The Peter Schiff Show Podcast

* The U.S. stock market finished up its worst week since August, when everybody though a rate hike was just around the corner

* Substantial triple-digit losses across the board

* The Dow Jones closed down 309 points - almost 4%

* Similar percentage decline for the S&P 500

* The NASDAQ dropped 111 points, over 4% decline for the week

* The media is blaming this decline on oil prices, and yes, oil prices are weighing on some stocks

* Some stocks benefit from lower oil prices - case in point: transportation

* Dow Transport was weaker than any other index - down more than the markets on a percentage basis

* The truth is that oil prices and stock prices are going down for the same reason

* The reason is a slower growing global economy, including the U.S. economy, and the fact that the Fed is threatening to slow it down further with an interest rate hike

* Some of biggest losers are not even in the stock market, but in the bond market

* The high-yield bond market is getting obliterated

* A chunk of the high yield market is energy companies

* Two things are hurting them: the fear of rising interest rates and the slowing of the U.S. economy

* We are heading for a recession, if we are not already in one

* This does not bode well for the high-yield bond market, because in a recession these companies will have more trouble servicing their debt

* The Fed's monetary policy of zero percent interest rates forced a lot of Americans into these high-yield bonds - people are hungry for yield

* A lot of risky companies who did not have access to credit, were able to borrow all sorts of money because of this hunger for yield

* This is the same thing that happened in the sub-prime market

* Customers all over the world needed yield, and the mortgage market was where they got it

* There was so much demand for mortgage debt on Wall Street it was easy for non-credit-worthy customers to get a loan

* The same thing is happening in this high-yield market. Carl Icahn was on CNBC on Friday morning, referring to the present situation as a "power keg"

* It is a powder keg that the Federal Reserve created and in theory they will light the match if they raise interest rates next week

* In fact in my last podcast I mentioned that for the first time, the Fed might actually raise rates, and I received quite a few comments asking me if I was ready to admit that I was wrong

* The Fed is trying to change the nature of a rate hike - alter the narrative away from normalization to a one-and-done scenario

* Markets anticipate future events and they price them in, so the beginning of the tightening - "liftoff" I felt markets would look toward the eventual destination and start pricing that in.

* None of the markets can handle that

* So the Fed assured the markets that liftoff didn't matter because the first hike will be small and the trajectory will be very low

* That's why I called it a trial balloon.  The Fed wanted to see how the markets would respond to a tiny, symbolic rate hike just to prove we can do it, and then a long period of time, before another one, if there is another one

* Initially it looked as if the markets was buying the idea, but remember I kept saying there is time, and the markets could decline - in fact that is already happening

* Maybe the Fed's trial balloon is not going to go over very well

* We had a "Black Monday" in August prior the potential September rate hike

* We have another Black Monday coming up - the technicals on the market look awful

* We could have a huge decline on Monday, and you'd better believe the stock market is going to be high on the Fed's agenda

* When the Fed called off the rate hike last time and we got a huge bounce in the stock market
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The U.S. stock market finished up its worst week since August, when everybody though a rate hike was just around the corner

Substantial triple-digit losses across the board

The Dow Jones closed down 309 points - almost 4%

Similar percentage decline for the S&P 500

The NASDAQ dropped 111 points, over 4% decline for the week

The media is blaming this decline on oil prices, and yes, oil prices are weighing on some stocks

Some stocks benefit from lower oil prices - case in point: transportation

Dow Transport was weaker than any other index - down more than the markets on a percentage basis

The truth is that oil prices and stock prices are going down for the same reason

The reason is a slower growing global economy, including the U.S. economy, and the fact that the Fed is threatening to slow it down further with an interest rate hike

Some of biggest losers are not even in the stock market, but in the bond market

The high-yield bond market is getting obliterated

A chunk of the high yield market is energy companies

Two things are hurting them: the fear of rising interest rates and the slowing of the U.S. economy

We are heading for a recession, if we are not already in one

This does not bode well for the high-yield bond market, because in a recession these companies will have more trouble servicing their debt

The Fed's monetary policy of zero percent interest rates forced a lot of Americans into these high-yield bonds - people are hungry for yield

A lot of risky companies who did not have access to credit, were able to borrow all sorts of money because of this hunger for yield

