The Peter Schiff Show Podcast

Fed Raises Rates for the 7th Time

The Federal Reserve raised interest rates today.  I think this is the 7th rate hike. Six of these rate hikes have now taken place since Donald Trump was elected; five of them since he was inaugurated. The official rate now is 1.75% to 2%.  The Federal Reserve targets the midpoint of that range.  But the Fed has been tightening a lot longer than those 7 rate hikes, because, remember, before they hiked rates, they talked about it and they were tapering.  And the tapering was a De Facto tightening, because interest rates were effectively negative while the fed was doing QE. So, as it was tapering those purchases, it was reducing how much rates were actually negative, and that was, in fact tightening.

Press Conference After Every Meeting?

So the Fed has been tightening for a lot longer than the markets believe, which is why the recession is probably going to come a lot sooner and be a lot deeper than what anyone believes. There were rumors that came out earlier in the week that Powell thinks there should be a press conference after every single meeting. Right now, they just do it quarterly, and when they initially announced that, the reaction in the markets was, "Oh, maybe that means more rate hikes." because every time the Fed hikes rates, they have a press conference. So the thinking was, if they have more press conferences, they would have more rate hikes.

Powell's Bullish Comments Contrarian Indicator

I don't think it means that at all, in fact, there is no rule that says that the Fed needs a press conference to hike rates. They can hike rates at any meeting; in fact, they don't even need a meeting! They can hike rates between meetings.  They just haven't been doing it, but there's nothing that says they can't. So, I don't think having more press conferences means anything, but people are always looking for an excuse to do something, so that might have been an excuse.  But if you listen to what Powell said at this press conference, he sounded bullish on the economy.  Listen to the words he chose.  Given the fact that he is so bullish and the fact that the Fed is a pretty good contrarian indicator, if Powell is extremely bullish, it likely means that the best days of our so-called growth are behind us, and it is all down hill from here.

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Fed Raises Rates for the 7th Time

The Federal Reserve raised interest rates today.  I think this is the 7th rate hike. Six of these rate hikes have now taken place since Donald Trump was elected; five of them since he was inaugurated. The official rate now is 1.75% to 2%.  The Federal Reserve targets the midpoint of that range.  But the Fed has been tightening a lot longer than those 7 rate hikes, because, remember, before they hiked rates, they talked about it and they were tapering.  And the tapering was a De Facto tightening, because interest rates were effectively negative while the fed was doing QE. So, as it was tapering those purchases, it was reducing how much rates were actually negative, and that was, in fact tightening.

Press Conference After Every Meeting?

So the Fed has been tightening for a lot longer than the markets believe, which is why the recession is probably going to come a lot sooner and be a lot deeper than what anyone believes. There were rumors that came out earlier in the week that Powell thinks there should be a press conference after every single meeting. Right now, they just do it quarterly, and when they initially announced that, the reaction in the markets was, "Oh, maybe that means more rate hikes." because every time the Fed hikes rates, they have a press conference. So the thinking was, if they have more press conferences, they would have more rate hikes.

Powell's Bullish Comments Contrarian Indicator

I don't think it means that at all, in fact, there is no rule that says that the Fed needs a press conference to hike rates. They can hike rates at any meeting; in fact, they don't even need a meeting! They can hike rates between meetings.  They just haven't been doing it, but there's nothing that says they can't. So, I don't think having more press conferences means anything, but people are always looking for an excuse to do something, so that might have been an excuse.  But if you listen to what Powell said at this press conference, he sounded bullish on the economy.  Listen to the words he chose.  Given the fact that he is so bullish and the fact that the Fed is a pretty good contrarian indicator, if Powell is extremely bullish, it likely means that the best days of our so-called growth are behind us, and it is all down hill from here.

Market Movers: Singapore Summit

We've got a lot of potentially market-moving events going on this week; we've got the Summit which I think is getting underway this evening with North Korea's President Kim Jong Un and President Trump meeting in  Singapore.

