The Peter Schiff Show Podcast

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

The Fed's Game of Chicken

The big news was yesterday, when Fed Chairman, Jerome Powell, basically flinched. I've been talking about the game of chicken that the Federal Reserve has been playing with the markets. The way the game of chicken goes, is the markets keep moving lower and the Fed keeps talking about how great the economy is and how many rate hikes are coming in the future. Somebody has to flinch - somebody has to blink. It's like you have these two automobiles driving toward each other, and there's going to be a major crash unless somebody turns the wheel.It seems like it was Jerome Powell who turned the wheel first, and, in fact, was chicken.

The Fed Is Worried About All Asset Prices, Not Just the Stock Market

As much as the Fed wants to pretend they don't care about the stock market - they absolutely care about the stock market. They are tremendously worried about a weakening stock market.  Remember the goal of quantitative easing was to lift the stock market - to create a wealth effect and it was that stock market-created wealth that was going to drive consumption and the economy. And it wasn't just the stock market; it was also the real estate market.  So the Fed is worried about all asset prices, not just the stock market.  Clearly the real estate market is in even more trouble than the stock market, but both of these markets were headed lower, and I think that is what really prompted the Fed to blink - to swerve in this game of chicken.

Powell Suddenly Dials Back the Narrative

Now, of course you also had President Trump pressuring the Fed, you had Mnuchin putting some pressure on the Fed, which I think should also be a worrying factor.  We don't really know. There was a lot of speculation about what was behind the Fed's change of heart - change in policy.  After all, up until yesterday, even when you had the Vice Chair speak, the tone was very hawkish: "Yep, we've got lots of rate hikes coming." And now all of a sudden, Powell dials it all back.  Basically, what Powell said that convinced people that maybe there will not be as many rate hikes in the future, is, "We're just below neutral. We're almost there, maybe one more rate hike ought to do it."

Is 2.25% to 2.5% Neutral?

First of all, we're still at 2%, so that would imply neutral is 2.25% or 2.5%. That really shows you how low the neutrality bar has been lowered given the enormity of the debt bubble that have.  Once upon a time, and not too long ago, a 2.5% Fed Funds rate would have been considered highly stimulative.

 

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

25% Tariffs Will Inflict Rather Substantial Damage to the U.S. Economy

The Dow Jones managed to finish the day up just over 100 points - I think that was about the high of the day, and we erased a loss that at one point was better than 200 points.  I think a potential catalyst was a talk given by Larry Kudlow earlier in the day in which Kudlow raised some optimism over the possibility of a deal with China that would, of course avert the 25% across the board tariffs that are going to go into effect at the beginning of the new year. Of course, there is always the possibility of a resolution, and I still thin that there is going to be some type of face-saving resolution on both sides to avert these 25% tariffs.  I do think that they will inflict rather substantial damage to the U.S. economy, which is already rapidly decelerating, despite everybody's refusal to admit that (including the Federal Reserve, and I'll get to some comments later in the podcast).

Trump Is Pulling the Strings

But I don't think the President can risk the 25% tariffs as much as he wants to posture that the U.S. economy is in great shape, and we are in a better position than China to weather any kind of short-term damage that might be created by the tariffs.  I don't think the President is eager to test that hypothesis.  I think he would rather take credit for averting the crisis, even if the crisis was a matter of his own doing. He throws out the potential for the crisis, but of course, the only reason why the crisis is dangling in front of us is because Trump is pulling the strings.

It's Impossible to Consume What Has Not Been Produced

To the extent that the Chinese can produce all these products, they don't need America to consume them; they can consume the products themselves. Once the products are produced, consumption is a foregone conclusion. It's easy to consume what's been produced; it's impossible to consume what has not been produced.

