The Peter Schiff Show Podcast

Summary:  Today's big miss in the Nonfarm Payroll report indicates further proof for the Fed that the Q1 weak economic data was not transitory.  Coupled with disappointing Labor Force Participation declines and increasing Trade Deficit numbers, the Fed will have no good news to justify a rate hike. All this news does not bode well for the U.S. dollar index, which closed at a new low for the year today. The next crisis is the dollar.

* Following yesterday's much stronger than expected May ADP Jobs report, the consensus was for 170,000 jobs and the actual number was 253,000

* The stage was set for another strong number for today's employment report

* But we didn't get it

* We got the official number from the U.S. government earlier this morning

* The consensus was for 185,000 jobs created

* We actually created, according to the government, just 138,00 jobs - a big miss

* In addition to that, they took last month's initial 211,000 report and they lowered that down to just 174,000

* In fact they made revisions to the prior month as well

* The official unemployment rate actually went down to 4.3%

* I think that is a new low

* Why did the unemployment rate drop?

* For the same reason it has been dropping; lots of people left the labor force

* Labor Force Participation once again dropped .02 to 62.7%

* That matches the all time record low

* We actually had more than 600,000 people leave the labor force in the month of May

* A new all-time record high

* In fact, breaking it down by part-time and full-time, all of the net new jobs added were part time jobs

* We actually lost 367,000 full-time jobs during the month of May

* That is the biggest decline in full-time employment in 3 years

* Of course, as usual, the jobs that we do create were in leisure and hospitality, education healthcare, temporary services

* We actually lost some information technology jobs, we lost jobs in the retail trade; small gains in the wholesale trade, a little better than normal in manufacturing and logging

* But a still a tiny portion of the overall jobs in goods-producing segments of the economy

* So we continue to create non-productive jobs which is another reason that the trade deficit continues to rise, and we'll get to that in a minute

* Weekly hourly earnings up just .02%, matching expectations on the lower end

* But they went back to last month's, originally reported as +.03% and they moved that down to +.2%

* So earnings are not growing, full-time jobs are disappearing, and this economy is weakening

* In fact, also yesterday, Challenger job cuts report announced layoffs surged in the month of May from 36,602 in April to 51,692 in May

* This is the highest number of announced layoffs of any month of the year

* That doesn't bode well for future job creation if all of a sudden we're getting a spike in layoffs

* In addition to the bad jobs report, which of course is going to weigh on GDP in Q2

* We got the trade deficit for April, which is the first month of the second quarter

* They were looking for a deficit of $46.1 billion

* Instead, the deficit ballooned all the way up to $47.6 billion

* From what was originally reported at $43.7 billion in March, revised that up to $45.3 billion

* So this is going to take away not only from Q2 GDP but it's going to go back and take away from Q1 GDP

* Remember, in my last podcast, I pointed out that the Federal Reserve, specifically, in their minutes said that before they raise rates again they want confirmation that the Q1 weak economic data was transitory

* Meanwhile all of the data that has come out since those minutes were released actually proves the opposite


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Summary:  Today's big miss in the Nonfarm Payroll report indicates further proof for the Fed that the Q1 weak economic data was not transitory.  Coupled with disappointing Labor Force Participation declines and increasing Trade Deficit numbers, the Fed will have no good news to justify a rate hike. All this news does not bode well for the U.S. dollar index, which closed at a new low for the year today. The next crisis is the dollar.

* Following yesterday's much stronger than expected May ADP Jobs report, the consensus was for 170,000 jobs and the actual number was 253,000

* The stage was set for another strong number for today's employment report

* But we didn't get it

* We got the official number from the U.S. government earlier this morning

* The consensus was for 185,000 jobs created

* We actually created, according to the government, just 138,00 jobs - a big miss

* In addition to that, they took last month's initial 211,000 report and they lowered that down to just 174,000

* In fact they made revisions to the prior month as well

* The official unemployment rate actually went down to 4.3%

* I think that is a new low

* Why did the unemployment rate drop?

