The Peter Schiff Show Podcast

* Today the possibility of a Fed rate hike in December rose about 10 points

* We're now at about an 80% probability, at least the way the markets assess the odds

* That the Fed will raise rates in December after failing to raise rates today

* If you remember, after they didn't raise rates last time there was some probability of a November rate hike

* But by this morning, the probability of November had pretty much been reduced to about zero

* With everybody believing that the Fed would raise rates in December

* And now, as a result of their failure to hike in November

* The probability apparently is now higher based on the language of their non-hike

* This, despite the fact that there were only 2 dissenters when the Fed didn't raise interest rates the last time they met

* Three members voted to hike and six voted not to hike

* This time it was 7 to 2 in favor of not hiking

* So what happened between meetings that caused the one guy who wanted to hike rates last time to decide he doesn't want to hike rates now?

* Is it possible that some data came out over the course of those weeks that caused him to re-assess his feelings about the strength of the economy

* And if so, why is that member going to flip back to "hike" in December, after just flipping to "no hike"

* Is it pure politics?

* Yesterday we finally got the release of the initial estimate for Q4 GDP

* The Atlanta Fed had originally come out with an estimate of about 3.8 and had steadily reduced their estimate

* They got down as low as 1.9 before ratcheting it up a couple of times and their estimate was at 2.1 when we got the official release

* And the number came out at 2.9; not only much higher than Atlanta Fed's estimate, but much higher than the consensus forecast at 2.5

* I am very suspicious of this number

* This is the strongest number in over 2 years and it comes out less than 2 weeks before the election

* Of course one of Donald Trump's issues has been the weak GDP growth, which has averaged just 1% for the last 3 quarters

* All of a sudden it's 2/9?

* Does anybody really believe that suddenly the U.S. economy in the fall of 2016 was 3 times as strong as the last 3 quarters?

* I dont' think so.  I don't believe that for a second

* I do believe that after the election when we get the revisions we will get a downward revision to this number

* But, even if this number were real; even if it holds up

* If you average the last 4 quarters to get the entire year, looking back, you're just below 1.5% for the entire year, which is still extremely weak growth

* Once you look beneath the surface of this 2.9, it's very easy to see how they rigged it, to use Donald Trump's expression

* Not that it's some kind of a conspiracy

* Look at these numbers - there was a 10% spike in exports - this the biggest gain in exports in 3 years

* It's not in manufactured products that we're exporting, where you've got some high-paying jobs

* It was primarily let by a one-time surge in soybean exports


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* Yesterday we finally got the release of the initial estimate for Q4 GDP

* The Atlanta Fed had originally come out with an estimate of about 3.8 and had steadily reduced their estimate

* They got down as low as 1.9 before ratcheting it up a couple of times and their estimate was at 2.1 when we got the official release

* And the number came out at 2.9; not only much higher than Atlanta Fed's estimate, but much higher than the consensus forecast at 2.5

* I am very suspicious of this number

* This is the strongest number in over 2 years and it comes out less than 2 weeks before the election

* Of course one of Donald Trump's issues has been the weak GDP growth, which has averaged just 1% for the last 3 quarters

* All of a sudden it's 2/9?

* Does anybody really believe that suddenly the U.S. economy in the fall of 2016 was 3 times as strong as the last 3 quarters?

* I dont' think so.  I don't believe that for a second

* I do believe that after the election when we get the revisions we will get a downward revision to this number

* But, even if this number were real; even if it holds up

* If you average the last 4 quarters to get the entire year, looking back, you're just below 1.5% for the entire year, which is still extremely weak growth

* Once you look beneath the surface of this 2.9, it's very easy to see how they rigged it, to use Donald Trump's expression

* Not that it's some kind of a conspiracy

* Look at these numbers - there was a 10% spike in exports - this the biggest gain in exports in 3 years

* It's not in manufactured products that we're exporting, where you've got some high-paying jobs

* It was primarily let by a one-time surge in soybean exports

* The odds of a  December rate hike continue to ratchet up above 70%

* We had a parade of Fed officials, most recently again today coming out and talking about why a December rate hike is a good idea, probable, possible, appropriate

* You name the adjective, some Federal Reserve president, governor is discussing it

* The markets are ratcheting up their expecations

* The dollar index continues to move higher, we hit about a 9-month high today

* We got above 99; but we didn't close there, in fact the dollar index managed to close down a notch

* Interestingly enough, gold had a pretty strong day today, we had about I think we're at $12.73

* Even to the extent the FOREX traders are worried about a December rate hike, the gold traders don't seem to care about how a rate hike might impact the price of gold

