Rank #1: Government Is the Threat, Not Facebook – Ep. 509
I am back! I know a lot of people have been upset that I haven't been able to do a podcast in almost 2 weeks. The reason I've been absent… I just haven't been feeling well. I've been coughing a lot and and haven't been up for doing a podcast - I'm doing one today, though. I'm still a little bit sick… but I figure it's been long enough, so I have to talk a little bit about what's on my mind.
Dollar Index Trending Lower
First of all, there hasn't been that much activity, I guess, in the markets over this time period. The U.S. dollar has generally been weaker. It has been trending down. It hasn't really broken down yet, but it is going lower. In fact, the dollar index closed today near 97.69. so that is lower than it had been. Remember, a few weeks ago, the dollar index was above 99. So the dollar is trending lower.
Interest Rates Up - Bond Prices Down
Interest rates are actually moving higher. Bond prices are going down. The yield on the 30-year U.S. Treasury now is at 2.26, and I think this is significant because it really shows the problems that are building in the economy because the dollar is weakening and interest rates are rising. That is going to mean higher consumer prices, it's going to mean higher borrowing costs; now of course, the Federal Reserve is doing everything it can to artificially suppress interest rates. One of the stories that I've read several times over the last couple of weeks is how the Federal Reserve is having to do more repurchase agreements; having to increase the size of the amount of Treasuries they're buying in the market. I didn't see that in today's balance sheet numbers; the balance sheet was up only about 2 billion over the prior week. But I have a feeling that the number is going to be much, much higher than that when we get it a week from today.
Oct 25 2019
Rank #2: The Fed Hiked Itself into Insolvency – Ep. 423
Mainstream Forecasts Incorporating Recession
We are in the early stages of this bubble popping. That's why, if you look now at a lot of the mainstream forecasts, all of a sudden, they're all incorporating recession. The probability of recession is now very high over the next couple of years. I read J.P. Morgan now is saying that there is a 70% probability that the U.S. is in recession by the end of 2020. In fact, most of the forecasts I'm looking at now predict that the U.S. will either enter recession next year or in the following year. This is a huge change from where people were just a few months ago, where there were no recessions as far as the eye can see. Now we're staring them in the face.
Third Consecutive Drop in Small Business Confidence
One thing that really hasn't changed so much is that you have all this optimism that still abounds. It doesn't make sense to me that people could be so optimistic about an economy that they concede is so close to recession. Now, I think on Tuesday we did get a drop in small business confidence, it's the third consecutive monthly drop, and three months ago, small business confidence hit an all-time record high. But if you have more of these small business owners thinking that we are a year away from recession, in fact less than a year if you think recession is going to start in 2019 - we're going to be in 2019 in a few weeks. So, if you think recession is so close, how much longer can you remain so confident?
The Fed Doesn't Have Recession in its Forecast
Now, of course, the Fed doesn't have recession in its forecast; not even close. The National debt is careening toward $22 trillion and these guys are putting out their rosy estimates for economic growth. They're not starting to factor in these recession forecasts that are becoming more and more mainstream.
Fed Funds Rate in Negative Territory in Real Terms
The problem for the Federal Reserve is that they are trying to keep this bubble from imploding, but the task is impossible because enough air has already come out of it. Interest rates have already risen to the point where the camel's back has been broken. The Fed has now backtracked into admitting that we're just slightly below "neutral". We're one more rate hike away from "neutral" even though one more rate hike will still leave the Fed Funds Rate in negative territory in real terms, not in nominal terms. If you accept the government's inflation numbers and we got CPI and PPI numbers that came out yesterday and today - if you look at the core, we've got the hottest core in 7 years.
Dec 13 2018
Rank #3: Markets Running out of Good News to Anticipate – Ep. 433
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A Bear Market Correction
U.S. stocks continue their correction by moving higher yet again today. Remember, when you have a bull market, the corrections are down, because you're correcting the upward trend by moving backward. In a bear market, it's the opposite. You correct a downward trend by retracing upwards. That's what we're doing now. I think this is the first rally in this bear market, so this rally is, in fact, a correction.
Powell is now "Super Dove"
I think the U.S. stock market is off to its best annual start in about a decade; certainly the NASDAQ is up I think not quite 5% - 4.7% on the year. Of course, what got the correction going was the complete 180 by Powell in that round table discussion, where he basically reversed everything he was saying and became the "Super Dove" when it comes to rate hikes. So the market is now pricing out many rate hikes it had probably priced in and that was the catalyst to really get the market going.
