The Peter Schiff Show Podcast

[button link="https://www.youtube.com/watch?v=mANOqcnLtqA" color="lightgray" size="medium" stretch="" type="" shape="" target="_self" title="" gradient_colors="|" gradient_hover_colors="|" accent_color="" accent_hover_color="" bevel_color="" border_width="1px" icon="" icon_divider="yes" icon_position="left" modal="" animation_type="0" animation_direction="down" animation_speed="0.1" animation_offset="" alignment="left" class="" id=""]Mr. Schiff Goes to Washington[/button] [button link="https://www.youtube.com/watch?v=mANOqcnLtqA" color="lightgray" size="medium" stretch="" type="" shape="" target="_self" title="" gradient_colors="|" gradient_hover_colors="|" accent_color="" accent_hover_color="" bevel_color="" border_width="1px" icon="" icon_divider="yes" icon_position="left" modal="" animation_type="0" animation_direction="down" animation_speed="0.1" animation_offset="" alignment="right" class="" id=""]Mr. Schiff Returns to Washington[/button]  The Bear Market Rally The big story continues to be the bear market rally that has been going on in the U.S. dollar. The dollar index  closed above 93.  The low this year was just above 88, so we've risen above 5% so far in the U.S. dollar index.  Year to date we're up on the dollar a little over 1%.  We're still down about 6% from where the dollar ended 2016, but we've had this considerable rally in a relatively short period of time.  To me, it has the makings of a bear market rally, a short-covering rally.  There hasn't been any good economic news that would explain the strength of the dollar.  In fact, I talked about Fed comments from last week which to me, are quite dovish when you have the Federal Reserve indicating a tolerance toward inflation above 2% talking about "symmetrical inflation" rather than keeping it below 2%, So to me, those are statements that would normally be negative for the dollar. Technical Rally for Short-Covering The economic data, the jobs numbers that came out last week - much weaker than expected, so all the information would actually argue against a more aggressive Fed, in favor of a more dovish Fed, yet the dollar is rising anyway.  I think it's technical, I think it's short-covering and I think it is short-sighted. Dollar Strong against Emerging Market Currencies One of the areas where the dollar is the strongest is actually against the emerging market currencies.  Not the currencies that are in the U.S. dollar index - that's dominated by the euro, the pound, the yen - but the emerging market currencies, they're the ones that are bearing the brunt of  this sell-off, and it's a self-perpetuating problem, because as these emerging currencies go down, it puts upward pressure on their already increasing inflation rate. I think inflation is picking up all around the world, but if your currency is going down, that puts even more pressure on consumer prices, and the politicians of these emerging economies are resisting higher interest rates, both to combat increasing inflation and to support a weakening currency which is only adding fuel to the fire. Currency Traders Have It Backwards What's so ironic about all this is that traders are missing the bigger point. The United States is in the exact same predicament (only worse) than the emerging economies. We are going to be faced with the same set of dynamics, in that we are going to have risingOur Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Fed is Willing to Tolerate Higher Inflation Today is the first Friday in May and that means we got the April Jobs Report released today, and before I actually get into the details of the jobs report, I want to talk about what happened with the Fed this week. I think that is the most significant news of the week.  The Fed's statement on Wednesday and the comments from today are the real reasons we had the 300+ point rally in the Dow today, that's why we had the 400+point turnaround in the Dow on Thursday.  It's all about the Fed and its willingness to tolerate higher inflation. Fed Inserted the word "Symmetrical" So we got the FOMC announcement on Wednesday after their 2-day meeting, and as expected, they left interest rates unchanged. The most significant part of the statement that accompanied the Fed's decision not to raise rates was inserting the word, "symmetrical" in their description of inflation.  Up until Wednesday, the Fed was always worried that we didn't have enough inflation. The inflation rate was too low, and their goal was to get it up to their 2% level. We Can Go Above 2% to the Same Extent We Were Below 2% Now the Fed is saying that they are at 2% and they expect the rate to actually go above 2%, and they're OK with it. What they mean by symmetrical is that inflation was below 2%, at least the way they measure it. It's probably always been well above it, but let's just look at the government statistics.  