Rank #1: Is Silver Finally Joining Gold’s Party? – Ep. 484
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93 Ounces of Silver for One Ounce of Gold
I think the most interesting development today in the market was in the metals market. I've been talking on the podcast for some time about the spread between gold and silver, and the fact that silver has never been this cheap, in terms of gold. The spread got to almost 93:1, where you can buy 93 ounces of silver for one ounce of gold - which is incredibly cheap.
Some Silver Stocks up 10% or More on the Day
It's a great time to be buying silver, and I've really been pounding the table on people buying silver. I recommended it again last night last night on my live YouTube event, I recommended it to my Managed Account clients on our last webinar, encouraging people to contact their brokers and maybe buy more silver stocks. In fact we had silver stocks today; some stocks up 10% or more on the day. Very, very significant jump up in the price of silver stocks, even thought the price of silver itself did not have that big a move. It was only up 19 cents.
Silver Up as Price of Gold Fell
But the significance of the move is that gold was down $8. So not only did silver have a relatively large move, although not large enough to normally cause silver stock to rise by 10%, but what was significant about it was that it rose as the price of gold was falling. This could signal - and it was looking to me technically that we saw some indications of this last week (I added to my own silver stocks last week - but it looked to me like this trend was about to change. We're still above 90:1. We're close to getting back to 90:1 even. But this is still an incredibly good opportunity to buy physical silver; to buy silver oriented stocks. But what I think this is showing me is that the bull market in gold is getting ready to kick into a higher gear.
Rank #2: Peter Schiff’s Bitcoin Challenge Live Stream
Welcome to the Peter Schiff Bitcoin Challenge. First of all, I have to make a confession. I really was not familiar with YouTube live streaming and live chatting, and so the way I thought about this in my head; I thought that people were going to be able to talk. Like a Skype group conversation. People would be able to actually engage me and make their case in their own voice, and to be able to have a little back and forth.
Post a Cogent Argument
I didn't realize that the way I had to do this was with a chat, where people who want to make a point have to do it by chat. So I'm going to try my best. Hopefully, this format can work. There are so many chats going by, it is hard to keep track of them. But I want to see if people can put together a cogent, concise argument. Think of it like you're composing a tweet. I can try to address each point, and try to take in what you're trying to tell me as to why I'm wrong about Bitcoin, and why I should actually be embracing it as digital gold.
Don't Forget to Subscribe to My Podcasts
So, what I'm going to try to do is to see the best points that are being made on this chat, then read it out loud, and then address it, make a statement and the person who authored that particular text listens to what I have to say, if they want to do a follow up or something, they can do that, and hopefully I will see that follow up. I'm doing this chat in my home studio in Connecticut. I'm in the studio where I normally do my video blogs, so if you're new to this channel, you should subscribe it. Two or three times a week a do these video blogs (podcasts) where I talk about all sorts of things that are relevant to people who buy Bitcoin.
Rank #3: This Time Rate Cuts Will Backfire – Ep. 483
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DJIA Record High Today
Dow Jones set a record high today, closing above 27,000 for the first time ever. We added 227.88 points on the day. We closed at 27,088.08. The record high, 27,088.45 set just before the close. You know, we added to yesterday's gains, the S&P 500 was also up again - not taking out the record that was set yesterday, but we did, for the second day in a row managed to trade above the 3000 mark, although we have yet to close above it - ever so close today: 2999.91. But a very small percentage gain for the S&P, not even a quarter of 1%.
Russell 2000 Down .5%
Broader market was weaker. The NASDAQ was actually down slightly - 6.5 points. The weakest index being the Russell 2000, down almost a half of a percent. It was lower during the day. Again, the Russell 2000 is the index that is most sensitive to the domestic economy. I've pointed out on this podcast many times that it is the index that is the weakest, and is not even close to making a new high. And I don't believe it will. I think the broader market is going to roll over, and the small caps are going to lead the way.