Markets Have Not Priced in End of Quantitative Tightening
Of course, what hasn't been priced in yet are the rate cuts or the end of the quantitative tightening program and the re-launching of quantitative easing. All that is coming. The markets just aren't there yet. They just can't see beyond where we are now. They're looking at this mountain and they don't see the valley on the other side.
Interest Rates High Relative to Mountain of Debt
Again, it's not the rate hikes in the future that were going to cause the recession, the rate hikes from the past have already guaranteed a recession, even though interest rates in absolute terms and relative to where they've been historically are still very low, they are not very low considering the enormity of the debt that we now have; that we didn't have historically. So when you have this mountain of debt, a historically large amount of debt, you need a historically low rate. Even though the rates we have now are still low, they're not as low as they used to be and they're not as low as they need to be.
Jan 10 2019
Rank #4: The Next Economic Hurricane Will Be a Category 5 – Ep. 389
Making the Rich Pay
Julia Salazar, another Democratic Socialist defeated Martin Dilan in the NY Senate primary. The only reference to taxes on her website was to "make the rich pay their fair share". That's it. Nothing about what specifically she wants to raise, by how much she wants to raise it and how much money is going to come it. This is going to be provided, that is going to be provided, and the people vote for her! This is how dumb the electorate has become.
Shift to Democratic Socialism
This is what I have been warning about on this podcast. This shift in the political spectrum. The Democrats are moving to the left. Democratic incumbents are going to be replaced by Socialists or will have to openly embrace Socialism themselves in order to maintain their seats. This is very dangerous, because when it does hit the fan, and it should hit the fan before the next elections a Democrat is going to be the next President, and the Democrats are going to control Congress. It's not going to be the Democratic party of Bill Clinton or even Barack Obama. It will be the Democratic party of Bernie Sanders.
Sovereign Debt Crisis and Dollar Crisis
We're going back to the anniversary of the Financial Crisis and the collapse of Lehman Brothers, and the next crisis, which will be a sovereign debt crisis and a dollar crisis. It's going to be much much worse. Bailouts are not going to work; stimulus is not going to work.
Injecting Stimulus Directly into the Rears of the Democratic Voters
But they're not going to try the same type of stimulus. They're not going to talk about injecting monetary heroin into the banking system to create a wealth effect. They're going to inject the stimulus right into the rear ends of the Democratic voters. They're going to want to give the money directly to the people, whether it is through some kind of basic income program or government make-work or forgiving student loans. Whatever they do, it will be about showering money that the Fed creates out of thin air and putting it directly in the pockets of the voters. That is just pure unadulterated inflation.
Sep 15 2018
Rank #5: Blind Fed Leading Blind Investors over a Financial Cliff – Ep. 434
Everything up on the Week Except Treasury Bonds and the Dollar
The stock market ended a positive week on a little bit of a down note; all of the major averages had small losses today - well off the lows of the day. The market tried a couple of times to sell off but the dips were bought on each occasion and we ended up closing near the highs of the day, even though we were down on the day. Pretty much everything was up on the week except treasury bonds and the dollar. The dollar fell, long-term interest rates rose. Gold was up. Oil was the big winner, even though it was down close to a dollar a barrel today, we closed right around $52; up better than 8% on the week.
All Fed - No Change in Fundamentals
But what has been driving the rally has all been the Fed. There's nothing fundamental that has changed about the U.S. economy or about the U.S. stock market other than the "Powell Put" is now back in play. In fact, it's not just Powell putting that out there, he has been joined by a chorus of central bankers who came out today, yesterday, all throughout the week - they're all now reading from the same dovish playbook. They've got their marching orders and they are talking up the market. Now talking how the Fed has to listen to the market, be careful and take its cues from the market. It used to be that the market didn't matter. The Fed was going to do its thing and the markets are going to do what they are going to do. And it didn't take long for that to change.
The Fed Can Not Allow the House of Cards to Fall
Of course, I've been saying that all along; that the Fed was not going to allow this house of cards that they deliberately inflated to just fall apart. Now they had to pretend that they didn't care about the markets but, of course the whole time, they were hoping the markets actually didn't go down because they didn't want to have to reverse policy. They wanted to talk tough even though they didn't have a stick.
Jan 12 2019
Rank #6: Peak GDP Sets Stage for Major Economic Fail – Ep. 374
U.S. GDP Growth Reported at 4.1%
Today we finally got the highly anticipated first look at U.S. economic growth, or really GDP growth, because the GDP is not that great a barometer of the economy. Nonetheless, thats the one that everybody uses to measure it, and that's the one that we're going to talk about. Perhaps I can get into why the GDP is such a flawed measure in a different podcast; I really don't want to get into it today. I just want to talk about the numbers that are being spoon-fed.
