The Peter Schiff Show Podcast

Summary:

More weak economic data today sent the U.S. stock market to record highs; at least the Dow and the S&P hit new records. NASDAQ not quite, but very close.  The dollar hit a new low for the year.  The dollar index, settling in at 95.10, right on the low for the day.  That's down .63.  Some of the other currencies are strong.

Aussie Dollar Strong

The Aussie dollar was up about 1.3% on the day; one of the strongest of the currencies today. The Aussie dollar is very close to a 2-year high.  The Canadian dollar was very strong this week on the back of a rate increase by the Bank of Canada. But the dollar falling across the board.

Foreign Stock Gain

Foreign stocks did better than U.S stocks, given their tailwind from appreciating currencies.  Gold prices were up just over $11. Given the weakness in the dollar and the weak economic data, gold should be moving up a lot more than it is; I still think there is still a lot of short selling going on, but I smell the mother of all short squeezes coming.  Silver is up about .30; back up to $16. remember was a low as $15.10 earlier in the week.

Dollar Index Weakening

The dollar index index at 95.10, just down over 7% on the year. It ended last year just above 1.02. In fact, in January, hit almost 1.04, so we're down 8-1/2% since the January high, and the year is only half over. So I think there is a lot more momentum coming, especially in light of the economic data I'm about to get to.

Retail Sales Disappoint

The big report was the Retail Sales numbers, were supposed to bounce back from May's -.3, and they did manage to revise that to down only .1%;but instead of getting a .1% rebound we had another drop.  We had -.2% in June, so that is back-to back declines.  In fact that is 3 consecutive months of falling retail sales. The picture gets worse when you strip out car autos. Last month, we got -.3%. That was unrevised.  They were looking for June to be +.2% - instead we were down another .2%. And if you strip out gasoline, it's even worse than that. They were looking for +4% and we got -.1%.  So very very weak retail sales. This was supposed to be the quarter of the big bounce back! How are we going to bounce back in GDP without retail sales?

Consumer Prices Weaker

We also got consumer prices that actually came out weaker than expected. That is supposedly bad news, the way the Fed spins it, because the Fed's trying to get higher inflation, at least the way the CPI measures it. They were supposed to get an increase of .1% for consumer prices following last month's .1% decline and instead we came in unchanged. Year over year CPI, up 1.6% vs an estimate of 1.7%, and core, stripping out food and energy, they were looking for +.2%. instead we were up .1%

Janet Yellen Wants More Inflation

So when Janet Yellen testified before Congress earlier in the week, the only thing she expressed concern about is that inflation is not high enough.  She does not seem concerned at all about the weakness in the economy.

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Summary:

More weak economic data today sent the U.S. stock market to record highs; at least the Dow and the S&P hit new records. NASDAQ not quite, but very close.  The dollar hit a new low for the year.  The dollar index, settling in at 95.10, right on the low for the day.  That's down .63.  Some of the other currencies are strong.

Aussie Dollar Strong

The Aussie dollar was up about 1.3% on the day; one of the strongest of the currencies today. The Aussie dollar is very close to a 2-year high.  The Canadian dollar was very strong this week on the back of a rate increase by the Bank of Canada. But the dollar falling across the board.

Foreign Stock Gain

Foreign stocks did better than U.S stocks, given their tailwind from appreciating currencies.  Gold prices were up just over $11. Given the weakness in the dollar and the weak economic data, gold should be moving up a lot more than it is; I still think there is still a lot of short selling going on, but I smell the mother of all short squeezes coming.  Silver is up about .30; back up to $16. remember was a low as $15.10 earlier in the week.

Dollar Index Weakening

The dollar index index at 95.10, just down over 7% on the year. It ended last year just above 1.02. In fact, in January, hit almost 1.04, so we're down 8-1/2% since the January high, and the year is only half over. So I think there is a lot more momentum coming, especially in light of the economic data I'm about to get to.

Retail Sales Disappoint

The big report was the Retail Sales numbers, were supposed to bounce back from May's -.3, and they did manage to revise that to down only .1%;but instead of getting a .1% rebound we had another drop.  We had -.2% in June, so that is back-to back declines.  In fact that is 3 consecutive months of falling retail sales. The picture gets worse when you strip out car autos. Last month, we got -.3%. That was unrevised.  They were looking for June to be +.2% - instead we were down another .2%. And if you strip out gasoline, it's even worse than that. They were looking for +4% and we got -.1%.  So very very weak retail sales. This was supposed to be the quarter of the big bounce back! How are we going to bounce back in GDP without retail sales?

