The Peter Schiff Show Podcast

Recorded April 10, 2019

VISIT PETER AT THE LAS VEGAS MONEY SHOW  May 13 - 15, 2019

Lyft Sinking

I began yesterday's podcast by pointing out the weakness in shares of the recent IPO of Lyft.  In fact, I mentioned that Friday's close above the IPO price (the first time it closed above that price since the day of the IPO) the fact that it couldn't hold on to that rally, I thought that meant the stock looked even weaker, technically. And we got a big follow through today.  Lyft sank about 11%, it closed near the lows of the day, 60.12.  In fact, we did trade as low as 59.75 on the closing minutes of trading.  We're now down about 32% from the opening print, after it went IPO on that day.  We're 17-18% below the IPO price.  If you happen to get the IPO price and you still have the stock, you're almost in a bear market from that purchase price.

Catalyst: Uber News

The catalyst today was the news that it looks like the Uber IPO is going to happen sooner than everybody thought. Maybe they will be filing as early as this week, and the IPO is going to be bigger than people initially thought, as far as how much stock they're looking to unload on investors.  Although, they're taking the valuation down from maybe $90 to $100 billion.  I think initially they were talking $110-120 billion, and they're going to look to unload about 10% of the company - $10 billion. Now, you would think, "Wait a minute, if Lyft is doing so poorly, what is the rush to bring Uber to the market?  Doesn't it seem like a bad time?"  But if you think about it, I think what Wall Street is worried about, is if they wait even longer, the price of Lyft will sink even further.  So it's a mad dash to get this thing out there before it really hits the fan, because this is showtime for all of these unicorns.

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Recorded April 10, 2019

VISIT PETER AT THE LAS VEGAS MONEY SHOW  May 13 - 15, 2019

Lyft Sinking

I began yesterday's podcast by pointing out the weakness in shares of the recent IPO of Lyft.  In fact, I mentioned that Friday's close above the IPO price (the first time it closed above that price since the day of the IPO) the fact that it couldn't hold on to that rally, I thought that meant the stock looked even weaker, technically. And we got a big follow through today.  Lyft sank about 11%, it closed near the lows of the day, 60.12.  In fact, we did trade as low as 59.75 on the closing minutes of trading.  We're now down about 32% from the opening print, after it went IPO on that day.  We're 17-18% below the IPO price.  If you happen to get the IPO price and you still have the stock, you're almost in a bear market from that purchase price.

Catalyst: Uber News

The catalyst today was the news that it looks like the Uber IPO is going to happen sooner than everybody thought. Maybe they will be filing as early as this week, and the IPO is going to be bigger than people initially thought, as far as how much stock they're looking to unload on investors.  Although, they're taking the valuation down from maybe $90 to $100 billion.  I think initially they were talking $110-120 billion, and they're going to look to unload about 10% of the company - $10 billion. Now, you would think, "Wait a minute, if Lyft is doing so poorly, what is the rush to bring Uber to the market?  Doesn't it seem like a bad time?"  But if you think about it, I think what Wall Street is worried about, is if they wait even longer, the price of Lyft will sink even further.  So it's a mad dash to get this thing out there before it really hits the fan, because this is showtime for all of these unicorns.

VERY IMPORTANT PODCAST! Please share with everyone you care about. Ray Dalio: Please start at 29:52

Extreme Inequality Is Not a Function of Capitalism

I agree that wealth inequality is a problem, but it is a problem that is created by government - created by the Federal Reserve. I was warning years ago, when the Federal Reserve first launched Quantitative Easing, that this was going to happen! This policy would only benefit assets at the expense of the overall economy. I've been warning about this for years. The government is doing this, not the market. So, yes, I want the government to do something about wealth inequality by getting out of the way. I want Capitalism to do something about inequality.  Now, of course, there's always going to be inequality - that's part of capitalism. People are not going to be equal, because peoples' contributions are not equal. What is not normal right now is the extent of the disparity. That extreme inequality is not a function of Capitalism.  if we enjoyed Capitalism, there would be less inequality.

