long-term trend of a rising market followed by extreme volatility usually marks the end of that trend * All this volatility is based on rate hike uncertainty * Sentiments range from rate hikes coming either in September, October, or December * The first rate hike is not scaring everybody, it is the consequences of interest rate normalizaion * If the Fed does raise rates, I think the market will start looking toward the next rate cut * This bubble is so big, the slightest pin will prick it * The Fed's only option will be stimulus to get out of the next recession * The cycle will be much shorter because of the amount of debt we have * Sentiment is coming from everywhere asking the Fed not to raise rates, which plays into the Fed's hand * This disguises the Fed's actual intention not to raise rates * Market volatility today was probable due to the JOLTS report today which unexpectedly jumped up to the highest level in years, indicating a huge number unfilled jobs * The JOLTS numbers have been good for years, and wages still have not gone up * This is just the raw number of jobs, so these may be a larger number of part time jobs open replacing full time jobs * Many low-paying jobs won't be filled because entitlements provide higher compensation * Everyone is on pins and needles because they know that cheap money is the only thing that is fueling the economy - it's not real earnings * The market may have sold off anyway because there has been a lot of technical damage done to this market and it is likely to go down until the Fed admits that rates are not going up * The stock market, unlike the foreign exchange market or the commodities market or the emerging markets have not discounted rate hike normalization * This means that if the Fed does rates by a quarter point, the dollar could sell off because it is too little too late * It could be the shortest tightening cycle ever * The stock market needs to know that the Fed is not going to raise rates * The U.S. will lose its safe haven appeal * One small example why the Fed can't raise rates is the sub-prime Auto Loan bubble, which is now above a trillion dollars * The short-term benefit to the economy is increased manufacturing, inventory and jobs * But the huge reduction in credit quality of these loans provides risk of fewer future sales due to longer payoff terms * It is much easier to default on an auto loan than it is to default on a home * If we have a trillion dollars in auto loans, if we go into recession next year, we would lose at least $100 - 200 billion on car loans which will further exacerbate the recession in a big way * High-paying jobs in the auto industry will be lost,and the Fed has to know this already * Another trend is a record high in auto leases because they offer lower monthly payments * Leases are not the best choice unless they are bought for a business, providing a tax write-off * Otherwise, for personal use, your payments never end - you never own the car/li> * I have already recommended not to borrow money to buy a car * Save your money and buy a used car you can afford * In the Chinese economy, most cars are purchased with cash, from savings 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 Sep 201531min

* Earlier today we released the most important Non-Farm Payroll report ever, at least according to the media * A WSJ article stated that this report could "seal the deal" on rate hikes * Interest rates have been at zero for 7 years as the Fed contemplated lift-off * It all boiled down to one jobs report? * If the Fed were going to raise interest rates in 2 weeks, how can it count on its accuracy or the fact that numbers will change next month? * Let's get into the numbers: * The number we got was 173,000 - well below the consensus forecast * One of the weaker components was private payrolls, which only grew by 140,000 vs and expected 211,000 * The headline number is the unemployment drop to 5.1% - the lowest in the Obama presidency * Once again, the devil is in the details * The unemployment rate is falling because of the mass exodus from the labor force * Another 261,000 Americans left the labor force this month * The participation rate held steady at 62.6% * The lowest rate since 1977 * I think it's heading lower * The total number of persons not in the labor force rose to a new record: 94,031,000 * Also this month another 158,000 Americans find themselves involuntarily employed part-time * That's what's responsible for the "improvement" in the labor numbers * Janet Yellen specifically wanted to an increase in labor force participation and more full-time jobs before contemplating raising rates * Those numbers have gone in the wrong direction * Why is nobody pointing this out? * This is the 9th month in a row that year-over-year factory orders have declined * The only other time that has happened is during recession * Every time we've seen a sharp decline in the market accompanied by an increase in the volatility index, the Fed has responded with Quantitative Easing * More and more people now do not believe the Fed will raise rates in September * If the Fed raises interest rates and the market keeps falling and the economy rolls over, the Fed loses a lot of credibility * This is affecting global markets * The Dow is now in correction * I pointed out in my last video blog that: a) the Fed has never raised interest rates from zero and b)normally the Fed raises interest rates into an accelerating economy * This time the Fed is raising interest rates when the economy is weakening * This time a rate hike will prick a much larger bubble * Even if the Fed raised rates to a quarter of a percent, that is still cheap money * The markets are forward-looking and they are not going to like what they see * The dollar strengthened on anticipation that the Fed will raise rates * America cannot afford higher interest rates on the debt we have now * One of the things most people overlook is the huge stockpile of U.Ss treasuries that are held abroad * Why do the emerging markets have so may dollars? * In the aftermath of the 1997 Asian economic crisis, they bought dollars as a reserve to defend their currency if it started to fall * That is happening * So now, foreign governments are going to start drawing on their reserves, selling treasuries to shore up their currencies * The vast majority of the accumulation happened after QE1, when we had a currency war * The media has labeled this sell-off "Quantitative Tightening" * China has already started to gradually sell treasuries * The Fed has promised not to roll over maturing treasuries and to shrink the $4.5 trillion balance sheet to about a trillion * That's $3.5 trillion of Quantitative Tightening * Interest rates would have to rise dramatically to attract real buyers to U.S. treasuries * No one can afford higher rates, 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