Atlanta Fed Forecast of 3.8% Might Be Closer to Final Number
In any event, we got the number today, and there was initially a loth of estimates that we could just blow it away this quarter, that we could have a number north of 5%, and we got 4.1%. So, we at least are above 4%, which lets Donald Trump brag about the number being over 4%, although we'll see how long it stays over 4%. You know, we did get a lot of data that was coming out this week, and in recent weeks. In fact, the Atlanta Fed lowered its forecast, which at one point was as high as 5.4% and it lowered it down to 3.8% yesterday. I think that 38 might end up being more accurate than the 4.1%. In fact, we may end up being below 3.8% by the time they make the final revisions.
Celebration May Be Premature
They actually revised the first quarter back up to 2.2%. So they revise these things constantly. The first number is rarely the correct number. In theory, they could revise it up but I think it's more likely that the revision is going to be down, so the celebration is premature.
New Home Sales Lowest in 8 Months
Two numbers that came out this week that caused the Atlanta Fed to move down to 3.8%: one was new home sales. It was the lowest in 8 months. In fact, they revised down some prior months. I had already reported in a previous podcast the weak numbers for existing home sales, which is a bigger number because most of the homes that are bought already exist. But the ones that are being built have a bigger impact on the economy proportionately because of all the construction jobs.
Jul 28 2018
Rank #7: Why Democrats Hate the Constitution – Ep. 397
Democrat Women Screaming in Agony
Brett Kavanaugh, over the weekend was confirmed by the Senate, and there were some Democrat women in the gallery watching the vote and they were just screaming in agony; that this was such a terrible thing. I don't think we've ever seen anything like that. They had to have the Sargent at Arms constantly removing people during the vote. The vote passed 50-48, on party lines.
These women were not screaming in pain because they think that a sexual predator is now on the Supreme Court, but apparently they think that Roe v. Wade will be overturned, and that abortions will be illegal in the U.S. This is all a bunch of nonsense. This is not going to happen. This is all much ado about nothing.
Liberal Judges Who Make the Constitution Be Anything They Want It to Mean
What it really all boils down to is that the Left wants a certain type of judges on the Supreme Court. They want liberal judges who believe in big government and all these social programs. They want these judges on the court to have a loose view of the Constitution, that the Constitution means whatever you want it to mean.
What the Republicans want is to appoint justices who will uphold the Constitution - NOT their political agendas. There's a reason for that. If you are a Conservative, you like the Constitution the way it is written. You like the law. If you are a Liberal, you hate the Constitution. The Constitution is a roadblock to everything you want to accomplish.
The Constitution Was Written to Limit the Power of Government
Remember: the Constitution was written to limit the power of government. That's where the laws apply. The Constitution is not about individuals. The Constitution is a law that was meant to apply to the government. to limit the power of the Federal government. To a lesser extent the states, because the Constitution does prohibit the states from doing certain things, but whatever is not prohibited, the states are free to do unless they are barred by their individual constitutions.
The Whole Principle Was to Have Weak Federal Government
What the Constitution does do is that it gives the U.S. government specific powers that are very few and enumerated. The Constitution says that if the Federal government doesn't have the power to do something, if it is not written in the Constitution that the government can do it, then they can't do it. The whole principle was to have weak Federal government and most of what governments do was on the state level. They didn't even want big government at the state level. Most of what the Federal government would do was in war time.
A Small Government Can't Give People Free Stuff
So if you are a Conservative and you believe in limited government, well then you like the Constitution. But if you are a Democrat or a "Liberal", you want to use the government to right wrongs of society. You want it to even things out, to redistribute wealth, to provide a social safety net, if you believe in giving people free stuff (free education, healthcare). A small government can't give people free stuff. If you believe in Social Security and Medicare and Obamacare and the minimum wage, all that stuff is unconstitutional.
Oct 10 2018
Rank #8: Bad News is Bad News – Ep. 431
Big Moves in the Market Today
For those of you who have been waiting all year for the first Peter Schiff Show Podcast of the new year, 2019, here it is. We finally got a day with enough worthwhile news that it made sense for me to do a podcast. I'll probably end up doing another one tomorrow, when we get the Nonfarm payroll numbers - the jobs numbers. We'll see if that's a big market mover. But we had a lot of movement in the markets today; all sorts of news came out as well, weighing on the markets.