* For the same reason it has been dropping; lots of people left the labor force

* Labor Force Participation once again dropped .02 to 62.7%

* That matches the all time record low

* We actually had more than 600,000 people leave the labor force in the month of May

* A new all-time record high

* In fact, breaking it down by part-time and full-time, all of the net new jobs added were part time jobs

* We actually lost 367,000 full-time jobs during the month of May

* That is the biggest decline in full-time employment in 3 years

* Of course, as usual, the jobs that we do create were in leisure and hospitality, education healthcare, temporary services

* We actually lost some information technology jobs, we lost jobs in the retail trade; small gains in the wholesale trade, a little better than normal in manufacturing and logging

* But a still a tiny portion of the overall jobs in goods-producing segments of the economy

* So we continue to create non-productive jobs which is another reason that the trade deficit continues to rise, and we'll get to that in a minute

* Weekly hourly earnings up just .02%, matching expectations on the lower end

* But they went back to last month's, originally reported as +.03% and they moved that down to +.2%

* So earnings are not growing, full-time jobs are disappearing, and this economy is weakening

* In fact, also yesterday, Challenger job cuts report announced layoffs surged in the month of May from 36,602 in April to 51,692 in May

* This is the highest number of announced layoffs of any month of the year

* That doesn't bode well for future job creation if all of a sudden we're getting a spike in layoffs

* In addition to the bad jobs report, which of course is going to weigh on GDP in Q2

* We got the trade deficit for April, which is the first month of the second quarter

* They were looking for a deficit of $46.1 billion

* Instead, the deficit ballooned all the way up to $47.6 billion

* From what was originally reported at $43.7 billion in March, revised that up to $45.3 billion

* So this is going to take away not only from Q2 GDP but it's going to go back and take away from Q1 GDP

* Remember, in my last podcast, I pointed out that the Federal Reserve, specifically, in their minutes said that before they raise rates again they want confirmation that the Q1 weak economic data was transitory

* Meanwhile all of the data that has come out since those minutes were released actually proves the opposite

Summary: Box office revenues for this holiday weekend were the weakest since 1999.  Why is that? Some say the movies were not very good, but I think it's more likely that this is just another piece of evidence that supports the fact that the consumer is in much worse shape than is generally perceived.

* Hopefully everybody had a happy Memorial Day weekend; I spent my holiday weekend up in Vancouver at the International Metal Writers Conference

* And when I came home, I came back to my home in Connecticut

* This was the first year I spent the winter in Puerto Rico, from January 1 until just a few days ago

* I bought a condo in Puerto Rico a few years ago, I moved my Euro Pacific Asset Management Company there from California at about that time, but I'd never moved there myself until this year

* I like snow, it's pretty, but the next time I see snow it's because I'm skiing on it

* I'm a snowbird now

* But this time I'm not only flying out of bad weather, I'm flying out of high taxes

* It's not just the high taxes in Connecticut; it's the high taxes in the U.S.

* By the way, Connecticut is basically broke, if you read a lot of the articles now

* The tax revenue is collapsing

* I'm moving from a bankrupt state to a  bankrupt territory

* Puerto Rico has already declared bankruptcy; Connecticut hasn't actually done that

* Connecticut is admitting that they can't raise taxes on the rich anymore, because the rich are leaving

* I moved down to Puerto Rico with my wife and two young children, and I love it

* I live in a nice community, Dorado Beach; great neighborhood, many in the same situation as me

* I read this article about box office - holiday weekends are usually a good time for Hollywood

* Memorial weekend is a big weekend to kick off the summer movie season

* The article I read stated that box office revenues for this holiday weekend were the weakest since 1999

* Why is that?


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Summary: Box office revenues for this holiday weekend were the weakest since 1999.  Why is that? Some say the movies were not very good, but I think it's more likely that this is just another piece of evidence that supports the fact that the consumer is in much worse shape than is generally perceived.