This is the same thing that happened in the sub-prime market

Customers all over the world needed yield, and the mortgage market was where they got it

There was so much demand for mortgage debt on Wall Street it was easy for non-credit-worthy customers to get a loan

The same thing is happening in this high-yield market. Carl Icahn was on CNBC on Friday morning, referring to the present situation as a "power keg"

It is a powder keg that the Federal Reserve created and in theory they will light the match if they raise interest rates next week

In fact in my last podcast I mentioned that for the first time, the Fed might actually raise rates, and I received quite a few comments asking me if I was ready to admit that I was wrong

The Fed is trying to change the nature of a rate hike - alter the narrative away from normalization to a one-and-done scenario

Markets anticipate future events and they price them in, so the beginning of the tightening - "liftoff" I felt markets would look toward the eventual destination and start pricing that in.

None of the markets can handle that

So the Fed assured the markets that liftoff didn't matter because the first hike will be small and the trajectory will be very low

That's why I called it a trial balloon.  The Fed wanted to see how the markets would respond to a tiny, symbolic rate hike just to prove we can do it, and then a long period of time, before another one, if there is another one

Initially it looked as if the markets was buying the idea, but remember I kept saying there is time, and the markets could decline - in fact that is already happening

Maybe the Fed's trial balloon is not going to go over very well

We had a "Black Monday" in August prior the potential September rate hike

We have another Black Monday coming up - the technicals on the market look awful

We could have a huge decline on Monday, and you'd better believe the stock market is going to be high on the Fed's agenda

When the Fed called off the rate hike last time and we got a huge bounce in the stock market

The reason the Fed gave was weak global economic condiditons

 None of those problems have been solved and it can be argued that global economic conditions are weaker now than in August

What is worse is the U.S. economy. All of the forward-looking indicators are flashing recession

* We are just about a week away from the Federal Reserve's first rate increase in about 10 years

* Everybody believes the stage is set for liftoff based on the most recent better than expected Non-Farms Payroll report

* The idea is that the only thing preventing the Fed from liftoff would have been a horrific jobs number

* In fact the markets estimated 190,000 jobs added and we got 211,000

* We did beat estimates, and in fact they revised last month's number up to 298,000

* The unemployment rate held steady at 5%

* This was not a strong report, any way you look at it

* The labor force participation rate: 62.5% is just one-tenth of a percent from the lowest level since the mid-1970's

* That is still going in the wrong direction

* We had the biggest surge in involuntary part-time workers - 300,000 new workers really wanted full time employment - the biggest jump in more than 3 years

* Janet Yellen has consistently stated until recently that before moving up interest rates she wanted to see improvement in the job market, specifically in participation and full-time vs part-time jobs

* Thus far that has not happened

* So why does everybody believe that the Fed is about to raise interest rates regardless of its stated criteria?

* I believed that the Fed had no intention of raising rates and I believe they did not, except one thing has changed: they have backed themselves into a corner

* They have floated some trial balloons as a litmus test

* One change of rhetoric occurred during Yellen's press conference last week as she switched from waiting for the data to improve to confidence that it will improve some time in the next year

* Another change is the idea that a rate hike would trigger a series of hikes with the goal of normalizing interest rates

* That's why they were calling it liftoff

* Now, since the markets tanked after September did not deliver a liftoff, the Fed Chair has changed her tune - liftoff does not matter, the trajectory does

* She may be saying, don't worry, if we raise rates, there won't be another one any time soon, meaning it would be the end of the tightening cycle

* The beginning of tightening during the taper, and if we get a rate hike it will end that process

* If this is just a trivial rate hike, why raise rates at all, considering the fact that the data is still bad?

* Manufacturing is already in a recession

* The ISM number that came out last week hit a 6-year low and even the service sector ISM missed estimates

* Retail sales and consumer confidence have been disappointing, indicating the end of this weak recovery which is actually a bubble

* The Fed now feels their credibility is on the line - it is a symbolic gesture to show confidence in the economy

* If they were truly confident, they would not assure everybody that the rate hikes are not likely to continue

* In 2016 we will be in a recession unless the Fed does something to delay its onset, and it may be too late for them to put out the fire they have already lit

* Why does Janet Yellen not say she believes the economy is still weak?

