The Peter Schiff Show Podcast

* The U.S. stock market finished up its worst week since August, when everybody though a rate hike was just around the corner * Substantial triple-digit losses across the board * The Dow Jones closed down 309 points - almost 4% * Similar percentage decline for the S&P 500 * The NASDAQ dropped 111 points, over 4% decline for the week * The media is blaming this decline on oil prices, and yes, oil prices are weighing on some stocks * Some stocks benefit from lower oil prices - case in point: transportation * Dow Transport was weaker than any other index - down more than the markets on a percentage basis * The truth is that oil prices and stock prices are going down for the same reason * The reason is a slower growing global economy, including the U.S. economy, and the fact that the Fed is threatening to slow it down further with an interest rate hike * Some of biggest losers are not even in the stock market, but in the bond market * The high-yield bond market is getting obliterated * A chunk of the high yield market is energy companies * Two things are hurting them: the fear of rising interest rates and the slowing of the U.S. economy * We are heading for a recession, if we are not already in one * This does not bode well for the high-yield bond market, because in a recession these companies will have more trouble servicing their debt * The Fed's monetary policy of zero percent interest rates forced a lot of Americans into these high-yield bonds - people are hungry for yield * A lot of risky companies who did not have access to credit, were able to borrow all sorts of money because of this hunger for yield * This is the same thing that happened in the sub-prime market * Customers all over the world needed yield, and the mortgage market was where they got it * There was so much demand for mortgage debt on Wall Street it was easy for non-credit-worthy customers to get a loan * The same thing is happening in this high-yield market. Carl Icahn was on CNBC on Friday morning, referring to the present situation as a "power keg" * It is a powder keg that the Federal Reserve created and in theory they will light the match if they raise interest rates next week * In fact in my last podcast I mentioned that for the first time, the Fed might actually raise rates, and I received quite a few comments asking me if I was ready to admit that I was wrong * The Fed is trying to change the nature of a rate hike - alter the narrative away from normalization to a one-and-done scenario * Markets anticipate future events and they price them in, so the beginning of the tightening - "liftoff" I felt markets would look toward the eventual destination and start pricing that in. * None of the markets can handle that * So the Fed assured the markets that liftoff didn't matter because the first hike will be small and the trajectory will be very low * That's why I called it a trial balloon.  The Fed wanted to see how the markets would respond to a tiny, symbolic rate hike just to prove we can do it, and then a long period of time, before another one, if there is another one * Initially it looked as if the markets was buying the idea, but remember I kept saying there is time, and the markets could decline - in fact that is already happening * Maybe the Fed's trial balloon is not going to go over very well * We had a "Black Monday" in August prior the potential September rate hike * We have another Black Monday coming up - the technicals on the market look awful * We could have a huge decline on Monday, and you'd better believe the stock market is going to be high on the Fed's agenda * When the Fed called off the rate hike last time and we got a huge bounce in the stock market * The reason the Fed gave was weak global economic condiditons *  None of those problems have been solved and it can be argued that global economic conditions are weaker now than in August * What is worse is the U.

