Bitcoin Tops $100K on Expected Government Bailout - Ep 997

* Last week on Thursday we got that much weaker than expected ISM Manufacturing number, which didn't get a lot of attention because it came out a day before the jobs number which cast a pretty big shadow on all the economic data * The number came in very weak, as I pointed out, it was 49.4, which is contraction mode * Anything below 50 in the ISM numbers indicates a contraction and a recession * But of course, no one cares about manufacturing because it is such a small part of the U.S. economy, which in and of itself, is a major problem * The fact that it is such a small part of the economy should be very concerning, because without manufacturing you really can't have a service sector * The way the U.S. gets away with it is to just import with everyone else manufactures and we run enormous trade deficits, which is an unsustainable model * It's a great gravy train while the ride lasts, but when the rest of the world figures out that we can never pay our debts, then the gravy train comes to an end * The trade deficit represents an artificially high standard of living, but in the long run it's unsustainable because our creditors will not let us get away with this forever * I want to get to the ISM Non-Manufacturing number which came out yesterday; this represents the service sector of the economy * They were looking for 55, which was not a great number; last month we got 55.5, so there was some optimism around that number * They were looking for 55 even and, instead, the number came in at 51.4 * The lowest number in better than 6 years * And if you look beneath the surface and all the various components; new orders, back logs, hiring - horrible numbers consistent with recession * The complete opposite of what everybody was looking for, and when you combine this with the 49.4 we got from manufacturing that is a very bleak picture * The fact that we are at 6+ lows in the service sector does not bode well for the future * The trajectory is down, and how much longer is it going to be before the ISM Non-Manufacturing breaches the 50 mark? * Just when they start talking about these rate hikes - everything before this number came out questioned a September or a December rate hike - foregone conclusion * We had the same discussion in September a year ago * They punted and raised rates in December - will they do it again? * Given the bad news to date, there is really no way the Fed is going to raise rates in September * But just when the Fed officials are talking up a rate hike, everything changes with some bad news * The Fed never admits the data is bad they just don't raise rates and you've got to figure it out for yourself * When the ISM Non-Manufacturing number came out, gold took off * It continued to rise throughout the day and closed up better than $20 * Gold got back above $1350 after having just tested the $1300 level * Silver had a big up day; it went back above the $20 mark * We had a strong move up in the gold stocks again following Thursday and Friday's strong move in gold stocks * The markets were very surprised, and when this number came out, all of a sudden all the bets were changing * The odds for a September rate hike were way down * But not that much for December, because people are just assuming they can't go in September because we got this bad news, but, of course, by December, we may get some good news * The reality is that by then, there will be even more bad news * The Fed is not going to be raising rates; they are just talking about it, politically * In fact, John C. Williams, President and CEO, Federal Reserve Bank of San Francisco late last night ignored the bad financial news entirely in his statement, 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

7 Sep 201638min

*  On Friday we got the Non-Farm Payroll report and, of course, this jobs report is the most important ever * Because it was going to determine whether the Federal Reserve would raise interest rates at its September meeting * Of course, I didn't think the Fed would raise interest rates in September regardless of what this jobs number was * It's just that so many people were convinced that it was going to happen just because several Fed officials said it was possible 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

3 Sep 201631min

*  On Friday we got the Non-Farm Payroll report and, of course, this jobs report is the most important ever * Because it was going to determine whether the Federal Reserve would raise interest rates at its September meeting * Of course, I didn't think the Fed would raise interest rates in September regardless of what this jobs number was * It's just that so many people were convinced that it was going to happen just because several Fed officials said it was possible 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

3 Sep 201631min

* The price of gold continues to retreat * Gold was down about $12 today; it closed around $1310 * The dollar index up again as more and more people begin to contemplate the possibility of a rate hike in either September or December * Or maybe even both, because the odds of a rate hike, either in September or December have now increased to about even money * If you go back to June, the odds were practically zero * What has changed in the last couple of months? * The only thing that has really happened is that you've had various Fed officials going out of their way to mention that a rate hike is still possible * Why would they do that? * Obviously, a rate hike is possible * Usually they are asked the question and they mention the possibility * If the Fed had no intention of raising interest rates, I doubt they would admit it at this juncture * They want people to believe that a rate hike is possible because if you admit that it's not possible, * That opens a can of worms that the Fed isn't interested in opening just yet 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