4 Sep 201530min

* The Dow just finished its worst month in over 4 years * A lot has happened in the market since I recorded my last podcast * When I recorded that podcast, I had anticipated a "Turnaround Tuesday" where the market would gap up, but then sell off by the close * That is exactly what happened * Then the Dow had its biggest 3-day rally in history * Still that record-setting rise was not enough to repair the damage done that was done earlier * The Dow had its biggest down month in over 4 years * Still in official correction territory * Adding woes to the stock market are Fed comments that September rate hikes are not off the table * This will continue to add pressure on the markets * If this week's Non-Farm Payroll number is positive, it could be very dangerous for the Dow Jones * Technically, the market is very vulnerable, and without the Fed's support there is little to stop the correction from progressing into a bear market * All of the big money is starting to sell stocks because they believe the Fed may raise rates * The market will keep falling until the Fed cries, "Uncle!" * Once the Fed comes to the rescue, big money will start buying again * The Fed is still ignoring negative economic data, such as today's August Dallas Fed Manufacturing Survey which came in at -15.8 * There is probably not going to be much change in the unemployment number, no matter how weak the economy is * Walmart is now cutting back on hours because they increased wages earlier * As long as the Fed is continuing to bluff that rate hikes are on the table for September or October, this market will be under a lot of pressure * If we close below the lows of last Monday, it is going to get ugly really fast * The Fed doesn't want the market to connect the dots directly from monetary policy to market performance * That would illustrate how unsustainable its policies really are * I compared the Fed's tactics to trying to yank the table out from under the tablecloth, rather than the tablecloth out from under the dishes * The Fed was basing the whole recovery on lifting the asset markets * As soon as the Fed stops lifting, the recovery goes away * One of the interesting things today was the reversal in oil prices * One of the few times oil prices rose, and the stock market didn't * Over the last 3 three days, we've had better than a $10 increase in the price of oil * Oil needs to go up quite a bit more before we can say a bottom is in * An end to rate hike rhetoric will knock the support out from under the dollar and that the strong dollar is undermining global demand for crude oil * I was in Jackson Hole during The Federal Reserve's Annual Economic Policy Symposium to participate in the American Principles Project Economic Summit, which was a protest against Fed policy * Concurrent to our conference another organization called, "Fed Up", sponsored by the AFLCIO and Black Lives Matter * Working class protesters carried signs encouraging the Fed to keep interest rates down and target higher inflation * How is that going to help these working-class "protestors"? * These participants probably had very little knowledge of the Fed or monetary policy * The American Principles Project Economic Summit was denied access to the resort where the Fed Summit met because for security reasons, citing that other group was allowed to meet in that venue * "Fed Up", however, was allowed to meet in the same venue as the Federal Reserve * I think "Fed Up" conference was staged. They conveniently provided a backdrop of signs encouraging more of the Fed's existing monetary policy * The protest I participated in was sharply critical of the Fed's monetary policy, 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

