The Peter Schiff Show Podcast

* Tomorrow is Thanksgiving Day, one day before Black Friday

* The one day of the year where Americans make their annual pilgrimmage there they stampede to the nearest mall to buy stuff they really don'[t need and can't afford

* It's almost like a black and blue weekend

* I believe that this will be a pretty weak holiday weekend; by the time we get the sales numbers next week, it's going to be pretty dismal

* The news that brought the euro down this morning was rhetoric coming from Mario Draghi , head of the ECB

* He's talking about expanding the QE program to a 2-tiered system

* Why is Draghi so determined to talk down the euro and talk up inflation?

* He is in pursuit of Keynesian economics' holy grail - inflation

* If only we can succeed in getting prices to go up faster then we would have economic growth and prosperity

* Believing that a rising cost of living is the secret sauce of economic growth

* If you search the internet, you see that no one is critical of this

* If rising prices are so important, why not just raise the VAT?

* You could obtain the exact amount of inflation desired if the real goal is to rais prices

* But that's not really the goal, because they would just raise the VAT

* The real goal is to wipe out government debt and to mitigate the effects of wage hikes imposed by the government

* Academia and the press all give them a pass on the idea that rising prices create prosperity

* The truth is the reverse: prosperity comes from reducing costs

* As things get cheaper, more people can afford them - I use the example of cell phones

* Now even poor people can afford a cell phone

* Falling prices lift standards of living and falling prices result from a productive economy

* Inflation results from government interference and it doesn't make things better

* Let's go over the economic data this week

* It's been a mixed bag

* On Monday we did get the manufacturing PMI number, expected to come in at 54.5 which would have been an improvement

* Instead, we got 52.6, the lowest number in 2 years

* I've been talking about this for a long time on this podcast - the manufacturing recession is already here

* The mainstream media dismisses this because manufacturing is so small it doesn't really matter

* That statement says so much

* A downturn in manufacturing will preclude a downturn in the service sector

* We also got existing home sales that came out on Monday - they were below estimates

* There's plenty of evidence that the housing market has already rolled over, and if the Fed were to raise interest rates, it would push it even further down that hill.

* The big number that came out yesterday was the revision to Q3 GDP

* Initially the government reported that the GDP was up 1.5%

* Everybody expected an upward revision and that's exactly what we got - a revision to 2.1

* The problem was, the number was due to a big build in inventory

* I have been talking about this for months on this podcast; we have huge amounts of unsold inventory

* Businesses have been more optimistic than they should have been based on the Fed's recovery rhetoric

* This mistake shows up as a positive in the GDP

* The other big factor is that the government assumes that inflation is just 1.3%

* I don't believe that for a second

* Health insurance alone is costing the average American's cost of living more than 2%

* Today the Atlanta Fed just reduced their Q4 GDP estimate from 2.3% down to 1.8%

* What the third quarter giveth, the fourth quarter taketh away

* Buried in that GDP report are some other bad numbers

* There was a 4.7% decline in corporate profits for the quarter - the biggest decli...

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Tomorrow is Thanksgiving Day, one day before Black Friday

The one day of the year where Americans make their annual pilgrimmage there they stampede to the nearest mall to buy stuff they really don'[t need and can't afford

It's almost like a black and blue weekend

I believe that this will be a pretty weak holiday weekend; by the time we get the sales numbers next week, it's going to be pretty dismal

The news that brought the euro down this morning was rhetoric coming from Mario Draghi , head of the ECB

He's talking about expanding the QE program to a 2-tiered system

Why is Draghi so determined to talk down the euro and talk up inflation?

He is in pursuit of Keynesian economics' holy grail - inflation

If only we can succeed in getting prices to go up faster then we would have economic growth and prosperity

Believing that a rising cost of living is the secret sauce of economic growth

If you search the internet, you see that no one is critical of this

If rising prices are so important, why not just raise the VAT?