Apple Closed Down 9.7%
The Dow was down 660 points today - pretty much about the same drop that we had on Christmas Eve. Now I doubt that today will be followed by a repeat of Boxing Day, where we get a 1,000 - point rally, but we'll see. The excuse of the day was probably Apple. You can say that Apple took a bite out of the stock market today. Apple announced yesterday just after the close that its sales would be disappointing, and Apple stock was down just under 10%. It closed down 9.7%, pretty close to the lows of the day - not the exact lows, but it has got to be one of the biggest losses in history for Apple.
Everybody Got a Rotten Apple Today
Apple is very widely owned; the Swiss Central Bank is a big holder of Apple stock. A lot of hedge funds own Apple, Berkshire Hathaway (Warren Buffet) has a big position in Apple - pretty much in everybody's portfolio. So everybody got a rotten Apple today. In fact, Apple is now down almost 40% - 39% from its peak price. Remember, when it was at peak, it was over a trillion dollars in market cap. It was Apple and Amazon that were trillion dollar companies. Well, no more. Apple, again, has dropped not quite $400 billion in market cap from its peak.
Jan 04 2019
Rank #9: Trump and Powell Follow the Same Script – Ep. 508
The Dallas Money Show October 13-14
and the New Orleans Investment Conference, Nov. 1-4
Dow jumps 300 points
U.S. stocks finished out the week on a strong note; in fact we broke a 3-week losing streak. This was the first time in 4 weeks that the major averages finished higher on the week. When I recorded my podcast earlier in the week, the week was off to a rough start. But we had a turnaround. In fact, today the Dow Jones was up 319 points on the day - about a 1.2% gain. The NASDAQ was up even more; 106 points, that's 1.34%. The Russell 2000, even better, up 1.8%. The Dow Transports were the stars of the day. They were up 2.23% - 224 points. Look at stocks like Apple, rising almost 3% to a new all-time record high.
Rumors and News Driving the Market
There was a lot of news driving the market today. Initially, we got rumors of some type of Brexit deal that potentially was imminent. Of course, there have been all sorts of rumors that have never panned out regarding a Brexit deal. But this morning, there was a rumor that really was causing a lot of buying in the European markets and that spilled over into the U.S. futures, which helped the U.S. market. And of course there was a lot of brewing optimism over some kind of impending trade deal with China, although that news didn't come out until very close to the close.
U.S. Consumer Sentiment Climbs to 3-Month High in October
But, earlier in the day, we got the Consumer Sentiment number for October, and the markets are already higher by the time we got this release, which comes out at 10am; the market opens at 9:30. The prior month was 93.2, and the consensus was for a slight drop in consumer sentiment to 92. After all, there are a lot of reasons for consumers to be less optimistic now than they were back then. But the consumer… surprise - ended up being more optimistic. The number came out at 96 and that sent the price of stocks much higher.
Oct 12 2019
Rank #10: As Bubbles Burst the Malinvestments Are Exposed – Ep. 416
Dow Could Not Hold Onto the Gain
After yesterday's, I think 550 point drop in the Dow, the market bounced back a bit today. I think at one point earlier in the day the Dow managed to gain over 200 points, but it could not hold on to that gain. It closed down just under one point. Very weak technical action for today's pre-Thanksgiving bounce. Normally, the markets are up on the day before Thanksgiving, and in general, they were. The other indexes all managed to close in the black, although considerably off their intra-day highs.
Decline in Retail Touted as Excuse, But It's Just a Bear Market
The XRT, which is an index of retailers (I talked about that on this podcast before) snapped an 8-day losing streak. More bad news came out from retailers yesterday; that was part of the reason that you saw the big sell-off in the Dow. That was the excuse; I don't think the market needs a reason to go down. It's a bear market, and that's what bear markets do - they go down. Of course people who don't know that they're in a bear market make excuses to try to rationalize why the market is going down because they don't want to admit that they are, in fact, in a bear market.
Dead Cat Bounces All Around
Everything bounced today, I guess dead cat bounces all around. Even Bitcoin managed a rally. In fact yesterday, Bitcoin got as low as $4,050. So it held $4,000. Of course, you have people saying, "Ah Ha! $4,000 is the bottom!" I doubt it. It makes sense that there'd be some support at a round number. I doubt that this is THE low. It may not last more than a day or two, given the momentum in this decline.
Malinvestments are a Classic Part of Every Bubble
Remember I have talked about all the malinvestments that are taking place. When a lot of people argued with me about why Bitcoin was going to succeed, they pointed out that all this capital was going into the industry; all this infrastructure was being built up, and so therefore Bitcoin was going to work because it had all this infrastructure behind it. My argument was always that infrastructure represents malinvestment. That is a classic part of every bubble.
