The Peter Schiff Show Podcast

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831 Point Rout in the Dow Jones Industrial Average

If you listened to Friday's podcast, I mentioned that I thought I would probably be doing a lot of podcasts this week. I did one yesterday, and I am doing another one today because my feeling about the stock market was confirmed today with an 831 point rout in the Dow Jones Industrial Average, down 3.15%. This is the biggest decline that the Dow has had since that 1000+ point drop that we had in February. I think it is maybe the third biggest down day ever, point-wise. Percentage-wise it's not even close.

NASDAQ Down Over 4%

The DJIA actually did a lot better than a lot of the other averages.  The Dow Jones transports were down just over 4%; 445 points.  the NASDAQ was down over 4% as well - 315 points. Weakness across the board in the stock market today.  And it's not just the homebuilders and the autos. I've been talking about those sectors as leading indicators and, yes, many of those stocks made new 52-week lows today as well. But they were not the worst performers on the day.

Financials Helped Lead the Declines

The financials were helping to lead the decline.  Again we have Morgan Stanley at a new 52-week low, down 3.3%. Goldman Sachs down 3.6%, a new 52-week low.  But really, the biggest losers on the day were the tech stocks. These have been the stand-outs. This is what has been holding up the market - the FAANG stocks, all of these technology infotech stocks - and a lot of people were actually describing them irrationally as a "safe havens".  I couldn't believe it when people were saying that tech stocks were the new "safe havens". When you hear stuff like that, you know you're close to the end.

FAANG Stocks Selling in After-Hours Trading

If you look at what some of these darlings did today, and I'm looking at the after-hours prices, too, because they're selling.  More selling is going on now, after the bell. But look at NVIDIA, down over 9%, Amazon down 7.3%, Netflix down 10% on the day. AMD down 11% - Twitter down almost 9%, Apple down 5.5%, Intel 4.5%, Cisco, 4.7%, Facebook down almost 5%. this is  basically one day plus an hour of aftermarket trading.

 

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831 Point Rout in the Dow Jones Industrial Average

If you listened to Friday's podcast, I mentioned that I thought I would probably be doing a lot of podcasts this week. I did one yesterday, and I am doing another one today because my feeling about the stock market was confirmed today with an 831 point rout in the Dow Jones Industrial Average, down 3.15%. This is the biggest decline that the Dow has had since that 1000+ point drop that we had in February. I think it is maybe the third biggest down day ever, point-wise. Percentage-wise it's not even close.

NASDAQ Down Over 4%

The DJIA actually did a lot better than a lot of the other averages.  The Dow Jones transports were down just over 4%; 445 points.  the NASDAQ was down over 4% as well - 315 points. Weakness across the board in the stock market today.  And it's not just the homebuilders and the autos. I've been talking about those sectors as leading indicators and, yes, many of those stocks made new 52-week lows today as well. But they were not the worst performers on the day.

Financials Helped Lead the Declines

The financials were helping to lead the decline.  Again we have Morgan Stanley at a new 52-week low, down 3.3%. Goldman Sachs down 3.6%, a new 52-week low.  But really, the biggest losers on the day were the tech stocks. These have been the stand-outs. This is what has been holding up the market - the FAANG stocks, all of these technology infotech stocks - and a lot of people were actually describing them irrationally as a "safe havens".  I couldn't believe it when people were saying that tech stocks were the new "safe havens". When you hear stuff like that, you know you're close to the end.

FAANG Stocks Selling in After-Hours Trading

If you look at what some of these darlings did today, and I'm looking at the after-hours prices, too, because they're selling.  More selling is going on now, after the bell. But look at NVIDIA, down over 9%, Amazon down 7.3%, Netflix down 10% on the day. AMD down 11% - Twitter down almost 9%, Apple down 5.5%, Intel 4.5%, Cisco, 4.7%, Facebook down almost 5%. this is  basically one day plus an hour of aftermarket trading.

 

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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.

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JOIN PETER at the New Orleans Investment Conference

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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.

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The Catalyst is Rising Interest Rates

October is just one week old and the carnage on Wall Street has already begun. I wonder if the October complacency is beginning to be shaken with the down move that we see.  Now, the Dow Jones is not down very much; in fact, it barely fell on the week; but the S&P was down about 1%.  But the NASDAQ was down more than 3% on the week. The catalyst is rising interest rates, which of course, the markets have been ignoring up until Wednesday afternoon, when all of a sudden somebody started to worry about the markets.

A Weak Thursday and Friday Led to 1987 Black Monday

The big declines happened on Thursday and then again today. The declines are not really big; not by the standards of an October crash, but we still have several weeks left for a big down move in October.  We had a weak Friday, a weak Thursday - that's exactly what we had in October of 1987, which led to Black Monday.

Economy Far More Vulnerable to a Rate Shock

Remember, the backdrop there was rising interest rates. We have interest rates rising now, of course they're not nearly as high as they were back then.  But percentage-wise, this is probably even higher, given where we're starting from. Of course, the economy is much more highly leveraged now than it was in 1987 and it's actually far more vulnerable to a rate shock now, than it was then.  Of course, back then, people were worried about rising trade deficits - they're even bigger now than they were back then.