You could obtain the exact amount of inflation desired if the real goal is to rais prices

But that's not really the goal, because they would just raise the VAT

The real goal is to wipe out government debt and to mitigate the effects of wage hikes imposed by the government

Academia and the press all give them a pass on the idea that rising prices create prosperity

The truth is the reverse: prosperity comes from reducing costs

As things get cheaper, more people can afford them - I use the example of cell phones

Now even poor people can afford a cell phone

Falling prices lift standards of living and falling prices result from a productive economy

Inflation results from government interference and it doesn't make things better

Let's go over the economic data this week

It's been a mixed bag

On Monday we did get the manufacturing PMI number, expected to come in at 54.5 which would have been an improvement

Instead, we got 52.6, the lowest number in 2 years

I've been talking about this for a long time on this podcast - the manufacturing recession is already here

The mainstream media dismisses this because manufacturing is so small it doesn't really matter

That statement says so much

A downturn in manufacturing will preclude a downturn in the service sector

We also got existing home sales that came out on Monday - they were below estimates

There's plenty of evidence that the housing market has already rolled over, and if the Fed were to raise interest rates, it would push it even further down that hill.

The big number that came out yesterday was the revision to Q3 GDP

Initially the government reported that the GDP was up 1.5%

Everybody expected an upward revision and that's exactly what we got - a revision to 2.1

The problem was, the number was due to a big build in inventory

I have been talking about this for months on this podcast; we have huge amounts of unsold inventory

Businesses have been more optimistic than they should have been based on the Fed's recovery rhetoric

This mistake shows up as a positive in the GDP

The other big factor is that the government assumes that inflation is just 1.3%

I don't believe that for a second

Health insurance alone is costing the average American's cost of living more than 2%

Today the Atlanta Fed just reduced their Q4 GDP estimate from 2.3% down to 1.8%

What the third quarter giveth, the fourth quarter taketh away

Buried in that GDP report are some other bad numbers

There was a 4.7% decline in corporate profits for the quarter - the biggest decline in corporate profits since 2009.

Think about this: corporate profits are declining and inventories are growing

Sales are down, profits are down; what does that tell you about employment?

Continuing unemployment claims are continuing to rise

If the Fed is really data dependent, then the fact that employment trends are starting to reverse could be sign...

* Friday the 13 was an unlucky day on Wall Street

* The Dow was down over 200 points - the second back to back decline of over 1% since August

* What was happening in August? Everybody was convinced the Fed was going to raise rates in September

* Now, everybody is just as convinced that the Fed will raise rates in December

* Once again, as I predicted a week ago, the market sold off

* We are down over 650 points on the week

* Nasdaq is down today even more - 1-1/2%

* The carnage was once again led by the retailers

* Bad earnings out of Macy's Nordstrom's Walmart and others set the scene for new share price lows

* I have been warning about this all year, based on inventory numbers

* All the evidence is flashing recession

* The Fed has been saying that they are data dependent - open your eyes and look at the data!

* This data is consistent with the beginning of a recession

* Yes, unemployment is low, but unemployment is always low when recessions begin

* I think the Fed knows they are not going to raise rates

* The Fed minutes are coming out next week and we'll get an insight into the deliberation between the members

* All Janet Yellen said was that an interest rate hike was a "live possibility" - The market did the rest.

* They took the word "possibility" and assumed that it was a probability

* Let's look at the economic data that came in today:

* First, October Producer Prices - they were looking for a rise of .2, because last month, they actually fell by .5

* We didn't get .2; we got -.4

* As of last month, year over year producer prices have declined 1.1%

* Now they are down 1.6% on the year

* This is going the opposite direction of the Fed's goal of 2% inflation

* The worst number was retail sales:

* They were looking for a rise of .3, which is still not a big rise - but we got an increase of just .1

* To add insult to injury, they had adjusted last month's forecast to zero

* Also x auto, they were looking for a gain of .4 and instead got a gain of .2

* These numbers will subtract from Q3 and Q4 GDP

* We also got September inventory numbers:

* The consensus was a rise of .1, but instead we rose .3

* This rise was not a result of an increase of sales, it is because sales are not keeping up with inventories