* A window into Yellen's perception is an interview that Ben Bernanke gave on Freakonomics yesterday.  It's entertaining, but it doesn't tell you anything new about Ben Bernanke

* The most important revelation occurred about halfway through the interview when the interviewer played some clips of Bernanke on television in 2005-2006.

* During those clips, Bernanke was talking about the great shape the economy was in, minimizing the housing and mortgage market troubles

* The interviewer asked how he felt listening to himself now,

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We are just about a week away from the Federal Reserve's first rate increase in about 10 years

Everybody believes the stage is set for liftoff based on the most recent better than expected Non-Farms Payroll report

The idea is that the only thing preventing the Fed from liftoff would have been a horrific jobs number

In fact the markets estimated 190,000 jobs added and we got 211,000

We did beat estimates, and in fact they revised last month's number up to 298,000

The unemployment rate held steady at 5%

This was not a strong report, any way you look at it

The labor force participation rate: 62.5% is just one-tenth of a percent from the lowest level since the mid-1970's

That is still going in the wrong direction

We had the biggest surge in involuntary part-time workers - 300,000 new workers really wanted full time employment - the biggest jump in more than 3 years

Janet Yellen has consistently stated until recently that before moving up interest rates she wanted to see improvement in the job market, specifically in participation and full-time vs part-time jobs

Thus far that has not happened

So why does everybody believe that the Fed is about to raise interest rates regardless of its stated criteria?

I believed that the Fed had no intention of raising rates and I believe they did not, except one thing has changed: they have backed themselves into a corner

They have floated some trial balloons as a litmus test

One change of rhetoric occurred during Yellen's press conference last week as she switched from waiting for the data to improve to confidence that it will improve some time in the next year

Another change is the idea that a rate hike would trigger a series of hikes with the goal of normalizing interest rates

That's why they were calling it liftoff

Now, since the markets tanked after September did not deliver a liftoff, the Fed Chair has changed her tune - liftoff does not matter, the trajectory does

She may be saying, don't worry, if we raise rates, there won't be another one any time soon, meaning it would be the end of the tightening cycle

The beginning of tightening during the taper, and if we get a rate hike it will end that process

If this is just a trivial rate hike, why raise rates at all, considering the fact that the data is still bad?

Manufacturing is already in a recession

The ISM number that came out last week hit a 6-year low and even the service sector ISM missed estimates

Retail sales and consumer confidence have been disappointing, indicating the end of this weak recovery which is actually a bubble

The Fed now feels their credibility is on the line - it is a symbolic gesture to show confidence in the economy

If they were truly confident, they would not assure everybody that the rate hikes are not likely to continue

In 2016 we will be in a recession unless the Fed does something to delay its onset, and it may be too late for them to put out the fire they have already lit

Why does Janet Yellen not say she believes the economy is still weak?

A window into Yellen's perception is an interview that Ben Bernanke gave on Freakonomics yesterday.  It's entertaining, but it doesn't tell you anything new about Ben Bernanke

The most important revelation occurred about halfway through the interview when the interviewer played some clips of Bernanke on television in 2005-2006.

During those clips, Bernanke was talking about the great shape the economy was in, minimizing the housing and mortgage market troubles

The interviewer asked how he felt listening to himself now, knowing how wrong he was on the economy then

The first words out of his mouth were that he admitted he was speaking as a member of the Administration

After that, he went back and said the economy was good in 2005 - 2006, so I wasn't wrong, because it was good, right up until the end

That's like a guy jumping off the Empire State Building saying,

* Mario Draghi of the ECB sent shockwaves through the foreign exchange and currency markets today

* He didn't deliver the stimulus traders expected

* The big question is, will Janet Yellen surprise the market by failing to raise rates?