Based on the government statistics we had inflation of 1.4, 1.5, 1.6; it was always below 2.  So now what they're saying is we can have some symmetry on the upside, meaning, all right, we can have 2.5, because 2.5 and 1.5. the average is 2. The Fed is Actually Lifting Their Inflation Target So what the Fed is really saying is their goal is not to have 2% inflation, their goal is to have inflation that averages 2%.  So if we've had inflation of under 2% for all these years, we can have inflation of over2% by the same proportion for the same number of years and they we would have averaged 2% inflation for the entire time.  So, in reality, what the Fed is really doing, and I have been saying this all along - for years and years - they are actually lifting their inflation target.    Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Market Tends to Produce Better Returns in the First 4 Months of the Year There is an old Wall Street adage: "Sell in May and Go Away". The reason for that saying is that seasonally, the market tends to produce better returns in the first 4 months of the year, January through April, and then, historically, beginning in May and throughout the summer, the market can generally go down, and I think the time to buy back in is typically September/October.  There are a lot of big down days, down months, crashes, so get out of the market in May, go away and then come back later in the year and buy back what you sold. Selling Started Right out of the Gate Today was May 1 and it looked like a lot of people were not going to wait to sell; they were selling right on the open.  The Dow was down all day.  At the worst, it was down better than 300 points but it pared its losses significantly, down just 64.  But the NASDAQ, which was never actually down that much (when the Dow was down 300 the NASDAQ was down only about 25) the NASDAQ ended up positive 64.  The S&P was up just under 7 points. Facebook Getting into the Dating Business Stocks were under pressure all day. I think the turnaround in Facebook - Facebook ended up a couple of percent.  Mark Zuckerberg announced plans to try to clamp down - I think he said he would have 20,000 people working in compliance.  They also announced that they are going into the dating business.  I'm surprised it has taken Facebook so long to get into that space.  It seems such an obvious fit. They already have everybody's profile. I think some of the other online sites, Match Group which owns Plenty of Fish are falling.  It's like Amazon stepping into your market. Heading toward 20,000 The market turned around and maybe that news lifted the NASDAQ, but to me, it was a weak day, the market was generally under pressure.  The Dow did manage to hold onto the 20,000 mark.  We were well below it - we were close to 23800.  It is really going to get interesting is when the Dow gets down to 20,000.  I think that's where we're headed.  Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Markets Down But Not by as Much as Expected All the major U.S. stock markets were down on the week, but not by as much as I thought. We got that big drop on Monday, where we got the very bad reaction to even better than expected earnings.  Plus, with interest rates rising, I thought we would have had more selling, but we didn't we actually rallied back most of the week from the big Monday decline, not enough to recover all of the losses, but the total losses on the week were not that bad.  The Dow was down today, actually, by about 11 points. The NASDAQ eked out a small gain as did the S&P 500. Yield on the 10-Year Highest Since Financial Crisis Interest rates were moving up.  In fact, the yield on the 10-year on Wednesday hit 3.035%. This is the highest it has been since before the Financial Crisis and I think one of the reasons that the stock market recovered a bit this week was because investors breathed a sigh of relief that the yield didn't stay above 3%.  We closed above 3% on that Monday, I think it was 3.024%, but then we dropped on Thursday and dropped again on Friday; we went out at 2.957%, and that's only a slight increase from the 2.951% that yields closed at the prior week. Existing Rates High Enough for Significant Damage I think the markets are lulling in a false sense of security if they think that it's just one and done. "We finally took out 3%, maybe we cleared out some stops, and that's it. Yields have peaked, so there's nothing to worry about." As I said on my last podcast, even if this is the peak, I think it is already high enough to do significant damage to the economy, to the financial markets, to U.S. government finances.  But - it's not the peak. Rising Bond Yields Are Not Bullish for the Dollar Rates have barely begun to rise and I think they are going a lot higher.  Higher rates did continue to support the dollar.  The dollar actually had a strong week; the dollar index closed up just over 1% on the week.  It was down slightly today, so we surrendered some gains earlier this morning, but it was still an up week for the dollar.  Again, I think those people who are buying the dollar are going to lose a lot of money if they don't turn around and sell. I think this is a sucker rally.  As I said in my last podcast: Rising bond yields are not bullish for the dollar.Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