* The inventory to sales ratio rose to 1.48 fro 1.47

* The last time we had this number was during the financial crisis

* I have been pointing out that these inventory numbers have been padding the GDP for the last several quarters

* This has been ignored on Wall Street

* This means future GDP will plunge as companies need to liquidate inventories and not replenish them

* Not only that, they will be liquidating their workforce

* The heavy layoffs may not happen this year - more likely they will come in January and February

* The odds are that the Fed is not going to raise rates in December and the odds against a rate hike as the market continues to sink, with more and more bad economic news

* This bad news about retail sales was unexpected by the market as evidenced by the sharp drop in share prices

* Is the Fed going to raise rates just as the economy is turning down? Not a chance.

* If they do, imagine how much worse the economy will be

* The question is: When is the Fed going to come clean and admit that they are not going to raise rates and will their excuse be and will the markets buy it?


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Friday the 13 was an unlucky day on Wall Street

The Dow was down over 200 points - the second back to back decline of over 1% since August

What was happening in August? Everybody was convinced the Fed was going to raise rates in September

Now, everybody is just as convinced that the Fed will raise rates in December

Once again, as I predicted a week ago, the market sold off

We are down over 650 points on the week

Nasdaq is down today even more - 1-1/2%

The carnage was once again led by the retailers

Bad earnings out of Macy's Nordstrom's Walmart and others set the scene for new share price lows

I have been warning about this all year, based on inventory numbers

All the evidence is flashing recession

The Fed has been saying that they are data dependent - open your eyes and look at the data!

This data is consistent with the beginning of a recession

Yes, unemployment is low, but unemployment is always low when recessions begin

I think the Fed knows they are not going to raise rates

The Fed minutes are coming out next week and we'll get an insight into the deliberation between the members

All Janet Yellen said was that an interest rate hike was a "live possibility" - The market did the rest.

They took the word "possibility" and assumed that it was a probability

Let's look at the economic data that came in today:

First, October Producer Prices - they were looking for a rise of .2, because last month, they actually fell by .5

We didn't get .2; we got -.4

As of last month, year over year producer prices have declined 1.1%

Now they are down 1.6% on the year

This is going the opposite direction of the Fed's goal of 2% inflation

The worst number was retail sales:

They were looking for a rise of .3, which is still not a big rise - but we got an increase of just .1

To add insult to injury, they had adjusted last month's forecast to zero

Also x auto, they were looking for a gain of .4 and instead got a gain of .2

These numbers will subtract from Q3 and Q4 GDP

We also got September inventory numbers:

The consensus was a rise of .1, but instead we rose .3

This rise was not a result of an increase of sales, it is because sales are not keeping up with inventories

The inventory to sales ratio rose to 1.48 fro 1.47

The last time we had this number was during the financial crisis

I have been pointing out that these inventory numbers have been padding the GDP for the last several quarters

This has been ignored on Wall Street

This means future GDP will plunge as companies need to liquidate inventories and not replenish them

Not only that, they will be liquidating their workforce

The heavy layoffs may not happen this year - more likely they will come in January and February

The odds are that the Fed is not going to raise rates in December and the odds against a rate hike as the market continues to sink, with more and more bad economic news

This bad news about retail sales was unexpected by the market as evidenced by the sharp drop in share prices

Is the Fed going to raise rates just as the economy is turning down? Not a chance.

If they do, imagine how much worse the economy will be

The question is: When is the Fed going to come clean and admit that they are not going to raise rates and will their excuse be and will the markets buy it?

