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

* It was Turnaround Tuesday in the global financial markets as stocks are recovering from 2 days of carnage following the surprise Brexit vote in the U.K. * The Dow was up almost 270 points today, NASDAQ up about 97 * But really the markets got beaten up the last couple days * The smallest bounce was from the banks, which have been beaten up the most * So they had the biggest drop and the smallest bounce * Which really shows you how weak that sector is * It couldn't even manage much of a dead cat bounce * In fact, the carnage in, particularly the European banks is much bigger than it was during the financial crisis of '08 * This really shows you how much more levered up the banking system must be, thanks to all these years of QE and negative interest rates * And of course, how much farther behind can the American banks be from their European cousins? * U.S bank stocks, too, were hitting 52-week lows yesterday * I still think there's a lot of carnage coming * Some banks may be in a position where they are going to have to raise equity, which means they'll have to sell stock * Clearly the market is not going to like that * But again, everybody is blaming this on all the uncertainty surrounding Brexit * To me, if we had a healthy financial system, if the markets were sound, and prices were based on fundamentals * Would it really make that much of a difference if the UK were in the EU or not? * What is being revealed here is the fragility of the whole system that is being propped up artificially by the banks * By cheap money, low interest rates - everybody is speculating * And everybody is assuming that the powers that be, whether it is the politicians, the governments or the central banks have everything under control * It's a big put out there and nothing can go wrong * And then when something does go wrong, then people get nervous * The wake up and say, "Wait a minute! Maybe it's not as safe as we thought!" 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 Juni 201633min

* The British actually voted to leave the EU and it wasn't even that close * I think by midnight last night EDT it was obvious that Leave was going to beat Remain * I think it ended up 52% voting to Brexit and 48% voting to remain * Of course, the markets were taken by surprise, in fact, we had a rally in to the close on Thursday as everybody was so confident that the polls would be right, and the online casinos would be right and that it was pretty much a sure thing that the British would vote to remain * All of the experts, the economists and the political elites around the world, including President Obama had lectured the British as to why the smart thing is to stay in the EU and how dangerous it would be, economic Armageddon - if they voted to leave * Of course this may have been reverse psychology * Especially when you've been sold a bill of goods over and over again, with cost of living rising and standard of living going down * The may be reaching for straws in the same manner as the Americans are voting for Donald Trump or Bernie Sanders * The straw that they had was Brexit * I think the markets are overreacting to the implications of the U.K. leaving the EU * After all, think of all the countries that aren't in the EU * Why aren't we all members? * Why doesn't the U.S. join? * They can't even get Switzerland to join the EU and it's located smack in the middle of Europe * One of the reasons why Switzerland is so prosperous is that it had the good sense not to join the EU * I think the markets believed their own hype * For so long, we've been talking about how awful it would be if the British actually voted to leave that when they did so, it was a self-fulfilling prophecy * Everybody is in this for a quick trade * A lot of traders are all levered up and do the minute this thing happened everybody hit the same sell button * This is just about traders having to reverse their bets * Look at what happened in the flight to safety - the dollar was way up against the pound * The pound really got "pounded" - it had its biggest down day in history * It was pounded even harder relative to gold - the price of gold in terms of the British pound rose above 1000 pounds per ounce last night * Gold was the strongest monetary asset of the day, but #2 was the yen * At one point I saw the yen was up 5% against the dollar, which meant it was up about 15% against the pound * Now why is everybody buying the yen, why are they buying the dollar? * People say it's a safe haven - not really. * Does anyone think that the Japanese economy is a bastion of safety? * Why would anybody worried about Europe buy the dollar? * Think about the irony of this: people are so worried about Britain leaving the EU that they're selling the pound to buy the Swiss franc - a country that never entered the Eurozone * It's not about safety.  It's about risk-on and risk-off * What is risk-on? That is when you buy risky assets like stocks * How does the leveraged speculative community fund a risk-on trade? they go to the funding currencies where you can borrow cheaply * The most popular funding currency is the Japanese yen because they pay you to borrow in yen * So it's real cheap, you can lever up, and to a lesser extent the dollar is a funding currency - we've had very low interest rates, especially relative to our rate of inflation 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 Juni 201630min

