Government to Sedate the Economy with More Stimulus – Ep 638

* One piece of positive economic news ISM Non-Manufacturing Index for July surged to 60.3 - highest number in 10 years * The ADP Employment Report came in at 185,000 jobs, well below the consensus * June Trade Deficit rose 7.1% - in line with expectations * June Layoffs rose to 105,696 biggest layoff number in 6 years * Consumer Comfort Index down to 40.3 second lowest number since November * The Atlanta Fed dropped a bombshell forecasting Q3 at just 1% * Given this slowdown, could we possibly have a rate hike? * The stock market has had 6 consecutive down days * The stocks with no earnings are doing the best * Very reminiscent of the dot com era * The "story stocks" are selling in 2015 * Companies that actually have earnings are experiencing the greatest pressure on their share price * Every time we have a dip in the stock market, the Fed always comes to the rescue * Why wait until the economy is slowing down to raise rates? * They can't do that this time, unless they want to abandon their rate hike rhetoric * They will have to take the rate hikes off the table * Janet Yellen continues to say rate hikes are data dependent * The data has been bad for quite a while * The economy is growing at the slowest pace of the entire "recovery" * All the Fed can do is go back to the drawing board with more QE, because they can't admit that it never worked * The money printing is just getting started * Not that it is going to work, but it is the only policy remedy the Fed has * Some stocks are really getting beaten up as earnings continue to disappoint * This topping pattern has got to worry the Fed * Any rate hike will accelerate the decline * We have a stock market bubble and raising rates will prick that bubble * Ben Bernanke created the stock market bubble thinking the "wealth effect" would cure the economy * Bernanke would not acknowledge that bubbles weaken the economy because it was not politically advantageous * The First Republican Debate was held tonight, so please follow me on Twitter for my comments * Donald Trump is far and away the leader in the polls and he is one of the few candidates who have been critical of the Fed * The only other candidate in the race who knows anything about the Fed is Rand Paul * Tomorrow could be a big day - the question is, if we get a bad jobs number, will we finally have a reaction in the currency markets?   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 Aug 201520min

* This is my 100th Podcast * This new format allows for timely analysis when is is most convenient for me and for you, the listener * Please share these podcasts, to get this valuable information out * My podcasts can be accessed on YouTube, on iTunes and other podcast sites and right here on my website * Also don't forget to check out my Twitter feed, because I comment much more frequently on daily economic news * Check out my post on Facebook about the CEO who established a $70,000 minimum salary for all his workers, and the latest news is that his policy is about to take the company down * Today a bombshell was dropped on the labor markets on Friday in the form of Employment Cost Index * Measures the cost to employers: wages and benefits * The expected increase was .6, but the actual number came in at just .2 for the quarter * This the weakest number since 1982, since they began keeping records * Janet Yellen has been saying that improvements in the labor market must precede a rate hike * This is understood to mean wages, labor participation rate and full time vs part time jobs * We're 0 for three, right now - all three are falling * As soon as this number came out, they dollar sold hard * But then, the dollar clawed its way back, and gold was down again - gold stocks got crushed - Why? * Jon Hilsenrath, the chief economics correspondent for The Wall Street Journal, came out with an article, speaking for the Fed, stating that the Fed does not need wage growth to hike rates * Really? The Fed is going out of its way to preserve the pretense that it can actually raise rates * They are seeking the psychological effect of rate hikes without the real world damage of actual rate hikes * If the Fed still believes it won't raise rates unless the labor market improves and they are taking wage hikes off the table, then what are they waiting for? * The other two remaining criteria are still down * Janet Yellen still says she's data dependent and all the data that she is depending on is negative * The stock market looks very toppy - it looks like it will roll over and when it does the Fed will bring in the cavalry in the form of stimulus * The Fed built the recovery on a stock market bubble and a real estate bubble * Ben Bernanke's goal for 7 years was to create a "wealth effect" on assets that are now at risk - they are not going to let them collapse * All of the data would argue for no rate hike in September * Janet Yellen is implying, by talking about rate hikes, that she believes that the economy is going to improve, when all signs indicate the opposite * Therefore traders are ignoring bad economic data because they trust that Janet Yellen believes the economy will improve soon * Don't pay any attention to the man behind the curtain, because Janet Yellen says the bad news is not real * We can all see the negative data, but no one wants to acknowledge it because Janet Yellen is not recognizing it publicly * They buy the dollar, they sell gold and there is a dichotomy between those who don't own gold and have no ability to deliver it and are selling gold to those who don't actually want it - they are gambling on the price of gold * The amount of gold being gambled is greater than ever before * Sales for those who want to hold gold are skyrocketing - the mints are running out of supply * We are running out of some of our silver * Schiff Gold * Our customers who buy gold and silver are not offering to sell - they are buying more * They are reacting to lower prices * On the other side of the coin, clients are reacting negatively to the high dollar weighing on the relative value of foreign stocks 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 Aug 201530min