* Hopefully everybody had a happy Memorial Day weekend; I spent my holiday weekend up in Vancouver at the International Metal Writers Conference

* And when I came home, I came back to my home in Connecticut

* This was the first year I spent the winter in Puerto Rico, from January 1 until just a few days ago

* I bought a condo in Puerto Rico a few years ago, I moved my Euro Pacific Asset Management Company there from California at about that time, but I'd never moved there myself until this year

* I like snow, it's pretty, but the next time I see snow it's because I'm skiing on it

* I'm a snowbird now

* But this time I'm not only flying out of bad weather, I'm flying out of high taxes

* It's not just the high taxes in Connecticut; it's the high taxes in the U.S.

* By the way, Connecticut is basically broke, if you read a lot of the articles now

* The tax revenue is collapsing

* I'm moving from a bankrupt state to a  bankrupt territory

* Puerto Rico has already declared bankruptcy; Connecticut hasn't actually done that

* Connecticut is admitting that they can't raise taxes on the rich anymore, because the rich are leaving

* I moved down to Puerto Rico with my wife and two young children, and I love it

* I live in a nice community, Dorado Beach; great neighborhood, many in the same situation as me

* I read this article about box office - holiday weekends are usually a good time for Hollywood

* Memorial weekend is a big weekend to kick off the summer movie season

* The article I read stated that box office revenues for this holiday weekend were the weakest since 1999

* Why is that?

Summary: The Fed is now indicating it needs evidence that  the Q1 weak economic data is transitory and not a trend.  This is interesting for 2 reasons.  The Fed's narrative has always been to tout economic growth even in the face of flimsy or no supporting data.  Now the Fed is actually admitting there is weakness.  The other interesting thing is that, although the Fed continues to claim it is "data dependent", it has been ignoring the economic data ever since the first rate hike.  The market puts chances of a June rate hike at almost 100%.  Maybe that is because it believes the Fed will raise rates regardless of proof.

* On Wednesday we got the release of the Federal Open Market Committee's minutes

* As usual, the FOMC is indicating that as long as the economy continues to evolve according to their forecast, that it would be appropriate to remove additional accommodations soon

* And, I guess the markets are assuming soon is in about 3 weeks when the Fed meets in June everybody anticipates that the Fed will hike rates again

* Actually raising interest rates all the way back up to 1% - that would be the new floor on rates

* That was the lowest that rates got during the Greenspan era that gave us the housing bubble and ensuing financial crisis

* It's taken a long time even to get up to that insanely low level of interest rates

* But everybody still assumes - I think the probability is near 100% - that the Fed is going to raise rates in June

* But what I thought was interesting about those minutes, and nobody's talking about this

* In the minutes, the Federal Reserve said that they are also looking for proof that the weak economic data from the first quarter was transitory

* They're looking for proof in order to continue to raise rates

* I'm thinking, if the Fed says they need proof that Q1 data was transitory, are they actually going to get that proof by the June meeting?

* If they don't have the proof yet, are they going to have it by June?

* Almost all the economic data that has come out recently, including this week, has been pretty bad

* In fact, the data that we're getting confirms to me that rather than being transitory

* The weakness in the first quarter is likely to continue

* If it's transitory at all it is because we're transitioning into a recession

* So if the Fed is looking for proof that the economic data was transitory, thus far they haven't gotten any

* If they actually need the proof prior to raising rates, they maybe they are not going to raise rates in June

* The market doesn't seem to even give that a possibility

* Maybe it's because the Fed claims to be data dependent

* Yet they've ignored data ever since the first rate hike

* Now they are saying that the data they are depending on is data that is going to provide proof that the first quarter weakness is transitory

* Maybe the markets aren't buying that, they're saying, "We think the Fed's going to raise rates regardless of whether or not there's any proof."