* We are just about a week away from the Federal Reserve's first rate increase in about 10 years * Everybody believes the stage is set for liftoff based on the most recent better than expected Non-Farms Payroll report * The idea is that the only thing preventing the Fed from liftoff would have been a horrific jobs number * In fact the markets estimated 190,000 jobs added and we got 211,000 * We did beat estimates, and in fact they revised last month's number up to 298,000 * The unemployment rate held steady at 5% * This was not a strong report, any way you look at it * The labor force participation rate: 62.5% is just one-tenth of a percent from the lowest level since the mid-1970's * That is still going in the wrong direction * We had the biggest surge in involuntary part-time workers - 300,000 new workers really wanted full time employment - the biggest jump in more than 3 years * Janet Yellen has consistently stated until recently that before moving up interest rates she wanted to see improvement in the job market, specifically in participation and full-time vs part-time jobs * Thus far that has not happened * So why does everybody believe that the Fed is about to raise interest rates regardless of its stated criteria? * I believed that the Fed had no intention of raising rates and I believe they did not, except one thing has changed: they have backed themselves into a corner * They have floated some trial balloons as a litmus test * One change of rhetoric occurred during Yellen's press conference last week as she switched from waiting for the data to improve to confidence that it will improve some time in the next year * Another change is the idea that a rate hike would trigger a series of hikes with the goal of normalizing interest rates * That's why they were calling it liftoff * Now, since the markets tanked after September did not deliver a liftoff, the Fed Chair has changed her tune - liftoff does not matter, the trajectory does * She may be saying, don't worry, if we raise rates, there won't be another one any time soon, meaning it would be the end of the tightening cycle * The beginning of tightening during the taper, and if we get a rate hike it will end that process * If this is just a trivial rate hike, why raise rates at all, considering the fact that the data is still bad? * Manufacturing is already in a recession * The ISM number that came out last week hit a 6-year low and even the service sector ISM missed estimates * Retail sales and consumer confidence have been disappointing, indicating the end of this weak recovery which is actually a bubble * The Fed now feels their credibility is on the line - it is a symbolic gesture to show confidence in the economy * If they were truly confident, they would not assure everybody that the rate hikes are not likely to continue * In 2016 we will be in a recession unless the Fed does something to delay its onset, and it may be too late for them to put out the fire they have already lit * Why does Janet Yellen not say she believes the economy is still weak? * A window into Yellen's perception is an interview that Ben Bernanke gave on Freakonomics yesterday.  It's entertaining, but it doesn't tell you anything new about Ben Bernanke * The most important revelation occurred about halfway through the interview when the interviewer played some clips of Bernanke on television in 2005-2006. * During those clips, Bernanke was talking about the great shape the economy was in, minimizing the housing and mortgage market troubles * The interviewer asked how he felt listening to himself now, knowing how wrong he was on the economy then * The first words out of his mouth were that he admitted he was speaking as a member of the Administration * After that, he went back and said the economy was good in 2005 - 2006,

* Mario Draghi of the ECB sent shockwaves through the foreign exchange and currency markets today * He didn't deliver the stimulus traders expected * The big question is, will Janet Yellen surprise the market by failing to raise rates? * The ECB did slightly lower interest rates, and extended QE if it will be needed * Draghi's goal is inflation * He equates 2% inflation to "price stability", when prices in Europe are stable now * The big divergence that everybody is trading on a tightening in the U.S. at the same time Europe continues to ease * The reality is more likely to be the reverse * If anything, the European recovery is just getting started, and the U.S. recession is just getting started * As a result of Draghi's decision to hold off on stimulus, the euro was up more than 3% on the day * The dollar was weak across the board * The stock market, including the DAX, fell accordingly * Both U.S. stocks and bonds experienced a selloff * Cheap money has been fueling rallies all over the world and when the ECB did not deliver it triggered a selloff in the U.S. assets * The Dow rallied over 2000 points off its September low based on rate hike expectations that did not materialize * We also got a key reversal in gold * Overnight it made a new low, but closed substantially above that level * The euro is still weak, it is just not as weak as the market expected * The best environment for gold when the weakest currency is the dollar * I wanted to address Janet Yellen's testimony today responding to questions * Yesterday, Yellen referred to Q4 GDP forecast consensus as 2-1/2% * She did not even realize that on that same day the Atlanta Fed reduced their forecast down to 1.4% * I think the real shocker will be that the Europea Q4 GDP will realize greater growth than the U.S. * Yellen was asked about Citibank's recent projection that the U.S. will experience a recession in 2016 * Obviously, she can't agree with the projection, as this runs contrary to the Fed's rhetoric * Asked as a followup, what tools the Fed would use in the event we did experience a recession in 2016, Yellen responded that the Fed would all the tools it has always had * She said, if we did raise rates, then we would lower them * Plus, she said it could use the asset purchase program (QE) that "has worked so well in the past * If QE worked so well in the past, we would not experience a recession in 2016 * You can't call QE a success until rates are normalized and the balance sheet shrinks back down to pre-crash levels * If the Fed finds that it has to launch QE4 in 2016 because it failed to reach "escape velocity" * How many QE's does the Fed have to initiate before it admits that it doesn't work, and is actually impossible to end without a great deal of pain? * This loss of credibility in the Fed will precipitate a dollar crisis * Anther thing that was ignored by Janet Yellen and the press was the six-year low in the ISM number * The market is focusing on the service sector, yet the most important jobs are the goods producing jobs * Lat month, we got a higher than expected jump in the non-manufacturing number:59.1 * This month we wend all the way down to 55.9, which is dangerously close to contraction * If we get the service and the manufacturing sectors both in contraction, that will be a total recession, supporting Citibank's 65% probability forecast may look optimistic * Since 2016 is an election year, a recession will not bode well for the Democrats' economic success narrative