* The ECB did slightly lower interest rates, and extended QE if it will be needed

* Draghi's goal is inflation

* He equates 2% inflation to "price stability", when prices in Europe are stable now

* The big divergence that everybody is trading on a tightening in the U.S. at the same time Europe continues to ease

* The reality is more likely to be the reverse

* If anything, the European recovery is just getting started, and the U.S. recession is just getting started

* As a result of Draghi's decision to hold off on stimulus, the euro was up more than 3% on the day

* The dollar was weak across the board

* The stock market, including the DAX, fell accordingly

* Both U.S. stocks and bonds experienced a selloff

* Cheap money has been fueling rallies all over the world and when the ECB did not deliver it triggered a selloff in the U.S. assets

* The Dow rallied over 2000 points off its September low based on rate hike expectations that did not materialize

* We also got a key reversal in gold

* Overnight it made a new low, but closed substantially above that level

* The euro is still weak, it is just not as weak as the market expected

* The best environment for gold when the weakest currency is the dollar

* I wanted to address Janet Yellen's testimony today responding to questions

* Yesterday, Yellen referred to Q4 GDP forecast consensus as 2-1/2%

* She did not even realize that on that same day the Atlanta Fed reduced their forecast down to 1.4%

* I think the real shocker will be that the Europea Q4 GDP will realize greater growth than the U.S.

* Yellen was asked about Citibank's recent projection that the U.S. will experience a recession in 2016

* Obviously, she can't agree with the projection, as this runs contrary to the Fed's rhetoric

* Asked as a followup, what tools the Fed would use in the event we did experience a recession in 2016, Yellen responded that the Fed would all the tools it has always had

* She said, if we did raise rates, then we would lower them

* Plus, she said it could use the asset purchase program (QE) that "has worked so well in the past

* If QE worked so well in the past, we would not experience a recession in 2016

* You can't call QE a success until rates are normalized and the balance sheet shrinks back down to pre-crash levels

* If the Fed finds that it has to launch QE4 in 2016 because it failed to reach "escape velocity"

* How many QE's does the Fed have to initiate before it admits that it doesn't work, and is actually impossible to end without a great deal of pain?

* This loss of credibility in the Fed will precipitate a dollar crisis

* Anther thing that was ignored by Janet Yellen and the press was the six-year low in the ISM number

* The market is focusing on the service sector, yet the most important jobs are the goods producing jobs

* Lat month, we got a higher than expected jump in the non-manufacturing number:59.1

* This month we wend all the way down to 55.9, which is dangerously close to contraction

* If we get the service and the manufacturing sectors both in contraction, that will be a total recession, supporting Citibank's 65% probability forecast may look optimistic

* Since 2016 is an election year, a recession will not bode well for the Democrats' economic success narrative


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Mario Draghi of the ECB sent shockwaves through the foreign exchange and currency markets today

He didn't deliver the stimulus traders expected

The big question is, will Janet Yellen surprise the market by failing to raise rates?

The ECB did slightly lower interest rates, and extended QE if it will be needed

Draghi's goal is inflation

He equates 2% inflation to "price stability", when prices in Europe are stable now

The big divergence that everybody is trading on a tightening in the U.S. at the same time Europe continues to ease

The reality is more likely to be the reverse

If anything, the European recovery is just getting started, and the U.S. recession is just getting started

As a result of Draghi's decision to hold off on stimulus, the euro was up more than 3% on the day

The dollar was weak across the board

The stock market, including the DAX, fell accordingly

Both U.S. stocks and bonds experienced a selloff

Cheap money has been fueling rallies all over the world and when the ECB did not deliver it triggered a selloff in the U.S. assets

The Dow rallied over 2000 points off its September low based on rate hike expectations that did not materialize

We also got a key reversal in gold

Overnight it made a new low, but closed substantially above that level

The euro is still weak, it is just not as weak as the market expected

The best environment for gold when the weakest currency is the dollar

I wanted to address Janet Yellen's testimony today responding to questions

Yesterday, Yellen referred to Q4 GDP forecast consensus as 2-1/2%

She did not even realize that on that same day the Atlanta Fed reduced their forecast down to 1.4%

I think the real shocker will be that the Europea Q4 GDP will realize greater growth than the U.S.

Yellen was asked about Citibank's recent projection that the U.S. will experience a recession in 2016

Obviously, she can't agree with the projection, as this runs contrary to the Fed's rhetoric

Asked as a followup, what tools the Fed would use in the event we did experience a recession in 2016, Yellen responded that the Fed would all the tools it has always had

She said, if we did raise rates, then we would lower them

Plus, she said it could use the asset purchase program (QE) that "has worked so well in the past

If QE worked so well in the past, we would not experience a recession in 2016

You can't call QE a success until rates are normalized and the balance sheet shrinks back down to pre-crash levels

If the Fed finds that it has to launch QE4 in 2016 because it failed to reach "escape velocity"

How many QE's does the Fed have to initiate before it admits that it doesn't work, and is actually impossible to end without a great deal of pain?