Consumer Prices Weaker

We also got consumer prices that actually came out weaker than expected. That is supposedly bad news, the way the Fed spins it, because the Fed's trying to get higher inflation, at least the way the CPI measures it. They were supposed to get an increase of .1% for consumer prices following last month's .1% decline and instead we came in unchanged. Year over year CPI, up 1.6% vs an estimate of 1.7%, and core, stripping out food and energy, they were looking for +.2%. instead we were up .1%

Janet Yellen Wants More Inflation

So when Janet Yellen testified before Congress earlier in the week, the only thing she expressed concern about is that inflation is not high enough.  She does not seem concerned at all about the weakness in the economy.

Summary:

There are market indicators of a major top as illustrated by the Blue Apron IPO, as it represents the failure of a very weak company attempting to raise money my means of an IPO when the market may have lost its steam. The stock is trading at $7.14, down from its initial $10/share offering. Wall Street has lost control of this IPO. A smaller bank actually issued a price target of $2/share. The point is that they brought the IPO to the market and they could not keep the air in the bubble. SnapChat, another Wall Street darling, went public at $17 not too long ago and although it had a big pop initially up to $29, now trades at about half that price. The point is that this process is coming unglued. The inability of Wall Street to maintain the air in these bubble stocks is an indication that we're nearing the end of this bull market.

The Yellen Put May Have Expired

The only way the Fed might be about to extend the bubble market is by changing its tune. As I said in my last podcast, I don't know if that Yellen put is still there. It may have expired with the election of Donald Trump.  We know that the Fed wanted to prop the market up during the Obama Presidency; that was clearly their goal. But, especially since Trump has wrapped his presidency in the market's recent upswing, the Fed's willingness to risk credibility may be waning. The Fed may have a greater tolerance for lower stock prices. The Fed will, however step in if they see weakness in Wall Street spill over to Main Street.

Commodities and Emerging Markets

Commodities are looking good, despite the recent dip in oil, gold and silver. Base metal stocks are rising, emerging markets are continuing to pick up, especially those markets that are big exporters of commodities. So, beneath the surface we are starting to see a rotation into these commodity-sensitive, inflation-sensitive sectors.

Golden Opportunity in Silver

Meanwhile the headlines are still all about the drop gold and silver.  I recorded a video blog on Monday morning; silver was down almost to $15. It has just bounced off that low as I recorded the video. At SchiffGold, we were able to organize a great deal from one of our suppliers on silver.  The ratio of the price of gold to the price of silver was near 80:1, which is about as cheap as silver is going to get, relative to gold.  Historically, it is a great buying opportunity.  We were able to lock up this deal where we have a limited quantity of junk silver bags we're offering to our clients at $1.25 over the spot price of silver. Sometimes these bags are scarce.

 

 

 

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Summary:

There are market indicators of a major top as illustrated by the Blue Apron IPO, as it represents the failure of a very weak company attempting to raise money my means of an IPO when the market may have lost its steam. The stock is trading at $7.14, down from its initial $10/share offering. Wall Street has lost control of this IPO. A smaller bank actually issued a price target of $2/share. The point is that they brought the IPO to the market and they could not keep the air in the bubble. SnapChat, another Wall Street darling, went public at $17 not too long ago and although it had a big pop initially up to $29, now trades at about half that price. The point is that this process is coming unglued. The inability of Wall Street to maintain the air in these bubble stocks is an indication that we're nearing the end of this bull market.

The Yellen Put May Have Expired

The only way the Fed might be about to extend the bubble market is by changing its tune. As I said in my last podcast, I don't know if that Yellen put is still there. It may have expired with the election of Donald Trump.  We know that the Fed wanted to prop the market up during the Obama Presidency; that was clearly their goal. But, especially since Trump has wrapped his presidency in the market's recent upswing, the Fed's willingness to risk credibility may be waning. The Fed may have a greater tolerance for lower stock prices. The Fed will, however step in if they see weakness in Wall Street spill over to Main Street.