* The price of gold was down another $15 today, a 6-year low * Selling began early this morning following a better than expected jobs report from ADP * This is private payrolls released a couple of days before the official government Non-Farm Payroll number, coming out on Friday * Last month's ADP report was 182,000 jobs, which was below expectations * But the government reported better than expected jobs numbers * Today's number was not significant enough to have triggered a sell-off in gold within seconds of the release of the news * So far, ADP has missed 8 of the 12 expectations this year * By the way, hedge funds are the most short they've ever been in gold * We'll see what happens between now and the end of the year if we get a lot of hedge funds that want to book those profits * Paper profits may be difficult to realize if everyone needs to take them at the same time *  In the physical world, demand for gold continues to hit records * 98-99% of the gold market is people selling gold they don't actually have to people who don't actually want it * It's interesting to me the difference between the market reaction to positive economic news versus negative news * The November PMI number, although slightly better than expected it is still a 2-year low * Where the news went from bad to horrific was when we got the November ISM number. Manufacturing is considered insignificant now because it is a smaller part of our economy, but the last time it was almost as low as this, the Fed immediately launched QE3. * Now with ISM number nearly as weak as it was when we launched QE1, the Fed is hinting at a rate hike, which is absurd if you believe that the Fed is data dependent. * If the Fed does raise rates in December it proves conclusively that they were never data dependent and that they were using it as a delay tactic *  Had the Fed raised rates years ago, it would have pushed the economy into recession that much sooner, but they've now waited so long, that the economy is already going back into a recession on its own * If the Fed now raises rates even slightly, we will go into recession that much more quickly, causing credibility loss. * Also, yesterday we got motor vehicle sales numbers, and we did 18.2 million, beating the expected number of 18.1 million; however this is the second or third month in a row that domestic sales have declined * This is all a product of the auto bubble. Contrary to comparisons to the housing bubble, where people bought homes for investments, the bubble exists in automobile financing * Also contributing to the weakness in gold, were Janet Yellen's recent statements containing the strongest indications yet that interest rates may raise in December * She did, however, go out of her way to insist that the Fed has not made a decision, based on data coming in prior to the December meeting * Yellen admits to improvements in the labor market, but acknowledges that there is underemployment and low labor force participation * She did say, however, that she is confident that over the next 1-2 years, the economy will show real improvement in full employment and labor force participation * She also believes that the economy is indicating enough momentum that inflation will also reach or exceed the 2% benchmark * Paradoxically, economic data over the last 6 months show no such momentum * If the manufacturing sector is already in recession, as data indicates, what makes Yellen believe that the service sector, which has shown modest growth, can sustain any growth? * The only problem Yellen does address is overseas markets * Ironically the worst thing that can happen to the U.S. economy is for markets to have more confidence in overseas economies, which will cause the dollar to fall * Another source of Yellen's optimism is her expectation that there will be more government hiring * The last thing our economy needs is to support more government workers!

* I am recording this podcast on Cyber Monday * Cyber Monday first got its name because e-commerce wanted its own version of Black Friday * It's losing some significance, given it is losing some of its competitiveness because of the strong online s...