The Correction is Over and the Bear Market is Resuming As I have been speaking about in my last couple of podcasts, it looks like the period of relative calm in the markets is over and the next leg down has begun.  So the correction is also over - not the downward move - that is not the correction - this is the bear market.  The upward move was the correction. It was the first correction in this young bear market.  Technically it is not a bear market yet because we're not down 20% but that is only a matter of time. So I think the correction is over and the bear market is resuming, the primary trend being down. Dow Transports Big Losers In fact, the U.S. stock market was down for its fifth consecutive day, although today was the biggest decline.  The Dow ended down 424 points.  We managed to close just above 24,000 at 24,024. But we were well below.  At the lows of the day we were down about 600 points.  Percentage wise we were down 1.74%. The NASDAQ, about the same, down 1.7%.  At the lows it was down close to 150 points on the NASDAQ.  Percentage wise, the Dow transports were the big losers, down 221 points - 2.08%. Earnings Don't Matter Now, one of the things that investors have been counting on to support stock prices and, in fact, drive them higher, were earnings.  Everybody's been saying, "Earnings are going to be higher!" Now what have I been saying on my podcasts, over the last several months?  I've been saying that it doesn't matter, because all these great earnings, if they materialize, are already baked into the cake. They are already discounted into the price of the stocks. So in other words, they don't matter. It's "buy the rumor, sell the fact". Double Whammy of Faster Growth and Lower Taxes If everybody knows that earnings are going to be good, well, they've priced in those expectations into the market.  Why do you think the market has gone up so much since Trump was elected President? It was on the anticipation of all these earnings that were going to come from a combination of faster growth and lower taxes. In fact, the lower taxes are why we were going to get the growth, so it was going to be a double whammy.  Well, all that was priced into the market.  Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Another Friday Down Day It looks like the period of calm may be coming to an end and the storm may be looming just over the horizon. The Dow Jones finished down today, just over 200 points off the day's low.  I think I saw us down about 280.  This was the 4th consecutive Friday where the markets were lower - there was a holiday in there (Good Friday) - it has been 5 Fridays.  This seems to be a trend.  The markets still managed to eke out a gain on the week.  All 3 of the major indexes managed gains despite the losses on Friday.   Investors Should Really Worry about the Bond Market What should really be worrying investors are the losses this week in the bond market. Yields continue to ratchet up almost every day, and in fact we closed at the high point all across the curve, from the 2-year all the way up to the 30-year.  The 1--year yield, which is the one everybody seems to be talking about closed at 2.96%.  So this is a new high for the year.  You've got to go back to pre-2008 financial crisis to get a yield up that high.  But the yield is still very very low. Who Believes that 3% Yields are Here to Stay? The amazing thing is to look at the 30-year. The 30-year is 3.15.  It's actually just under 20 basis points - 19 basis points is all you get for taking 20 additional years of interest rate and inflation risk.  Think about that! Think about how crazy that is. Interest rates right now on the 10-year are just under 3%; on the 30-year they are slightly above 3%.  Why would anybody believe that 3% yields are here to stay? Low Rates Are an Aberration Obviously, if you go back to the post-war period and look at what rates have averaged on the 10-year, these low rates are an aberration.  They've been going on now, for a while, but they can't go on forever, Yet the market thinks it's going to go on for another 30 years.  If you think about a 30-year bond, that's like buying a 10-year bond today, holding it for 10 years, letting it mature, then buying another 10-year bond, holding that one for 10 years, letting it mature and buying another one! So you do that 3 times over 30 years, in theory it should give us the same rate as buying one 30-year bond right now.Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Podcast Break: Investor Summit at Sea I apologize to everybody who has been waiting patiently for my next podcast.  Las week I went the entire week without doing a podcast, which is unusual. If you are a regular listener to this podcast you'll know that I was on a cruise ship all last week; I was on the Real Estate Guys' cruise.  The internet connections on a ship are very slow; particularly the upload speeds - plus I was very busy, so I really decided to take a week off from podcasting. Markets  Were Overall Quiet You know, there really wasn't that much that happened last week.  the markets were overall quiet, although the U.S  stock market rallied, gold didn't do much, the dollar didn't do much; no real earth-shattering news, so I didn't see any reason why I couldn't wait until I was back onshore, which is what I'm doing, and in fact, I was so  busy today that it is very late on a Monday night and I'm just trying to get this podcast recorded today. FOMC Minutes Released First of all, I'll talk about some if the stuff that happened last week.  We did get the release of the FOMC minutes, in fact, after the minutes came out we had a pretty big drop in the price of gold.  Gold did manage to get all the way up to about 1365 during the week before selling off and I think the Fed minutes were a catalyst to get gold to sell off.  Of course, it really can't get much below 1330; there is a lot of buying that comes in down there. Fed Half Right The read on the minutes was that they were hawkish in that the Fed was signaling that the economy is going to keep strengthening and inflation is going to keep rising.  Well, at least they're half right.  The economy isn't going to keep strengthening, but inflation will keep rising, PPI Close to a Breakout In fact, they're not even half right: They're right that inflation is going to go up, but it is going to go up by a lot more than they think, so even the part they got right they really got wrong.  We did get some inflation numbers - official measures of inflation that the government released last week.  If you look particularly at the Producer Price Index, core producer prices rose at the fastest pace in 7 years.  And if you look at a chart, we're very close to a breakout of resistance on core PPI.  Core CPI also up a little better than expected, but this is just the beginning of a trend.  During the week oil prices made new highs.  We got above $67 a barrel, so we're continuing to get closer and closer to 70 and eventually and 100.  It's not just oil prices that are rising, it's pretty much  commodities prices across the board. Fed Will not Deliver Rate Hikes But the Fed is not going to be able to deliver the rate hikes that the market is expecting and, again, it is the expectation of more rate hikes that is keeping a lid on the price of gold, but it's only a matter of time before the market blows the lid off and the price of gold goes up.Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Wednesday Reversal Day On my Wednesday podcast, I talked about Wednesday reversal day, where we gapped way down and then rallied and closed up.  It was a strong outside reversal day. I thought this could be the beginning of a correction.  The correction meaning a rise in a bear market.  Everybody thinks we're in a correction now of a bull market, but I think the bull market is over and a rise is the correction. Three Consecutive Up Days So I thought maybe we'll get one based on that reversal day, and we did.  For one day. The market was up on Thursday; I think the Dow was up better than 200 points, so we did have some follow through to Tuesday and Wednesday's gains.  We had 3 consecutive up days.  Remember we had a big down day on Monday, but then we had those 3 up days. End of Bear Market Correction Well the whole correction came to an end today.  The Dow at one point again was down better than 700 points; we didn't close that badly - we were down 572 points.  Still, below 24,000; 23,932.  This is only the second close below 24,000 this year, on a weekly basis.  The last time was 2 weeks ago.  The NASDAQ was down 161 points back below 7000 - 6915. Dangerous Territory in Dow Transports Dow Transports were also down big.  They were down 307 points, just barely avoiding the Dow Theory sell signal.  So we're not quite there.  We can easily be there on Monday.  If we have another down day on Monday, it seems that we're going to have a sell signal for the Dow Theory. Pattern Developing That seems to be the pattern: big down day Friday followed by a big down day Monday.  Believe me the technicals on this market look awful.  So there is certainly another chance that we have another big sell off on Monday. This entire bear market so far, we've had a pattern of a big sell off on Fridays and Mondays and sometimes we get a big down day, we don't get the follow through on Monday, but to me, this looks like it's all clear on the way down.  Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Extreme Volatility It was another extremely volatile day in the U.S. stock market. When I finished my podcast on Monday and we had that big drop, I suspected that Tuesday might be a reversal Tuesday.  So I thought we'd get a bounce on Tuesday and, in fact we did.  We had a big rally; the Dow was up 400 points or so. Then this morning the Dow opened up down 500 points.  In fact when I woke up this morning, a couple of hours before the market opened, the Dow was down closer to 600. Reversing Up Typically when we get these huge sell offs right on the open because overnight weakness, what generally happens is that we end up reversing up - getting some buying after we open the markets down, and that's exactly what happened. The markets ended up recovering the entire loss.  We closed around the highs of the day: the Dow up 230 points and the NASDAQ up just over 100 points. This is a reversal.  Checking the numbers, the Dow did not take out yesterday's low but the NASDAQ and the S&P did.  All the markets closed above the previous day's high. Bear Market: Primary Trend is Down I'm sure some people will look at these numbers and say, "Hey, this is a technical reversal, we took out the lows we closed above the highs,  it's an outside day and this is maybe the end of the correction.  I do think potentially we could have more to the rally.  But I think the rally is the correction.  I still think this is a bear market.  We narrowly avoided the Dow Theory sell. The Dow Theory is still on a buy, and now we have a bit of a reversal, so maybe this correction has a little more legs. The correction being the move up.  I think the primary trend is down.  I don't think today's reversal is big enough to have put in the low of this correction if it is a correction. So I still think that we are in a bear market.        Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy

Really a Head Fake As I suspected and as I stated in my last podcast at the end of the first quarter, I speculated that the rally that closed out the quarter was really a head fake. When the quarter started, I said you would see a resumption of the downtrend of the evolving bear market, which I believe we are already in. Bear Market Even though technically we're not there yet because we're not down 20%, but you can't get to 20% without first hitting 10%. Although not officially acknowledged, we are in a bear market. Just as often a recession is not acknowledged until after 2 quarters of negative GDP growth, but clearly you're in the recession for a long time before it's officially acknowledged.  That doesn't mean you weren't in a recession before they admitted it, albeit not officially.  Similarly, they haven't proclaimed this bear market. The Fed Could Change the Game There's one caveat:  if the Federal Reserve comes in and changes the game by taking away the rate hikes or launching QE4, then we may never make it to a bear market.  But if the Fed continues on its current path and maintains the current pretense, then we are in a bear market and it's only a question of time before it is officially acknowledged. No Real News to Blame for Sell Off As I expected, traders came back from the Passover/Easter break and started to sell.  They came in almost out of the bell; no real news to blame the selloff on.  Now they tried to blame it on Trump and the tariffs, and while I agree that tariffs are a problem, there was nothing new over the weekend.  Yes, China came out and announced a couple of billion dollars worth of tariffs on some agricultural products, etc, but this was not unanticipated.  Anybody who did not think this was coming - c'mon - China could have could have done a lot worse than this. Any News is an Excuse to Sell In fact, the market could have just as easily rallied on the fact that this is such a small response and they could have said, "Oh, this is nothing, it could have been a lot worse!" So the markets could have bought, if they were in a buying mood. But this is a bear market, and so all news is bad news.  So, whatever the news is, that's an excuse to sell. Chinese Tariffs on Agricultural Products But what it does, is it lulls investors into a false sense of security: "Well, the market's not going down for any reason", "It's not because we're in a bear market, it's because of the reaction to the news that the Chinese are going to have tariffs on agricultural products.  Our Sponsors:* Check out Fast Growing Trees and use my code GOLD for a great deal: https://www.fast-growing-trees.com* Check out GhostBed: https://ghostbed.com/PETER* Check out Grammarly: https://grammarly.com* Check out Quince: https://quince.com/GOLD* Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.comPrivacy & Opt-Out: https://redcircle.com/privacy