* I'm on vacation this week but I did take a little time out to little time out to listen to Janet Yellen's semi-annual "Humphrey-Hawkins" testimony - she testified first before the Senate, that was yesterday and today she was before the house * It used to be a lot more interesting with Ron Paul was on the house banking committee and you could see Ron Paul asking questions to Ben Bernanke * I really would like to hear Rand Paul questioning Janet Yellen but unfortunately, we don't have that opportunity * Also, the big news, we are on the eve of the Brexit vote in the U.K.; it's going to be on Thursday * Polls of investor sentiment show the remain camp is firmly in the lead * Betting certainly shows that more money is on the remain, but more people are betting on leave * Probably, though the remain camp will carry the day; the forces of big government are very hard to overcome * Nowhere is big government better exemplified than in the case of the Federal Reserve, which is the combination of big government and central banking * Janet Yellen's testimony, I thought, was relatively boring, but I'm going to go over some of the more important tidbits * Yellen keeps referring to the recovery that appears to be on track and the rate hike is just around the corner * All this is nonsense - if the Fed were going to raise rates, they would have already done so * One senator or congressman asked Yellen about the box the Fed might be in because the rates are still so low, what tools does Yellen have to fight off the next recession * Yellen confidently replied that we have all the tools we've always had, which is true * They still have those tools; the problem is that these tools have never worked * They can't cut rates, much, they can print all the money they want, they can do QE4, it can be bigger than QE3, and  it probably will be * Even though Janet Yellen, in response to a direct question about negative interest rates, said that she didn't think the Fed would go there, well we'll see * When push comes to shove they may be more willing to go there than they are right now because they still want to pretend that the recovery is on track, so why even bring up negative rates when you're talking about raising rates * So I think once the conversation turns then negative rates may be a more serious consideration * One of the congressmen asked about Puerto Rico and Janet Yellen said, "No, there's nothing we can do, Puerto Rico is on it's own." * I wish the Fed would have had the same attitude about the mortgage market * The Federal Reserve has no problem buying up toxic mortgages but they wouldn't touch Puerto Rican sovereign debt with ta 10-foot pole * Which leads you to believe how risky that debt much be * I wish the Fed would do the same thing to the U.S. government - force the U.S. government to make those tough choices * In fact, there was a House member, today, who talked to Janet Yellen about the independent central banks and Janet Yellen bluffed, that if interest rates, and that was a problem for Congress, that Congress would have to deal with the problem * I don't believe her for a second * I believe on of the reasons, specifically that Janet Yellen doesn't want to raise rates is that she knows that will complicate the budget situation in Washington because the Federal Government can't afford to pay higher interest rates * If the Federal Reserve already bailed out the government by doing QE and buying all these bonds, why are they going to change course? * I don't believe for a second Janet Yellen's tough talk about how independent the Federal Reserve is and how if the situation warranted it, they would raise interest rates and Congress would have to deal with the consequences 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 Juni 201622min

* Gold closed the week at the highest weekly close since January of 2015 * Not quite above the $1300 benchmark - I think we closed about $1298 - up about $20 on the day * Intra-day yesterday, gold was well above $1300 * Until there was news that a British Member of Parliament was shot and that somehow revised hope for the "stay" vote in the Brexit referendum * As if the price of gold is going up based on the outcome of that vote * As far as I'm concerned next week's vote is a non-event for the gold market * The conventional wisdom seems to believe that if Britain leaves, all hell is going to break loose in Europe * I guess all this chaos is supposed to be bullish for gold * If Britain votes to stay, the euro will go up and that might be bullish for gold, because a weak dollar is generally bullish for gold * I think gold will go up regardless of the British vote * The price of gold is not going up because of what's happening in Europe * It's going up because of what's happening in the United States *  More specifically at the Federal Reserve * The Federal Reserve concluded its June meeting on Wednesday and Janet Yellen - surprise! did not raise interest rates * If you remember, a few months ago, some minutes leaked to the public caused the public to think the Fed would raise rates in June for sure - maybe July, but probably June * And gold tanked and the dollar rallied and I said, "I don't think so." * There's nothing in these minutes that say the Fed is going to do anything * It's the same old Open Mouth Operation * If you read between the lines, they didn't commit to anything * But she cried wolf and everybody came running, and * Not only did the Fed not raise in June but they backtracked on their intentions to raise rates in the future * They toned down their so-called dot plots for this year and next year * Now, instead of announcing the first rate hike of the year, they actually pushed back expectations * There were a lot of articles about the Fed losing credibility, the Fed surrendering * This is what I have been forecasting * None of this is a surprise to faithful listeners to this podcast * Those who have been listening to the talking heads on the major media outlets expect the Fed to raise rates because they actually believe that the Fed's policies have worked and that we have a recovery * They have not figured out that this is a bubble * They never figure it out until after the bubble has burst * If you go back and read the transcript of Janet Yellen's press conference, she's still talking about  a July rate hike * If she had been honest, she would have said,"Why would we raise rates in July? We didn't raise them in June, what is going to change in a month? * But she is still on script:  she said, "I guess it's not impossible that we could raise rates in July" * So that's what it's come to: * It's come to, "We're probably going to raise rates in June or July" and now we're at, "I guess it's not impossible" * There a lot of things that are not impossible. It's not impossible that aliens are going to invade the Earth in July 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 Juni 201631min