* Tomorrow is Thanksgiving Day, one day before Black Friday * The one day of the year where Americans make their annual pilgrimmage there they stampede to the nearest mall to buy stuff they really don'[t need and can't afford * It's almost like a black and blue weekend * I believe that this will be a pretty weak holiday weekend; by the time we get the sales numbers next week, it's going to be pretty dismal * The news that brought the euro down this morning was rhetoric coming from Mario Draghi , head of the ECB * He's talking about expanding the QE program to a 2-tiered system * Why is Draghi so determined to talk down the euro and talk up inflation? * He is in pursuit of Keynesian economics' holy grail - inflation * If only we can succeed in getting prices to go up faster then we would have economic growth and prosperity * Believing that a rising cost of living is the secret sauce of economic growth * If you search the internet, you see that no one is critical of this * If rising prices are so important, why not just raise the VAT? * You could obtain the exact amount of inflation desired if the real goal is to rais prices * But that's not really the goal, because they would just raise the VAT * The real goal is to wipe out government debt and to mitigate the effects of wage hikes imposed by the government * Academia and the press all give them a pass on the idea that rising prices create prosperity * The truth is the reverse: prosperity comes from reducing costs * As things get cheaper, more people can afford them - I use the example of cell phones * Now even poor people can afford a cell phone * Falling prices lift standards of living and falling prices result from a productive economy * Inflation results from government interference and it doesn't make things better * Let's go over the economic data this week * It's been a mixed bag * On Monday we did get the manufacturing PMI number, expected to come in at 54.5 which would have been an improvement * Instead, we got 52.6, the lowest number in 2 years * I've been talking about this for a long time on this podcast - the manufacturing recession is already here * The mainstream media dismisses this because manufacturing is so small it doesn't really matter * That statement says so much * A downturn in manufacturing will preclude a downturn in the service sector * We also got existing home sales that came out on Monday - they were below estimates * There's plenty of evidence that the housing market has already rolled over, and if the Fed were to raise interest rates, it would push it even further down that hill. * The big number that came out yesterday was the revision to Q3 GDP * Initially the government reported that the GDP was up 1.5% * Everybody expected an upward revision and that's exactly what we got - a revision to 2.1 * The problem was, the number was due to a big build in inventory * I have been talking about this for months on this podcast; we have huge amounts of unsold inventory * Businesses have been more optimistic than they should have been based on the Fed's recovery rhetoric * This mistake shows up as a positive in the GDP * The other big factor is that the government assumes that inflation is just 1.3% * I don't believe that for a second * Health insurance alone is costing the average American's cost of living more than 2% * Today the Atlanta Fed just reduced their Q4 GDP estimate from 2.3% down to 1.8% * What the third quarter giveth, the fourth quarter taketh away * Buried in that GDP report are some other bad numbers * There was a 4.7% decline in corporate profits for the quarter - the biggest decline in corporate profits since 2009. * Think about this: corporate profits are declining and inventories are growing * Sales are down, profits are down; what does that tell you about employment? * Continuing unemployment claims are continuing to rise

* Friday the 13 was an unlucky day on Wall Street * The Dow was down over 200 points - the second back to back decline of over 1% since August * What was happening in August? Everybody was convinced the Fed was going to raise rates in September * Now, everybody is just as convinced that the Fed will raise rates in December * Once again, as I predicted a week ago, the market sold off * We are down over 650 points on the week * Nasdaq is down today even more - 1-1/2% * The carnage was once again led by the retailers * Bad earnings out of Macy's Nordstrom's Walmart and others set the scene for new share price lows * I have been warning about this all year, based on inventory numbers * All the evidence is flashing recession * The Fed has been saying that they are data dependent - open your eyes and look at the data! * This data is consistent with the beginning of a recession * Yes, unemployment is low, but unemployment is always low when recessions begin * I think the Fed knows they are not going to raise rates * The Fed minutes are coming out next week and we'll get an insight into the deliberation between the members * All Janet Yellen said was that an interest rate hike was a "live possibility" - The market did the rest. * They took the word "possibility" and assumed that it was a probability * Let's look at the economic data that came in today: * First, October Producer Prices - they were looking for a rise of .2, because last month, they actually fell by .5 * We didn't get .2; we got -.4 * As of last month, year over year producer prices have declined 1.1% * Now they are down 1.6% on the year * This is going the opposite direction of the Fed's goal of 2% inflation * The worst number was retail sales: * They were looking for a rise of .3, which is still not a big rise - but we got an increase of just .1 * To add insult to injury, they had adjusted last month's forecast to zero * Also x auto, they were looking for a gain of .4 and instead got a gain of .2 * These numbers will subtract from Q3 and Q4 GDP * We also got September inventory numbers: * The consensus was a rise of .1, but instead we rose .3 * This rise was not a result of an increase of sales, it is because sales are not keeping up with inventories * The inventory to sales ratio rose to 1.48 fro 1.47 * The last time we had this number was during the financial crisis * I have been pointing out that these inventory numbers have been padding the GDP for the last several quarters * This has been ignored on Wall Street * This means future GDP will plunge as companies need to liquidate inventories and not replenish them * Not only that, they will be liquidating their workforce * The heavy layoffs may not happen this year - more likely they will come in January and February * The odds are that the Fed is not going to raise rates in December and the odds against a rate hike as the market continues to sink, with more and more bad economic news * This bad news about retail sales was unexpected by the market as evidenced by the sharp drop in share prices * Is the Fed going to raise rates just as the economy is turning down? Not a chance. * If they do, imagine how much worse the economy will be * The question is: When is the Fed going to come clean and admit that they are not going to raise rates and will their excuse be and will the markets buy it?

