The Peter Schiff Show Podcast

The Peter Schiff Show Podcast - Episode 433

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A Bear Market Correction

U.S. stocks continue their correction by moving higher yet again today. Remember, when you have a bull market, the corrections are down, because you're correcting the upward trend by moving backward.  In a bear market, it's the opposite. You correct a downward trend by retracing upwards.  That's what we're doing now. I think this is the first rally in this bear market, so this rally is, in fact, a correction.

Powell is now "Super Dove"

I think the U.S. stock market is off to its best annual start in about a decade; certainly the NASDAQ is up I think not quite 5% - 4.7% on the year.  Of course, what got the correction going was the complete 180 by Powell in that round table discussion, where he basically reversed everything he was saying and became the "Super Dove" when it comes to rate hikes. So the market is now pricing out many rate hikes it had probably priced in and that was the catalyst to really get the market going.

Markets Have Not Priced in End of Quantitative Tightening

Of course, what hasn't been priced in yet are the rate cuts or the end of the quantitative tightening program and the re-launching of quantitative easing.  All that is coming. The markets just aren't there yet. They just can't see beyond where we are now. They're looking at this mountain and they don't see the valley on the other side.

Interest Rates High Relative to Mountain of Debt

Again, it's not the rate hikes in the future that were going to cause the recession, the rate hikes from the past have already guaranteed a recession, even though interest rates in absolute terms and relative to where they've been historically are still very low, they are not very low considering the enormity of the debt that we now have; that we didn't have historically. So when you have this mountain of debt, a historically large amount of debt, you need a historically low rate. Even though the rates we have now are still low, they're not as low as they used to be and they're not as low as they need to be.

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The Peter Schiff Show Podcast - Episode 433

RATE AND REVIEW this podcast on Facebook.

A Bear Market Correction

U.S. stocks continue their correction by moving higher yet again today. Remember, when you have a bull market, the corrections are down, because you're correcting the upward trend by moving backward.  In a bear market, it's the opposite. You correct a downward trend by retracing upwards.  That's what we're doing now. I think this is the first rally in this bear market, so this rally is, in fact, a correction.

Powell is now "Super Dove"

I think the U.S. stock market is off to its best annual start in about a decade; certainly the NASDAQ is up I think not quite 5% - 4.7% on the year.  Of course, what got the correction going was the complete 180 by Powell in that round table discussion, where he basically reversed everything he was saying and became the "Super Dove" when it comes to rate hikes. So the market is now pricing out many rate hikes it had probably priced in and that was the catalyst to really get the market going.

Markets Have Not Priced in End of Quantitative Tightening

Of course, what hasn't been priced in yet are the rate cuts or the end of the quantitative tightening program and the re-launching of quantitative easing.  All that is coming. The markets just aren't there yet. They just can't see beyond where we are now. They're looking at this mountain and they don't see the valley on the other side.

Interest Rates High Relative to Mountain of Debt

Again, it's not the rate hikes in the future that were going to cause the recession, the rate hikes from the past have already guaranteed a recession, even though interest rates in absolute terms and relative to where they've been historically are still very low, they are not very low considering the enormity of the debt that we now have; that we didn't have historically. So when you have this mountain of debt, a historically large amount of debt, you need a historically low rate. Even though the rates we have now are still low, they're not as low as they used to be and they're not as low as they need to be.

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Big Move Up Today

Another big move today in the U.S. stock market except this time the big move was to the upside, more than eradicating yesterday's big decline.  In fact, looking back historically, yesterday's drop was the second biggest drop in history for the second day of the New Year. The biggest drop on the second day of a new year was in the year 2000. That was the year when the NASDAQ bubble originally popped. That big drop happened at a time where the market was peaking and we were just beginning a bear market where the U.S. stock market went down by about half and the NASDAQ went down by abut 80%.  So not a good comparison.