Nov 22 2018
Rank #11: A Bubble That Will Live in Infamy – Ep. 422
Pearl Harbor Day 2018: A Very Interesting Technical Day
Today is December 7th, a day that will live in infamy. Unless you are a Millennial who was educated in the U.S. public school system. In which case you have absolutely no idea what happened on December 7th 1941. You've probably never heard of Pearl Harbor, you certainly don't know where Pearl Harbor is located. Maybe you've heard of World War II, but a lot of them haven't. Even those who have heard of World War II probably have no idea who fought, or even who won.
As Goes the NASDAQ, so Goes the Rest of the Market
Today, December 7th maybe won't live in infamy, but it seems to me it was a very interesting technical day in the U.S. stock market, which should give the bulls on the stock market something to think about. I think the action today, particularly in the NASDAQ, (I think as goes the NASDAQ, so goes the rest of the market) but that action was particularly significant.
An "Outside Day"
One of the more reliable technical patterns is an "Outside Day". An outside day is when you trade above and below the highs and lows of the previous day, and then close above or below one of those lows. It's an outside day even if you close somewhere in the middle. An "Inside Day" is when you trade within the range of the previous day; you don't take out the high or the low. But the most significant type of an outside day is an outside day where you close above or below the previous day's high or low. That would be called an "Outside Reversal Day". It' s a positive if you could take out the previous day's low, but then rally and then close above the previous day's high.
The Russell 2000 and the NASDAQ Took out Yesterday's Lows
What the NASDAQ did today was the opposite of that. The NASDAQ rallied this morning on, I guess the weaker than expected jobs numbers and took out the highs from yesterday. In fact, all of the major markets - the Dow, the NASDAQ, the Russell 2000 - they all took out yesterday's highs. But then they came crashing down, The Dow did not take out yesterday's low - so the Dow did not have an outside day. But both the Russell 2000 and the NASDAQ took out yesterday's lows.
Dec 08 2018
Rank #12: Socialism’s Slippery Slope – Ep. 438
Broader Averages Up
The Dow Jones rose 171 points today recovering a little better than half of yesterday's 300 point decline, helped by some better than expected earnings in both IBM and Proctor and Gamble. The broader averages is also up, but not nearly as much, because of the impact from those stocks; obviously not as strong. In fact, the NASDAQ, and even the S&P 500 all took out yesterday's lows intra-day, but still managed to eke out small gains - actually the Russell 2000 was down slightly on the day.
Dow Transports Down All Day
But the Dow Transports were down all day. They didn't even recover; they closed off the lows, adding about 48 points to yesterday's decline. But everybody in the financial media, in fact everybody at Davos (I'm going to talk about that in a minute) but everybody seems to be completely forgetting the bear market. Ignoring the fact that we went into a bear market and pretending that either we're back in a correction of the bull market or we've actually left correction territory, as if the bull market is still intact, and that bear market that we had never even really took place.
I Wouldn't Bet on the Fact That the Bear Market Is Over
Now, it is possible that the bear market is over. I am not saying it's impossible. It seems to me again that it is extremely unlikely that the longest bull market in history is going to be followed by the shortest bear market in history. I guess it could happen but I wouldn't want to bet on it. A lot of people seem to be betting on it. To me, again, the rally that we had made a lot of sense. After all, the Fed came in and did exactly what I have been saying it is going to do since before they raised rates for the first time.
Jan 24 2019
Rank #13: In Bear Markets Rallies Are Corrections – Ep. 436
It Is Not a New Bull Market
The U.S. stock market averages continued the bear market correction - the correction actually extended for another week. We capped a strong week with a strong gain today across the board. But this is a correction. It is not a new bull market. But of course, if you watch stations like CNBC you wouldn't know that. All day today all they kept talking about on CNBC was that the market is now out of correction territory, meaning that it is no longer down 10% from the highs, and so we're no longer in a correction.
We Entered a Bear Market
First of all, we didn't enter a correction - we entered a bear market. Now, bear markets have corrections, too. They're called rallies, except people at CNBC don't get that. They think the only correction is a move down in a bull market. Now this bull market went on for 10 years, so a lot of these guys don't remember the last bear market, and it wasn't even that long. A lot of these bear markets have been very short. They decline 40-50% and then the Fed was able to come in and save the day. But people don't get that we are in a bear market now. We haven't made new highs, so any rally is a correction. Certainly a rally of more than 10% - that's the same definition for the downward correction in a bull market. So if you want to apply that definition to an upward correction in a bear market - we are in a correction. This is a pretty big correction, helping the bear market fall a slope of hope.