* This is the week of the June FOMC meeting, although it's really going to be a dud * For a while there was speculation that the Fed was going to pull the trigger and increase interest rates for the second in almost 10 years - for the first time this year * I don't know if anybody expects the Fed to raise rates on Wednesday - it's a 2 day meeting, it gets started tomorrow and we get the announcement on Wednesday afternoon * Brexit was one of the things they were concerned about * Now the polls are showing that a British exit of the EU is becoming more and more likely and that was one of the things supposedly the Fed was concerned about * I think all that is an excuse - they're really concerned about the U.S. bubble economy and domestic problems * But they don't want to acknowledge that so they want to rationalize their decisions with problems abroad * That vote is looking like it may go the wrong way as far as the powers that be are concerned * I've already mentioned on this podcast that if I were in Britain, I would vote to go * It's not because I'm anti free trade, I'm for free trade - it's just that the EU is no longer about free trade * That was its initial pretext and it might have been a good idea, but no idea that involves more government can ever be good * The problem with government is that it grows and grows and grows * Like the camel getting its nose under the tent * That's what happening in the EU and the British are finally saying we've had enough * It's too bad the British don't have enough with their own big government, but they don't want big government imposed from Brussels * Whatever benefits member nations got in the beginning from freer trade, they've lost from regulations, taxation and micro-management coming out of the EU * As I said before, the only reason there was a need for the EU is because governments impose too many tariffs and regulation and theoretically the solution was to let some other entity circumvent all the other government regulation * And they made the deal with the devil and it didn't work out * But the same thing is true in the United States * The original American colonies all made a deal - we came together, abandoned the Articles of Confederation we went for a less weak central government and we passed the Constitution of the United States * But the problem is, the Federal government is not abiding by its constitutional restraints on its powers * The Federal government is not acting the way the framers envisioned, it has usurped powers that were not granted to it in the Constitution, so the Federal government is no longer a benefit to the United States, just like the EU is not longer a benefit to Europe * The difference is, the EU disintegrated a lot quicker * The U.S. government lasted for a much longer period of time, and was a positive factor for the colonies * But the EU quickly degenerated * Every time you can remove a layer of government, you restore more freedom and prosperity * So I wish the British luck with their revolution * So this is just one more cloud on the horizon providing a reason for the Fed not to raise rates this week * A more important reason is the stock market * Once again on the decline, the NASDAQ is down a little over 2% over the last 2 days * The Dow Jones is down about 1.5% - down a little more than 130 points today * Meanwhile gold continues to rise * The last 2 days it was up about $15 - nothing huge, but it is making progress toward the $1300 level * It was up about $10 today - we closed around $1284 * I don't know if the Orlando terrorist event had anything to do with the weakness in the market today - probably not * But psychologically, 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 Juni 201635min

* Janet Yellen spoke yesterday and this was the first time she spoke following the release of the much weaker than expected Non-Farm Payroll report that we got on Friday * Not only was the month of May much weaker than expected but they revised down the prior month which was already weaker than expected and now it is even more weak * This is the first time the Fed had a chance to react, remember Janet Yellen and all her cohorts at the Fed had been talking about how the economy is getting better and how we're getting ready for a summer rate hike * Everybody was thinking, "Will they move in June or will they wait until July? * Of course, I was saying all along that I doubted that they would move in either month * They did make it clear, if you read the FOMC minutes that it was contingent on the labor market improving * I had already pointed out that based on the most recent jobs report the labor market was already not improving, it was getting worse, and now we know it is even worse than the Fed would have understood * By the time the minutes were released we had had all this bad news * While people were jumping to the conclusion that the Fed was about to hike rates, even though the labor market had weakened since they expressed those sentiments and the Fed specifically said that the rate hike was contingent on improvements in the labor market, and we were getting the reverse * I never understood why so many people were so convinced that a rate hike this summer was a fait accomplit * But now all the people who were so convinced have caved in and no longer expect a rate hike in June or July, but they're talking September!  Why? * Well Janet Yellen spoke yesterday and she's still talking about rate hikes * She still said she thinks the economy is improving and at some point rate hikes will be appropriate * Well of course!  That qualifies as a "Duh!" Obviously if the economy was improving, rate hikes would be appropriate, in fact they're appropriate right now * They're appropriate even if the economy is not improving, because interest rates are much too low * I believe one of the reasons the economy is so weak is because interest rates are so low * Now I understand that if we raise interest rates we're going to burst this bubble * If we raise interest rates, the stock market will come down, the real estate market will come down and that's going to be a big problem for a lot of people, in particular the banks * And I know that when interest rates go up, all the people who borrowed so much money when they were so low, including the U.S. government, will be in a lot of trouble * The Federal Reserve itself is going to be in a lot of trouble because it has an enormous portfolio, a balance sheet of long term bonds that will collapse in value when it raises rates * I am not a Pollyanna, thinking if we raise interest rates everything is great - no, it is a disaster * But it is a bigger disaster if we don't raise interest rates and keep waiting because we don't want to deal with the consequences 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