NASDAQ Biggest Mover Up 4.25%

On the other hand, today's rise was the second biggest rise for the S&P on the third day of a new year in U.S. stock market history. The biggest rise happened in 1932, and that was during the great depression.  Clearly not a good period for the U.S. stock market or the U.S. economy to have to go back to 1932 to see a third trading day in January where you have this big a gain.  In fact, the Dow was up 3.3% on the day but the S&P up 3.4%.  The biggest mover was the NASDAQ, which was up 4.25%. So much bigger than the drop that we had yesterday.  The Russell 2000 was up 3.75%.

What was the Catalyst?

So what was the catalyst?  Why did the U.S. stock market go up so much today after being down so much yesterday? First of all, the market started off on a positive note.  I'm pretty sure we were up 2-300 points right out of the gate in the futures, even before we got the Nonfarm Payroll number that came out at 8:30 a.m.  Futures were already trading, and there was already a big gain before that number was released. So it wasn't the jobs report that actually was responsible for today's move.

Fed Chairman Jerome Powell's Dovish Statements

It had much more to do with the comments made by Fed Chairman Jerome Powell.  Those comments were made maybe an hour or so after the stock market opened.  But let's start off early this morning.  What was propping up the market in the morning, or overnight, was more optimism that a trade deal between the U.S. and China is imminent. Now, of course, whatever trade deal is negotiated is going to do nothing.

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Big Moves in the Market Today

For those of you who have been waiting all year for the first Peter Schiff Show Podcast of the new year, 2019, here it is.  We finally got a day with enough worthwhile news that it made sense for me to do a podcast.  I'll probably end up doing another one tomorrow, when we get the Nonfarm payroll numbers - the jobs numbers.  We'll see if that's a big market mover.  But we had a lot of movement in the markets today; all sorts of news came out as well, weighing on the markets.

Apple Closed Down 9.7%

The Dow was down 660 points today - pretty much about the same drop that we had on Christmas Eve.  Now I doubt that today will be followed by a repeat of Boxing Day, where we get a 1,000 - point rally, but we'll see. The excuse of the day was probably Apple.  You can say that Apple took a bite out of the stock market today.  Apple announced yesterday just after the close that its sales would be disappointing, and Apple stock was down just under 10%.  It closed down 9.7%, pretty close to the lows of the day - not the exact lows, but it has got to be one of the biggest losses in history for Apple.

Everybody Got a Rotten Apple Today

Apple is very widely owned; the Swiss Central Bank is a big holder of Apple stock.  A lot of hedge funds own Apple, Berkshire Hathaway (Warren Buffet) has a big position in Apple - pretty much in everybody's portfolio. So everybody got a rotten Apple today. In fact, Apple is now down almost 40% - 39% from its peak price.  Remember, when it was at peak, it was over a trillion dollars in market cap. It was Apple and Amazon that were trillion dollar companies.  Well, no more.  Apple, again, has dropped not quite $400 billion in market cap from its peak.

 

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Big Moves in the Market Today

For those of you who have been waiting all year for the first Peter Schiff Show Podcast of the new year, 2019, here it is.  We finally got a day with enough worthwhile news that it made sense for me to do a podcast.  I'll probably end up doing another one tomorrow, when we get the Nonfarm payroll numbers - the jobs numbers.  We'll see if that's a big market mover.  But we had a lot of movement in the markets today; all sorts of news came out as well, weighing on the markets.

Apple Closed Down 9.7%

The Dow was down 660 points today - pretty much about the same drop that we had on Christmas Eve.  Now I doubt that today will be followed by a repeat of Boxing Day, where we get a 1,000 - point rally, but we'll see. The excuse of the day was probably Apple.  You can say that Apple took a bite out of the stock market today.  Apple announced yesterday just after the close that its sales would be disappointing, and Apple stock was down just under 10%.  It closed down 9.7%, pretty close to the lows of the day - not the exact lows, but it has got to be one of the biggest losses in history for Apple.

Everybody Got a Rotten Apple Today

Apple is very widely owned; the Swiss Central Bank is a big holder of Apple stock.  A lot of hedge funds own Apple, Berkshire Hathaway (Warren Buffet) has a big position in Apple - pretty much in everybody's portfolio. So everybody got a rotten Apple today. In fact, Apple is now down almost 40% - 39% from its peak price.  Remember, when it was at peak, it was over a trillion dollars in market cap. It was Apple and Amazon that were trillion dollar companies.  Well, no more.  Apple, again, has dropped not quite $400 billion in market cap from its peak.