No Market Move Expected on Rate Hike

We've got the Federal Open Market Committee Meeting beginning tomorrow, it's a 2-day meeting ending on Wednesday.  The odds of a rate hike are 100%! So in all probability there will be a rate hike.  Eventually the Fed is going to reverse course and that will come as a surprise; odds are the surprise won't happen on Wednesday. Right now we are at one and a half to one and three quarters, so  the next hike will be one and three quarters to two. I think what might surprise the markets, is if the Fed dials back expectations for later hikes. A lot of people are still looking for 2 more hikes this year in addition to the one we will get on Wednesday.  They may indicate that they are closer to the end of their rate-hiking cycle.  Maybe they will dial back their anticipated "Quantitative Tightening". I don't think the Fed is going to deliver much at all in the way of Quantitative Tightening but they may indicate to the markets that they're not going to do as much as what the the markets believe.  But in any event, given a 100% probability of a hike this time, the hike itself will not move markets at all.

What If They Don't Hike?

If the Fed does not hike, that would provide a big boost to gold and a big drop in the dollar. If they do not hike, that would be an indication that there may not be as many future hikes.  But, again, if you look at how gold has traded in the past, if you look at how gold has traded in this cycle, it has generally been bullish for gold, if not the very day, then within the next few days.

 

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Market Movers: Singapore Summit

We've got a lot of potentially market-moving events going on this week; we've got the Summit which I think is getting underway this evening with North Korea's President Kim Jong Un and President Trump meeting in  Singapore.

No Market Move Expected on Rate Hike

We've got the Federal Open Market Committee Meeting beginning tomorrow, it's a 2-day meeting ending on Wednesday.  The odds of a rate hike are 100%! So in all probability there will be a rate hike.  Eventually the Fed is going to reverse course and that will come as a surprise; odds are the surprise won't happen on Wednesday. Right now we are at one and a half to one and three quarters, so  the next hike will be one and three quarters to two. I think what might surprise the markets, is if the Fed dials back expectations for later hikes. A lot of people are still looking for 2 more hikes this year in addition to the one we will get on Wednesday.  They may indicate that they are closer to the end of their rate-hiking cycle.  Maybe they will dial back their anticipated "Quantitative Tightening". I don't think the Fed is going to deliver much at all in the way of Quantitative Tightening but they may indicate to the markets that they're not going to do as much as what the the markets believe.  But in any event, given a 100% probability of a hike this time, the hike itself will not move markets at all.

What If They Don't Hike?

If the Fed does not hike, that would provide a big boost to gold and a big drop in the dollar. If they do not hike, that would be an indication that there may not be as many future hikes.  But, again, if you look at how gold has traded in the past, if you look at how gold has traded in this cycle, it has generally been bullish for gold, if not the very day, then within the next few days.

 

Focusing on Emerging Markets

I'm going to spend most of today's podcast talking about what is going on in the emerging markets, in the currency market and in the stock markets; what the speculators are doing, why they are doing it and why I think they are wrong and why I think it creates an excellent opportunity for investors to fade this trade and prepare for the ultimate reversal of these moves.

Freedom Fest in Las Vegas

But before I get into that, I want to talk about a few other topics of interest that happened after my last podcast.  I also want to talk about Freedom Fest in July.  I am going to Freedom Fest again, as I do every year in July. Not the greatest time of the year in Las Vegas - not that there's really a bad time to be in Las Vegas, you're going to have fun in Las Vegas whenever you go - but it is quite hot in July.  Of course I spend almost all my time indoors, so the heat really does not affect me.  And when I do go out, it is at night, and it is not so hot. The event is July 12-14 and if you have not already registered you can do it now.  It will be at the Paris Hotel & Casino; I will be there with my entire family - my wife and 3 kids.  We'll be at our booth, you can come by and have a chance to meet my wife and kids and say hello.

Presentation on Tax Incentives of Working and Moving to Puerto Rico

I am going to be participating in several events; I am going to be doing a talk on Puerto Rico and the tax incentives of working from and moving to Puerto Rico. Most of you should know by now, I am Puerto Rican. Puerto Rico is my main residence; I summer in Connecticut, but I am a resident of Puerto Rico. Euro Pacific Asset Management and Euro Pacific Bank are both  based in Puerto Rico.

Bitcoin Debate Moderated by Naomi Brockwell

Also I am going to be doing a Bitcoin debate against Jeffrey Tucker and Gary Smith - is it real, or is it Tulipmania? All of you realize what side I am on.  The debate will be moderated by Naomi Brockwell, who is known as "The Bitcoin Girl" in fact she appeared on my old radio show, the Peter Schiff Show, and I sure wish I'd listened to her and bought a bunch of bitcoin - obviously I would have a lot more money today.