* This says either the gold traders don't believe that a December rate hike is coming, or they've correctly concluded that even if the Fed does raise interest rates in December, it's no big deal

* It's too little too late to be a negative for the gold market

* The Fed is going to deliver far less than it promised when it comes to rate hikes

* In fact the most interesting comment from a Fed official came last week from St. Louis Fed President James Bullard

* He said that the Federal Reserve only needs to nudge interest rates up by 25 basis points

* Right now, the official rate of Fed funds is between .25 and .50

* It used to be between 0 and 25

* I think where we actually are right now is 38 basis points

* So if we moved up 25, at least these are the numbers Bullard is throwing out, we'd move up to 63 basis points for the Fed Funds Rate

* Which is just barely above a half point

* He says that's all we need to do is nudge it up to 63 basis points, and that's it - we're done

* He said, "We need to do it in December, but then that's it, interest rates are going to stay really low for years."

* He's talking 2 or 3 years or maybe even more of ultra low interest rates, despite whatever is happening in employment, and inflation

* This is all we need

* Nudging up by a quarter basis point and we're done

* I was surprised, to be honest, that we didn't get more of a reaction to this admission by Bullard that the next hike, if it comes in December is the end of it

* If that's it and then we're on hold for years

* Sometime, during that period of time, we're going to find ourselves back in recession

* Even if we're not in recession now

* Even if this so-called recovery is in its twilight

* Remember this is the 3rd longest recovery of the post-war era and it is the weakest recovery - ever

* And, of course, it has the most stimulus

* So despite having the most stimulus, it's the weakest

* Clearly, it's going to run out of steam

* So if the Fed does in fact raise rates ever so slightly in December and then say:

* "That's it for now, we're just going to wait"

* What's going to happen is, we'll be back in recession

* If Hillary Clinton becomes the next president, and it's looking more and more likely that that nightmare will become a reality

* If she is, she will try to stimulate the economy

* Look what happened with George Bush

* When George Bush was initially elected the first time, he inherited the bursting of the dot com bubble

* The odds of a  December rate hike continue to ratchet up above 70%

* We had a parade of Fed officials, most recently again today coming out and talking about why a December rate hike is a good idea, probable, possible, appropriate

* You name the adjective, some Federal Reserve president, governor is discussing it

* The markets are ratcheting up their expecations

* The dollar index continues to move higher, we hit about a 9-month high today

* We got above 99; but we didn't close there, in fact the dollar index managed to close down a notch

* Interestingly enough, gold had a pretty strong day today, we had about I think we're at $12.73

* Even to the extent the FOREX traders are worried about a December rate hike, the gold traders don't seem to care about how a rate hike might impact the price of gold

* This says either the gold traders don't believe that a December rate hike is coming, or they've correctly concluded that even if the Fed does raise interest rates in December, it's no big deal

* It's too little too late to be a negative for the gold market

* The Fed is going to deliver far less than it promised when it comes to rate hikes

* In fact the most interesting comment from a Fed official came last week from St. Louis Fed President James Bullard

* He said that the Federal Reserve only needs to nudge interest rates up by 25 basis points

* Right now, the official rate of Fed funds is between .25 and .50

* It used to be between 0 and 25

* I think where we actually are right now is 38 basis points

* So if we moved up 25, at least these are the numbers Bullard is throwing out, we'd move up to 63 basis points for the Fed Funds Rate

* Which is just barely above a half point

* He says that's all we need to do is nudge it up to 63 basis points, and that's it - we're done

* He said, "We need to do it in December, but then that's it, interest rates are going to stay really low for years."

* He's talking 2 or 3 years or maybe even more of ultra low interest rates, despite whatever is happening in employment, and inflation

* This is all we need

* Nudging up by a quarter basis point and we're done

* I was surprised, to be honest, that we didn't get more of a reaction to this admission by Bullard that the next hike, if it comes in December is the end of it

* If that's it and then we're on hold for years

* Sometime, during that period of time, we're going to find ourselves back in recession

* Even if we're not in recession now

* Even if this so-called recovery is in its twilight

* Remember this is the 3rd longest recovery of the post-war era and it is the weakest recovery - ever

* And, of course, it has the most stimulus

* So despite having the most stimulus, it's the weakest

* Clearly, it's going to run out of steam

* So if the Fed does in fact raise rates ever so slightly in December and then say:

* "That's it for now, we're just going to wait"

* What's going to happen is, we'll be back in recession

* If Hillary Clinton becomes the next president, and it's looking more and more likely that that nightmare will become a reality