Commodities and Emerging Markets

Commodities are looking good, despite the recent dip in oil, gold and silver. Base metal stocks are rising, emerging markets are continuing to pick up, especially those markets that are big exporters of commodities. So, beneath the surface we are starting to see a rotation into these commodity-sensitive, inflation-sensitive sectors.

Golden Opportunity in Silver

Meanwhile the headlines are still all about the drop gold and silver.  I recorded a video blog on Monday morning; silver was down almost to $15. It has just bounced off that low as I recorded the video. At SchiffGold, we were able to organize a great deal from one of our suppliers on silver.  The ratio of the price of gold to the price of silver was near 80:1, which is about as cheap as silver is going to get, relative to gold.  Historically, it is a great buying opportunity.  We were able to lock up this deal where we have a limited quantity of junk silver bags we're offering to our clients at $1.25 over the spot price of silver. Sometimes these bags are scarce.

 

 

 

Summary:

There wasn't much of a market reaction to this Nonfarm Payroll report; the dollar index was only up .2% on the day. It closed up flat on the week. The Canadian dollar closed at a 10-month high against the dollar. Also bond prices continue to fall; this is a bad week if you own bonds, worldwide.  Yields are rising across the board.  The trend looks like we are about to break down in the bond market and break out in yield.

Gold Market

I think it is the weakness in bonds and the backup in yields that is one reason the gold market has been acting as weak as it has. There is still a false perception that rising interest rates are bad for gold. That, coupled with the fact that the dollar has been falling recently and gold has not been rising (meaning gold prices are falling in terms of other currencies) is causing a breakdown in the charts, resulting in selling. Even North Korea's recent successful ICBM testing did not cause gold to catch a bid.

Silver Dropped

Early last night, around the opening of the Japanese stock market, there was a bit of a flash crash in silver. Silver prices dropped abruptly by about fifty cents an ounce within a second.  The market quickly recovered but then re-tested those lows. Silver was down over .40 today in the U.S. market. It didn't open down that soft, but it traded lower all day. The price of silver hit a new 52-week low.

Gold Stocks Signalling a Reversal

I have been talking about the relative strength of  the gold miners in the face of this correction and once again, the GDX, which is an index of gold stocks, was only down 1.3% on the day, which is not a big drop, considering the price of gold was down by 1% on the day and the price of silver was down close to 3% on the day. I think this is a good sign for a reversal.

A Weaker Japanese Yen

Another reason for the recent weakness in gold and silver prices has to do with the weakness in the Japanese yen. While the U.S dollar has been losing ground against other currencies, it has actually been gaining ground against the yen. I am not sure why, or for how long this relationship is going to hold, but there has been a very close correlation between the price of gold and silver and the exchange rate between the U.S dollar and the Japanese yen.

Printing Yen to Prevent Interest Rates From Rising

The yen was weak overnight particularly because of the global rise in yields above a level where the JGB has drawn a line in the sand. It is basically committed to printing an infinite amount of Japanese yen to keep buying those JGB's to prevent interest rates from rising. Why is the Bank of Japan determined to keep interest rates from rising? Because of the enormity of the Japanese government debt. If interest rates go up, there is not way to service that debt. The choice is default or runaway inflation, and they are choosing the latter. So, last night during all this selling in global bonds, including the JGB, there was massive intervention to support the bond market. That meant the printing of a lot of Yen. It is possible that this is the catalyst that drove down the price of silver and gold.

Risk-On/Risk Off Trade

One reason for the correlation between the yen and gold has to do with the risk-on/risk-off trade, where both the Japanese yen and gold are seen as the safe-haven assets.  Therefore, when investors want to take risk off, they buy gold and they buy the yen and that may be one of the reasons that the two have been moving together.  Once they start to move together and form a relationship, traders start to key off of it. So if they see weakness in the yen, they sell gold, and if they see strength in the yen they buy gold.

Rising Interest Rates are Positive for Gold

One of the reasons interest rates are rising in the world is because inflation is picking up. Higher inflation is positive for gold, it is the most bullish factor for gold.

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Summary:

There wasn't much of a market reaction to this Nonfarm Payroll report; the dollar index was only up .2% on the day. It closed up flat on the week. The Canadian dollar closed at a 10-month high against the dollar. Also bond prices continue to fall; this is a bad week if you own bonds, worldwide.  Yields are rising across the board.  The trend looks like we are about to break down in the bond market and break out in yield.