* When I recorded my last video blog, I mentioned how positively the market reacted to jobs report, which could signal the Fed to raise rates

* I said there might be a delayed reaction and, in fact it did

* Four days into this trading week we are down more than 450 points

* Also, I did an interview on CNBC.com where I said I felt the retail markets would have a a tough time this Christmas

* That was translated into headlines that I stated that consumers would have a horrible Christmas, which was not my point

* So far, my prediction about the retail space is bearing out, bad earnings reports from Macy's Walmart, Men's Wearhouse, and its subsidiary, Joseph A. Bank, Nordstrom and Neiman Marcus

* The data that the Fed depends on is getting worse and worse

* If the Fed raises rates in December, it will prove that they have not been data dependent, they were delaying

* Copper a six-month low today, oil prices are down, gold hit a new low inter-day but rallied back and the dollar finished broadly lower for the day

* Based on these market prices, the Fed will have another excuse to delay rate hikes, again

* What will stop the stock market from falling? The only thing that will stop it is if the Fed takes a rate hike off the table

* I recently wrote a commentary where I reference the shadow rate

* Tightening actually began about 18 months ago when the Fed started tapering

* The Fed's monetary policy is not just about rates, it is also about easing and foreward guidance

* When the Fed began tapering they were tightening

* When they began talking about raising rates that was the equivalent of tightening, because the markets braced for the hikes

* That's why the economy is rolling over, that's why the stock market is rolling over

* Given how weak this recovery has been and the enormity of the stimulus required, if the Fed removes all stimulus it will result in a worse than normal reaction in this over-valued stock market compared to previous tightening cycles

* More evidence of the weakening economy is the number of millennials still living with their parents is at a record high

* I posted a Bloomberg article on my Facebook page about the number of young women living at home is the highest in 70b years

* Bloomberg prefaces the article by stating that this is not a sign of a weak economy, but clearly it is

* This also affects housing:

* Couples are delaying buying "starter homes" which delays or prevents them from saving up for a down payment on their dream house

* I also wanted to discuss the Fox Business Republican Debate

* I believe Rand Paul was actually the winner of that debate

* Paul stood out, and made some good points, which allowed him to move forward in the polls

* Paul is drawing a contrast, as he made the point that the real threat to the U.S. is not a military threat from the outside, but the self-inflicted threat of a weak economy

* Our debt is a bigger enemy than ISIS

* Paul also avoided jumping on the immigration bandwagon. Immigration is not the problem. If we turn off the welfare magnet, then the only people who come to America will be the people who want to work

* The country would benefit from that, because it will keep labor costs down and boost productivity

* The anti-immigrant voice of the Republican party will be vilified as racist in the general election


Our Sponsors:
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When I recorded my last video blog, I mentioned how positively the market reacted to jobs report, which could signal the Fed to raise rates

I said there might be a delayed reaction and, in fact it did

Four days into this trading week we are down more than 450 points

Also, I did an interview on CNBC.com where I said I felt the retail markets would have a a tough time this Christmas

That was translated into headlines that I stated that consumers would have a horrible Christmas, which was not my point

So far, my prediction about the retail space is bearing out, bad earnings reports from Macy's Walmart, Men's Wearhouse, and its subsidiary, Joseph A. Bank, Nordstrom and Neiman Marcus

The data that the Fed depends on is getting worse and worse

If the Fed raises rates in December, it will prove that they have not been data dependent, they were delaying

Copper a six-month low today, oil prices are down, gold hit a new low inter-day but rallied back and the dollar finished broadly lower for the day

Based on these market prices, the Fed will have another excuse to delay rate hikes, again

What will stop the stock market from falling? The only thing that will stop it is if the Fed takes a rate hike off the table

I recently wrote a commentary where I reference the shadow rate

Tightening actually began about 18 months ago when the Fed started tapering

The Fed's monetary policy is not just about rates, it is also about easing and foreward guidance

When the Fed began tapering they were tightening

When they began talking about raising rates that was the equivalent of tightening, because the markets braced for the hikes

That's why the economy is rolling over, that's why the stock market is rolling over

Given how weak this recovery has been and the enormity of the stimulus required, if the Fed removes all stimulus it will result in a worse than normal reaction in this over-valued stock market compared to previous tightening cycles

More evidence of the weakening economy is the number of millennials still living with their parents is at a record high

I posted a Bloomberg article on my Facebook page about the number of young women living at home is the highest in 70b years

Bloomberg prefaces the article by stating that this is not a sign of a weak economy, but clearly it is

This also affects housing:

Couples are delaying buying "starter homes" which delays or prevents them from saving up for a down payment on their dream house