* Even if there is no proof, they are going to pretend that there is


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Summary: The Fed is now indicating it needs evidence that  the Q1 weak economic data is transitory and not a trend.  This is interesting for 2 reasons.  The Fed's narrative has always been to tout economic growth even in the face of flimsy or no supporting data.  Now the Fed is actually admitting there is weakness.  The other interesting thing is that, although the Fed continues to claim it is "data dependent", it has been ignoring the economic data ever since the first rate hike.  The market puts chances of a June rate hike at almost 100%.  Maybe that is because it believes the Fed will raise rates regardless of proof.

* On Wednesday we got the release of the Federal Open Market Committee's minutes

* As usual, the FOMC is indicating that as long as the economy continues to evolve according to their forecast, that it would be appropriate to remove additional accommodations soon

* And, I guess the markets are assuming soon is in about 3 weeks when the Fed meets in June everybody anticipates that the Fed will hike rates again

* Actually raising interest rates all the way back up to 1% - that would be the new floor on rates

* That was the lowest that rates got during the Greenspan era that gave us the housing bubble and ensuing financial crisis

* It's taken a long time even to get up to that insanely low level of interest rates

* But everybody still assumes - I think the probability is near 100% - that the Fed is going to raise rates in June

* But what I thought was interesting about those minutes, and nobody's talking about this

* In the minutes, the Federal Reserve said that they are also looking for proof that the weak economic data from the first quarter was transitory

* They're looking for proof in order to continue to raise rates

* I'm thinking, if the Fed says they need proof that Q1 data was transitory, are they actually going to get that proof by the June meeting?

* If they don't have the proof yet, are they going to have it by June?

* Almost all the economic data that has come out recently, including this week, has been pretty bad

* In fact, the data that we're getting confirms to me that rather than being transitory

* The weakness in the first quarter is likely to continue

* If it's transitory at all it is because we're transitioning into a recession

* So if the Fed is looking for proof that the economic data was transitory, thus far they haven't gotten any

* If they actually need the proof prior to raising rates, they maybe they are not going to raise rates in June

* The market doesn't seem to even give that a possibility

* Maybe it's because the Fed claims to be data dependent

* Yet they've ignored data ever since the first rate hike

* Now they are saying that the data they are depending on is data that is going to provide proof that the first quarter weakness is transitory

* Maybe the markets aren't buying that, they're saying, "We think the Fed's going to raise rates regardless of whether or not there's any proof."

* Even if there is no proof, they are going to pretend that there is

Summary:  The dollar's decline really started with the Fed's too-little-too late rate hikes.  The rally of 2014 - 2015 was fueled by expectations of more aggressive Fed monetary policy that did not materialize. We've been trending sideways since then with the exception of an upward spike after the Trump victory.  Now, as much of the hype surrounding Trump's election is losing its momentum, support for the dollar is waning. This is not a case of "buy the rumor, sell the fact".  This is going to be a situation where the fact does not live up to the rumor.

* The dollar continued its losing streak today.  The dollar index was down for the 8th time in 9 days

* The 9 day decline is about 2-1/2 percent

* The dollar index actually traded below 97 today for the first time since Donald Trump was elected President

* So we have wiped out 100% of the ill-gotten dollar gains that were racked up in the wake of that victory

* If you remember, when the dollar was rallying as a result of the trump victory, I said it was a sucker's rally and sure enough, that's exactly what it was

*  The dollar's decline is only just getting started

* I think the dollar would have begun its decline a while ago had Hillary Clinton been elected

* But because of Trump's unexpected victory and the prospects of faster economic growth,

* Trump-flation (as if inflation were even good for the dollar) but to the extent that it made the Fed raise interest rates

* That's what created the rally and it was a great selling opportunity for people who understood what really was going on

* But all we've done thus far is get rid of gains that never should have been racked up

* The dollar hasn't really even begun its decline, but I think that decline is going to begin in earnest

* In fact, my next target for the dollar index is going to be around 92, which is about 5% below current levels

* But if we get below 92, that will be the dollar's lowest level since January 2015, so about a 2-1/2 year low, assuming we get there in the next couple of months, depending how long it takes to trade down