1 Sep 201533min

* It wasn't a Black Monday of the 1987 variety, but it was one for the record books * The Dow was down opened downjust over 1,000 points - the biggest intra-day point drop ever * When the market opened down that low, bargain hunters came in for a spectacular rally * Bringing the Dow almost back into positive territory before surrendering those gains and ending the day down 588 points, another 3.5% drop, closing at 15,871 * Taking out the 16,000 handle just a few days after taking out the 17,000 handle * All of these drops are being blamed by the media on China * The Dow Jones is down about 11% year to date * After today's drop, the Chinese market was down less than 1% * This is not all about falling Chinese stocks * It's the Fed - Everybody believes the Fed is going to end the party * As we got closer to September, the stock market was already going down * I've said all along that the Fed was bluffing - it is a game of chicken * Finally, today, Barclay's is predicting a Fed rate hike in March of 2016 * I think the Fed will launch QE4 before we get to a rate hike in March 2016, which is an election year * The media wants to blame the correction on China, as if there are no domestic problems to worry about * China should be blaming it on us - we're the ones who got the world hooked on zero percent interest rates * The fantasy was that we could raise rates without an impact on the economy * The falling stock market is going to have an impact on the real economy * The economy is weak and getting weaker * This correction will turn into a full-fledged bear market unless we get some official statement from the Fed that they will not raise rates * That may come later this week in Jackson Hole * I am going to be in Jackson Hole at an anti-Fed conference * Here's an example of how ridiculous the "Blame China" rhetoric is: * Maria Bartoromo was talking about the market decline with respect to the China currency devaluation * She actually said that by devaluing the Yuan, Chinese made products will be more competitive against American-made products * America does not produce products that compete with Chinese products! * She's grasping at straws to connect the stock market correction with the Chinese Yuan devaluation * Right now it is positive for America if we can purchase Chinese products more cheaply because we're buying them anyway * Eventually, however, Chinese products will get more expensive when the yuan goes up * She's just trying to fit the narrative because that's what makes everybody feel comfortable * That's why I am not on CNBC and CNN - they realize my comments do not support their editorial policy * I am not talking about Armageddon for the markets - I am talking about the Fed saving the day * I don't think the market is going to crash, but I believe it will go down until the Fed cries "Uncle" and prop up the equities markets with another round of QE * The Federal Reserve did not solve our problems in 2008 - they interrupted the crisis with QE and zero percent interest rates * That crisis would have solved the problem but we kicked the can down the road and we finally caught up to that can * We are resuming the financial crisis that the Fed interrupted from a much deeper hole * Had the Fed raised rates two years ago, we would have been in recession sooner * They should have allowed the markets to solve the problems they caused * Now we have more debt than ever before * I have also been talking about the developments in the foreign exchange markets * The dollar has been strong because rate hikes were expected * The strong dollar has weakened commodities, 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 Aug 201523min

* What a week for global stock markets, but in particular, the U.S. stock market, which had its worst week in 4 years * The Dow Jones down better than 1,000 points - over 10% from its peak puts it in official correction territory * One-third of the stocks in the S&P 500 are already down 20% from their highs * The Dow lost more than half of the 1,000 points today - 530 points, which is the 9th biggest point decline ever * This is on top of the 350 points dropped on Thursday * Thursday we broke below some key technical levels so Friday's drop was inevitable * There could be a bigger one looming for Monday * This is reminiscent of the weekend before Black Monday back in 1987 * We are only about 300 points above the lows from October last year when St. Louis Fed President James Bullard saved the market and sent the Dow up 2,000 points * This time he is throwing the market an anchor * He still indicates the Fed is undecided * What data over the next couple of weeks could be that significant? * The Fed does not want to admit that they can't raise rates * When is the Fed going to blink? * Valuations are extremely high, and the Fed is about to go from supporting the market to leaning against it * The economy is decelerating * I think the market is going to surrender all the gains it has made since March of 2009 * None of those gains have been real - they did not come from increased production or a genuine increase in corporate earnings, it was all Fed engineering * The market has gained no ground since QE was suspended * If the market goes down on Monday, what is the Fed going to do? * The Fed needs an excuse not to raise rates * The drop is not because of China * The problem in China and in the emerging markets is caused by the perception that U.S. Fed is going to raise rates * The markets want to blame the market correction on China but that is not why our market had a correction * Emerging market currencies are taking the brunt of the selling by those who are expecting a Fed rate hike * The euro is very strong today, and the dollar index is declining * The euro is going to go on a big move, especially if the Fed caves * Gold is up $80 in the last 2 weeks * What happened to the theory that gold will collapse below 1000? * Two weeks ago hedge funds were for the first time net short gold * How is that trade working out for them now? * A lot of people are trapped short the euro and short gold * Now pro-dollar bets are pressing smaller currencies * This is the last throes of the dollar bull, based on the rate hikes that aren't going to happen * At the end of the 6 or 7 year journey, there can't be a rate hike * If the Fed actually raises rates, they lose credibility because they will have to immediately reverse course * If they do not raise rates, they can say caution is needed because of another dip in the recession * This way they don't have to admit that the policy was a failure * The only economic data that came out today was the August Manufacturing PMI number - expected to improve over last month * It dropped again to 52.9 - the lowest level since October 2013, and the biggest miss in 2 years * If the Fed is truly data dependent it would have already admitted that it can't raise rates * At the end of 2014, I predicted that 2015 would be a much weaker economy than forecasted * I was right about that * I thought by now the Fed would have admitted that the economy is too weak for a rate hike * But the Fed just keeps talking about a potential rate hike as though it were a real possibility * This is a very dangerous game 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