 

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Published on: Dec 28, 2018 

Or Did It?

It looks like the Grinch may not have been able to stop Christmas from coming to Wall Street.  It looks like the Santa Claus Rally came just the same. - or did it?

The worst Christmas Eve in the history of the stock market was followed by the biggest Boxing Day rally in the history of the stock market. We don't celebrate Boxing Day here in the United States; all the other English-speaking nations celebrate that holiday, but maybe we'll celebrate it in the future, given the fact that the Dow Jones rallied over 1,000 points this Boxing Day.  So that more than eradicated the 650 point drop which was the biggest Christmas Eve drop in history.

A Bounce Could Come at any Time

If you recall, on my last podcast, I mentioned that following Christmas Eve's drop, this December was the worst December in stock market history. We has finally beaten out the 1931 December.  But I also mentioned that given the extreme oversold condition that existed in the market, it was possible that a bounce could come any minute or any day, and I was not sure whether or not we would finish as the worst December in the history of the stock market because we still had several trading days left for the market to bounce, and that is exactly what happened.

The Grinch May Have a Change of Heart

In fact, we managed to close positive on the week. I think the Dow finished up about 617 points.  Now, of course, we still have one more day for the Grinch to have another change of heart. If on Monday, the Dow is down more than 617 points which is easy to do given the volatility that we're seeing, especially we're no longer oversold to the extent that we were on Tuesday - then the Grinch may have ended up stealing the Santa Claus Rally anyway.


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Published on: Dec 28, 2018 

Or Did It?

It looks like the Grinch may not have been able to stop Christmas from coming to Wall Street.  It looks like the Santa Claus Rally came just the same. - or did it?

The worst Christmas Eve in the history of the stock market was followed by the biggest Boxing Day rally in the history of the stock market. We don't celebrate Boxing Day here in the United States; all the other English-speaking nations celebrate that holiday, but maybe we'll celebrate it in the future, given the fact that the Dow Jones rallied over 1,000 points this Boxing Day.  So that more than eradicated the 650 point drop which was the biggest Christmas Eve drop in history.

A Bounce Could Come at any Time

If you recall, on my last podcast, I mentioned that following Christmas Eve's drop, this December was the worst December in stock market history. We has finally beaten out the 1931 December.  But I also mentioned that given the extreme oversold condition that existed in the market, it was possible that a bounce could come any minute or any day, and I was not sure whether or not we would finish as the worst December in the history of the stock market because we still had several trading days left for the market to bounce, and that is exactly what happened.

The Grinch May Have a Change of Heart

In fact, we managed to close positive on the week. I think the Dow finished up about 617 points.  Now, of course, we still have one more day for the Grinch to have another change of heart. If on Monday, the Dow is down more than 617 points which is easy to do given the volatility that we're seeing, especially we're no longer oversold to the extent that we were on Tuesday - then the Grinch may have ended up stealing the Santa Claus Rally anyway.

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Worst Christmas Eve Day in Stock Market History

As I thought would be the case, it looks like the Grinch Stole the Santa Claus Rally.  Normally, the U.S. stock market rallies during the final five trading days of the year between Christmas and New Year's Day. But today was not only the worst Christmas Eve day in stock market history, it blew apart the old record.  In fact, there has never been a Christmas Eve day where the S&P or the Dow fell by as much as 1%. Today, the Dow Jones dropped better than 650 points - 2.9% on the day.

Officially Not a Correction

Although the Dow now is the only major index not officially in a bear market (now down 19.15% from its peak), but the S&P 500, which dropped 2.7% today is now down just over 20%.  So it's now official, Wall Street can stop pretending that it's a correction, they have to admit that it's a bear market. Now, if they want to hang their had on the Dow, O.K. well they can hang it there maybe for one more trading day, because it's not going to take much for the Dow to join the party.  Of course, other indexes are extending moves into bear market territory. The Dow Transports are down 25.7%; the NASDAQ just under 24% to the downside.