This loss of credibility in the Fed will precipitate a dollar crisis

Anther thing that was ignored by Janet Yellen and the press was the six-year low in the ISM number

The market is focusing on the service sector, yet the most important jobs are the goods producing jobs

Lat month, we got a higher than expected jump in the non-manufacturing number:59.1

This month we wend all the way down to 55.9, which is dangerously close to contraction

If we get the service and the manufacturing sectors both in contraction, that will be a total recession, supporting Citibank's 65% probability forecast may look optimistic

Since 2016 is an election year, a recession will not bode well for the Democrats' economic success narrative

* The price of gold was down another $15 today, a 6-year low

* Selling began early this morning following a better than expected jobs report from ADP

* This is private payrolls released a couple of days before the official government Non-Farm Payroll number, coming out on Friday

* Last month's ADP report was 182,000 jobs, which was below expectations

* But the government reported better than expected jobs numbers

* Today's number was not significant enough to have triggered a sell-off in gold within seconds of the release of the news

* So far, ADP has missed 8 of the 12 expectations this year

* By the way, hedge funds are the most short they've ever been in gold

* We'll see what happens between now and the end of the year if we get a lot of hedge funds that want to book those profits

* Paper profits may be difficult to realize if everyone needs to take them at the same time

*  In the physical world, demand for gold continues to hit records

* 98-99% of the gold market is people selling gold they don't actually have to people who don't actually want it

* It's interesting to me the difference between the market reaction to positive economic news versus negative news

* The November PMI number, although slightly better than expected it is still a 2-year low

* Where the news went from bad to horrific was when we got the November ISM number. Manufacturing is considered insignificant now because it is a smaller part of our economy, but the last time it was almost as low as this, the Fed immediately launched QE3.

* Now with ISM number nearly as weak as it was when we launched QE1, the Fed is hinting at a rate hike, which is absurd if you believe that the Fed is data dependent.

* If the Fed does raise rates in December it proves conclusively that they were never data dependent and that they were using it as a delay tactic

*  Had the Fed raised rates years ago, it would have pushed the economy into recession that much sooner, but they've now waited so long, that the economy is already going back into a recession on its own

* If the Fed now raises rates even slightly, we will go into recession that much more quickly, causing credibility loss.

* Also, yesterday we got motor vehicle sales numbers, and we did 18.2 million, beating the expected number of 18.1 million; however this is the second or third month in a row that domestic sales have declined

* This is all a product of the auto bubble. Contrary to comparisons to the housing bubble, where people bought homes for investments, the bubble exists in automobile financing

* Also contributing to the weakness in gold, were Janet Yellen's recent statements containing the strongest indications yet that interest rates may raise in December

* She did, however, go out of her way to insist that the Fed has not made a decision, based on data coming in prior to the December meeting

* Yellen admits to improvements in the labor market, but acknowledges that there is underemployment and low labor force participation

* She did say, however, that she is confident that over the next 1-2 years, the economy will show real improvement in full employment and labor force participation

* She also believes that the economy is indicating enough momentum that inflation will also reach or exceed the 2% benchmark

* Paradoxically, economic data over the last 6 months show no such momentum

* If the manufacturing sector is already in recession, as data indicates, what makes Yellen believe that the service sector, which has shown modest growth, can sustain any growth?

* The only problem Yellen does address is overseas markets

* Ironically the worst thing that can happen to the U.S. economy is for markets to have more confidence in overseas economies,

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The price of gold was down another $15 today, a 6-year low

Selling began early this morning following a better than expected jobs report from ADP

This is private payrolls released a couple of days before the official government Non-Farm Payroll number, coming out on Friday

Last month's ADP report was 182,000 jobs, which was below expectations

But the government reported better than expected jobs numbers

Today's number was not significant enough to have triggered a sell-off in gold within seconds of the release of the news

So far, ADP has missed 8 of the 12 expectations this year

By the way, hedge funds are the most short they've ever been in gold

We'll see what happens between now and the end of the year if we get a lot of hedge funds that want to book those profits

Paper profits may be difficult to realize if everyone needs to take them at the same time

 In the physical world, demand for gold continues to hit records

98-99% of the gold market is people selling gold they don't actually have to people who don't actually want it

It's interesting to me the difference between the market reaction to positive economic news versus negative news

The November PMI number, although slightly better than expected it is still a 2-year low

Where the news went from bad to horrific was when we got the November ISM number. Manufacturing is considered insignificant now because it is a smaller part of our economy, but the last time it was almost as low as this, the Fed immediately launched QE3.