* This morning we got the first look at Q2 GDP * Q1 had been reported most recently at -.2 * Everybody was looking for an upward revision due to the double seasonal adjustments * The revision brought Q1 into the black, but only by .6 * Q2 expectation was 2.9; instead it came in at 2.3 * I had mentioned that at best, Q2 GDP would be in the low 2's, which is what we have * After revisions, however, we could end up at below 2 for Q2 * Wall Street and the Fed were too optimistic about Q2 * Now previous GDP years have been revised, with the net effect of lowering U.S. GDP growth almost 1 percentage point for the past three years * After revisions, the average growth rate is 2% per year * 2015 Q1 & Q2 average GDP growth rate is just 1.45% * The worst first half of the "recovery" * What is the point of raising rates now, when the economy is at its weakest? * The Fed is still waiting to see improvements in the labor market * Unemployment is low * The Fed is waiting to see increases in wage growth and in labor force participation * It is unlikely that there will be more part-time workers finding full time jobs * The Fed is still putting on a show, pretending that a rate hike will be appropriats * This recovery is the weakest recovery in the modern era, since WWII * We have had the most Keynesian monetary stimulus ever * The Keynesians will not consider that their policies are an economic sedative * Even though this is the biggest economic ever, the Keynesians still want more * Redbook Year-Over-Year Same Store Sales rose by just 1% * Last year, the year-over-year growth was 3% * Pundits blame poor retail sales on "hot weather" * People aren't shopping because they aren't making enough money * The U.S. home ownership rate fell to a new low of 63.4% * The result of government efforts to increase home ownership is the the lowest rate since 1967 * Rental prices are at an all time record high * July Consumer Confidence plunged from 99.8 in June to 90.9 in July * As evidence continues to pour in that the U.S. economy is weaker than the government and the press report, the dollar remains high * Gold is not getting a rally from the economic news * Shorting of gold by speculators is a dangerous game, as there is no indication that the price of gold overvalued * It's not the traders who are buying gold. It's the strong, long-term holders that are doing all the buying 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 Juli 201521min

* The Dow Jones had its worst week since January - closed the week at 17,568, down 518 points * Friday's drop alone accounted for 163 points * Capital One had a huge earnings miss and announced big layoffs * Big losses on bad debt * All the economic data from this year has been negative * There is no precedent for the Fed to raise rates when all economic indicators are down * Normally The Fed stimulates when the economy is down * The most interesting economic news on Friday was a leak from the Federal Reserve * Fed employees' internal projections are way below the Fed's public estimates * Projections go all the way out to 2020 and can only amount to guesses * The document is posted on my Facebook page * Real GDP: 2015: 2.31 way below the official forecast but still overly optimistic * Real GDP for 2016: 2.38 - 2017: 2.17 - 2018:1.76 - 2019:1.75 - 2020:1.74 * This shows an average of under 2% for the next 5 years * If the Fed believes its staff's estimates, why would they be talking about raising rates? * Inflation numbers are even more difficult to believe: * 2015: 1.15 - 2016: 1.54 - 2017:1.76 - 2018:1.89 - 2019: 1.92 - 2020: 1.94 * How can they possibly know? It looks like they just picked numbers somewhere below 2% * They even have the core PCE * 2015: 1.33 - 2016: 1.52 - 2017: 1.78 - 2018: 1.9 - 2019: 1.92 - 2020: 1.94 * Fed Funds Numbers: * 2015: .35%(implies one rate hike) - 2016: 1.26% - 2017: 2.12% - 2018: 2.8% - 2019: 3.1% - 202 : 3.34% * After 5 years of tightening rates would still be at historically low levels * This indicates how little confidence the Fed has in the economy * They predict the yield on the 10-year note to rise 2.63% in 2015 up to 4.2 in 5 years * One of the most ridiculous assumptions is unemployment: 2015: 5.34% - 2016: 5.24% - 2017: 5.18 - 2018: 5.15 - 2019: 5.15 - 2020: 5.16 * These are all just guesses. How do they know? * This shows by the Fed's own estimates that employment is not expected to improve * Th * The Fed expects the economy to grow even slower over the next 5 years than during the preceding 5 years * The Fed is either ignoring staff's numbers to paint a rosy picture or they don't trust their own staff * I think the market can't handle the truth and that may have been the reason for Friday'd drop in the Dow * The only thing that will stop the market from going down is some talk from Janet Yellen to dial back the rate hikes and to open the door to QE4 * Another number that came out on Friday which confirms the slowdown in the economy is the new home sales * The current rise in new home sales is primarily for those trying to beat the Fed * June's number was awful: 482,000 against an expectation of 550,000 * The last 2 month's estimates were revised down * The July plunge was the biggest number since November of 2014, and the biggest miss in a year * There is also an interesting statistic on new homes: prices are continuing to rise * It now requires 10 times your salary to buy a new home * In the 1950's it took 2 times a year's salary to buy a new home * All the government spending on "affordable housing" has managed to increase the cost of a home from twice a worker's salary to ten times a worker's salary * That is a 500% increase - that is far beyond failure * This also illustrates how much our standard of living has fallen * New York State passed a minimum wage of $15/hr, which applies to chains of over 30 restaurants * Because employers cannot be forced to pay wages higher than workers' productivity allows, employers will be forced to fire some employees and will seek automation to replace unskilled workers. 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 Juli 201540min