Traders Weren't Paying Attention to Bond Market
In fact, if the traders were paying attention to what was going on in the bond market, we probably would have seen a bigger selloff today. I think we still have some euphoria left over from the two-day "Dove Fest" where Fed Chairman Jerome Powell was up on Capitol Hill basically green-lighting the July rate cut, which is coming up in a couple of weeks. Remember, when we got that better than expected nonfarm payroll report, the odds of a rate cut in July went down from about 100% to maybe 91%, and the odds really came down for the probability of a 50 basis points cut. So it was pretty much 91%, I think, 25 basis points, and that was it.
Odds of Rate Cut in July Back up to 100%
But after Powell released his prepared remarks, before he even made it up to Capitol Hill - just merely when the markets got a look at his prepared testimony, the odds of a rate cut in July immediately went back up to 100%, and, in fact the odds of a 50 basis point cut went back up to 20%.
Rank #4: Moral Hazard and Unintended Consequences – Ep. 482
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More Market News after Powell's Congressional Testimony
The markets have been pretty quiet over the last couple of days, so I really don't feel like spending a lot of time on today's podcast talking about the markets. I probably will have more to say, maybe on Thursday when I'll probably do another podcast because Jerome Powell is making his way up to Capitol Hill tomorrow and Thursday to testify before the House and the Senate. My guess is that some of his comments may move the markets; the currency markets, the gold market, maybe even the stock market. I'll probably have more market-oriented commentary to give you on Thursday.
Laffer Curve for Dummies
But there are a few things on my mind, which is why I wanted to take some time today and record this podcast. One has to do with Art Laffer. Of course, Art Laffer gained fame back in the Reagan era. He came up with the "Laffer Curve" that he supposedly sketched out on a napkin one day and showed it to Ronald Reagan. The Laffer Curve basically says that when you reduce taxes, or lower marginal tax rates, you actually end up collecting higher tax revenues because you incentivize people to work more, they earn more, and then they pay more taxes even if they are paying taxes at a lower rate. Obviously, the Laffer Curve bends at some point, because if taxes are zero, you collect no revenue and if taxes are 100%, you also collect no revenue. Because if you're going to tax somebody 100% of their income, they're not going to work at all. Nobody is a complete idiot - they're not going to work for nothing. So at a 100% tax rate and a 0% percent tax rate the government collects exactly zero taxes. So somewhere along that curve is an optimal point where you would have the tax rate that generates the most amount of revenue.
Rank #5: Holiday Markets Overreact to Jobs Report – Ep. 481
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Markets Up on Low Volume
A lot of people on Wall Street probably took today off; after all yesterday was the Fourth of July, the market was closed. On Wednesday they closed the markets early in preparation for the July Fourth holiday. So when you have a Friday where the markets are open, but you have a Thursday when they're closed… most people probably left for the Hamptons on Wednesday afternoon, and so were not in their offices or down at the stock market when we released the nonfarm payroll numbers today.
ADP Disappointing Number Teed Up Low Expectations
The June number, highly anticipated, as always, especially with a rate cut on deck now by the Fed. Most of the people who were probably handicapping the jobs number thought that it would probably come out weaker than expected. After all, most of the data we've been getting has been weaker than expected. In particular, the jobs numbers, including the ADP report that came out on Wednesday, on that holiday-shortened trading session. We got a disappointing number. The consensus for private-sector employment for ADP was 140,000, and we ended up with 102,000. So we had a significant miss in the ADP numbers.
Back-to-Back Declines in Small Business Jobs
But also, look at the employment components of some of the other numbers that also came out weak on Wednesday, like the ISM non-manufacturing index. It printed 55.1 versus an estimate of 55.8. The employment component of that index was notably weak, especially for small businesses which had major reduction in jobs, no only in this month but the previous month. In fact, I read a tweet by Dave Rosenberg who pointed out that he hasn't seen back-to-back monthly declines like this since February/March of 2008. That was the year of the Financial Crisis. He basically said that small business job growth is the weakest it's been in over 9 years.
Bigger Decline in Factory Orders
Now, small business job growth, that is the heart of the job market. That's where most of the jobs are created. So, if you look at a lot of the other data that has been coming out that might reflect on employment, you might have thought that there might have been a weak number. Look at the factory orders number that also came out on Wednesday. They were looking for a drop of .5% in factory orders, and instead, the orders dropped by .7%. So a bigger decline.