We Need to Embrace and Re-Discover Capitalism

Ray Dalio recently replied to a recent Tweet of mine, referring to his appearance on 60 Minutes, stating that if the only solution Ray Dalio has is to raise taxes on the rich, and to hope the government spends the money productively, then he has no solution.  So then he referred me to his article, which I read, word for word: Why and How Capitalism Needs to be Reformed, parts 1 and 2. Again, Capitalism does not need to be reformed. What needs to be reformed is Democracy. We need to embrace and re-discover Capitalism and what needs to be reformed is all of the Socialism that has been interjected into Capitalism.

Government Makes It Difficult for Small Businesses to Hire Young People

I told Ray Dalio that I would read his article and I read it and made some notes and I'm going to go over my thoughts now. Number one, right off the bat, Dalio talks about all the jobs he had by the time he was age 12. He came from humble beginnings, he wasn't born wealthy, he is a rags-to-riches story, an American Dream story. By the time his was 12, he made money delivering newspapers, mowing lawns, caddying, and he invested the money he earned in the stock market. The first thing that grabs my attention is, "how many 12-year-olds today have jobs?" Very few young people today have jobs. Why is that? one of the reasons is because the government has made it so difficult for small businesses to hire young people -  minimum wage laws, and workmen's comp, disability, unemployment make it difficult for young people to get jobs.

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VERY IMPORTANT PODCAST! Please share with everyone you care about. Ray Dalio: Please start at 29:52

Extreme Inequality Is Not a Function of Capitalism

I agree that wealth inequality is a problem, but it is a problem that is created by government - created by the Federal Reserve. I was warning years ago, when the Federal Reserve first launched Quantitative Easing, that this was going to happen! This policy would only benefit assets at the expense of the overall economy. I've been warning about this for years. The government is doing this, not the market. So, yes, I want the government to do something about wealth inequality by getting out of the way. I want Capitalism to do something about inequality.  Now, of course, there's always going to be inequality - that's part of capitalism. People are not going to be equal, because peoples' contributions are not equal. What is not normal right now is the extent of the disparity. That extreme inequality is not a function of Capitalism.  if we enjoyed Capitalism, there would be less inequality.

We Need to Embrace and Re-Discover Capitalism

Ray Dalio recently replied to a recent Tweet of mine, referring to his appearance on 60 Minutes, stating that if the only solution Ray Dalio has is to raise taxes on the rich, and to hope the government spends the money productively, then he has no solution.  So then he referred me to his article, which I read, word for word: Why and How Capitalism Needs to be Reformed, parts 1 and 2. Again, Capitalism does not need to be reformed. What needs to be reformed is Democracy. We need to embrace and re-discover Capitalism and what needs to be reformed is all of the Socialism that has been interjected into Capitalism.

Government Makes It Difficult for Small Businesses to Hire Young People

I told Ray Dalio that I would read his article and I read it and made some notes and I'm going to go over my thoughts now. Number one, right off the bat, Dalio talks about all the jobs he had by the time he was age 12. He came from humble beginnings, he wasn't born wealthy, he is a rags-to-riches story, an American Dream story. By the time his was 12, he made money delivering newspapers, mowing lawns, caddying, and he invested the money he earned in the stock market. The first thing that grabs my attention is, "how many 12-year-olds today have jobs?" Very few young people today have jobs. Why is that? one of the reasons is because the government has made it so difficult for small businesses to hire young people -  minimum wage laws, and workmen's comp, disability, unemployment make it difficult for young people to get jobs.

VISIT PETER AT THE LAS VEGAS MONEY SHOW

May 13 - 15, 2019

https://conferences.moneyshow.com/moneyshow-las-vegas/speakers/4532d84bf93311d3a5dd00104b96e7b5/peter-schiff/

Rebound Expected in Jobs Report

Stock market in the U.S. continued to grind higher today, although I still believe that this is a bear market rally.  The Dow added a little better than 40 points; the NASDAQ up about 47, so a bigger percentage gain there.  The S&P was up about 13 points.  This was following the release of the March Nonfarm Payrolls numbers - aka the Jobs Report. There was a lot of hope that we would see a rebound in the month of March.  Remember, in February, they initially reported just 20,000 jobs created, which was well short of what had been expected.  It was probably something close to 200,o00 jobs.  And the consensus for March was for 170,000 jobs and we actually got 196,000 jobs.