 

Our Sponsors:
* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com
* Check out Plaud AI and use my code GOLD for a great deal: https://www.plaud.ai


Privacy & Opt-Out: https://redcircle.com/privacy

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

25% Tariffs Will Inflict Rather Substantial Damage to the U.S. Economy

The Dow Jones managed to finish the day up just over 100 points - I think that was about the high of the day, and we erased a loss that at one point was better than 200 points.  I think a potential catalyst was a talk given by Larry Kudlow earlier in the day in which Kudlow raised some optimism over the possibility of a deal with China that would, of course avert the 25% across the board tariffs that are going to go into effect at the beginning of the new year. Of course, there is always the possibility of a resolution, and I still thin that there is going to be some type of face-saving resolution on both sides to avert these 25% tariffs.  I do think that they will inflict rather substantial damage to the U.S. economy, which is already rapidly decelerating, despite everybody's refusal to admit that (including the Federal Reserve, and I'll get to some comments later in the podcast).

Trump Is Pulling the Strings

But I don't think the President can risk the 25% tariffs as much as he wants to posture that the U.S. economy is in great shape, and we are in a better position than China to weather any kind of short-term damage that might be created by the tariffs.  I don't think the President is eager to test that hypothesis.  I think he would rather take credit for averting the crisis, even if the crisis was a matter of his own doing. He throws out the potential for the crisis, but of course, the only reason why the crisis is dangling in front of us is because Trump is pulling the strings.

It's Impossible to Consume What Has Not Been Produced

To the extent that the Chinese can produce all these products, they don't need America to consume them; they can consume the products themselves. Once the products are produced, consumption is a foregone conclusion. It's easy to consume what's been produced; it's impossible to consume what has not been produced.

 

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

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.

Our Sponsors:
* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com
* Check out Plaud AI and use my code GOLD for a great deal: https://www.plaud.ai


Privacy & Opt-Out: https://redcircle.com/privacy

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

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.

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

FAANG's Took a Big Bite Out of the Market

Another Monday, another big down day for the U.S. stock market, it is turning out to be one hell of a quarter; not all of the declines happening in October. But as I said earlier, it doesn't have to be in October for the market to crash. Today wasn't a Black Monday; certainly the percentage decline wasn't out of the ordinary.  Although the FAANG stocks, in particular, there was a big bite taken out of those stocks, and it wasn't just the bite that was taken out of the Apple, which was some of the news that precipitated today's decline. A big down day nonetheless.

NASDAQ Having one of the Worst Quarters Ever

The Dow Jones down just shy of 400 points - 395, or 1.5%. On the lows, we were down better than 500 points.  The Russell 2000 closed down just over 30 points - that's a 2% point drop.  But the big drop was the NASDAQ - down 219 points, just over 3%, pretty close to the lows of the day. The NASDAQ is now down 12.5% so far this quarter - probably one of the worst quarters ever.

I think the only thing that may slow down the decline is if the Fed skips the December rate hike. Although, even that may not be enough. If the Fed doesn't hike in December, the markets might get worried that the Fed knows something and that the economy is much weaker and therefore earnings will be much weaker, so, to me, i think if the market's going to get a stay of execution from the Fed, it's actually going to have to be a rate cut.

Homebuilder Sentiment Lower Than Expected

There are plenty of other data points that are coming out, both corporate news and news about the overall economy,  In particular, today, that I think weighed heavily on the markets. The first one being the Homebuilder Sentiment for November.  That came out at 10am. So the markets were already trading based on another piece of news which I will get to. Last month, Homebuilder Sentiment's number was at 68. Now anything above 50 is supposedly O.K. It still means they're optimistic. And the consensus was for Homebuilder Sentiment to stay at 68. Instead, it plunged all the way down to 60. In fact, the range of forecasts went from a low of 66 to a high of 69. That drop, from what I've read, that is bigger than any drop we've had during any month of the last bust that led to the 2008 Financial Crisis. We've never seen a rate of decline like this. Obviously that scared the market. This is just one of the first sentiment indicators that is giving way. Obviously, home sales are imploding so you might expect builders to be a little bit nervous about this, even though they are still somewhat optimistic. But remember, this whole rally is built on confidence and the confidence is going to start going everywhere, In addition to the Homebuilders, you're going to see business confidence, particularly small business confidence, which was at a record high.