I also wanted to discuss the Fox Business Republican Debate

I believe Rand Paul was actually the winner of that debate

Paul stood out, and made some good points, which allowed him to move forward in the polls

Paul is drawing a contrast, as he made the point that the real threat to the U.S. is not a military threat from the outside, but the self-inflicted threat of a weak economy

Our debt is a bigger enemy than ISIS

Paul also avoided jumping on the immigration bandwagon. Immigration is not the problem. If we turn off the welfare magnet, then the only people who come to America will be the people who want to work

The country would benefit from that, because it will keep labor costs down and boost productivity

The anti-immigrant voice of the Republican party will be vilified as racist in the general election

* Friday, November 6, 2015

* Earlier today the government released the Non-Farm Payroll Report for the month of October

* I was told that this was the most import Non-Farm Payroll report ever

* They were looking for 190,000 jobs and we created 271,000 jobs

* Everybody now has jumped to the conclusion that a December rate hike is a lock

* There is nothing in this jobs report that indicates that

* The reason everybody believes that the Fed is like to raise rates is because Janet Yellen testified before Congress earlier in the week

* This is what the Fed Chair said about interest rates:

* If we get further improvements in the labor market and we make progress at achieving the Fed's inflation goal of 2% in the medium term

* How much improvement and what kind? We don't know, because thus far, no improvements have been enough to prompt a rate hike

* Yellen said that if we got those improvements, then a rate hike in December would be a "live possibility"

* This does not mean it will actually happen - it means it is possible

* She did not even use the word probable

* I don't think the Fed is going to raise rates in December

* We have one more "most important" jobs report between now and December and this month's numbers may be revised down, as others have

* From my perspective, if the Fed does not know that they will raise rates by now, they will not decide on the spur of the moment after a jobs report

* Even with positive economic news, the Fed still does not have to raise rates; they can come up with another excuse, real or unreal

* What happens if the stock market declines after a rate hike? what would the Fed do then?

* "Extend and Pretend" is working like a charm for the Fed now

* Getting back to today's job's report:

* This is the strongest month of the year following the two weakest months of the year

* Both of those months arrived with expectations of upward revisions, and they did not happen

* The three month average is 187,000 jobs

* The last three months have been slower than any prior three month period this year

* Last year, the 3-month average was about 250,000+ jobs

* So the job market is much slower this year than it was last year when the Fed was looking for "more improvements" before raising rates

* The unemployment rate did decline, but so far no positive data on unemployment rates have prompted the Fed to raise rates

* The Labor Force Participation Rate stayed at 62.4% which matches the low of this so-called recovery

* So we are not seeing more people entering the labor force

* This is not a sudden accelleration in the pace of job growth

* Let's look at the quality of the jobs:

* Most of the jobs, about 200,000 of the 271,000 jobs added are low-paying service sector jobs

* In second place, at 45,000, is temporary help

* Third place, at 44,000, is retail trade

* The fourth largest category is leisure and hospitality

* Manufacturing, mining, logging, transportation sectors lost jobs

* Where it really gets bad is in the demographics:

* All job gains went to people 55 and older

* People under the age of 55 lost 35,000 jobs

* If you look at the gender, men from 25 - 54 lost 119,000 jobs

* What would explain this?

* Older people can no longer afford to be retired, and are supplementing their retirement incomes

* Some of the older people are taking better jobs because they are more experienced

* Why are more women getting jobs?

* Women who were previously homemakers also need to supplement their incomes

* When you look at the demographic numbers, it is further proof that the Fed's explanation of the labor force participation rate is wrong

Our Sponsors:
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Friday, November 6, 2015

Earlier today the government released the Non-Farm Payroll Report for the month of October

I was told that this was the most import Non-Farm Payroll report ever

They were looking for 190,000 jobs and we created 271,000 jobs

Everybody now has jumped to the conclusion that a December rate hike is a lock

There is nothing in this jobs report that indicates that

The reason everybody believes that the Fed is like to raise rates is because Janet Yellen testified before Congress earlier in the week

This is what the Fed Chair said about interest rates:

If we get further improvements in the labor market and we make progress at achieving the Fed's inflation goal of 2% in the medium term

How much improvement and what kind? We don't know, because thus far, no improvements have been enough to prompt a rate hike

Yellen said that if we got those improvements, then a rate hike in December would be a "live possibility"

This does not mean it will actually happen - it means it is possible

She did not even use the word probable

I don't think the Fed is going to raise rates in December

We have one more "most important" jobs report between now and December and this month's numbers may be revised down, as others have

From my perspective, if the Fed does not know that they will raise rates by now, they will not decide on the spur of the moment after a jobs report

Even with positive economic news, the Fed still does not have to raise rates; they can come up with another excuse, real or unreal

What happens if the stock market declines after a rate hike? what would the Fed do then?

"Extend and Pretend" is working like a charm for the Fed now

Getting back to today's job's report:

This is the strongest month of the year following the two weakest months of the year

Both of those months arrived with expectations of upward revisions, and they did not happen

The three month average is 187,000 jobs

The last three months have been slower than any prior three month period this year

Last year, the 3-month average was about 250,000+ jobs

So the job market is much slower this year than it was last year when the Fed was looking for "more improvements" before raising rates

The unemployment rate did decline, but so far no positive data on unemployment rates have prompted the Fed to raise rates

The Labor Force Participation Rate stayed at 62.4% which matches the low of this so-called recovery

So we are not seeing more people entering the labor force

This is not a sudden accelleration in the pace of job growth

Let's look at the quality of the jobs:

Most of the jobs, about 200,000 of the 271,000 jobs added are low-paying service sector jobs

In second place, at 45,000, is temporary help

Third place, at 44,000, is retail trade

The fourth largest category is leisure and hospitality

Manufacturing, mining, logging, transportation sectors lost jobs

Where it really gets bad is in the demographics:

All job gains went to people 55 and older

People under the age of 55 lost 35,000 jobs

If you look at the gender, men from 25 - 54 lost 119,000 jobs

What would explain this?

Older people can no longer afford to be retired, and are supplementing their retirement incomes

Some of the older people are taking better jobs because they are more experienced

Why are more women getting jobs?

Women who were previously homemakers also need to supplement their incomes

When you look at the demographic numbers, it is further proof that the Fed's explanation of the labor force participation rate is wrong

The Fed claims the participation rate is due to retiring Baby Boomers

The people who should be buying houses are the younger ones who are not getting jobs

Freddie Mack reported its first quarterly loss in 4 years

This is with rates still at zero

Imagine the losses if the Fed raises rates?

Also later in the day today, the government reported a record increase in consumer cred...

* Here we go again; Janet Yellen was on Capitol Hill testifying about the banking system

* Forget about all her comments about how solvent the banking industry is - of course it's not

* The banking system is more vulnerable and more highly leveraged than before the bailout

* I am focusing on what she did or did not say about the Fed's intentions to raise rates in December and how the markets reacted

* Headlines following the testimony were about the probability that the Fed will raise rates in December

* The December meeting will be a live meeting with a rate hike on the table

* The official probability of a December rate hike rose from 50% to 60%

* When the Fed did not raise rates in October they removed language referencing concerns about international markets

* This was interpreted as a more hawkish stance on the part of the Fed

* The global economy was used as an excuse, but the Fed had no intention of raising rates in October

* In December when it doesn't raise rates, it'll use another excuse

* The markets wants to believe that the Fed will rates, and as soon as Yellen's comments were released, the dollar soared and gold tanked

* Let's look at what Janet Yellen actually said: first I am going to go to a Reuters story, Fed's Yellen sees possible December rate rise

* That's all it takes, just the mention of a possibility makes everybody jump to the conclusion it is going to happen

* Here's Yellen's quote directly from the artice:

* "What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market and to return inflation to our 2 percent target over the medium term,"

* "If the incoming information supports that expectation then our statement indicates that December would be a live possibility."