Russell 2000 Had Best Annual Start Since 1987
The Dow was up around 330 points today, back up to 24,706.35. In fact, if you look at the Dow Jones year to date, we're up almost 6% so far this year. Strong move. We're not even finished with the month of January. Of course we have a holiday weekend, s the markets will not be open on Monday celebrating Martin Luther King Day. But there are still quite a few days left in January. The NASDAQ composite is actually outdoing the Dow, it is now up almost 8% on the year and the biggest gainer is the Russell 2000. It's up almost 10%. In fact the Russell 2000 is having its best annual start since 1987. Now, of course, 1987 didn't end well for the Russell 2000 or any of the stock markets. That was the year of the stock market crash in October.
Jan 19 2019
Rank #14: The Fed Put a Fork in the Stock Market – Ep. 427
Seventh Rate Hike since Trump's Election
As expected, earlier today, the Federal Reserve nudged up the Fed Funds rate by another quarter point. The Fed is now targeting their rate at 2.25 - 2.5%. So the range is somewhere in the middle, there. This marks the sixth time the Federal Reserve has hiked interest rates since Donald Trump has been President, and the seventh time that the Fed has hiked rates since Trump was elected. Remember, during the entirety of Obama's 8-year Presidency, the Fed raised interest rates only once.
A 900-point Selloff
What the markets did not expect was the dovish hike to be so hawkish. In fact, the minute I heard the language, I was surprised that the Dow didn't immediately sell off, more than it did. It had a bit of a bounce before it sold off, the Dow Jones ended up down just over 350 points. The selloff from the high to the low was just under 900 points. Earlier in the day the Dow had rallied up about 300 points because there was a lot of anticipation that even though the Fed was going to hike rates today, that it would indicate it would pause. That was on neutral - that it wasn't really planning any more rate hikes for 2019, and would just play it by ear. It was going to be data dependent.
Dow's Worst December since 1932
But what the Federal Reserve said in their official statement that accompanied the news was that they had reduced their expectation for rate hikes for next year from 3 to just 2 anticipated rate hikes. Now, that may be considered dovish, but it did not nearly meet the expectations of the market. It was expecting something much more than that. When I heard that, I thought, "The market's going to get killed." And it did go down but I think a lot more of the carnage is going to happen probably later in the week and next week. In fact, the market is now down so much that the Dow is having its worst December since 1932. Of course, that was the beginning of the Great Depression.
Dec 20 2018
Rank #15: The Grinch Stole the Santa Claus Rally – Ep. 429
Worst Christmas Eve Day in Stock Market History
As I thought would be the case, it looks like the Grinch Stole the Santa Claus Rally. Normally, the U.S. stock market rallies during the final five trading days of the year between Christmas and New Year's Day. But today was not only the worst Christmas Eve day in stock market history, it blew apart the old record. In fact, there has never been a Christmas Eve day where the S&P or the Dow fell by as much as 1%. Today, the Dow Jones dropped better than 650 points - 2.9% on the day.
Officially Not a Correction
Although the Dow now is the only major index not officially in a bear market (now down 19.15% from its peak), but the S&P 500, which dropped 2.7% today is now down just over 20%. So it's now official, Wall Street can stop pretending that it's a correction, they have to admit that it's a bear market. Now, if they want to hang their had on the Dow, O.K. well they can hang it there maybe for one more trading day, because it's not going to take much for the Dow to join the party. Of course, other indexes are extending moves into bear market territory. The Dow Transports are down 25.7%; the NASDAQ just under 24% to the downside.
The Russell 2000 Losing Gains Rapidly
The Russell 2000 is down 27.3%. This index is down better than 5-1/2% since Donald Trump was inaugurated. This was the index that was supposed to benefit the most from Trump's economic policies. It's still up about 6% since he was elected President. So all that hype is still in there. But at the rate the index is falling, this index is going to lose those gains pretty rapidly. Then, of course, Trump is not going to be able to talk about all the wealth that has been created in the stock market since he's been elected, because all that paper wealth will have been destroyed.
Dec 24 2018
Rank #16: The Hike that Breaks the Market’s Back – Ep. 393
As expected, the Federal Reserve raised interest rates for the eighth time, today. The rate is now 2 to 2.25 percent, so I guess the midpoint is 2.125%. The move was highly anticipated, of course, even I expected the Fed to raise rates. At this point I had been expecting that for some time ever since the Fed first began raising interest rates it became apparent that they would continue to move rates higher.
"Accommodative" is Out
The only thing that was potentially significant about this rate hike was the removal of the word "accommodative" by the Fed in their official statement to describe the current state of monetary policy. I initially thought that that was a significant removal of the word. Obviously, the Federal Reserve thinks very carefully about the written statements, so if they chose to remove a word, that was there, and they know that people parse through these words with a microscope. The fact that the word was missing, obviously by intention - it wasn't just an accident - that they're trying to send a message.