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Focusing on Emerging Markets

I'm going to spend most of today's podcast talking about what is going on in the emerging markets, in the currency market and in the stock markets; what the speculators are doing, why they are doing it and why I think they are wrong and why I think it creates an excellent opportunity for investors to fade this trade and prepare for the ultimate reversal of these moves.

Freedom Fest in Las Vegas

But before I get into that, I want to talk about a few other topics of interest that happened after my last podcast.  I also want to talk about Freedom Fest in July.  I am going to Freedom Fest again, as I do every year in July. Not the greatest time of the year in Las Vegas - not that there's really a bad time to be in Las Vegas, you're going to have fun in Las Vegas whenever you go - but it is quite hot in July.  Of course I spend almost all my time indoors, so the heat really does not affect me.  And when I do go out, it is at night, and it is not so hot. The event is July 12-14 and if you have not already registered you can do it now.  It will be at the Paris Hotel & Casino; I will be there with my entire family - my wife and 3 kids.  We'll be at our booth, you can come by and have a chance to meet my wife and kids and say hello.

Presentation on Tax Incentives of Working and Moving to Puerto Rico

I am going to be participating in several events; I am going to be doing a talk on Puerto Rico and the tax incentives of working from and moving to Puerto Rico. Most of you should know by now, I am Puerto Rican. Puerto Rico is my main residence; I summer in Connecticut, but I am a resident of Puerto Rico. Euro Pacific Asset Management and Euro Pacific Bank are both  based in Puerto Rico.

Bitcoin Debate Moderated by Naomi Brockwell

Also I am going to be doing a Bitcoin debate against Jeffrey Tucker and Gary Smith - is it real, or is it Tulipmania? All of you realize what side I am on.  The debate will be moderated by Naomi Brockwell, who is known as "The Bitcoin Girl" in fact she appeared on my old radio show, the Peter Schiff Show, and I sure wish I'd listened to her and bought a bunch of bitcoin - obviously I would have a lot more money today.

Current Events

Not much has been going on in the economy or the financial markets the last couple of days.  Its been  pretty quiet, so I'm going to take an opportunity to record a podcast more on current events and politics, so if you're not interested in those topics, then maybe just wait for my next podcast, although, when I did the Peter Schiff Radio Show 5 days a week, there were people who complained when I did not talk about the markets, or even the economy.  But I always enjoyed talking more about politics and current events, and I think the feedback I got was more engaging, so the show was more interesting.

Supreme Court Wedding Cake Case

So, I am going to talk about a couple of topics today; one has to do about that ruling that came out of the Supreme Court yesterday on the baker in Colorado who had refused to bake a cake for a gay wedding.  I know I have talked about this topic in the past; it is not the first time it has come up, but it has come up again in the wake of this ruling so I want to revisit that topic.

No More Swimsuit Competition for Miss America

Before I get to that topic, I would like to address a lighter topic, but nonetheless just as interesting.  The Miss America Pageant is no longer going to consider beauty as the criteria for the pageant.  In other words, it is a beauty pageant, but beauty doesn't count.  It's not outer beauty, it's just going to be, I guess inner beauty. They are going to get rid of the swimsuit competition, they are going to get rid of the evening gown competition and they will select a winner based on other characteristics.  I'm really not sure what.  I know they've got the talent competition; no one really paid too much attention to talent. Some of the women actually had some talent. Usually the most humorous part of the Miss America Pageant was the Q&A where there were often political questions asked and the contestants would try to give the most politically correct answer they could come up with.

 

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Current Events

Not much has been going on in the economy or the financial markets the last couple of days.  Its been  pretty quiet, so I'm going to take an opportunity to record a podcast more on current events and politics, so if you're not interested in those topics, then maybe just wait for my next podcast, although, when I did the Peter Schiff Radio Show 5 days a week, there were people who complained when I did not talk about the markets, or even the economy.  But I always enjoyed talking more about politics and current events, and I think the feedback I got was more engaging, so the show was more interesting.