31 Aug 201644min

* Earlier today Janet Yellen delivered her much-anticipated and way over-hyped speech at the annual Jackson Hole Symposium * It wasn't as irrelevant as I thought it was going to be, but the actual relevant part of the speech was lost on just about everybody * Instead they keep focusing on whether or not the Fed is going to raise rates by another .25 in September or December or maybe both * In reality, whether they do or do not is irrelevant, given the nature of where we are and where the U.S. economy actually is * For a small person, Janet Yellen certainly casts a large shadow over the financial markets * Everybody was on pins and needles, all the traders were there with their fingers on the buttons waiting to react to anything that Yellen said * I mentioned on an earlier podcast that there had already been a sell-off  on gold stocks a couple of days ago on the anticipation of Yellen's hawkish comments * The rest of the market seemed to ignore the possibility that Yellen would be a hawk * Before I discuss what she said, I want to examine whether anyone on the committee could be considered a hawk * A hawk is predatory; is to be feared, reflecting a tough central banker who believes in sound money * On the other hand, a dove is cute and fluff; doesn't really hurt anybody * A dove wants cheap money - keep interests low so as not to harm anybody - nothing to fear * When it comes to hawks with respect to the Federal Reserve, the bird is extinct * They are all doves and the only difference is the degree of dovishness * The hawks are gone and are probably never coming back * Yellen was not a hawk, and neither was Stan Fischer 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

27 Aug 201634min

* The price of gold fell about $12/oz today; silver prices were down another .28 * Both metals have been falling since recent new yearly highs * Gold, though is not very much below the highs * The real carnage has been in the mining stocks, particularly today; today was one of the biggest down days I've seen all year * The GDX index was down just over 7% * Some of the mining stocks were down 10% or more on a very small move in the price of gold and silver * In fact, we've wiped out the last 2 months of gains in the mining stocks * What is the catalyst for this? * Early this morning, around 8:30 - 9:00 New York time before the U.S. Stock Market opened * No news - gold was up 1 or 2 bucks... * All of a sudden a huge sell order hits and gold drops about 7 or 8 bucks on no news * Somebody decided to dump a lot of gold on the market, at one time and didn't really care what the execution price was * Considering how large the sell order was, it didn't really knock the market down very much * But the gold stock market was a different story * It kind of made me think that the rationale for getting gold to drop was the impact it might have on the gold stocks themselves * My guess is that a lot of people who were running with stops, that's when you have an order to sell below the market to try to protect your profits * My guess is that they hit a lot of stops today in a lot of these mining stocks and maybe, some of the bigger players were able to buy more gold stocks based on the shake-out that was created * By a relatively modest drop in the price of gold * Meanwhile, the dollar didn't rise very much today; the downtrend still seems to be firmly in place * What everybody seems to be focusing on is the Fed * People are worried about what Janet Yellen might say on Friday * The Fed's Jackson Hole Conference gets underway tomorrow and Janet Yellen speaks on Friday * I guess the thoughts are: "Maybe she will say something hawkish." * Maybe she'll say the U.S economy is strengthening and the Fed is getting closer to meeting its objectives * And that a rate hike is possible in the near future * So what? That's what she always says. * Now she's not going to come out and say, "We're raising rates for sure. We're moving rates in September." * The only thing she could say is that a rate hike is still possible * That is no different than anything that she has said in the past * So people being nervous about a possible unprecedented hawkish statement makes no sense * Even in Janet were to say she is raising rates in September and she followed through a rate hike * So what? * It's not going to hurt gold and it's not going to help the dollar * Expected rate hikes were already baked into the dramatic rise of the dollar in 2014-2015 * Gold declined from a high of almost $1900 to a low of $1050 because it was discounting all the rate hikes that are never going to materialize * Even if we get one or two more, that is nothing compared to market expectations * Even if we get a couple of small rate hikes, even if we get to .75 or even 1% * That is still not enough to hurt gold or help the dollar * When are people going to figure out it doesn't matter what the Fed does 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 Aug 201629min