* If she is, she will try to stimulate the economy

* Look what happened with George Bush

* When George Bush was initially elected the first time, he inherited the bursting of the dot com bubble


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* The odds of a  December rate hike continue to ratchet up above 70%

* We had a parade of Fed officials, most recently again today coming out and talking about why a December rate hike is a good idea, probable, possible, appropriate

* You name the adjective, some Federal Reserve president, governor is discussing it

* The markets are ratcheting up their expecations

* The dollar index continues to move higher, we hit about a 9-month high today

* We got above 99; but we didn't close there, in fact the dollar index managed to close down a notch

* Interestingly enough, gold had a pretty strong day today, we had about I think we're at $12.73

* Even to the extent the FOREX traders are worried about a December rate hike, the gold traders don't seem to care about how a rate hike might impact the price of gold

* This says either the gold traders don't believe that a December rate hike is coming, or they've correctly concluded that even if the Fed does raise interest rates in December, it's no big deal

* It's too little too late to be a negative for the gold market

* The Fed is going to deliver far less than it promised when it comes to rate hikes

* In fact the most interesting comment from a Fed official came last week from St. Louis Fed President James Bullard

* He said that the Federal Reserve only needs to nudge interest rates up by 25 basis points

* Right now, the official rate of Fed funds is between .25 and .50

* It used to be between 0 and 25

* I think where we actually are right now is 38 basis points

* So if we moved up 25, at least these are the numbers Bullard is throwing out, we'd move up to 63 basis points for the Fed Funds Rate

* Which is just barely above a half point

* He says that's all we need to do is nudge it up to 63 basis points, and that's it - we're done

* He said, "We need to do it in December, but then that's it, interest rates are going to stay really low for years."

* He's talking 2 or 3 years or maybe even more of ultra low interest rates, despite whatever is happening in employment, and inflation

* This is all we need

* Nudging up by a quarter basis point and we're done

* I was surprised, to be honest, that we didn't get more of a reaction to this admission by Bullard that the next hike, if it comes in December is the end of it

* If that's it and then we're on hold for years

* Sometime, during that period of time, we're going to find ourselves back in recession

* Even if we're not in recession now

* Even if this so-called recovery is in its twilight

* Remember this is the 3rd longest recovery of the post-war era and it is the weakest recovery - ever

* And, of course, it has the most stimulus

* So despite having the most stimulus, it's the weakest

* Clearly, it's going to run out of steam

* So if the Fed does in fact raise rates ever so slightly in December and then say:

* "That's it for now, we're just going to wait"

* What's going to happen is, we'll be back in recession

* If Hillary Clinton becomes the next president, and it's looking more and more likely that that nightmare will become a reality

* If she is, she will try to stimulate the economy

* Look what happened with George Bush

* When George Bush was initially elected the first time, he inherited the bursting of the dot com bubble

* The official probability of a December rate hike continues to diminish over the last several days

* The markets had the rate hike at about a 70% probability; now we're down to about 60%

* Personally, I think the odds are closer to zero, and over time, as we get closer and closer to that December meeting, the odds will steadily move down

* Just like the Atlanta Fed keeps moving down its estimates for Q3 GDP; most recently down to 1.9%

* I expect the Atlanta Fed to move lower again this week on more weak economic data

* As the potential for a rate hike diminishes, gold's appeal improving, gold prices now back above $1260 today

* We've had a couple of back to back strong days in the gold sector

* Maybe the catalyst for the recent correction in the price of gold was the renewed expectation of a November and now December rate hike

* As those expectations are realistically dialed back, you'll see more money moving into the metals

* The dollar, though, continues to trade firm

* It's not moving higher, but it's not really surrendering much of its gains

* Maybe some of this has to do with weakness particularly in the pound

* Why is the pound so weak?

* The Bank of England was very forthright, they wasted no time in warning voters not to vote for Brexit as it would be a disaster for the British economy

* Well, sure enough, the people voted for Brexit, and so now, it is a self-fulfilling prophecy

* The central bankers in Britain had convinced themselves that the economy would require stimulus, and therefore announced an increase in their QE program


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The official probability of a December rate hike continues to diminish over the last several days

The markets had the rate hike at about a 70% probability; now we're down to about 60%

Personally, I think the odds are closer to zero, and over time, as we get closer and closer to that December meeting, the odds will steadily move down

Just like the Atlanta Fed keeps moving down its estimates for Q3 GDP; most recently down to 1.9%

I expect the Atlanta Fed to move lower again this week on more weak economic data

As the potential for a rate hike diminishes, gold's appeal improving, gold prices now back above $1260 today

We've had a couple of back to back strong days in the gold sector

Maybe the catalyst for the recent correction in the price of gold was the renewed expectation of a November and now December rate hike

As those expectations are realistically dialed back, you'll see more money moving into the metals

The dollar, though, continues to trade firm

It's not moving higher, but it's not really surrendering much of its gains

Maybe some of this has to do with weakness particularly in the pound

Why is the pound so weak?