* Today's Podcast is entirely devoted to gold and gold stocks * Last night, in just a few minutes, gold dropped $50 * One or more major sell orders hit the market at the same time and gold went down below $1100 * It was down $20 by the time New York trading opened and by market close gold was down around $37 on the day * Silver was down only about .15 today * Why was all that gold dumped? The goal could not have been to get a good price - the goal was to knock the price down * The HUI was down 10% on the day * This bear market in gold stocks is now bigger than the one from 1996 to 2000 * Gold stocks are much cheaper today than they were at the end of the dot com bubble * If this a measure of trust in central bankers, the market is expressing greater confidence in Janet Yellen than it did in Alan Greenspan in 1999-2000, * We know how badly that turned out for stocks and how bullish it turned out for gold * The timing of this selloff comes on the heels of the media's spin on Janet Yellen's recent Congressional testimony * But the real news that ignited the sell-off was China's admission that they have gold reserves and in fact they intend to add to those reserves, surprising the market * If China was lying about how much gold they have had for the last six years, why does anyone believe they are telling the truth now? * I think they are still lying - being strategic * They want to get the price of gold down because they still want to buy a lot more gold * If China still needs more gold, eventually this will bring the price of gold up * Also a very negative WSJ article compared gold to the "pet rock" craze * This is the same nonsense that proliferated in the 1990's * The WSJ article describes gold investment as "a leap of faith" relative to dollar or stock investments * Gold should not be compared to stocks - it is currency, a commodity * Gold has intrinsic value, whereas the dollar is a fiat currency, backed by faith alone * Gold has had value for 5,000 years - you don't need ot have faith, you just own it * There will always be a use for gold * Why have faith in central bankers when everybody who has put their faith in central bankers in the past has been burned * An article on Zero Hedge compared the WSJ op-ed to a similar one from 1999 * The title was, "Who Needs Gold, When You Have Alan Greenspan?" * They called him "the maestro" * He gave us the dot com bubble, the real estate bubble and the financial crisis of 2008 * That's what happened to the people who put their faith in Alan Greenspan * Over the next 12 years after that article was written, gold appreciated 650% * Who needs gold when you have Alan Greenspan? Everybody * Today Alan Greenspan recommends gold * If we've got Janet Yellen, then we need gold * Greenspan wrote the playbook that Bernanke and Yellen are expanding and he knows it does not work * When you have Janet Yellen, you need all the gold you can get * Fortunately, it's a lot cheaper to buy gold and it is a lot cheaper to buy the companies that mine it * What could go wrong? Everything - what went wrong in 1999 and in 2008? * The same thing that went wrong then will go wrong now, because it is the same central bankers * And the same players on Wall Street either don't recognize the danger or are pretending it doesn't exist and abandoning everything we know about monetary policy * This is the biggest bubble yet - the entire economy is dependent on bubbles * Just when people trust the central bankers the most, that's the best time to buy gold * When this market turns it's going to be vicious * Once the market turns, 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