Gold Market

I think it is the weakness in bonds and the backup in yields that is one reason the gold market has been acting as weak as it has. There is still a false perception that rising interest rates are bad for gold. That, coupled with the fact that the dollar has been falling recently and gold has not been rising (meaning gold prices are falling in terms of other currencies) is causing a breakdown in the charts, resulting in selling. Even North Korea's recent successful ICBM testing did not cause gold to catch a bid.

Silver Dropped

Early last night, around the opening of the Japanese stock market, there was a bit of a flash crash in silver. Silver prices dropped abruptly by about fifty cents an ounce within a second.  The market quickly recovered but then re-tested those lows. Silver was down over .40 today in the U.S. market. It didn't open down that soft, but it traded lower all day. The price of silver hit a new 52-week low.

Gold Stocks Signalling a Reversal

I have been talking about the relative strength of  the gold miners in the face of this correction and once again, the GDX, which is an index of gold stocks, was only down 1.3% on the day, which is not a big drop, considering the price of gold was down by 1% on the day and the price of silver was down close to 3% on the day. I think this is a good sign for a reversal.

A Weaker Japanese Yen

Another reason for the recent weakness in gold and silver prices has to do with the weakness in the Japanese yen. While the U.S dollar has been losing ground against other currencies, it has actually been gaining ground against the yen. I am not sure why, or for how long this relationship is going to hold, but there has been a very close correlation between the price of gold and silver and the exchange rate between the U.S dollar and the Japanese yen.

Printing Yen to Prevent Interest Rates From Rising

The yen was weak overnight particularly because of the global rise in yields above a level where the JGB has drawn a line in the sand. It is basically committed to printing an infinite amount of Japanese yen to keep buying those JGB's to prevent interest rates from rising. Why is the Bank of Japan determined to keep interest rates from rising? Because of the enormity of the Japanese government debt. If interest rates go up, there is not way to service that debt. The choice is default or runaway inflation, and they are choosing the latter. So, last night during all this selling in global bonds, including the JGB, there was massive intervention to support the bond market. That meant the printing of a lot of Yen. It is possible that this is the catalyst that drove down the price of silver and gold.

Risk-On/Risk Off Trade

One reason for the correlation between the yen and gold has to do with the risk-on/risk-off trade, where both the Japanese yen and gold are seen as the safe-haven assets.  Therefore, when investors want to take risk off, they buy gold and they buy the yen and that may be one of the reasons that the two have been moving together.  Once they start to move together and form a relationship, traders start to key off of it. So if they see weakness in the yen, they sell gold, and if they see strength in the yen they buy gold.

Rising Interest Rates are Positive for Gold

One of the reasons interest rates are rising in the world is because inflation is picking up. Higher inflation is positive for gold, it is the most bullish factor for gold.

Summary:

One of the key differences between Americans and citizens of other countries is that in most nations of the world, individuals gradually won freedoms and privileges from a monarchy. In the U.S., however, we started with all of our rights.  Then, Americans created government by surrendering some of their power, empowering government.  These rights are spelled out in Article 1 Section 8 of the Constitution.

Free Stuff Rather Than Freedom

We have government not to give us stuff, but to secure our freedom. Americans today really don't want freedom.  They want free stuff. When the government gives you something they take away your choice; they tell you what you are going to get and how you are going to get it. When the government gives you something, however, they must take away from someone else, diminishing that person's freedom.

Article 1, Section 8 of the Constitution

The Constitution created a Federal Government.  Prior to the Constitution we were organized under the Articles of the Confederation. But the framers of the Constitution wanted the government to have a little more power.  All of the powers of the Federal Government are contained in Article 1, Section 8, and it's not a big section.  It has 18 enumerated powers.

Government Powers vs. State Powers

The Constitution is written in two ways: it grants powers to the Federal Government and it denies powers to the states. You know that by reading the 10th Amendment to the U.S. Constitution, The Bill of Rights ,which lays out how the Constitution is organized, and that the Federal Government has only the powers expressly granted. The states retain certain powers owned prior to the formation of the Federal government. So, if the Constitution did not specifically prohibit the states from doing something, they could do it.