Now with ISM number nearly as weak as it was when we launched QE1, the Fed is hinting at a rate hike, which is absurd if you believe that the Fed is data dependent.

If the Fed does raise rates in December it proves conclusively that they were never data dependent and that they were using it as a delay tactic

 Had the Fed raised rates years ago, it would have pushed the economy into recession that much sooner, but they've now waited so long, that the economy is already going back into a recession on its own

If the Fed now raises rates even slightly, we will go into recession that much more quickly, causing credibility loss.

Also, yesterday we got motor vehicle sales numbers, and we did 18.2 million, beating the expected number of 18.1 million; however this is the second or third month in a row that domestic sales have declined

This is all a product of the auto bubble. Contrary to comparisons to the housing bubble, where people bought homes for investments, the bubble exists in automobile financing

Also contributing to the weakness in gold, were Janet Yellen's recent statements containing the strongest indications yet that interest rates may raise in December

She did, however, go out of her way to insist that the Fed has not made a decision, based on data coming in prior to the December meeting

Yellen admits to improvements in the labor market, but acknowledges that there is underemployment and low labor force participation

She did say, however, that she is confident that over the next 1-2 years, the economy will show real improvement in full employment and labor force participation

She also believes that the economy is indicating enough momentum that inflation will also reach or exceed the 2% benchmark

Paradoxically, economic data over the last 6 months show no such momentum

If the manufacturing sector is already in recession, as data indicates, what makes Yellen believe that the service sector, which has shown modest growth, can sustain any growth?

The only problem Yellen does address is overseas markets

Ironically the worst thing that can happen to the U.S. economy is for markets to have more confidence in overseas economies, which will cause the dollar to fall

Another source of Yellen's optimism is her expectation that there will be more government hiring

The last thing our economy needs is to support more government workers!

The stock market sold off today; maybe the market is reacting t...

* I am recording this podcast on Cyber Monday

* Cyber Monday first got its name because e-commerce wanted its own version of Black Friday

* It's losing some significance, given it is losing some of its competitiveness because of the strong online sales during Black Friday

* Online sales were up about 20% over last year, but the brick and mortar retail sales were down about 10%

* The retailers' inventories were positioned for a big increase

* I think this holiday sales season will be weaker than expected, just as last year was

* I think we may see more returns on the online sales this year

* When the after Christmas sales start, we'll see more aggressive pricing in the brick and mortar stores, getting rid of excess inventory

* What is the Fed going to do with weak Black Friday sales data?

* We got more data out this morning, the Chicago PMI, horrible number

* Last month we got a bounce up to 56.2

* It turned out to be a dead cat bounce - November's number was expected at 54 and delivered 48.7

* We are back in contraction mode

* If the Fed does raise interest rates in December, it will prove that it was not data dependent, and that the Fed's credibility was the primary reason for the hike

* This Friday, the Non-Farm Payroll number will be the last number before the Fed's December meeting, making it once again, the most important jobs number ever

* Former Fed Governor Lawrence Lindsey recently pointed out on CNBC that the Fed has created another bubble

* He stated that asset price inflation is going to end badly

* In response, Joe Kernan questioned the assumption that the asset bubble will end badly

* Historically, all bubbles end badly

* I also wanted to comment on a WSJ article today predicting that the Fed would continue to raise interest rates, while the ECB would continue to ease rates into negative territory, and that U.S. interest rates would be 2.75% by early 2018

* How can they know that this will happen?