21 Juli 201522min

* Today Janet Yellen goes back up the Hill for the second of her 2-day Congressional testimony and the press has already made headlines about what she did not say * According to the headlines, Yellen's "hawkish" testimony reflected that she is putting the Fed on a path to hike rates later later this year * That is not what she said * From her prepared, written testimony, which was carefully crafted for all eyes, this is what she said: * "If the economy evolves as we expect, economic conditions likely will make it appropriate at some time this year to raise the Federal Funds rate target, thereby beginning to normalize the stance on monetary policy." * This sentence starts with a big condition: "If the economy evolves as we expect" * When has the economy ever evolved as the Fed expected? - Probably never * Even if the economy improves, those improvements may not live up to the Fed's unspecified expectations * "Economic conditions might make it appropriate to raise rates- * Not result in raising rates, of require us to raise rates - just because it is appropriate to raise rates doesn't mean the Fed will raise them * If the Fed was going to do what was appropriate, they would have raised rates a long time ago * Zero percent interest rates was never appropriate * Yellen herself has said she was likely to leave interest rates lower than would be appropriate because of "special circumstances" * Even if it is appropriate, there is no commitment to raise rates at any point this year * If Janet Yellen really said what the headlines infer, she would have said: * "Given the strength in the economy we will be raising interest rates later this year * She said nothing like that * The Fed went way out of its way to commit to nothing * Yet that's not the way the media is covering this * Why is that? Everyone wants to pretend that the economy is good and that the Fed is going to normalize interest rates * All of this make-believe causes the dollar to rally and gold to go down * By talking about raising interest rates, the Fed is pretending that the U.S. economy is strong enough to withstand higher interest rates without actually inflicting the pain of higher interest rates on all those addicted to the bubble economy * Yellen's responses to to questions during the Q&A were equally dovish * At one point in particular Yellen admitted that we've had zero percent interest rates for a long time and will proceed slowly in any attempt to raise rates * If we notice higher rates are causing pain, we will slow down * What is hawkish about that? * When Paul Volker raised rates to 20% of course he knew it would hurt the economy in the short term, but he knew it was needed * Yellen is worried that if the patient makes a bad face, she will discontinue the "medicine" * It is impossible to raise rates without hurting the economy, especially because a large part of our economy is now dependent on zero interest rates * Higher interest rates will expose a lot of unsound business decisions * It's not the economy that will be hurt, but the bubble - zero percent interest rates are the fuel for the bubble * Zero percent interest rates are more essential now than they were six years ago * Now we have much more debt to service * An interest rates hike would quickly wipe out any minimal gain from a stronger economy * The reality is the economy is already weakening * 70% of our GDP is consumption fueled by debt * Yellen said that zero percent interest rates may be a problem in the long run * It's the long run now * The deficit is already unsustainable * One of the most interesting rates went unanswered: 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 Juli 201531min