Rank #6: Monday’s Gold Drop Flushed out Weak Longs – Ep. 480
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Markets Worried About Slowing Domestic Economy
If you just looked at the U.S. stock market averages, you would conclude that not much happened today, but you would be wrong. Even though the S&P and the Dow and the NASDAQ were only up about a quarter of a percent, or maybe .3% - pretty small days. Although, as has been typical recently the Russell 2000 was down .6% and the Dow Transports down .8%. So the market, contrary to all the hoopla that you hear about how great the U.S. economy is, the markets are more worried about the slowing domestic economy than they are the global economy.
Strongest Economy in U.S. History?
In fact, the Cheerleader-In-Chief, for how strong the U.S. economy is, of course, is Donald Trump. He is constantly up there tweeting about how strong the U.S economy is. In fact, today, he proclaims that we currently have the strongest U.S. economy in history. Now, I remember, when he used to tweet about h0w strong the economy was, that we had the strongest economy in history, he would say, "Oh it's probably the strongest economy in history…" I mean he would qualify it a little bit. But now, no more qualifiers. He is emphatic. Without a doubt, this is the strongest economy is U.S. history.
Of course, I don't like hypocrites. One of the things that Trump does, is he calls out the media for spreading fake news. The problem, is, he spreads fake news, too. When he is talking about how we have the strongest economy ever, that's fake news! So you can't live in a glass house and then throw stones and that's what the President does.
More Weak Numbers
In fact, if you look at the economic data that came out this week, the data was weak! The ISM manufacturing number and the PMI number were weak . In fact they weren't as weak as they were expecting, but they were expecting weak numbers and we got weak numbers. Just not quite as weak. Although, the construction spending number that came out yesterday was considerably weaker than had been expected. Now, the Atlanta Fed is still at 1.54% .
Rank #7: Political Reality Could Sink Stocks in 2nd Half – Ep. 479
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Recorded June 28, 2019
Dow Jones Had Best June Since 1938
U.S. stocks finished a down week on an up note, but the gains were not that large today. But of course, they were very big for the month of June. In fact, the Dow Jones just had its best June since 1938. That was during the Great Depression. S&P, not as big a record; you only have to go back to 1955 to find a June where the S&P did better than June 2019. So these are big moves up. Percentage-wise, though, I think it's about 7%, approximately, maybe a little bit less.
Stock Market Actually Lost Value In Terms of Gold
Now the price of gold was up 8% during the month of June. In other words, while the price of stocks went up in terms of paper money - dollars - in terms of real money - gold - stocks actually lost value during the month. Now, the first half of the year also comes to an end today, as does the second quarter, and this is the best first half of the year in 22 years. the S&P was up about 17.5% or so, the Dow about 14%. I think I'm counting dividends - I'm just talking about the appreciation, so the total return would be a little better when you throw in the meager dividends that you can collect on U.S. stocks. NASDAQ was up about 20% - not much in the way of dividends there. Russell 2000 was up about 9%. This is on the first half of the year.
Stocks Recovering From Worst December Since Great Depression
I'm sure you're going to read a lot of tweets from Donald Trump about how great the stock market is in 2019; how great the month of June is and why we should thank him for this spectacular performance in the stock market. But the only reason that the market has done so well this year is because it got destroyed in the 4th quarter of last year. Remember, we had the worst December since the Great Depression, as well.
Rank #8: The Fed Has Served Government Well, Not America – Ep. 478
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Gold: Six-Year High Overnight
Overnight the price of gold rose to a six-year high. We almost got to $1440. I think the high I saw was maybe $1438 - 39… we were up about $19 at the high point. Then it became a very volatile session overnight into the wee hours of the morning. But I think by the time we got into the New York time zone, gold was still up about $10-$12-$13 dollars on the day and it was up about that amount when the U.S. stock market opened for trading.