Pretty Weak Number

That's the first look. So that is, what, 26,000 jobs better than had been expected.  The February number was revised upward, but just to 33,000, and I think I remember when this number first came out, that there were a lot of naysayers who were saying, "This is crazy, there is no way this is true, let's wait for the revisions".  Well, we've got a revision, and all we did is revise it up to 33,000. So it seems like the number was legitimate. We did have a rebound in the month of March, but 170,000 is not a lot of jobs, considering how few jobs were created in February.  In fact, if you average the two months, it's a pretty weak number.

Weakness in Labor Force Participation Rate

The official unemployment rate, that held steady at 3.8%, but the labor force participation rate, which I know a lot of people have been encouraged by, because they see that number notching higher, it dropped back down .o2, from 63.2% to 63%. So that's some weakness there.  Also, if you look at the manufacturing jobs, they were looking for a gain of 10,000 jobs.  Instead, we got a loss of 6,000 jobs.  They took the February gain, which was originally reported at 4,000, and we only gained 1,000. So the markets were looking for an improvement over the original estimate for February; instead, not only did we take February's number down, but instead of improving, we actually went in the other direction and lost manufacturing jobs.

Average Hourly Earnings Posts Sharp Slowdown

If you look at the average hourly earnings, they were looking for a gain of +.2 and we got half that of +.1, and that is a sharp slowdown from the gain the prior month, which was +.4, which was better than had been estimated at the time.  So now you average them out, and, again, we're not getting much in the way of earnings growth, although we are seeing a rise in the cost of living.

Average Work Week Up

The average work week was up; it ticked up from 34.4 hours to 34.5 hours. Nonetheless, most of the coverage of the jobs numbers was that is was a good report.  It was better than estimates, because they were looking for 170-whatever and they got 190-something, so it was better than estimates.

Our Sponsors:
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VISIT PETER AT THE LAS VEGAS MONEY SHOW

May 13 - 15, 2019

https://conferences.moneyshow.com/moneyshow-las-vegas/speakers/4532d84bf93311d3a5dd00104b96e7b5/peter-schiff/

Rebound Expected in Jobs Report

Stock market in the U.S. continued to grind higher today, although I still believe that this is a bear market rally.  The Dow added a little better than 40 points; the NASDAQ up about 47, so a bigger percentage gain there.  The S&P was up about 13 points.  This was following the release of the March Nonfarm Payrolls numbers - aka the Jobs Report. There was a lot of hope that we would see a rebound in the month of March.  Remember, in February, they initially reported just 20,000 jobs created, which was well short of what had been expected.  It was probably something close to 200,o00 jobs.  And the consensus for March was for 170,000 jobs and we actually got 196,000 jobs.

Pretty Weak Number

That's the first look. So that is, what, 26,000 jobs better than had been expected.  The February number was revised upward, but just to 33,000, and I think I remember when this number first came out, that there were a lot of naysayers who were saying, "This is crazy, there is no way this is true, let's wait for the revisions".  Well, we've got a revision, and all we did is revise it up to 33,000. So it seems like the number was legitimate. We did have a rebound in the month of March, but 170,000 is not a lot of jobs, considering how few jobs were created in February.  In fact, if you average the two months, it's a pretty weak number.

Weakness in Labor Force Participation Rate

The official unemployment rate, that held steady at 3.8%, but the labor force participation rate, which I know a lot of people have been encouraged by, because they see that number notching higher, it dropped back down .o2, from 63.2% to 63%. So that's some weakness there.  Also, if you look at the manufacturing jobs, they were looking for a gain of 10,000 jobs.  Instead, we got a loss of 6,000 jobs.  They took the February gain, which was originally reported at 4,000, and we only gained 1,000. So the markets were looking for an improvement over the original estimate for February; instead, not only did we take February's number down, but instead of improving, we actually went in the other direction and lost manufacturing jobs.

Average Hourly Earnings Posts Sharp Slowdown

If you look at the average hourly earnings, they were looking for a gain of +.2 and we got half that of +.1, and that is a sharp slowdown from the gain the prior month, which was +.4, which was better than had been estimated at the time.  So now you average them out, and, again, we're not getting much in the way of earnings growth, although we are seeing a rise in the cost of living.

Average Work Week Up

The average work week was up; it ticked up from 34.4 hours to 34.5 hours. Nonetheless, most of the coverage of the jobs numbers was that is was a good report.  It was better than estimates, because they were looking for 170-whatever and they got 190-something, so it was better than estimates.