* If this is the case, it also assumes that there will not be a recession between now and 2018

* This would make it the longest recovery in history, while also requiring the most stimulus

* The WSJ article also assumes that the European economy will remain in recession for two years

* The article's logic is that the dollar is going to go up and the euro is going to go down

* Which brings me to gold

* Gold was down about $15; however gold stocks did not make a new low - up about 2% today

* This is a positive technical divergence

* The gold stock price may be anticipating a dovish December Fed meeting

* The ECB and Japan is talking up inflation, which is bullish for gold

* The problem is that if the ECB is more dovish than the Fed, it depresses gold prices in dollars

* The dollar is still losing its value

* All fiat currencies are being debased

* In the U.S. economy, M2 is growing at 6% a year

* Even if you believe the government's GDP numbers, it is growing at 2% a year

* So the money supply is growing three times the GDP

* That is as inflationary a monetary policy as we've ever had

* We have money supply growth, negative interest rates and no ceiling on the national debt

* This is an extremely bullish environment for gold, but the market is simply looking at the price of the dollar vs. the euro

* At some point the dollar is going to be weaker than the euro

* This looks a lot like the 1960's when the price of gold was constant because of artificial intervention

* There was a lot of demand for physical gold at that time

* Eventually when the artificial constraints were removed, the price of gold skyrocketed

* There are some artificial influencers on the price of gold right...

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I am recording this podcast on Cyber Monday

Cyber Monday first got its name because e-commerce wanted its own version of Black Friday

It's losing some significance, given it is losing some of its competitiveness because of the strong online sales during Black Friday

Online sales were up about 20% over last year, but the brick and mortar retail sales were down about 10%

The retailers' inventories were positioned for a big increase

I think this holiday sales season will be weaker than expected, just as last year was

I think we may see more returns on the online sales this year

When the after Christmas sales start, we'll see more aggressive pricing in the brick and mortar stores, getting rid of excess inventory

What is the Fed going to do with weak Black Friday sales data?

We got more data out this morning, the Chicago PMI, horrible number

Last month we got a bounce up to 56.2

It turned out to be a dead cat bounce - November's number was expected at 54 and delivered 48.7

We are back in contraction mode

If the Fed does raise interest rates in December, it will prove that it was not data dependent, and that the Fed's credibility was the primary reason for the hike

This Friday, the Non-Farm Payroll number will be the last number before the Fed's December meeting, making it once again, the most important jobs number ever

Former Fed Governor Lawrence Lindsey recently pointed out on CNBC that the Fed has created another bubble

He stated that asset price inflation is going to end badly

In response, Joe Kernan questioned the assumption that the asset bubble will end badly

Historically, all bubbles end badly

I also wanted to comment on a WSJ article today predicting that the Fed would continue to raise interest rates, while the ECB would continue to ease rates into negative territory, and that U.S. interest rates would be 2.75% by early 2018

How can they know that this will happen?

If this is the case, it also assumes that there will not be a recession between now and 2018

This would make it the longest recovery in history, while also requiring the most stimulus

The WSJ article also assumes that the European economy will remain in recession for two years

The article's logic is that the dollar is going to go up and the euro is going to go down

Which brings me to gold

Gold was down about $15; however gold stocks did not make a new low - up about 2% today

This is a positive technical divergence

The gold stock price may be anticipating a dovish December Fed meeting

The ECB and Japan is talking up inflation, which is bullish for gold

The problem is that if the ECB is more dovish than the Fed, it depresses gold prices in dollars

The dollar is still losing its value

All fiat currencies are being debased

In the U.S. economy, M2 is growing at 6% a year

Even if you believe the government's GDP numbers, it is growing at 2% a year

So the money supply is growing three times the GDP

That is as inflationary a monetary policy as we've ever had

We have money supply growth, negative interest rates and no ceiling on the national debt

This is an extremely bullish environment for gold, but the market is simply looking at the price of the dollar vs. the euro

At some point the dollar is going to be weaker than the euro

This looks a lot like the 1960's when the price of gold was constant because of artificial intervention

There was a lot of demand for physical gold at that time

Eventually when the artificial constraints were removed, the price of gold skyrocketed

There are some artificial influencers on the price of gold right now, even as demand is booming

My father recognized this early and collected all coins manufactured prior to 1965, because they were made of silver

He eventually amassed a sizable fortune in silver coin, even as his contemporaries thought he was crazy for not turning the into dollars and earning interest.