* The dollar was broadly weaker today with the dollar index closing down .85 to 94.78 * At that time gold was up about $18; sliver up about .25 * Then all of a sudden New York Fed Chairman William Dudley in an interview on Fox Business basically said that a September rate hike was still possible * Look, a September alien invasion is still possible, but I'm not going to waste my time preparing for it * What's amazing to me is how all of the villagers still come running every time a Fed official cries "Wolf!" * Haven't they noticed that they've cried, "Wolf!" over and over again and there's never a wolf? * I think that Dudley purposely came out and mentioned a September rate increase just to keep the markets in check; to preserve the false narrative that there is actually a recovery, instead of a bubble * All of a sudden, gold sold off, it went from +$18 to +$2 or $3 * Silver went negative; it lost its entire rally in a matter of minutes * I think Dudley was trying to undo the damage done overnight by Dudley's counterpart at the San Francisco Fed, John Williams' well-thought out paper * Williams wrote in his piece that he believes we're in a "new era".  He doesn't understand that the new era that we're in is collateral damage from central bank monetary policy * They think this is a random occurrence that needs a new government prescription * John Williams is proposing, based on this "new normal" the neutral interest rate is so low, it's almost impossible for the central banks to get there, absent negative interest rates * What Williams is proposing, is more inflation * What he is arguing is that we should scrap this 2% inflation target and that we need a higher number *  I've been saying for years that this is going to happen * It's just like the unemployment rate, where they said, "We'll raise interest rates if it gets below 6.5% and then we let it go below 5% * We kept moving that goal post * I said the same thing was going to happen to inflation * In fact it is happening.  If you look at the CPI numbers that just came out today, we continue to be above the 2% level on the core; we've been there for many months in a row * Now they're already starting to say, "Hey wait a minute, 2% isn't high enough * We need more inflation because we need lower rates, and the only way to get there is to have higher inflation * This is what I have been expecting * If you read William's piece, he says one of the ways we should get there is for the Fed to target nominal GDP * In other words, not GDP after you adjust for inflation * I've argued that the deflator is under the actual inflation number, therefore overestimating GDP growth * The Fed is saying, "Who cares about the GDP deflator? * All we care about is the nominal number * We don't care if the growth is real or inflationary, we just want nominal GDP numbers to go up" * What good is that? * No one benefits from phony GDP growth that is simply a by-product of inflation * The whole point is that we want the economy to actually, grow, not for just prices to go up * But what the Williams is saying is no, all we care about is prices going up * It's all about style over substance * That's why we're stuck in this malaise * Additionally, what Williams was also arguing for was more fiscal stimulus * He was saying that we're at the end of our rope with interest rates at practically at zero * We need the government to provide more stimulus in the form of deficit spending * We've already got about a $20 trillion national debt * If deficit spending were stimulative, why haven't we gotten a huge stimulus from that $20 trillion of debt? 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 Aug 201634min

* Today we got the official numbers for Q2 Non-Farm Productivity and the consensus was that it would increase for the first time in 3 quarters; the prior 2 quarters we saw a decline in productivity * So analysts were looking for a .5 increase in the second quarter * Instead, we got a decline of .5 * More importantly, this is the first 3-quarter consecutive decline in productivity since 1979 * That was the Carter years - stagflation, the misery index, sky-high inflation, sky-high interest rates * That was the last time we had a 3-quarter drop in productivity and President Obama is bragging about how great the recovery is and Hillary Clinton promises more of this * If you look at the actual size of the decline over those 3 quarters, it's the biggest drop in productivity since 1993 * If you look at the year-over-year decline, this is the biggest decline in productivity in 3 years * Productivity is extremely important * Politicians are all talking about higher wages - "We need higher wages!" * You can't get higher wages without higher productivity. * That is where higher wages come from * Now, a lot of politicians want to substitute government decrees - they want to mandate higher wages * Like minimum wage - we're going to force employers to pay this minimum wage * All that does, is raise the bar; it makes it harder for unskilled workers to get a job in the first place * Now employers are forced to pay a wage that may be well above the productivity that they can deliver * In that case, they can't get the job * Mimimum Wage doesn't just raise wages, it raises the bar * Another popular way that politicians try to mandate higher compensation is by mandating benefits such as health care, sick leave, paid vacation days, or overtime * The idea is that you're getting something for nothing - I voted for this guy and he delivered * That's not how it works * When an employer hires somebody, they look at the overall cost of employing that person, relative to the productivity required for the job * If I am mandated to provide certain benefits, the costs associated with them are also mandated * If you force the employer to provide benefits at a certain cost, how is he going to pay for it? * What happens is, the compensation becomes a mix of wages and benefits * Maybe the worker doesn't perfer that, maybe the worker just wants the higher wage * The worker can't have it because the government took that decision away by mandating that a portion of the pay include benefits, whether the worker wants them or not * The politicians hope the voters fall for the idea that they got something for nothing * That's government for you.  They always want you to think you're getting something for nothing * But the something for nothing costs a lot more than you think because the nothing is not nothing * In this case, wages go down so the benefits can go up * Everybody would be better off if the government stayed out and let each worker negotiate independently with the employer for a compensation package that is most valuable to that worker * But productivity is really the holy grail of higher wages * If we really want higher wages we need to raise productivity and that's not happening * If productivity is going down, wages are going down * If you want wages to go up, you have to have higher productivity * How do you get that?  Less government, lower taxes, higher interest rates so we get more savings and more investment and less of all this speculation and paper-shuffling that we have in this bubble economy * I want to talk also on this podcast about Donald Trump's economic speech yesterday 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 Aug 201628min