What I first thought the message was, and I still believe that was in fact the message (even if the Fed is trying to backpedal), but that the Federal Reserve views a 2% as neither accommodative nor restrictive. Maybe neutral. The Fed now believes that rates are high enough that they would no longer be described as accommodative.
Interest Still Below Inflation: Negative Rates
Meanwhile, rates are at 2%. Two percent in my mind is still a highly accommodative monetary policy, especially when the annual rate of inflation, even the way the government measures it, is above 2%. That means you still have negative rates of interest. How can you describe negative real rates as anything but accommodative?
Powell: "Don't Read Anything Into The Omission of Accommodative"
Powell was specifically asked about the removal of the word accommodative from the statement during the Q&A period that followed the official announcement. Basically, what Powell said was, "Don't read anything into the removal of that word".
Sep 27 2018
Rank #17: Could Soaring Twin Deficits Portend October Surprise? – Ep. 394
Today was the end of the month of September; it's also the end of the third quarter we are now beginning the final quarter of the year. When we come back to trading next week, we will be in the month of October, and as I mentioned on my last podcast, we have had some substantial stock market declines in October, obviously not every October has a big drop, in fact most of the Octobers don't, but some of the most notable declines have occurred in the month of October, including the crash of 1987 and the crash of 1929.
You'd Think There Would Be More Concern
But given that our valuations are probably higher now than they were at those prior peaks, you would think that there would be more concern right now about the possibility of another October surprise in the way of a major decline in the stock market. But the stock market finished the day positive - on the week it was a mixed picture. The Dow Jones was down a bit and the NASDAQ was up on a week that the Federal Reserve did, in fact, raise interest rates yet again, as expected. Now we're at 2-2.25%.
Italy's Economy Putting Pressure on the Euro
The yield, though, on the long bond actually went down, in fact, it was down a little bit again today (Buy the rumor sell the fact). The dollar continued to rise and I thought that maybe we would have seen a dollar sell-off following the rate hike. But I think the reason is because of the weakness in the euro, the result of what's going on in Italy. The Italian market is under a lot of pressure because the Italian government is running deficits that exceed 2% deficit guideline imposed by the Eurozone. I think that Italy's proposed new budget deficit is 2.4% of Italian GDP. This puts pressure on Italy which is also putting pressure on the euro.
Our Debt to GDP Is Twice That of Italy
It's interesting that if America tried to get into the EU, we couldn't because out debt to GDP is about 5% and that's now. It will soar well over 10% in the next recession. Our debt is twice as high relative to our GDP as Italy's. If we keep running trade deficits like the trade deficit that we printed this month, we are going to be having a serious crisis in the dollar. It was bad trade deficits and concerns about the dollar was one of the biggest reasons we had the 1987 stock market crash.
Sep 29 2018
Rank #18: Making the Dollar Weak Again – Ep. 381
Strong Dollar Policy?
There used to be a lot of talk about the so-called Strong Dollar Policy. We had the Strong Dollar Policy when Bill Clinton was President, George Bush; I guess when Barack Obama was President, as well. I've talked about it, I've written about it in Crash Proof, How to Profit from the Coming Economic Collapse; I talked about it like it was the Loch Ness monster. Everybody knows about it, everybody's heard about it but no one has actually seen it.
We Like the Strong Dollar. A Strong Dollar is Good for America
We didn't actually have an official policy that constituted the strong dollar policy. It was simply talking about the strong dollar being in the national interest, and that was just the mantra that was repeated often by the Secretary of the Treasury or by the President. "We like the strong dollar. A strong dollar is good for America… and that pretty much constituted the policy.
The Trend Was Your Friend
But nonetheless, having the belief that there was some kind of hidden strong dollar policy helped to create confidence in the dollar, even in periods of time when the dollar was declining. Perhaps it would have declined even more had it not been for the belief that there was some kind of strong dollar policy. And of course, when the dollar was rising, the "strong dollar policy" really helped add fuel to the increase because after all, you were riding the policy. So the dollar was going up and that was what the U.S. government wanted, so it was all good. The trend was your friend.
Donald Trump's Weak Dollar Policy
Well, it should be obvious that Donald Trump has a weak dollar policy, whether he wants to name it or not, that's the policy. Of course, the weak dollar policy will not involve actually doing anything, just as the strong dollar policy didn't involve doing anything, but I think the rhetoric will have the same impact in that when the dollar finally starts to fall, it will fall even faster when people think it's a deliberate policy.