Apple Now in a Bear Market

But there was some other particularly bad news that came in before the opening bell, and that one was from Apple. They said they will be cutting production because of lower sales. That decision trickles down, effecting a lot of companies who count on those orders from Apple. The price of Apple is down by 4% on the day. But if you now look at the total drop - just over 20% - and that means the way Wall Street scores it, Apple is now in a bear market.

Facebook Led the Market Down

Of course, not just Apple, the FAANG's in general, the market took a bite out of those guys today. Facebook leading the market down - down another 5.5% on the day. That brings the total decline for this bear market to 40%. In second place is NETFLIX, that was down 5.5%, today so pretty much neck and neck with Facebook. But since its peak, NETFLIX is down 36%.

Our Sponsors:
* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com
* Check out Plaud AI and use my code GOLD for a great deal: https://www.plaud.ai


Privacy & Opt-Out: https://redcircle.com/privacy

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

FAANG's Took a Big Bite Out of the Market

Another Monday, another big down day for the U.S. stock market, it is turning out to be one hell of a quarter; not all of the declines happening in October. But as I said earlier, it doesn't have to be in October for the market to crash. Today wasn't a Black Monday; certainly the percentage decline wasn't out of the ordinary.  Although the FAANG stocks, in particular, there was a big bite taken out of those stocks, and it wasn't just the bite that was taken out of the Apple, which was some of the news that precipitated today's decline. A big down day nonetheless.

NASDAQ Having one of the Worst Quarters Ever

The Dow Jones down just shy of 400 points - 395, or 1.5%. On the lows, we were down better than 500 points.  The Russell 2000 closed down just over 30 points - that's a 2% point drop.  But the big drop was the NASDAQ - down 219 points, just over 3%, pretty close to the lows of the day. The NASDAQ is now down 12.5% so far this quarter - probably one of the worst quarters ever.

I think the only thing that may slow down the decline is if the Fed skips the December rate hike. Although, even that may not be enough. If the Fed doesn't hike in December, the markets might get worried that the Fed knows something and that the economy is much weaker and therefore earnings will be much weaker, so, to me, i think if the market's going to get a stay of execution from the Fed, it's actually going to have to be a rate cut.

Homebuilder Sentiment Lower Than Expected

There are plenty of other data points that are coming out, both corporate news and news about the overall economy,  In particular, today, that I think weighed heavily on the markets. The first one being the Homebuilder Sentiment for November.  That came out at 10am. So the markets were already trading based on another piece of news which I will get to. Last month, Homebuilder Sentiment's number was at 68. Now anything above 50 is supposedly O.K. It still means they're optimistic. And the consensus was for Homebuilder Sentiment to stay at 68. Instead, it plunged all the way down to 60. In fact, the range of forecasts went from a low of 66 to a high of 69. That drop, from what I've read, that is bigger than any drop we've had during any month of the last bust that led to the 2008 Financial Crisis. We've never seen a rate of decline like this. Obviously that scared the market. This is just one of the first sentiment indicators that is giving way. Obviously, home sales are imploding so you might expect builders to be a little bit nervous about this, even though they are still somewhat optimistic. But remember, this whole rally is built on confidence and the confidence is going to start going everywhere, In addition to the Homebuilders, you're going to see business confidence, particularly small business confidence, which was at a record high.

Apple Now in a Bear Market

But there was some other particularly bad news that came in before the opening bell, and that one was from Apple. They said they will be cutting production because of lower sales. That decision trickles down, effecting a lot of companies who count on those orders from Apple. The price of Apple is down by 4% on the day. But if you now look at the total drop - just over 20% - and that means the way Wall Street scores it, Apple is now in a bear market.

Facebook Led the Market Down

Of course, not just Apple, the FAANG's in general, the market took a bite out of those guys today. Facebook leading the market down - down another 5.5% on the day. That brings the total decline for this bear market to 40%. In second place is NETFLIX, that was down 5.5%, today so pretty much neck and neck with Facebook. But since its peak, NETFLIX is down 36%.