Ignoring the Constitution

We know what the Constitution means because its writing is clear. Today they say the Constitution needs to be interpreted - that the Supreme Court is there to "interpret the Constitution". The Constitution is not written in Chinese - it is written in plain English.  The Constitution needs to be applied and enforced.  When people are talking about interpreting the Constitution they are really talking about ignoring the Constitution and to impart meaning that doesn't exist.

The Federalist Papers

If you look back at the Federalist Papers, at what the founders of the Constitution wrote about the meaning of the document, particularly James Madison, in Federalist Paper #45. If you don't know what the Federalist Papers are, or you've never read them, they are a collection of articles, written at the time the Constitution was being ratified, to generate understanding and support. The authors were James Madison, Alexander Hamilton and John Jay.

Here is a quote from Madison, who was considered to be the "Father of the Constitution":

The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace,

Our Sponsors:
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Summary

Independence Day is a great American holiday, but it fills me with joy and sadness.  I love to commemorate what America was, and the whole idea of what made America different. Once we declared our independence in 1776 the people created a government.  We the people had all the power and we surrendered some of our power to form a limited government.  The government was a creation of the people and they ceded some power to the government. This was unique. As a result of this limited government, this uniquely American way of life, America prospered and created the wealthiest country in the history or the world. So we celebrate the beginning of this experiment in freedom and limited government. Benjamin Franklin famously responded to the question, "What have you given us, Mr. Franklin?": "A republic, if you can keep it." We have become what the founding fathers feared most, a democracy.

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

Summary:

One of the key differences between Americans and citizens of other countries is that in most nations of the world, individuals gradually won freedoms and privileges from a monarchy. In the U.S., however, we started with all of our rights.  Then, Americans created government by surrendering some of their power, empowering government.  These rights are spelled out in Article 1 Section 8 of the Constitution.

Free Stuff Rather Than Freedom

We have government not to give us stuff, but to secure our freedom. Americans today really don't want freedom.  They want free stuff. When the government gives you something they take away your choice; they tell you what you are going to get and how you are going to get it. When the government gives you something, however, they must take away from someone else, diminishing that person's freedom.

Article 1, Section 8 of the Constitution

The Constitution created a Federal Government.  Prior to the Constitution we were organized under the Articles of the Confederation. But the framers of the Constitution wanted the government to have a little more power.  All of the powers of the Federal Government are contained in Article 1, Section 8, and it's not a big section.  It has 18 enumerated powers.

Government Powers vs. State Powers

The Constitution is written in two ways: it grants powers to the Federal Government and it denies powers to the states. You know that by reading the 10th Amendment to the U.S. Constitution, The Bill of Rights ,which lays out how the Constitution is organized, and that the Federal Government has only the powers expressly granted. The states retain certain powers owned prior to the formation of the Federal government. So, if the Constitution did not specifically prohibit the states from doing something, they could do it.

Ignoring the Constitution

We know what the Constitution means because its writing is clear. Today they say the Constitution needs to be interpreted - that the Supreme Court is there to "interpret the Constitution". The Constitution is not written in Chinese - it is written in plain English.  The Constitution needs to be applied and enforced.  When people are talking about interpreting the Constitution they are really talking about ignoring the Constitution and to impart meaning that doesn't exist.

The Federalist Papers

If you look back at the Federalist Papers, at what the founders of the Constitution wrote about the meaning of the document, particularly James Madison, in Federalist Paper #45. If you don't know what the Federalist Papers are, or you've never read them, they are a collection of articles, written at the time the Constitution was being ratified, to generate understanding and support. The authors were James Madison, Alexander Hamilton and John Jay.

Here is a quote from Madison, who was considered to be the "Father of the Constitution":

The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace,

Summary

Independence Day is a great American holiday, but it fills me with joy and sadness.  I love to commemorate what America was, and the whole idea of what made America different. Once we declared our independence in 1776 the people created a government.  We the people had all the power and we surrendered some of our power to form a limited government.  The government was a creation of the people and they ceded some power to the government. This was unique. As a result of this limited government, this uniquely American way of life, America prospered and created the wealthiest country in the history or the world. So we celebrate the beginning of this experiment in freedom and limited government. Benjamin Franklin famously responded to the question, "What have you given us, Mr. Franklin?": "A republic, if you can keep it." We have become what the founding fathers feared most, a democracy.