Aug 21 2018
Rank #19: Ep. 373: Freedom Is Great; Tariffs Are Not.
Voting Responsibly for Freedom
I am "pro" young people because I want them to grow up in a free country. I want them to have every opportunity to be as prosperous as possible. Democracy is actually an enemy of freedom. Young people have a better chance to achieve their goals if the 18-19-20 year old generation aren't voting for leaders who pass policies that will actually undermine our success and our progress. They're not sophisticated enough yet; they don't know enough yet about the real world to understand the real role of government.
Socialism Masquerading as Capitalism
The goal is to have the best government. that's why we don't let elementary kids vote. Why? because they are not sophisticated enough and even 18-year olds who have never had a job are not able to discern what we need for good government. I am trying to reach more and more young people to help them understand the benefits of freedom and capitalism and understand the dangers of socialism and of socialism that is masquerading as capitalism, crony capitalism and corporatism. We have the U.S. government controlling the economy with regulation and taxes and then blaming everything that goes wrong on the free market. Everything that goes right is because of the free market. Everything we achieve is despite all of the road blocks that government creates and the level to which they go to undermine success.
Turn on to Liberty
So the more young people who can listen to this podcast (younger people are more likely to listen to podcasts) the more knowledgeable voters we'll have to vote for good government. The higher this podcast is ranked, the more people will discover it. I have heard this story many times: first time listeners who have found me. Once I turn them on to liberty, once I appeal to them, I open their eyes. They then do their own research; they start to read. They start to tune out all the propaganda and start thinking for themselves. I can change people's mind.
Help Me Get the Word Out
You can help me change people's minds by posting your rating and review this podcast on iTunes. Put the stars on there and write up a review and help me get my podcast to more people. That's the way to win this political war. There is a giant move to the left. People have misinterpreted the results of the last election. The electorate is moving left. That left wave is going to affect the moderates and even the Republicans in this next election. The coming recession will be worse than the last one and is going to be entirely blamed on free market capitalism.
Pierce the Smokescreen of Mainstream Media
We need to make as many people as possible realize that they are being lied to. The media can repeat a lie often enough that people believe it is the truth. The point of my podcast is to get the real truth out there and to pierce the smokescreen of lies that is being blown by the government, by Wall Street, and by the mainstream media.
Jul 25 2018
Rank #20: Yes to Socialism Means No to Freedom – Ep. 388
Another Round of Tax Cuts
Now the Republicans are talking about another round of tax cuts. Just in time for the November election. Whether or not these tax cuts actually get passed is anyone's guess, but it will be an issue on the campaign trail, either because they delivered the tax cut or because the only thing standing in the way of a tax cut is the Democrats. Remember the individual tax cuts were passed the last time are temporary - they phase out. The corporate rates do not phase out. Of course, all tax cuts are temporary because any Congress can raise taxes any time it wants, so it's just semantics.
Temporary Tax Cuts Were a Lie
The reason they had to make the individual tax cuts temporary was so that they can pretend that the increase in the budget deficits was not going to be as high as everybody knew that it was. The presumption was that Congress would vote to extend them. Here we are, not even a year has gone by and the Republicans already want to come back and make them permanent, which shows that the temporary tax cuts were a lie.
Government Revenues up 1% - Government Spending Up 7%
The August budget deficit was $211 billion - nearly double the deficit that we had in the same month last year. In the first 8 months of the year, the deficit is $895 billion. This is a trillion dollar deficit during a supposedly booming economy. If we can't generate surpluses in a booming economy, imagine the enormity of the deficits when the economy is not booming,. Imagine how bad the deficits will be when the economy is actually in a recession. In this most recent year, the deficit is $222 billion higher than the previous year and government spending is up 7%, yet revenues only rose 1%. So it is not closing the gap, not by a long shot.
Too Big to Bail
The U.S. government is too big to bail - not too big to fail - too big to bail. Of course the government technically does not need a bailout; it just prints more money. Of course, that's the problem. They will print money that nobody wants and the currency is going to collapse.
Saying Yes to Socialism Says No to Prosperity
Recently on the Bill Maher show Jim Carrey said, "Socialism is great, so why don't the Democrats just embrace it? Say yes to Socialism, already. Now they can come out and openly declare that they are Socialists now because everybody likes it. When you say yes to Socialism, you're saying no to some very important things, like individual liberty, freedom, prosperity. Voters don't know that. They just think Socialism is a bunch of free stuff, and they get more free stuff under Socialism than under Capitalism. People want stuff.
Sep 12 2018