VISIT PETER AT THE LAS VEGAS MONEY SHOW

May 13 - 15, 2019

https://conferences.moneyshow.com/moneyshow-las-vegas/speakers/4532d84bf93311d3a5dd00104b96e7b5/peter-schiff/

Recorded April 2, 2019

February Durable Goods Order Declined Slightly Less Than Expected

We had a quiet day in the U.S. stock market today.  Not much reaction from a slightly weaker than expected February Durable Goods Orders number that came out before the market opened.  They were looking for a weak number; the consensus was for a decline of 1.8% - we got a decline of slightly less than that: 1.6%. They revised the prior month down from +.4% to +.1%, so we declined less, but from a lower number. Overall, slightly weaker.  In fact, the Core Capital Goods number was also slightly weaker.  They were looking for a rise of .2%; instead, we had a drop of .1% - although they revised the prior month up from .8% to .9%.  Still a little weaker on the day.

Lyft Hitting Lows

But the market still seems to be oblivious to the weak data, in fact later in the day we did get the auto sales numbers that were disappointing, as well. A lot of bad news is being routinely overlooked by Wall Street.  Lyft, the company that went public on Friday: I discussed the lackluster performance of that IPO on Friday.  In fact, most of the commentary that I listened to or saw was positive.  They were describing the Lyft IPO as a big success… everything went great… the stock went up… But what concerned me about the stock was not how it went up, but how weakly it closed. It pretty much closed on the low of the day.  It had sold off pretty much all day, following the pop on the open.

Lyft Sank into Bear Market on Day 2

The stock came public at $72 and it immediately traded as high as $88.6, but closed the first day of trading at $78.29. Still above the $72 opening, but anybody who bought the opening print was down.  Then it got clobbered on Monday and it fell again today.  It only closed down slightly.  It closed relatively near the highs of the day, but the low was $66.10.  That's 25% below the peak price on Friday. So that's a bear market.  In fact, officially Lyft sank into a bear market on its second day as a public company.  So that bear market got even worse today.  The stock is now better than 8% below its IPO price.


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VISIT PETER AT THE LAS VEGAS MONEY SHOW

May 13 - 15, 2019

https://conferences.moneyshow.com/moneyshow-las-vegas/speakers/4532d84bf93311d3a5dd00104b96e7b5/peter-schiff/

Recorded April 2, 2019

February Durable Goods Order Declined Slightly Less Than Expected

We had a quiet day in the U.S. stock market today.  Not much reaction from a slightly weaker than expected February Durable Goods Orders number that came out before the market opened.  They were looking for a weak number; the consensus was for a decline of 1.8% - we got a decline of slightly less than that: 1.6%. They revised the prior month down from +.4% to +.1%, so we declined less, but from a lower number. Overall, slightly weaker.  In fact, the Core Capital Goods number was also slightly weaker.  They were looking for a rise of .2%; instead, we had a drop of .1% - although they revised the prior month up from .8% to .9%.  Still a little weaker on the day.

Lyft Hitting Lows

But the market still seems to be oblivious to the weak data, in fact later in the day we did get the auto sales numbers that were disappointing, as well. A lot of bad news is being routinely overlooked by Wall Street.  Lyft, the company that went public on Friday: I discussed the lackluster performance of that IPO on Friday.  In fact, most of the commentary that I listened to or saw was positive.  They were describing the Lyft IPO as a big success… everything went great… the stock went up… But what concerned me about the stock was not how it went up, but how weakly it closed. It pretty much closed on the low of the day.  It had sold off pretty much all day, following the pop on the open.

Lyft Sank into Bear Market on Day 2

The stock came public at $72 and it immediately traded as high as $88.6, but closed the first day of trading at $78.29. Still above the $72 opening, but anybody who bought the opening print was down.  Then it got clobbered on Monday and it fell again today.  It only closed down slightly.  It closed relatively near the highs of the day, but the low was $66.10.  That's 25% below the peak price on Friday. So that's a bear market.  In fact, officially Lyft sank into a bear market on its second day as a public company.  So that bear market got even worse today.  The stock is now better than 8% below its IPO price.