The Bank of England was very forthright, they wasted no time in warning voters not to vote for Brexit as it would be a disaster for the British economy

Well, sure enough, the people voted for Brexit, and so now, it is a self-fulfilling prophecy

The central bankers in Britain had convinced themselves that the economy would require stimulus, and therefore announced an increase in their QE program

* It's another week where the dollar remained relatively firmly bid; the dollar index closing just above 98

* Gold prices seem to have a lid on them; they closed down today about $7

* Gold's not really going down, but it's not really going up, either

* What are going up are bond yields, long-term bond yields are rising today to about a 4-month high

* 30-year Treasury yield to about 2.5%

* The 10-year just below 1.8

* This despite the fact that the economic news, during the week, on balance, was generally weaker than expected

* Obviously the numbers are worse because the Atlanta Fed reduced again their Q3 GDP estimate down to 1.9%

* This is the first time it has been below 2

* It is not half of what it was just over a month ago, when they were at 3.8

* I still think their estimate is too high

* I do think that Q3 is going to be a stronger quarter than Q4, which will probably be another 1% or below

* The last 3 quarters averaged 1%

* This is the weakest 3 consecutive quarters of this entire so-called recovery

* Yet now the Fed is supposedly raising rates?

* In fact, we got the JOLTS report on Wednesday, supposedly Janet Yellen's favorite indicator of the labor market

* Not only did we have a slight downward revision to the prior month, but we had a 7.3% collapse in August

* That was the biggest drop since December of last year

* Everything about that report was weak

* If this is Janet Yellen's favorite number, and if the Fed didn't raise rates in September because they wanted more data on the job market, and now they just got the JOLTS number, which was much worse than expected,

* Why is every Fed governor talking about rate hikes in interviews?

* Another one was out on CNBC, talking about how rate hikes would be appropriate

* Yes! It would have been appropriate to raise them a long time ago

* It would have been appropriate in June, in September, in March, in January, last year, 2 years ago, 3 years ago

* It would have been appropriate a long time ago to raise rates - they didn't do it

* You know what was inappropriate? Cutting them to zero

* That was not appropriate - they did it anyway

* The Fed is not about doing what's appropriate


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* It's another week where the dollar remained relatively firmly bid; the dollar index closing just above 98

* Gold prices seem to have a lid on them; they closed down today about $7

* Gold's not really going down, but it's not really going up, either

* What are going up are bond yields, long-term bond yields are rising today to about a 4-month high

* 30-year Treasury yield to about 2.5%

* The 10-year just below 1.8

* This despite the fact that the economic news, during the week, on balance, was generally weaker than expected

* Obviously the numbers are worse because the Atlanta Fed reduced again their Q3 GDP estimate down to 1.9%

* This is the first time it has been below 2

* It is not half of what it was just over a month ago, when they were at 3.8

* I still think their estimate is too high

* I do think that Q3 is going to be a stronger quarter than Q4, which will probably be another 1% or below

* The last 3 quarters averaged 1%

* This is the weakest 3 consecutive quarters of this entire so-called recovery

* Yet now the Fed is supposedly raising rates?

* In fact, we got the JOLTS report on Wednesday, supposedly Janet Yellen's favorite indicator of the labor market

* Not only did we have a slight downward revision to the prior month, but we had a 7.3% collapse in August

* That was the biggest drop since December of last year

* Everything about that report was weak

* If this is Janet Yellen's favorite number, and if the Fed didn't raise rates in September because they wanted more data on the job market, and now they just got the JOLTS number, which was much worse than expected,

* Why is every Fed governor talking about rate hikes in interviews?

* Another one was out on CNBC, talking about how rate hikes would be appropriate

* Yes! It would have been appropriate to raise them a long time ago

* It would have been appropriate in June, in September, in March, in January, last year, 2 years ago, 3 years ago

* It would have been appropriate a long time ago to raise rates - they didn't do it

* You know what was inappropriate? Cutting them to zero

* That was not appropriate - they did it anyway

* The Fed is not about doing what's appropriate