Supreme Court Wedding Cake Case

So, I am going to talk about a couple of topics today; one has to do about that ruling that came out of the Supreme Court yesterday on the baker in Colorado who had refused to bake a cake for a gay wedding.  I know I have talked about this topic in the past; it is not the first time it has come up, but it has come up again in the wake of this ruling so I want to revisit that topic.

No More Swimsuit Competition for Miss America

Before I get to that topic, I would like to address a lighter topic, but nonetheless just as interesting.  The Miss America Pageant is no longer going to consider beauty as the criteria for the pageant.  In other words, it is a beauty pageant, but beauty doesn't count.  It's not outer beauty, it's just going to be, I guess inner beauty. They are going to get rid of the swimsuit competition, they are going to get rid of the evening gown competition and they will select a winner based on other characteristics.  I'm really not sure what.  I know they've got the talent competition; no one really paid too much attention to talent. Some of the women actually had some talent. Usually the most humorous part of the Miss America Pageant was the Q&A where there were often political questions asked and the contestants would try to give the most politically correct answer they could come up with.

 

Jobs Friday

Today is the first day of June and it's also jobs Friday. But before we get to the always highly-anticipated nonfarm payroll number, I want to talk about some of the economic data that came out yesterday, on Thursday.

Personal Income and Spending

I think the most significant release was the Personal Income and Spending number for the month of April. The spending numbers were so strong that it prompted the Atlanta Fed to adjust its estimate for Q2 GDP all the way up to 4.6% and I think they notched it up another tenth today to 4.7%, so this is the highest estimate they've had since they had that 5.4% estimate for Q1.  Of course we now know that we got 2.2%, so they were much too optimistic on Q1 and my gut is they're equally overly optimistic on Q2.

Spending Went Up as Income Went Down

Let's talk about this Personal Income and Spending data.  The surprise was not on the income, but on the spending. In fact, the revisions, when they went back to March. the original report was for a .3% gain in income and a .4% gain in spending. They ended up revising the income number down, so income rose only by .2%, but they revised spending up. Spending went up by .5%. What does that mean? That means savings went down quite a bit, because, where did the money come from to finance the extra spending?  It didn't come from income, so it came from savings, or it came from debt. Either people depleted their existing savings, or they went deeper into debt by putting their purchases on the credit card.

Spending Money Twice as Fast as They Are Earning It

But then, for the month of April, we got a .3% increase in income, which was anticipated, but spending, instead of rising by .4%, rose by .6%. So consumers are spending money twice as fast as they are earning it for the month of April: .6 up on spending, .3 up on earnings . So, again, what does this tell you? People are tapping into an already shallow savings pool or they are running up m0re credit card debt to buy stuff.

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Jobs Friday

Today is the first day of June and it's also jobs Friday. But before we get to the always highly-anticipated nonfarm payroll number, I want to talk about some of the economic data that came out yesterday, on Thursday.

Personal Income and Spending

I think the most significant release was the Personal Income and Spending number for the month of April. The spending numbers were so strong that it prompted the Atlanta Fed to adjust its estimate for Q2 GDP all the way up to 4.6% and I think they notched it up another tenth today to 4.7%, so this is the highest estimate they've had since they had that 5.4% estimate for Q1.  Of course we now know that we got 2.2%, so they were much too optimistic on Q1 and my gut is they're equally overly optimistic on Q2.

Spending Went Up as Income Went Down

Let's talk about this Personal Income and Spending data.  The surprise was not on the income, but on the spending. In fact, the revisions, when they went back to March. the original report was for a .3% gain in income and a .4% gain in spending. They ended up revising the income number down, so income rose only by .2%, but they revised spending up. Spending went up by .5%. What does that mean? That means savings went down quite a bit, because, where did the money come from to finance the extra spending?  It didn't come from income, so it came from savings, or it came from debt. Either people depleted their existing savings, or they went deeper into debt by putting their purchases on the credit card.

Spending Money Twice as Fast as They Are Earning It

But then, for the month of April, we got a .3% increase in income, which was anticipated, but spending, instead of rising by .4%, rose by .6%. So consumers are spending money twice as fast as they are earning it for the month of April: .6 up on spending, .3 up on earnings . So, again, what does this tell you? People are tapping into an already shallow savings pool or they are running up m0re credit card debt to buy stuff.