The Russell 2000 Losing Gains Rapidly

The Russell 2000 is down 27.3%.  This index is down better than 5-1/2% since Donald Trump was inaugurated.  This was the index that was supposed to benefit the most from Trump's economic policies.  It's still up about 6% since he was elected President. So all that hype is still in there. But at the rate the index is falling, this index is going to lose those gains pretty rapidly. Then, of course, Trump is not going to be able to talk about all the wealth that has been created in the stock market since he's been elected, because all that paper wealth will have been destroyed.

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Worst Christmas Eve Day in Stock Market History

As I thought would be the case, it looks like the Grinch Stole the Santa Claus Rally.  Normally, the U.S. stock market rallies during the final five trading days of the year between Christmas and New Year's Day. But today was not only the worst Christmas Eve day in stock market history, it blew apart the old record.  In fact, there has never been a Christmas Eve day where the S&P or the Dow fell by as much as 1%. Today, the Dow Jones dropped better than 650 points - 2.9% on the day.

Officially Not a Correction

Although the Dow now is the only major index not officially in a bear market (now down 19.15% from its peak), but the S&P 500, which dropped 2.7% today is now down just over 20%.  So it's now official, Wall Street can stop pretending that it's a correction, they have to admit that it's a bear market. Now, if they want to hang their had on the Dow, O.K. well they can hang it there maybe for one more trading day, because it's not going to take much for the Dow to join the party.  Of course, other indexes are extending moves into bear market territory. The Dow Transports are down 25.7%; the NASDAQ just under 24% to the downside.

The Russell 2000 Losing Gains Rapidly

The Russell 2000 is down 27.3%.  This index is down better than 5-1/2% since Donald Trump was inaugurated.  This was the index that was supposed to benefit the most from Trump's economic policies.  It's still up about 6% since he was elected President. So all that hype is still in there. But at the rate the index is falling, this index is going to lose those gains pretty rapidly. Then, of course, Trump is not going to be able to talk about all the wealth that has been created in the stock market since he's been elected, because all that paper wealth will have been destroyed.

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NASDAQ Now in Bear Territory

It was a big down day, in fact there was even more carnage in the NASDAQ.  Today is the day that NASDAQ finally slipped into bear market territory. So, Wall Street's been calling this a correction the whole way, well now the NASDAQ is down 22%, joining the Russell 2000, down 26% and the Transports down 24%.  Those 3 indexes are now officially in bear markets.

It's All a Matter of Time

But what does that mean? That means when the NASDAQ was only down 5%, it was in a bear market. That's exactly what I was saying. They don't acknowledge the bear market until it's down 20%, but that doesn't mean it's not in a bear market. It just means nobody wants to admit that it's a bear market.   Now we still have 2 indexes that are not in bear markets, the S&P 500 is now down almost 18% and the Dow Jones is down just under 17%.  So Wall Street maybe can cling to the notion that these indexes are not in bear markets because they're not down 20%.  Look, it's all a matter of time.  As I said on the last podcast, I thought that the NASDAQ would be in a bear market by the end of the week and that's exactly what happened, and I'm pretty sure that the S&P 500 and the Dow are going to join this party before the end of the year.

Huge Bear Market in FAANG Stocks

Today's decline started off as a rally.  The Dow was up about 400 points this morning, before it collapsed.  So we basically reversed yesterday's decline and then we got clobbered and took out new lows. The NASDAQ was down 3%.  That was the weakest index, and it was led down by the FAANG stocks, which are now down collectively, on average, 35%. This is just generally in the last few months. So this is a huge bear market in the FAANG stocks. The worst of the FAANG's is Facebook, which was down big again today, like 5 of 6%.  Facebook is now down 43%.  Second place, is Netflix, down 42%, then Amazon down 33%, and lastly, Google, which is down only 23%. Google just finally went into a bear market this week. If you look at the charts, there is nothing but air - there is a long way down between where we are now and where any kind of trend lines or support lines could be drawn.

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