* She is saying, if we get the improved data we're expecting

* The labor market has been weakening and the last two jobs numbers have been quite weak

* Yellen says it is possible if we get improvements we expect we will raise rates

* Anything is possible... it is more probable that she is not going to raise rates in December

* She actually says it's a long shot

* She's been saying this all year and it has not meant anything

* Reuters omitted from the article that Yellen followed up the above statement by reiterating that at this point, the Fed still has not made up its mind

* Another story from CNBC:Janet Yellen: December rate hike a 'live possibility'

* Here's a Yellen quote from this article:

* "Now no decision has been made on that and, what it will depend on, is the [Federal Open Market Committee's] assessment at the time. That assessment will be informed by all of the data that we collect between now and then,"

* This implies that they intend to collect data from now until the December meeting and make their decision on that data

* If the Fed does not know now, how different can the data be?

* If nothing is going to change, why not make a decision?

* Yellen's monetary policy is to pretend to raise rates and then not do it

* If you actually listen to what she is saying, it is far more probable that she won't raise rates, because thus far, we have not seen an improvement in the data she is tracking

* Even if the Fed sees improvements, they still might not raise rates

* Here's the one thing that Yellen is not doing: she does nothing to alter the false perception that a rate hike is likely

Our Sponsors:
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Here we go again; Janet Yellen was on Capitol Hill testifying about the banking system

Forget about all her comments about how solvent the banking industry is - of course it's not

The banking system is more vulnerable and more highly leveraged than before the bailout

I am focusing on what she did or did not say about the Fed's intentions to raise rates in December and how the markets reacted

Headlines following the testimony were about the probability that the Fed will raise rates in December

The December meeting will be a live meeting with a rate hike on the table

The official probability of a December rate hike rose from 50% to 60%

When the Fed did not raise rates in October they removed language referencing concerns about international markets

This was interpreted as a more hawkish stance on the part of the Fed

The global economy was used as an excuse, but the Fed had no intention of raising rates in October

In December when it doesn't raise rates, it'll use another excuse

The markets wants to believe that the Fed will rates, and as soon as Yellen's comments were released, the dollar soared and gold tanked

Let's look at what Janet Yellen actually said: first I am going to go to a Reuters story, Fed's Yellen sees possible December rate rise

That's all it takes, just the mention of a possibility makes everybody jump to the conclusion it is going to happen

Here's Yellen's quote directly from the artice:

"What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market and to return inflation to our 2 percent target over the medium term,"

"If the incoming information supports that expectation then our statement indicates that December would be a live possibility."

She is saying, if we get the improved data we're expecting

The labor market has been weakening and the last two jobs numbers have been quite weak

Yellen says it is possible if we get improvements we expect we will raise rates

Anything is possible... it is more probable that she is not going to raise rates in December

She actually says it's a long shot

She's been saying this all year and it has not meant anything

Reuters omitted from the article that Yellen followed up the above statement by reiterating that at this point, the Fed still has not made up its mind

Another story from CNBC:Janet Yellen: December rate hike a 'live possibility'

Here's a Yellen quote from this article:

"Now no decision has been made on that and, what it will depend on, is the [Federal Open Market Committee's] assessment at the time. That assessment will be informed by all of the data that we collect between now and then,"

This implies that they intend to collect data from now until the December meeting and make their decision on that data

If the Fed does not know now, how different can the data be?

If nothing is going to change, why not make a decision?

Yellen's monetary policy is to pretend to raise rates and then not do it

If you actually listen to what she is saying, it is far more probable that she won't raise rates, because thus far, we have not seen an improvement in the data she is tracking

Even if the Fed sees improvements, they still might not raise rates

Here's the one thing that Yellen is not doing: she does nothing to alter the false perception that a rate hike is likely

This shows me that it is by design. They are tightening by rhetoric

Here's an illustration of how an interest rate hike would be disastrous

Freddie Mac issued its first quarterly loss ($475 million) in 4 years

This is significant because Freddie Mac's profits have been reducing the deficit

They have been making risky sub prime loans that produce short term profits, but we know how this is going to end

This quarter's loss presents the government with a bill - a bailout

They are losing money with interest rates still at zero