VISIT PETER AT THE LAS VEGAS MONEY SHOW

May 13 - 15, 2019

https://conferences.moneyshow.com/moneyshow-las-vegas/speakers/4532d84bf93311d3a5dd00104b96e7b5/peter-schiff/

A Gift from the Federal Reserve

The Dow Jones closed out its best quarter since 1998 with a 211 point gain: 25,928.68 was the close.  The Dow, on the quarter up 10.3% - the broader averages doing even better.  The S&P 500 rose 12.3% on the quarter. The Russell 2000 - 13.8%, and the NASDAQ 15.6% gain on the quarter.  of course, the entire rally was a gift from the Federal Reserve. Had the Federal Reserve stayed on its course, indicating that more rate hikes were coming; 3 or 4 this year; had the Fed continued with its planned auto-pilot reduction in the size of its enormous balance sheet, the stock market would be considerably lower.  In fact, we probably would have added to the losses experienced in the 4th quarter of last year with additional losses this year. But the Fed, as I had been predicting for many years, reacted to the weakness in the stock market and the weakness in the economy by reversing course.

Bigger Cuts Ahead then the Market is Currently Pricing In

Now the Fed hasn't actually cut rates yet, although the markets are already anticipating rate cuts and not additional rate hikes. Where the markets got it wrong is that there will be much bigger cuts than what the market is currently pricing in.  I think the market is looking at maybe 25 or 50 basis points of cuts. In fact, we're going all the way back to zero. A reduction in interest rates of 25 basis points or 50 basis points would do absolutely nothing.

Quackery: Substituting a Bubble for the Illusion of Economic Growth

I think the Fed, again, is going to have to go all the way down to zero once it decides that's what it's going to do. But had the Fed not changed course, the markets and the economy would be quite a bit weaker. Although not weaker - more air would have come out of the bubble. That's all the Fed has been doing with its monetary policy is sustaining a bubble.  Allowing the bubble to get bigger and bigger, while preventing the underlying structural problems from being solved.  Even though those solutions involve some short-term pain, as a trade-off for long-term gain, it is a very healthy process that would be good for the economy in the long run.  But, instead, the Fed has interfered with the market's medicine and substituted its own quackery - substituting a bubble to create the illusion of economic growth as the economy is actually worsening.

Our Sponsors:
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VISIT PETER AT THE LAS VEGAS MONEY SHOW

May 13 - 15, 2019

https://conferences.moneyshow.com/moneyshow-las-vegas/speakers/4532d84bf93311d3a5dd00104b96e7b5/peter-schiff/

A Gift from the Federal Reserve

The Dow Jones closed out its best quarter since 1998 with a 211 point gain: 25,928.68 was the close.  The Dow, on the quarter up 10.3% - the broader averages doing even better.  The S&P 500 rose 12.3% on the quarter. The Russell 2000 - 13.8%, and the NASDAQ 15.6% gain on the quarter.  of course, the entire rally was a gift from the Federal Reserve. Had the Federal Reserve stayed on its course, indicating that more rate hikes were coming; 3 or 4 this year; had the Fed continued with its planned auto-pilot reduction in the size of its enormous balance sheet, the stock market would be considerably lower.  In fact, we probably would have added to the losses experienced in the 4th quarter of last year with additional losses this year. But the Fed, as I had been predicting for many years, reacted to the weakness in the stock market and the weakness in the economy by reversing course.

Bigger Cuts Ahead then the Market is Currently Pricing In

Now the Fed hasn't actually cut rates yet, although the markets are already anticipating rate cuts and not additional rate hikes. Where the markets got it wrong is that there will be much bigger cuts than what the market is currently pricing in.  I think the market is looking at maybe 25 or 50 basis points of cuts. In fact, we're going all the way back to zero. A reduction in interest rates of 25 basis points or 50 basis points would do absolutely nothing.

Quackery: Substituting a Bubble for the Illusion of Economic Growth

I think the Fed, again, is going to have to go all the way down to zero once it decides that's what it's going to do. But had the Fed not changed course, the markets and the economy would be quite a bit weaker. Although not weaker - more air would have come out of the bubble. That's all the Fed has been doing with its monetary policy is sustaining a bubble.  Allowing the bubble to get bigger and bigger, while preventing the underlying structural problems from being solved.  Even though those solutions involve some short-term pain, as a trade-off for long-term gain, it is a very healthy process that would be good for the economy in the long run.  But, instead, the Fed has interfered with the market's medicine and substituted its own quackery - substituting a bubble to create the illusion of economic growth as the economy is actually worsening.