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Let’s Go Crazy – Episode 161

  • I recorded my last podcast on the afternoon of April 19, and I wanted to announce that later that evening, my first daughter was born – we named her Lilyan Ruth after both of our maternal grandmothers – so we now have Lilyan Ruth Schiff, she was 7 lbs 2 oz. of pure cuteness!
  • If you just looked at the close of the gold and silver market, you wouldn’t know that much went on, gold closed up under $5 – silver was up about .04, but you wouldn’t know that earlier in the morning gold was up better than $25, we did trade back above $1270
  • Silver made a new high for the year – silver was up about 75¢ early in the morning, in fact I think it made its peak during the Draghi press conference
  • We were above $1760 and then, just around 9am or so, there was a huge seller in the gold and the silver market and the whole complex went negative and we managed to close slightly positive on the day, but we had a huge sell-off intra-day following a big rally
  • That doesn’t mean the top is in – I think it’s interesting; we just got a huge correction out of the way and the price went up – we flushed out a big seller and now that seller is out of the market and this market is still going a lot higher
  • I put an article on my Facebook page about how gold stocks are way up this year, and they are way up this year, but the article basically said, “Don’t buy”, because gold is going to sell off.
  • I’m seeing a log of mainstream articles now about why you should not jump on this bandwagon, how dangerous the gold market is
  • And all this is just music to my ears.  If you are bullish on gold, this is exactly what you want.  You want everybody to be skeptical.
  • You want this wall of worry, that gold and silver are going to climb, and we’re going to climb with it while everybody else is worried about the crash, because they still don’t get it.
  • They’re still talking about how the Fed is going to raise rates, and how that’s bad for gold
  • It’s not bad for gold – it all depends on how the Fed raises rates
  • If the Fed raises rates Paul Volker style, really jacks them up there, yeah, that will be bad for gold
  • But they’re not going to do that.  If they raise rates, slowly, which is the only way they can do that if they even raise them, they will be slower than Greenspan was
  • When Greenspan raised rates, that was great for gold, because he was very slow
  • Well, Yellen is going to be even slower
  • So if gold did well under Greenspan, it will do even better under Yellen hikes, if we even get hikes
  • If we even get hikes.  We could get cuts, QE4, negative rates
  • If the Fed raises rates a little bit, that’s bullish for gold; if they don’t raise rates at all, even more bullish for gold, or they cut rates, and gold goes ballistic
  • Either way, gold stocks are going up
  • Meanwhile Wall Street is looking at amazement at the rally and it wouldn’t dawn on them to participate
  • The mainstream investment world is not on board.  The train has left – there’s nobody on it
  • Eventually they’re going to buy, just like they piled in to the gold trade when it was 17-18-1900, that’s when the big firms started finally noticing it
  • Eventually they are going to realize… I think it is going to take Yellen admitting the economy is weak, of the Fed actually cutting rates, but by then the prices are going to be much higher than they are now and we keep getting bad economic news
  • But I want to talk first about the Draghi press conference
  • Mario Draghi of the ECB, leaving interest rates unchanged, and continuing their QE program
  • The euro initially rallied, even during the Q&A, but then at the end, the euro turned around with the gold market, and the euro ended up unchanged
  • Draghi made some interesting comments. One of them had to do with inflation
  • Draghi admitted that lower gas prices were helping European consumers, giving them more purchasing power
  • But in the same Q&A session, he said that inflation wasn’t high enough, but he was confident that they would get it back just below 2%
  • Which is it? Is it good if prices go down, or is it good if prices go up? You can’t have it both ways
  • If lower gas prices are good for the Euro Zone, why does he want to force prices higher?
  • If lower gas prices are good for the consumer, why aren’t lower food prices good?
  • Why aren’t lower rents good? Why aren’t lower clothing prices good?
  • Why aren’t lower prices in general good?
  • So why does Draghi want more inflation?
  • In the same speech, Draghi says they are pursuing their mandate of price stability, and then he says, we want prices to go up close to 2%
  • That’s not price stability
  • The truth is, the Euro Zone has price stability right now
  • What Draghi wants is to force stable prices to go up
  • It’s because central bankers have redefined stable prices to mean “going up”
  • This is exactly what George Orwell talked about with doublespeak
  • When you have politicians, changing the meaning of words to fit their purposes
  • So he has to pretend that he is pursuing their old goal of price stability, when in reality, he is trying to prevent price stability and force prices to go up by almost 2% per year
  • Another interesting question came from someone who asked him what he thinks about the German criticism of his policy
  • First of all, he said we’re doing the same thing all the other central banks are doing, as if that makes it right
  • He also said, we’re independent, we’re not going to bow down to criticism from politicians
  • But it’s not just politicians, it’s the Bundesbank, the bankers are upset with what Mario Draghi is doing but he’s ignoring that, he keeps saying, “Our policies are working, you just have to give it more time”
  • How long have they been cutting interest rates in the Euro Zone.  Now they’re negative. When they got to zero and they still didn’t have economic growth, that should have clued them in that it wasn’t working
  • Interestingly, one of the questions was, “What about savers and pensioners and insurance companies?
  • His answer was, “We want higher interest rates, too, but interest rates just reflect inflation in the economy’.
  • He said, “We can’t have higher interest rates unless we have higher economic growth and more inflation, and so we have to have this stimulus in order to the economic growth, and then we can have higher interest rates’.