* But what really gets interesting once the dollar index gets below 92

* If you look at a chart, there's nothing but air between 92 and 80

* Because the dollar index rose in 2014

* The dollar had a huge rally anticipating the Fed's tightening monetary policy

* Tapering and all the talk about rate hikes

* That was probably the best year for the dollar

* And that momentum continued into 2015

* The dollar didn't lose its momentum until the Fed started hiking rates


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Summary:  The dollar's decline really started with the Fed's too-little-too late rate hikes.  The rally of 2014 - 2015 was fueled by expectations of more aggressive Fed monetary policy that did not materialize. We've been trending sideways since then with the exception of an upward spike after the Trump victory.  Now, as much of the hype surrounding Trump's election is losing its momentum, support for the dollar is waning. This is not a case of "buy the rumor, sell the fact".  This is going to be a situation where the fact does not live up to the rumor.

* The dollar continued its losing streak today.  The dollar index was down for the 8th time in 9 days

* The 9 day decline is about 2-1/2 percent

* The dollar index actually traded below 97 today for the first time since Donald Trump was elected President

* So we have wiped out 100% of the ill-gotten dollar gains that were racked up in the wake of that victory

* If you remember, when the dollar was rallying as a result of the trump victory, I said it was a sucker's rally and sure enough, that's exactly what it was

*  The dollar's decline is only just getting started

* I think the dollar would have begun its decline a while ago had Hillary Clinton been elected

* But because of Trump's unexpected victory and the prospects of faster economic growth,

* Trump-flation (as if inflation were even good for the dollar) but to the extent that it made the Fed raise interest rates

* That's what created the rally and it was a great selling opportunity for people who understood what really was going on

* But all we've done thus far is get rid of gains that never should have been racked up

* The dollar hasn't really even begun its decline, but I think that decline is going to begin in earnest

* In fact, my next target for the dollar index is going to be around 92, which is about 5% below current levels

* But if we get below 92, that will be the dollar's lowest level since January 2015, so about a 2-1/2 year low, assuming we get there in the next couple of months, depending how long it takes to trade down

* But what really gets interesting once the dollar index gets below 92

* If you look at a chart, there's nothing but air between 92 and 80

* Because the dollar index rose in 2014

* The dollar had a huge rally anticipating the Fed's tightening monetary policy

* Tapering and all the talk about rate hikes

* That was probably the best year for the dollar

* And that momentum continued into 2015

* The dollar didn't lose its momentum until the Fed started hiking rates

Summary: Republicans face chaos around Trump's political difficulties, causing some to consider potential advantages of a President Pence.  Market volatility has not yet brought the DJIA below pre-Trump numbers while the dollar index slides and gold moves up. Meanwhile, household debt is higher than 2008 levels even as fewer Americans own homes.

* It looks like I picked a very volatile week to go out to Las Vegas, although I didn't pick this week; the week picked me

* I have two conferences that I am attending here: the Las Vegas Money Show and the SkyBridge Alternatives Conference  otherwise known as SALT

* A lot is going on, certainly the political chaos in the United States, the Dow was down 365 points yesterday based on new revelations with respect to why Donald Trump may have fired FBI Director James Comey

* Was he doing it because Comey refused to give up on his investigation of Trump's Russian ties?

* Now you've got Congress members on both sides of the aisle questioning whether the allegations are true

* Apparently Comey has some contemporaneous notes of conversations he had with Donald Trump

* Donald Trump may have asked him to give up the investigation

* Although from what I've heard President Trump said it would be nice if Comey gave up the investigation - was that some kind of idle threat?

* Did that mean "You'd better do it, or you're fired."