Investors Not Smart Enough to Worry About Trade

In fact, we got the trade deficit out today for August. Another jump following the jump we had in July.  I think it was the biggest increase in 6 months.  Imports are rising, exports are falling.  It's bad news on trade. People were worried about trade back in 1987.  They're not smart enough to worry about it now, but they should.  The trade deficit is probably more important today than it was back then.

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The Catalyst is Rising Interest Rates

October is just one week old and the carnage on Wall Street has already begun. I wonder if the October complacency is beginning to be shaken with the down move that we see.  Now, the Dow Jones is not down very much; in fact, it barely fell on the week; but the S&P was down about 1%.  But the NASDAQ was down more than 3% on the week. The catalyst is rising interest rates, which of course, the markets have been ignoring up until Wednesday afternoon, when all of a sudden somebody started to worry about the markets.

A Weak Thursday and Friday Led to 1987 Black Monday

The big declines happened on Thursday and then again today. The declines are not really big; not by the standards of an October crash, but we still have several weeks left for a big down move in October.  We had a weak Friday, a weak Thursday - that's exactly what we had in October of 1987, which led to Black Monday.

Economy Far More Vulnerable to a Rate Shock

Remember, the backdrop there was rising interest rates. We have interest rates rising now, of course they're not nearly as high as they were back then.  But percentage-wise, this is probably even higher, given where we're starting from. Of course, the economy is much more highly leveraged now than it was in 1987 and it's actually far more vulnerable to a rate shock now, than it was then.  Of course, back then, people were worried about rising trade deficits - they're even bigger now than they were back then.

Investors Not Smart Enough to Worry About Trade

In fact, we got the trade deficit out today for August. Another jump following the jump we had in July.  I think it was the biggest increase in 6 months.  Imports are rising, exports are falling.  It's bad news on trade. People were worried about trade back in 1987.  They're not smart enough to worry about it now, but they should.  The trade deficit is probably more important today than it was back then.

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NAFTA was the Worst Deal in World History?

I want to talk about Donald Trump's new trade deal. When Donald Trump was running for President, he said that NAFTA (North America Free Trade Agreement) was the worst trade deal ever negotiated ever by anyone in world history. It wasn't just the worst trade deal that America got into, it was the worst trade deal that anybody ever got into.

I don't know how many trade deals Donald Trump actually studied, and whether he compared them to NAFTA to know that NAFTA was worse than any other deal that had ever been negotiated, but that was his claim. In fact, even in the ceremony where he took credit for the new deal that he negotiated he repeated that NAFTA was the worst deal ever negotiated.

We Went from a Good Name to a Lousy Name

Then he unveiled his deal, which he now calls the greatest deal ever negotiated.  So we went from the worst deal in the history of deals to the best deal in the history of deals. The problem is, it is basically the same deal! The only thing that has really changed is the name. We went from a good name to a lousy name, and the funny thing about it is Donald Trump is claiming that the name is better. The old name was NAFTA. The new name is USMCA. Us-ma-ca! Us-ma-ca? What kind of name is that? We basically went from a nice name to a ridiculous name.

NAFTA Re-Branded with a Worse Name

But the bottom line is that's probably the most substantive difference between the two deals.  Pretty much, it is the same deal. Yet this is the greatest deal in history and the old deal was the worst deal ever. This is standard operating procedure for Donald Trump. Everything is great now that he is President. Donald Trump pretended everything was awful before he was elected, and now, he's made everything fantastic, but he hasn't done anything.

You listen to Fox News, they're talking about this thing like it is the greatest thing since sliced bread. It is NAFTA re-branded with a worse name.

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JOIN PETER at the New Orleans Investment Conference

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NAFTA was the Worst Deal in World History?

I want to talk about Donald Trump's new trade deal. When Donald Trump was running for President, he said that NAFTA (North America Free Trade Agreement) was the worst trade deal ever negotiated ever by anyone in world history. It wasn't just the worst trade deal that America got into, it was the worst trade deal that anybody ever got into.

I don't know how many trade deals Donald Trump actually studied, and whether he compared them to NAFTA to know that NAFTA was worse than any other deal that had ever been negotiated, but that was his claim. In fact, even in the ceremony where he took credit for the new deal that he negotiated he repeated that NAFTA was the worst deal ever negotiated.

We Went from a Good Name to a Lousy Name

Then he unveiled his deal, which he now calls the greatest deal ever negotiated.  So we went from the worst deal in the history of deals to the best deal in the history of deals. The problem is, it is basically the same deal! The only thing that has really changed is the name. We went from a good name to a lousy name, and the funny thing about it is Donald Trump is claiming that the name is better. The old name was NAFTA. The new name is USMCA. Us-ma-ca! Us-ma-ca? What kind of name is that? We basically went from a nice name to a ridiculous name.

NAFTA Re-Branded with a Worse Name

But the bottom line is that's probably the most substantive difference between the two deals.  Pretty much, it is the same deal. Yet this is the greatest deal in history and the old deal was the worst deal ever. This is standard operating procedure for Donald Trump. Everything is great now that he is President. Donald Trump pretended everything was awful before he was elected, and now, he's made everything fantastic, but he hasn't done anything.

You listen to Fox News, they're talking about this thing like it is the greatest thing since sliced bread. It is NAFTA re-branded with a worse name.

JOIN PETER at the New Orleans Investment Conference

https://neworleansconference.com/conference-schedule/

Ominous October

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.

 

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JOIN PETER at the New Orleans Investment Conference

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Ominous October

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.