  • In other words, according to Draghi, in order to get higher interest rates, you first have to have lower interest rates
  • And the lower interest rates will create the economic growth and the inflation that will make higher interest rates possible
  • First we want real interest rates to be high. What good is it if interest rates only go up because inflation goes up?
  • Draghi is half right
  • He’s not going to create economic growth, but he will create inflation
  • And that inflation will force interest rates to go up, and that is going to be a huge problem
  • Commodities prices in general have really started to move up since mid-January
  • Not just gold and silver – precious metals are leading the complex, look at oil, copper, soy beans, base metals
  • I’m reading these articles about how this is what the central bankers want – they want inflation so they can raise rates
  • The absence of inflation gives them an excuse – it gives them cover
  • The last thing they want is for inflation to pick up because then they are out of excuses
  • They don’t want to raise rates, because, at least in America, we can’t service our huge debt if interest rates go higher
  • They want deflation
  • They want to prop up these asset bubbles and, more importantly, monetize the government debt
  • So the excuse is that there’s not enough inflation
  • But then you’ve got guys like Mario Draghi admit that lower oil prices are positive for the Euro Zone economy
  • The fact that you have commodities go up, you will see a pick up in inflation everywhere
  • Right now, in the U.S. we already have core CPI (the way the Fed measures it) year-over-year over 2%
  • The only thing that kept the headline number under 2% was low gas and other commodities prices
  • That’s about to change
  • So the Fed’s going to have to come up with a whole new level of excuses why they are not raising rates
  • We got more economic data that will be problematic for the Fed
  • Weekly jobless claims dropped to another new low – they dropped 6,000 to 247,000
  • This is the lowest in over 4 years and of course the Obama administration is touting this a great sign, “Nobody is getting fired!”
  • This anomaly should be raising eyebrows.  Why are so few people being fired?
  • In a healthy job market, more people would be getting fired, because there would be a lot of turnover in the job market
  • We’re not getting the hires.  It’s the government’s 200,000 jobs a month numbers that aren’t true
  • Remember, they have not proof that all these jobs are created
  • Economists who believe the economy is really strong assume that businesses are starting up and hiring people
  • We’ve got so much anecdotal evidence of this, payroll tax receipts are going down
  • The huge support for Donald Trump and Bernie Sanders who both say the economy is lousy are the ones getting the most votes
  • If things were as great as the President says, people would want Hillary Clinton
  • They don’t – because things are lousy
  • More economic data that came out today proves that, we got the Philadelphia Fed Business Outlook, this number bounced back out of negative territory in March, it got up to 12.4, and the consensus was that it would be another positive number for April – the range of expectations was that it would go from a low of 5 to a high of 15
  • We got -1.6. they weren’t even close, we’re back in contraction
  • Also, we got Bloomberg Consumer Comfort Index dropped again from 43.6 to 42.9, that’s about as low as that number has been in some time
  • Leading Economic Index also came out worse than expected
  • For February, they told us it was +.1, they revised it to -.1 and the March number was expected to be .5, instead it came in at .2
  • Also for the Chicago Fed National Activity Index – they revised down the February number, originally reported as -.29; revised to -.38 – the March number was -.44
  • The stock market did sell off, and it could be under pressure tomorrow
  • After the bell we got bad earnings from a couple of big companies
  • Microsoft is down
  • Alphabet, the parent of Google got shellacked for about 4% after hours – they reported weaker than expected earnings
  • You know who reported good earnings today? Newmont Mining reported better than expected earnings
  • The stock was up 57% closing at 32.19 – a new 52-week high
  • Most gold stocks were positive on the day, even though gold surrendered most of its gains
  • We’re still seeing healthy moves in the gold mining stocks
  • As more people figure out the severity of our problems, and more people see that the Fed has not cured out problems, the economy has not recovered
  • We finally found out that from the Treasury that Harriet Tubman is in fact going to make her debut on a U.S. Federal Reserve note, but it is not going to be the $10 bill because of the big uproar over removing Alexander Hamilton, due to the recent Broadway hit, “Hamilton”, depicting him as the “liberal” founding father
  • None of the founding fathers, including Alexander Hamilton would have approved of social security, medicare, Obamacare, food stamps, welfare
  • Hamilton would not in his wildest Federalist dreams have contemplated something like this
  • Instead, they will remove slave-owning, central bank killing, Andrew Jackson – He’s going off the $20 bill
  • I was thinking based on the inflation we are going to have the $20 bill is going to be the new $10 bill
  • Personally, Andrew Jackson would have never wanted to be on the bill – he hated central banks
  • I don’t think George Washington would want to be on the 1$ bill – none of the founding fathers were fans of paper money
  • What we’re trying to do, by putting our founding fathers on paper money is to create confidence and trust
  • We’re abusing that trust
  • We ought to just put cartoon characters on our money
  • Make it look like Monopoly money
  • The original paper money was an I.O.U. from the Federal Reserve for an equivalent amount in gold
  • Now they don’t promise to pay anything.  They say this note is legal tender
  • We ought to take off our real heroes and replace them with cartoon characters
  • It’s an insult to Harriet Tubman, she should be honored, but it is not an honor to be on our currency
  • Especially when we’re about to have a currency crisis