Fed's Tough Inflation Talk Sparks Gold Correction - Ep 895

* 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 Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com 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, Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com 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... Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com 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... Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com 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 Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com Privacy & Opt-Out: https://redcircle.com/privacy

17 Mars 201629min

* We have some key primary elections coming up tomorrow and I want to take an opportunity to do a podcast on Donald Trump and the Trump phenomenon * A lot of people are under the impression that I am endorsing Donald Trump because I have said some positive things about him and his campaign * But I want to make it clear that I am not doing that * I am not convinced that he is going to be a good President, although it's possible that he could * I think there's no chance that Hillary Clinton would be a good President, that's clear * Donald Trump is a wild card * I do have a lot of problems with much of what Donald Trump says * What is more telling is that he has so much support because he is tapping into a vein in the Republican Party, in fact, outside the Republican Party because he is getting Independents and Democrats to cross over and vote in Republican primaries because some people find his message so appealing * The country is in much worse shape than the media or the Federal Reserve or Congress are leading people to believe * Everybody keeps talking about the recovery, especially President Obama, but the people who are showing up for Trump at these rallies know there is no recovery * In fact, the economy is in even worse shape than even Donald Trump recognizes, but at least he is talking about the enormity of the problems * He's right - America isn't great. There are a lot of people who are in denial * They say we don't have to make America great again, because it's still great * No, it's not * Based on any measure, the U.S. economy is far from its greatest * Donald Trump recognizes that American has lost her greatness and he wants to restore it * Voters want to make America great again and they believe Donald Trump can do it * Donald Trump probably believes he can do it and that is part of the problem, because he can't make America great again * Only free market capitalism can make America great again and I'm not sure Donald Trump understands this * He believes America is in trouble because we're run by a bunch of idiots, by incompetent people who are in charge of the country - and he's right about that * They are incompetent, but just changing the politicians, having more competent leaders is not going to make America great again * If we have big government, it doesn't matter whether Donald Trump is in charge or the current crop of politicians * There is no way to make big government work * Smarter people at the helm won't steer this massive ship any straighter * Donald Trump believes that because he's successful in business and he's built a high net worth that he can run the U.S. government and make it profitable for American citizens * He thinks he can get in there and get rid of the waste, fraud and abuse and we're going to negotiate better trade deals and this is going to bring our jobs back, and America will be great again * None of that is true * We don't need better negotiators.  We don't need trade deals. We just need free trade * The problem with trade deals is that they're not free - they're managed * There are all sorts of nonsense in these agreements * The fact that the U.S. has these huge trade deficits, and the fact that we're losing all our high-paying manufacturing jobs is not because we got outsmarted by the Chinese in negotiations * Our trade deficits are a symptom of the problem - they are not the cause of the problem * The reason we have deficits with everybody is not because we have bad trade deals * It is because we have too much government * Even if Donald Trump is the leader of that government, he's not going to make it work any better * What he needs to do is to talk about how he is going to dismantle governme... Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com Privacy & Opt-Out: https://redcircle.com/privacy

14 Mars 201636min

* Mario Draghi at the ECB fired his big bazooka today; people had anticipated that that would be the case * In fact, it seems like he fired a bigger blast than people were expecting, he announced that he would reduce negative interest rates further * They moved from -.3 to -.4 and he announced an expansion of their quantitative easing program from €60 billion per month to €80 billion, which means that their program is not larger than the Fed's; remember we were doing $85 billion a month before we tapered it down * So what the ECB is doing is closer to $90 billion * The problem for the market is that even though he fired a bigger blast than the markets had anticipated, after he fired it, he put that bazooka back in his holster * What I mean by that, is at the end of his press conference, Draghi mention that he thought that this would probably be the last cut, that -40 is as low as the ECB is going to go * Now maybe the market was just looking for an excuse to reverse, but the Euro, which had initially dropped sharply, about 1.5% down on the day, following the initial announcement, reversed and ended up falling about 2%, so it was a 3.5% reversal, and from what I've read, this is the biggest reversal, ever in the euro, from down to up * In fact the dollar index went through 4 handles, at its highs this morning, the dollar index was at 98.5 and at its lows it was trading at around 95 * Many people think this is a failure for the ECB; they want a weaker euro, because they want more inflation * I think the ECB is going to get more inflation, whether the euro weakens or strengthens against the dollar, because it's still going to weaken in real purchasing power * Just as I mentioned in yesterday's podcast, referring to the Reserve Bank of New Zealand, Mario Draghi is saying that he doesn't have enough inflation, and interestingly enough, Draghi is going to get more inflation, and more than he's bargaining for * He mentioned in his press conference that these things take time, because it will take time for inflation for develop because first we need the recovery to regain traction, as if inflation is a by-product of economic growth - it's not. * It's a by-product of all the money printing * It's just that right now, a lot of that money printing is in the financial assets * But all this QE and negative interest rates are not going to get economic growth * Now maybe the Eurozone economy will grow, but it's not because of QE, it's despite QE * In fact, there would be more growth, if the ECB wasn't doing this, what they are doing is counter productive * But ultimately they will succeed in getting more inflation, in fact they will get more than they bargained for * I predict that prices in the Eurozone will not only hit the 2% target, it will exceed it, and that will mean the ECB is going to have to quickly withdraw that stimulus, they will have to raise rates much faster than they thought and much higher than they thought, but at least they'll do it * We can't. that's the big difference.  Europe can afford higher rates, America cannot * Europe is going to have the Bundesbank pressuring the ECB fight that inflation; there will be no such pressure on the Fed from the United States * Normally, too, when the ECB eases, gold goes down and that was the knee-jerk reaction, as soon as the announcement came out, the price of gold dropped about $15, but it reversed very quickly and it ended up finishing up $19 * We're talking about a $35 intra day reversal, in fact, the low was below $1240, but ever since the price of gold closed above $1250, it has never closed below $1250 * This is the highest close of the year, it's the first time I've see gold close above $1270 * Gold stocks closed at their highs of the year, Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com Privacy & Opt-Out: https://redcircle.com/privacy