* I have no idea, but this obviously is creating concerns for the Trump Administration

* The market, as far as I'm concerned, is really not down very much at all, given how much it had rallied based on nothing but the optimism surrounding expectations for all the good things that would happen as a result of a Trump Presidency

* We were going to get tax reform, we were going to get regulations; we were going to have all this stimulus

* Not only has none of these things materialized yet, even before the scandals broke, it was obvious that even if we got any of the promised legislation

* Of course I've always said it would not even help the economy

* But regardless, people actually think it it is going to, which created the big stock market rally

* Even before this controversy it was obvious that the expected improvements were going to take a lot longer than people thought

* Now this is going to delay Trump's agenda even more

* Because now, rather than concentrating on tax reform or repealing ObamaCare, or stimulus, now they've got to deal with damage control to hold on to the Presidency and fend off these calls for impeachment

* Now they've got to get a special prosecutor and all of this is going to add additional delays

* Of course, a lot of momentum we had in Q1, in spite of weak GDP, you had all this confidence, all this enthusiasm on the part of Republicans and Trump voters

* And it was all this confidence that was supposed to lead to extra economic growth

* Businesses were going to have more confidence to invest and hire

* And consumers were going to have more confidence to spend

* Well certainly, what is happening now in the White House is going to shake some of that confidence

* Some of the people who were so enthusiastic about Trump don't even know if Trump is going to be there anymore

* And to the extent that is is there, he is politically damaged

* Now he has to use a lot of his political capital just to secure his position rather than to advance his agenda

* Whether or not that agenda would actually help the economy

* Despite that, the drop in the stock market is not very large

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Summary: Republicans face chaos around Trump's political difficulties, causing some to consider potential advantages of a President Pence.  Market volatility has not yet brought the DJIA below pre-Trump numbers while the dollar index slides and gold moves up. Meanwhile, household debt is higher than 2008 levels even as fewer Americans own homes.

* It looks like I picked a very volatile week to go out to Las Vegas, although I didn't pick this week; the week picked me

* I have two conferences that I am attending here: the Las Vegas Money Show and the SkyBridge Alternatives Conference  otherwise known as SALT

* A lot is going on, certainly the political chaos in the United States, the Dow was down 365 points yesterday based on new revelations with respect to why Donald Trump may have fired FBI Director James Comey

* Was he doing it because Comey refused to give up on his investigation of Trump's Russian ties?

* Now you've got Congress members on both sides of the aisle questioning whether the allegations are true

* Apparently Comey has some contemporaneous notes of conversations he had with Donald Trump

* Donald Trump may have asked him to give up the investigation

* Although from what I've heard President Trump said it would be nice if Comey gave up the investigation - was that some kind of idle threat?

* Did that mean "You'd better do it, or you're fired."

* I have no idea, but this obviously is creating concerns for the Trump Administration

* The market, as far as I'm concerned, is really not down very much at all, given how much it had rallied based on nothing but the optimism surrounding expectations for all the good things that would happen as a result of a Trump Presidency

* We were going to get tax reform, we were going to get regulations; we were going to have all this stimulus

* Not only has none of these things materialized yet, even before the scandals broke, it was obvious that even if we got any of the promised legislation

* Of course I've always said it would not even help the economy

* But regardless, people actually think it it is going to, which created the big stock market rally

* Even before this controversy it was obvious that the expected improvements were going to take a lot longer than people thought

* Now this is going to delay Trump's agenda even more

* Because now, rather than concentrating on tax reform or repealing ObamaCare, or stimulus, now they've got to deal with damage control to hold on to the Presidency and fend off these calls for impeachment

* Now they've got to get a special prosecutor and all of this is going to add additional delays

* Of course, a lot of momentum we had in Q1, in spite of weak GDP, you had all this confidence, all this enthusiasm on the part of Republicans and Trump voters

* And it was all this confidence that was supposed to lead to extra economic growth

* Businesses were going to have more confidence to invest and hire

* And consumers were going to have more confidence to spend

* Well certainly, what is happening now in the White House is going to shake some of that confidence

* Some of the people who were so enthusiastic about Trump don't even know if Trump is going to be there anymore

* And to the extent that is is there, he is politically damaged

* Now he has to use a lot of his political capital just to secure his position rather than to advance his agenda

* Whether or not that agenda would actually help the economy

* Despite that, the drop in the stock market is not very large