22 Aug 201527min

* Today the FOMC minutes were released at 2:00 today and this is the last look inside the head of the FOMC members before September * Now expectations are being pushed back to December * Gold and silver prices were up today in spite of expected hawkish Fed comments * We are at more than a one-month high in the gold price now above 1130 against a backdrop of extreme bearishness suggests we've seen the low in this cycle * Silver was down yesterday and recovered dramatically today which suggests an upward trend * There is no more upside in the "Fed is raising rates" trade * The Fed may not raise rates at all, or say they might not raise rates again * Is the Fed raising rates just so they can cut them? Raising rates will accelerate the recession * Whether the Fed raises rates or does not raise them, this may be the end of the dollar rally and the end of the gold and silver decline * The FOMC minutes do not indicate a plan for a rate hike in the future * The Fed does not want to admit we're not progressing in the direction the Fed wants; we're moving the other way. * Case in point: the Empire State Manufacturing Index came out on Monday * Last month, in July the Index was 3.86% - a low number * The consensus for August was a slight improvement to 4.75% * We actually got -14.92% * This is the lowest number since April of 2009 and the biggest miss since 2010 * The Fed is worried that there is not enough inflation * There's not enough growth and the job market is not there yet * If the Fed is further away from their goal than they have been in this ridiculous monetary experiment of zero percent interest rates and quantitative easing * Walmart earnings are down - blaming weak earnings on the strong dollar * How much weaker will their earnings be with a weak dollar? * Americans are spending more money on food - inflation that is not being measured * The Stock Market is still selling off, because a rate hike is not priced in, as it is in the currency markets * This would be the first Fed rate hike in a decelerating economy * This is not a normal period, so don't expect the stock market to behave normally * Now, people are now starting to figure out that the Fed's process is not so smooth * The stock market will trend down until the Fed comes clean and admits that it cannot raise rates * This is just a lag between QE3 AND QE4 * Anything that can go wrong, will go wrong and when it comes to this Fed and this monetary policy, Murphy is going to look like an optimist 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

20 Aug 201520min

* On Friday we finally got the Non-Farm Payroll numbers for July * The consensus is that this reports indicates that an interest rate hike is inevitable * This is the rate hike that everybody has been expecting and this report see * The report is weak, relative to previous months, but slightly ahead of the consensus * It seems like we are going in the wrong direction * Labor Force Participation Rate is stagnant at the lowest in decades * Q2 GDP was much lower than expected * the Atlanta GDP Now Forecast for Q3 at 1% - a third of the official forecast * If the Fed was not willing to raise rates last year, when the economy grew at 5%, why would they raise rates now? * The Fed may have backed themselves into a corner where they have to raise rates * If so, Yellen has already prepared the market for a tiny raise * They recognize that the market is fragile * It would be a more credible move for the Fed to not raise rates at all * The market's reaction to the jobs data and the "certainty" that rates are going up * The dollar sold off somewhat * Gold rose slightly * Higher interest rages are expected to be bullish for the dollar - Why didn't the dollar rise? * The old adage, "Buy on the rumor, sell on the fact" * If the Fed raises rates in September, it will be the most highly anticipated rate hike ever * If the market buys on the anticipation of a rate hike, the actual rate hike will be the sell signal * The market is telling us it has gained all that it is going to gain from any future rate hike * The Fed will deliver much less in the way of rate hike than the market expects * The reaction in the stock market was more interesting - The market was down again * The longest losing streak in the Dow in about 4 years * The fact that the U.S stock market is still falling indicates whereas the currency markets may have factored in a rate hike, the equity markets have not * I have been hearing the refrain,"There is no reason to fear a rate hike!" * This is a very naive to look at the market because there is no historical precedent for interest rates to stay low for so long * These are not "normal" times * More importantly, the market only expects a rate hike if the economy get better * But now the data shows that the economy is continuing to slow down * The crowd that believes a rate hike will not harm the economy should reassess their thinking * Corporate earnings, already under pressure will be further weakened by an interest rate hike * The consumer is barely surviving with rates at zero * 2015 is probably going to be the weakest year of the entire so-called recovery * If the Fed really begins to raise interest rates, what is going to happen in 2016? * We will be in a bear market, the real estate market will drop and a recession will follow * The Fed's only medicine at that point will be QE * The truth is, the economy did not need the first round of QE and it nees QE4 even less * This is going to be the mother of all money drops and all the people who have been saying,"The Fed was right!" are taking a premature victory lap * Hopefully it will shock the Keynesians into abandoning central banking and central planning * And finally embracing a real market recovery based on free market principles * Those of us who have seen the writing on the wall will be rewarded in the investment front * For having the fortitude to maintain our positions and not throw in a winning hand 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 Aug 201524min