11 Mars 201625min

* So far it's been a pretty light week but what little economic data that has been released is bad, and all of it evidences the recession that nobody wants to acknowledge * Let's start with the Consumer Credit numbers that came out on Monday.  Not only was the number extremely weak, but the revisions to the prior month were even weaker * The initial report for the growth in consumer credit in December was $21.3 billion * Now I don't think growth in consumer credit is good; I think it undermines long-term living standards * The last thing you want to do is borrow money to consume, one of the points I really hammered home in my book, "How an Economy Grows and Why it Crashes" * If you haven't bought that book, you should get a copy * Be sure to pick the collector's edition because, in addition to being a really beautiful book, it has two entirely new chapters.  If you already have the original one, buy the collector's edition and give the original away to a friend. * Consumers should not borrow to consume.  They should save to consume. * Businesses should use our savings to invest in capital equipment to grow the economy * When you consume savings, you undermine long-term economic growth and therefore future consumption is diminished * The problem is we're living in a bubble, and in order to sustain this bubble economy, consumers have to keep spending * In this economy, however in order to keep spending they have to keep borrowing because they're certainly not earning, and they don't have any savings *  This has to blow up eventually but right now, it's all about keeping the music going * Consumer credit was revised down from the originally reported $21.3 billion to just $6.4 billion of growth * They were looking for January to grow by $16.5 billion, and of course, this also includes student loans, as well as credit cards * Instead, we got an increase of just $10.5 billion * Consumer credit growth imploded in December and January * If there's all this job creation why aren't these newly-employed people spending money? * This shows you the jobs are going to people who already have part-time jobs, and need to supplement hours and wages * Also, we got the Small Business Optimism Index, which last month was 93.9, and there was an expectation that it would increase to 94.2, that small businesses would be a little more optimistic, yet it dropped a full point to 92.9 - the lowest level in 2 years * If that is the case, why are they hiring people? * The type of hiring that is going on is hiring part time workers to replace full-time workers * Which brings me to the data that came out today: Wholesale Trade * Inventories were expected to drop, but they increased by .3% * And the inventory for December was revised from -.1 to unchanged * The reason inventories spiked is because sales collapsed * The inventory to sales ratio just hit a new high, at 1.35 * This is a 7-year high. The last time the inventory to sales ratio was this high was in April of 2009.  We were still knee-deep in the Great Recession * If this recovery even exists, why isn't the merchandise being bought? * At some point this year, the lone remaining bright spot in this horrible economic landscape - the number of jobs being created - will turn down * We got more disappointing corporate earnings news this week * The reason the stock market is moving slightly up is because of the sentiment that the Fed will not raise rates in the near future * It's not just the stock market - Oil is above $38/barrel * Also some of the industrial metals have had huge spikes * And of course, the dollar is going down against other currencies * The Australian dollar hit an 8- month high Our Sponsors: * Check out Avocado Green Mattress: https://avocadogreenmattress.com * Check out Boll & Branch: https://boilandbranch.com/SCHIFF * Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com Privacy & Opt-Out: https://redcircle.com/privacy

10 Mars 201636min