Before Today, Gold Stocks Up 20%
Gold stocks initially had a small rally, but nothing big. Then they spent most of the day on the downside. Obviously the gold traders are still very cautious. As I have been saying, this gold breakout, even though we did see pretty big moves in gold stocks, I think the GDX, not counting today's losses, (the GDX was down about 2% today) but not counting today, we were up 20% in the month of June. So, still, a very big rise. But really not nearly as big a rise as it should be, considering, I think, the significance of this gold breakout. Except, of course, if people don't believe it. If they're cautious about it, so they're reluctant to bid up the price of gold stocks.
Investors Still Reluctant on Gold and Silver - Why?
The same thing with silver. In fact, silver never had much of a rally today, and it actually settled down, I think 8 cents on the day, even though gold ended up finishing up $4 - well off the highs. But it didn't close negative. At one point during New York trading, the price of gold was negative on the day, but it managed to bounce back for the close. Silver, I think, ended at 15.33. The gold/silver ratio that I spoke about on the last podcast now, I think is close to 93:1. Again, I think investors are reluctant to buy up silver because they are expecting the price of gold to roll over.
Rank #9: Gold Breaks out but Investors Remain Cautious – Ep. 477
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S&P Record High: Why?
U.S. stock market averages finished an up week on a down note. In fact, the S&P 500, before closing negative on the day made a new all-time record high. The S&P is the only major index that did make a new record high this week, in fact Donald Trump tweeted about the record high in the S&P twice yesterday. As soon as the market gapped open at a record high, Donald Trump tweeted out a reminder that the S&P opened at a record high, and then when it closed at a record high, he sent out a second tweet to remind everybody that the stock market closed at a record high.
Fed's Lower Rates Behind Stock Market Highs
The idea is that he's taking credit for it. The stock market is doing so well because Donald Trump is President, and if anybody else were President, the market would be collapsing. That's the impression that Donald Trump is trying to convey. But, of course, the reality is the opposite. The reason the market made a new high is because investors are relieved that the Fed is going to cut interest rates. So, it's lower interest rates that is behind the record high in the S&P - not anything Donald Trump has done.
Low Interest Rates Needed to Bail out Economy
Now, Donald Trump is saying, "Hey I've been telling the Fed to cut rates!". So maybe he can claim credit for the fact that the Fed is cutting rates because he beat them up so much, but that's really not what he is trying to claim. He's trying to claim that the rising stock market is indicative of how great the economy is under his presidency. But, it's not because the economy is great that the Fed is cutting rates, it's because it's lousy!
Heading for Recession
The Fed is cutting rates because the economy is headed for recession. So if that's the only reason the stock market is going up, that the economy is so bad that the Federal Reserve has to abort their rate-tightening campaign, and they have to come to an emergency rescue mission, they have to try to bail out the economy with rate cuts, is that really something that Donald Trump should be bragging about?
Rank #10: Fed Readies Markets for July Rate Cut – Ep. 476
Fed Tweaking Language to Officially Adopt Easing Bias
Keeping with its tradition of having a tendency to act incrementally, the Federal Reserve Open Market Committee today announced that it was leaving interest rates unchanged - which was the consensus. There was an 80% probability that the Fed would leave interest rates unchanged. The other 20% was that they would cut rates. So there was a zero percent probability that the Fed would increase rates. But before delivering an official rate cut, what the Fed wanted to do was to prepare the markets in advance and take one step in that direction, which was to tweak its language to officially adopt a bias toward easing, which is exactly what the Fed did.
Fed to Sustain "Expansion"
The Fed basically acknowledged that the economic data had been weakening and that they wanted to do what was appropriate, or that they were willing to do what was appropriate to sustain the expansion. Now, they didn't come right out and say that the economy is headed for a recession; even though that is exactly what is happening. They said they wanted to see more data before they moved. But after they failed to cut rates, the probability for a rate cut in July, which is the very next time the Fed meets, rose to 100%. So they took the 20% probability for the cut in June, since we didn't get it, the markets added that to the 80% probability of a cut in July.
Looking Toward Negative Data
Which means the markets are convinced that whatever data the Fed sees between now and the July meeting in going to be bad. It's not going to be good (positive) data. Of course, it IS going to be bad data. The data has been bad. The economy has been weakening. We've been seeing a series of weakening economic data. The economy is not just slowing down, it is headed to a recession. That is something that the Fed will never admit.