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

Optimism Over No Tariffs Fueling Market Move

Donald Trump, I think, was the reason the markets ended up finishing in the black today, at least most of the major indexes.  In fact, the only index that was down on the day was the NASDAQ - the NASDAQ was the only major index that was down on the week, thanks to weakness in tech stock, in particular, the FANG stocks.  The comments that Trump made today basically gave hope to some people that potentially 25% across the board tariffs on all Chinese imports may not go into effect at the beginning of next year, which is the threat. If the Chinese ant Trump don't come to an agreement, then those tariffs are going to hit.

Tariffs Are the Stick

Apparently the tariffs are the stick that is going to be brandished by Trump, and he is going to use it to hit the Chinese over the head. But the threat of this big stick is supposedly going to bring the Chinese to the table, and there will be a deal that is favorable to the United States.  Of course, if these tariffs actually go into effect, the people who are really going to be hit with the stick are going to be Americans.  It's going to be American consumers who have to pay 25% more for everything they buy, and it's going to be American retailers who, of course, are going to sell a lot less stuff, because, if they have to raise prices by 25%, sales are going to collapse.

Fed Hinting that "Data Dependent" May Signal Slowdown in Rates

We had a couple of Fed guys out today -Fed Vice Chairman Richard Clarida - was interviewed today on CNBC by Steve Liesman -  I happened to catch that interview, and was listening closely to what Clarida had to say.  To me, he almost admitted that when the Fed pretended to be "data dependent" early on, they really weren't data dependent at all. They were just raising interest rates because they wanted to get them higher. They were afraid of getting caught with rates too close to zero in the beginning of the next recession, so they wanted to re-load that gun, so they wanted to get interest rates higher.  They kept saying they were data dependent, but I never really thought they were. Once they started to raise rates, they were just on auto pilot. But now, Clarida seems to open the door to the possibility that maybe, some of the rate hikes that we think are coming aren't going to come, because he talked about how now, the Fed can be more data dependent than it was in the past.

Optimism Among Warning Signals

Where in the past, we talked about being data dependent, but we really weren't, but now we actually can be because now we're closer to neutral. And since we're now closer to that number  we can take the data more seriously, meaning that if the data comes out weaker than we expect, well maybe we won't raise rates as much as we think.  and I think Dallas Fed President Robert Kaplan was also out today making similar comments that were initially taken as Dovish by the markets, because he was leaving the door open, apparently to the fact that the Fed may not deliver as many rate hikes as the markets believe. Both of these guys are extremely optimistic and upbeat about the U.S. economy. As if none of the bad news  that is happening around them matter. You've got the semi-conductors, you've got the retailers, you've got the autos, you've got the home builders.  All these sectors are blowing up one after another and they guys at the Fed are thinking "No Problem!"

Cramer Exceeding Very Low Bar Set By Fed

Also today, Jim Kramer, on CNBC, was out there critical of the Fed, basically saying that these guys don't know what they are talking about and that he's smarter than them, and they should pay attention to what he's saying.  Kramer may in fact know more than the Fed,

Our Sponsors:
* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com
* Check out Plaud AI and use my code GOLD for a great deal: https://www.plaud.ai


Privacy & Opt-Out: https://redcircle.com/privacy

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

Optimism Over No Tariffs Fueling Market Move

Donald Trump, I think, was the reason the markets ended up finishing in the black today, at least most of the major indexes.  In fact, the only index that was down on the day was the NASDAQ - the NASDAQ was the only major index that was down on the week, thanks to weakness in tech stock, in particular, the FANG stocks.  The comments that Trump made today basically gave hope to some people that potentially 25% across the board tariffs on all Chinese imports may not go into effect at the beginning of next year, which is the threat. If the Chinese ant Trump don't come to an agreement, then those tariffs are going to hit.