* As I have been saying all along, the Greek Prime Minister capitulated to German demands * In fact, he is agreeing to a plan that is more onerous on Greece than the one he encouraged his own people to vote down just over a week ago * Those who thought Greece held all the cards, that the Eurozone would risk a domino effect of other nations leaving the euro * I felt Germany held the stronger hand and would push Greece from the Eurozone rather than cave in to Greek demands * Greece is going to stay a part of the Eurozone, at least for now, because it is the only way they can get the bailout funds they need to sustain Greek socialism * Greek socialism will be mitigated to a degree, by the austerity demands to cut government spending * They don't need higher taxes * If Germany were to allow the Greek debt to be forgiven, the moral hazard for other struggling states would be enormous * The message Germany is sending is that it did not go well for Greece, it is not going to go well for any country who refuses to get their economic house in order * Germany demonstrated that membership in the Eurozone is not for life * This will force other countries to get their house in order * I don't agree with Greece's choice, although it might be better for Greece in the short than leaving the Eurozone * No Greek politician wants to accept responsibility for the austerity measures - it is easier to throw the blame over to Germany of Brussels * Push comes to shove no politician is going to be able to undo Eurozone austerity measures without having to face the music * Greece has run out of other people's money to fund socialism * Now their debt to GDP will be over 200% * They can't pay their debt now - how are they going to pay off a larger debt? * Part of the austerity measures, included a €50 billion privatization program, similar to the IMP's recommendation years ago * Greek government assets will be sold off for the benefit of foreign creditors * I think it would have been best for Europe to kick Greece out and loan them no more money * The euro is down today, but I think it is a dip to buy the euro * This move will show the markets that the euro is here to stay * Greece could have done one of two things: * Greece could have refused the aid package and defaulted on the debt * If they got kicked out of the euro, they could still use the euro as currency, they just would not have access to the ECB for bailout * If this happened, banks would fail; the government would have to downsize, pensions would have to be cut; * Without a tax income in euros, the government would have to operate on a balanced budget * Eventually, relieved of the debt they currently owe, they would be about to re-establish better credit * Greece could then enact real tax reform, become a tax haven in Europe and that would grow the Greek economy * The liberals will point to Greek economic challenges as proof that cuts in government spending do not work * It's not about asking the people who are already pulling the wagon to pull harder; it's about the people who are riding in the wagon to get out and start pulling themselves * Greece needs government level austerity * The Greek shipping industry is vibrant because it is not taxed * If shipping is now taxed, it will drive the industry away from Greece * In order to stimulate business with lower taxes, they would have to leave the Eurozone * Another choice is to establish a sound drachma backed by gold * Where would they get the gold? From privatization of assets * I would use the proceeds to back up my currency * Alternatively, they could back the currency with a Foreign Exchange Reserve 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 Juli 201521min

* This podcast comes from my hotel room in Las Vegas, as I am attending Freedom Fest * Janet Yellen received a standing ovation at the end of her talk, and I can't understand why... * Headlines from the talk report "Rates to go up by the end of the year" * Actual quote:"Based on my outlook, I expect that it will be appropriate at some point later to take the first step to raise the Federal Funds Rate, and thus begin normalizing monetary policy." * "I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate the first step." * In other words, the process will be delayed because whatever happens will be unanticipated or unannounced because the last thing Yellen wants to do is to admit that she can't raise rates. * We have gone 9 years without a rate hike * The market is not prepared for a rate hike given the enormity of the debt * The U.S. owes more money than all the other debtor nations combined * We can only pretend to be solvent and zero percent interest rates are a big part of that pretense * We will not be able to service our debt under normalization * Yellen states that the labor market is continuing to improve * No, it's not * Didn't she see Friday's jobs report, based on downward revisions to prior months? * Didn't she see the plunge in the labor force participation rate to a new low since 1977? * Didn't she see the all the part-time jobs that have replaced the lost full-time jobs? * Didn't she see yesterday's weekly jobless claims report that surged to 297,000? * Yellen previously stated that she would not raise interest rates until the labor market improves, and since then, the labor market has worsened * Wholesale inventories for May up by .8% * Year over year, sales are down 3.4%, the biggest decline since the 2008 financial crisis * Greece is forced to revisit austerity measures as Germany refuses to budge * Greece realizes they don't want to leave the Eurozone * The moral hazards are such that Europe can't budge * I dont'know how the Greek economy can grow, given the enormity of their debt in the hands of a socialist government * Europe needs to keep pressure on Greece in order to maintain standards for weaker economies * The Chinese stock market "collapse" is being overstated in the press * Even though the Chinese market is down 30% in a short period of time the Chinese market is still positive on the calendar year * The U.S. market is down * In April of this year, Chinese stocks took off because changes in Chinese government policy, making it possible for investors to own certain stocks for the first time * It should be no surprise that when a rush of investors tried to buy the new stocks, the price went up * At some point there is going to be profit-taking, sparking panic selling * This is normal market behavior * The market just retraced its steps, leaving gains achieved prior to April * The fundamentals that drove the market higher earlier this year are still solid, and they're in place * The dip in the market is a buying opportunity * The next round of gains will be more sustainable * The Chinese government exacerbated the volatility, making a classic mistake by chasing the market * U.S. economic pundits are commenting on the absurdity of the valuations on some of the Chinese stocks * They are living in a glass house - why are they throwing stones? * The same can be said about some U.S. stocks with ridiculous valuations * The Chinese monetary policy is creating issues, but beneath the bubble is a legitimate economy with production growth, savings and investment 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 Juli 201520min