8 Juni 201639min

* It was a few weeks ago, following the release of the FOMC meetings, in which the various governors appeared quite hawkish in their tone * They were talking about the resurgent U.S. economy, the strengthening labor market and that they thought it would be appropriate to raise interest rates in June * As a result of that, the markets reacted, the dollar had a big rise, gold dropped * Gold had risen to almost $1300 when everybody thought the Fed wasn't going to raise rates * Now as soon as the Fed changed the conversation, and they put rate hikes back on the table, gold touched below $1200 * The dollar index got as high as 96 earlier this week * But the catalyst for the rally of the dollar and the decline in gold was the Fed, and the anticipation of rate hikes coming this month * In fact, in the days and weeks that followed the release of the unexpectedly hawkish FOMC minutes various Fed officials were out giving speeches * Every one of them talked about how it was going to be appropriate to raise rates, how we are bouncing back from the unexpected Q1 weakness, and that now the Fed is finally going to resume normalizing rates * The first time they raised rates was December last year; of course they talked about it all year before they finally went up by a quarter point * If they went up by another quarter point in June of this year, it's still, it's still a pace much slower than Greenspan used * He was moving up a quarter every time they met * This would be a quarter every 6 months * Even if the Fed were going to raise rates in June, that would have been the only hike of the year * I didn't even believe that they were going to do it in Juneof * If you listen to one of my recent podcasts at the beginning of the June rate hike talk, I was saying, * "How can they talk about a June rate hike? They haven't seen the May jobs report, which will come out in the first week of June, and if that jobs report is weak, they're not going to raise rates * And even if they did raise rates, it's too little too late * It's not going to be good for the dollar, it's not going to hurt gold because the FOREX markets and the metal exchange markets have priced in far more rate hikes than the Fed could possibly deliver * In fact if they did raise rates, that would be the end of the cycle and by the end of the year they would be cutting rates * The market is anticipating a normalization * And if you remember, too, it wasn't just that the Fed was going to raise rates, they were going to shrink the balance sheet * Janet Yellen was saying she was going to get the balance sheet back down to where it started * I was saying she was lying back then * The balance sheet has not shrunk at all * That is because the proceeds of every maturing bond have been reinvested * Every nickel earned in interest has been reinvested also * So the Fed hasn't even started to unwind the balance sheet, and they've barely raised interest rates * But I did say that if we got a weak jobs report, that would clearly take rate hikes off the table * I believe they were never on the table and that's exactly what we got June 3 * The Labor Department dropped a bombshell on the markets * A relative weak report of 170,000 was expected due to the Verizon strike * The actual number of jobs created in May was 38,000 * That is the lowest number in 6 years * But it gets worse: they revised last month's number, which was also weaker than expected, from 200,000 to 123,000 * The expectation was that this number would be revised up * They even revised down the month before by another 10,000 * You've got 123,000 jobs in April and just 38,000 jobs in May 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

4 Juni 201628min

* Well the tone and tenor of the discourse of the various market pundits and Wall Street economists seems to be that this recovery is on track * I guess there were some doubts about the recovery until the Federal Reserve laid all those doubts to rest based on the confidence with which they discussed the likelihood that the Fed would raise interest rates in June or July * The confidence persists despite the drumbeat of consistently weaker than expected numbers * Once in a while, we're getting better than expected numbers, but the beats are in the minority * Sometimes we get a number that superficially appears better than the forecast, but as soon as you actually delve beneath a very thin surface, you see a lot of negative details that don't make the headlines * People overlook a lot of information beneath the surface that is actually quite bad * But before I get into the economic data, I want to talk a little about Janet Yellen * On Friday she gave a monetary policy speech at the Radcliffe Institute for Advanced Studies at Harvard * Yellen studied economics at prestigious institutions, herself * Economics is Janet Yellen's passion; she's dedicated to economics * For someone who has dedicated herself to one subject, it's amazing how little she actually knows, despite going to our nation's best universities * It might be that the upper echelon universities are so deeply wedded to Keynesianism that a student might get a better economics education at a community college * One of the things that Janet Yellen said during her speech was that she she believes in capitalism, but that the government needs to protect the economy because capital is prone to "breakdowns" that cause mass unemployment and that we need government, or central banks to save capitalism from itself * Capitalism is not prone to breakdowns, nor is it prone to mass unemployment - in fact it's just the opposite * Capitalism is stable; it has a cyclical nature much less pronounced absent the Fed * Huge breakdowns and mass unemployment are always the result of government interference 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 Juni 201624min