Tariffs Are the Stick

Apparently the tariffs are the stick that is going to be brandished by Trump, and he is going to use it to hit the Chinese over the head. But the threat of this big stick is supposedly going to bring the Chinese to the table, and there will be a deal that is favorable to the United States.  Of course, if these tariffs actually go into effect, the people who are really going to be hit with the stick are going to be Americans.  It's going to be American consumers who have to pay 25% more for everything they buy, and it's going to be American retailers who, of course, are going to sell a lot less stuff, because, if they have to raise prices by 25%, sales are going to collapse.

Fed Hinting that "Data Dependent" May Signal Slowdown in Rates

We had a couple of Fed guys out today -Fed Vice Chairman Richard Clarida - was interviewed today on CNBC by Steve Liesman -  I happened to catch that interview, and was listening closely to what Clarida had to say.  To me, he almost admitted that when the Fed pretended to be "data dependent" early on, they really weren't data dependent at all. They were just raising interest rates because they wanted to get them higher. They were afraid of getting caught with rates too close to zero in the beginning of the next recession, so they wanted to re-load that gun, so they wanted to get interest rates higher.  They kept saying they were data dependent, but I never really thought they were. Once they started to raise rates, they were just on auto pilot. But now, Clarida seems to open the door to the possibility that maybe, some of the rate hikes that we think are coming aren't going to come, because he talked about how now, the Fed can be more data dependent than it was in the past.

Optimism Among Warning Signals

Where in the past, we talked about being data dependent, but we really weren't, but now we actually can be because now we're closer to neutral. And since we're now closer to that number  we can take the data more seriously, meaning that if the data comes out weaker than we expect, well maybe we won't raise rates as much as we think.  and I think Dallas Fed President Robert Kaplan was also out today making similar comments that were initially taken as Dovish by the markets, because he was leaving the door open, apparently to the fact that the Fed may not deliver as many rate hikes as the markets believe. Both of these guys are extremely optimistic and upbeat about the U.S. economy. As if none of the bad news  that is happening around them matter. You've got the semi-conductors, you've got the retailers, you've got the autos, you've got the home builders.  All these sectors are blowing up one after another and they guys at the Fed are thinking "No Problem!"

Cramer Exceeding Very Low Bar Set By Fed

Also today, Jim Kramer, on CNBC, was out there critical of the Fed, basically saying that these guys don't know what they are talking about and that he's smarter than them, and they should pay attention to what he's saying.  Kramer may in fact know more than the Fed,

RATE AND REVIEW this podcast on Facebook.

https://www.facebook.com/PeterSchiff/reviews/

Very Negative Technical Action

We had another roller coaster ride in the stock market today, with the Dow Jones ending down about 200 points, but that was well off the lows of the day. I think we were down about 350 points, or close to it, at the lows. But, more interesting, we were up over 200 points earlier this morning. So this is very negative technical action, when you have these rallies and then close negative.  In fact, we were down another 100 points yesterday on the Dow, and today, we came to within, I think 10 points of taking out yesterday's high - and then we not only crashed below yesterday's low, but we closed below yesterday's low.  So another very weak day.

A Change in Name Only

I think one of the catalysts for the late afternoon rally, before the selloff, was all of the headlines coming out of Europe - the UK, regarding a Brexit deal, and I think that caused some people to buy stocks.  The dollar actually sold off.  It was down already; it sold off some more on that news coming out of Europe. But I don't know if this deal is going to fly . we'll see.  I read through some parts of the deal, and to me, it looks like Theresa May is trying to borrow a page from President Donald Trump. Basically, what she is doing, is she is trying to rename the union that the UK has with Europe . If you read what they are going to sign on to, it is going to be some kind of trade pact that really kind of subjects the UK to all the rules and regulations that prompted them to want to get out of the European Union in the first place.  So they're going to Brexit, but they're not actually going anywhere. Kind of like renaming NAFTA the USMCA . Basically, you're re-branding what you had before and claiming a victory. Maybe, politically speaking, May wants to try to honor the will of the voters by saying we accomplished Brexit, but basically not change anything.  It's just a change in name only.

Our Sponsors:
* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com
* Check out Plaud AI and use my code GOLD for a great deal: https://www.plaud.ai


Privacy & Opt-Out: https://redcircle.com/privacy