Recession Hiding in Plain Sight – Ep. 146

  • We had some wild swing in the market today, particularly the stock market and the gold market
  • At one point this morning, the Dow Jones was down about 270 points
  • It finished the day up 53 points
  • There wasn’t any real news that caused the market to go up; people were buying the dip
  • The oil market also turned around; it was down a buck and change and managed to close up .20-.30
  • Gold was the mirror image; gold was up at one point to $27-$28, back above $1250
  • Then when the stock market rallied back the gold market sold off
  • It managed to closed with a small $3 gain or so
  • Gold stocks closed the day mixed, most still positive on the day
  • The reason why the stock market falling is positive for gold is the effect that a falling stock market is going to have on the Fed, and its decisions on future interest rate hikes
  • Even if the stock market is not going down, the Fed will still reverse on rates because of the economy
  • The economy is back in recession, whether the Fed wants to acknowledge the fact or not
  • We had another Fed official, Richmond Fed President Jeffrey Lacker, actually came out saying he sees no signs that a recession is imminent
  • He sees no reason why the Fed should not go forward with the planned rate hikes for 2016
  • Maybe rose-colored glasses are standard issue over at the Fed
  • There is ample evidence that there is a recession
  • However, if someone of Lacker’s stature would come out and say, “Look, we’re going into a recesssion, but rates are really low and the Fed has to raise them anyway, and this is going to be difficult.” That would be honest.
  • But the Fed is saying they are going to raise rates because the economy is in great shape
  • To do otherwise is to admit that the Fed’s monetary policy failed
  • The Fed is playing a very dangerous game
  • Not only do they risk making the economy worse, they risk their credibility
  • Here is some economic news that came out today, after Lacker’s speech
  • At 9:45 am we got the February PMI Flash  Services Index
  • Last month, the number was 53.7 and this number was expected to repeat for February
  • The February number came out at 49.8! This shows that the recession is not contained to manufacturing
  • This reminds me of what they said about sub-prime: “Don’t worry about it, the recession is contained to sub-prime.” – That was nonsense and it is nonsense now
  • The problems in the economy are not contained to manufacturing, and today’s numbers prove it
  • The service sector contracted in February
  • The last time this happened was in October of 2013. That was during the government shut-down, so a lot of government services were not available
  • That’s an outlier – if you take that out, the last time we had a service sector PMI below 50 was during the great recession
  • So again, another indicator flashing recession
  • It’s amazing to me that the Atlanta Fed still hasn’t walked down their 2.6% forecast for Q1 GDP
  •  We’ve gotten so much bad news since the good news that prompted that forecast yet they’ve done nothing to downwardly revise their estimate
  • The FOMC might have said, “Hey, Atlanta, get with the program! We’re talking up the economy – stop coming up with these negative forecasts.”
  • On Friday, we’re going to get the revised Q4 GDP numbers, which was originally reported as +.7
  • I think it will be revised down, in fact the consensus is a revision down to .4
  • So we’re getting closer and closer to zero
  • The numbers we’re getting for the first quarter could be worse, despite the Federal Reserve’s rosy scenario
  • Also we got New Home Sales, which was a disaster; they were looking for 520,000 and we got 494,000 – that was a big, big miss and the lowest level in a couple of years
  • In fact we got a couple of disappointing corporate earnings today: Avis stock was down 26% on the day
  • Today, after the bell, Restoration Hardware forecasted a terrible Q4 and broke out every excuse in the book
  • This morning on CNBC, they were commenting on the “strength of the consumer” and that the economy will be able to shrug off the bad news based on that strength
  • What are they basing this on?
  • Retailers are dropping like flies, and the Fed says there are no signs of a recession
  • To explain falling sales, I hear comments like, “people don’t want to buy things anymore, they’re looking for experiences.”
  • What people are experiencing is poverty.

Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.



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