* When I recorded my last video blog, I mentioned how positively the market reacted to jobs report, which could signal the Fed to raise rates * I said there might be a delayed reaction and, in fact it did * Four days into this trading week we are down more than 450 points * Also, I did an interview on CNBC.com where I said I felt the retail markets would have a a tough time this Christmas * That was translated into headlines that I stated that consumers would have a horrible Christmas, which was not my point * So far, my prediction about the retail space is bearing out, bad earnings reports from Macy's Walmart, Men's Wearhouse, and its subsidiary, Joseph A. Bank, Nordstrom and Neiman Marcus * The data that the Fed depends on is getting worse and worse * If the Fed raises rates in December, it will prove that they have not been data dependent, they were delaying * Copper a six-month low today, oil prices are down, gold hit a new low inter-day but rallied back and the dollar finished broadly lower for the day * Based on these market prices, the Fed will have another excuse to delay rate hikes, again * What will stop the stock market from falling? The only thing that will stop it is if the Fed takes a rate hike off the table * I recently wrote a commentary where I reference the shadow rate * Tightening actually began about 18 months ago when the Fed started tapering * The Fed's monetary policy is not just about rates, it is also about easing and foreward guidance * When the Fed began tapering they were tightening * When they began talking about raising rates that was the equivalent of tightening, because the markets braced for the hikes * That's why the economy is rolling over, that's why the stock market is rolling over * Given how weak this recovery has been and the enormity of the stimulus required, if the Fed removes all stimulus it will result in a worse than normal reaction in this over-valued stock market compared to previous tightening cycles * More evidence of the weakening economy is the number of millennials still living with their parents is at a record high * I posted a Bloomberg article on my Facebook page about the number of young women living at home is the highest in 70b years * Bloomberg prefaces the article by stating that this is not a sign of a weak economy, but clearly it is * This also affects housing: * Couples are delaying buying "starter homes" which delays or prevents them from saving up for a down payment on their dream house * I also wanted to discuss the Fox Business Republican Debate * I believe Rand Paul was actually the winner of that debate * Paul stood out, and made some good points, which allowed him to move forward in the polls * Paul is drawing a contrast, as he made the point that the real threat to the U.S. is not a military threat from the outside, but the self-inflicted threat of a weak economy * Our debt is a bigger enemy than ISIS * Paul also avoided jumping on the immigration bandwagon. Immigration is not the problem. If we turn off the welfare magnet, then the only people who come to America will be the people who want to work * The country would benefit from that, because it will keep labor costs down and boost productivity * The anti-immigrant voice of the Republican party will be vilified as racist in the general election

* Friday, November 6, 2015 * Earlier today the government released the Non-Farm Payroll Report for the month of October * I was told that this was the most import Non-Farm Payroll report ever * They were looking for 190,000 jobs and we created 271,000 jobs * Everybody now has jumped to the conclusion that a December rate hike is a lock * There is nothing in this jobs report that indicates that * The reason everybody believes that the Fed is like to raise rates is because Janet Yellen testified before Congress earlier in the week * This is what the Fed Chair said about interest rates: * If we get further improvements in the labor market and we make progress at achieving the Fed's inflation goal of 2% in the medium term * How much improvement and what kind? We don't know, because thus far, no improvements have been enough to prompt a rate hike * Yellen said that if we got those improvements, then a rate hike in December would be a "live possibility" * This does not mean it will actually happen - it means it is possible * She did not even use the word probable * I don't think the Fed is going to raise rates in December * We have one more "most important" jobs report between now and December and this month's numbers may be revised down, as others have * From my perspective, if the Fed does not know that they will raise rates by now, they will not decide on the spur of the moment after a jobs report * Even with positive economic news, the Fed still does not have to raise rates; they can come up with another excuse, real or unreal * What happens if the stock market declines after a rate hike? what would the Fed do then? * "Extend and Pretend" is working like a charm for the Fed now * Getting back to today's job's report: * This is the strongest month of the year following the two weakest months of the year * Both of those months arrived with expectations of upward revisions, and they did not happen * The three month average is 187,000 jobs * The last three months have been slower than any prior three month period this year * Last year, the 3-month average was about 250,000+ jobs * So the job market is much slower this year than it was last year when the Fed was looking for "more improvements" before raising rates * The unemployment rate did decline, but so far no positive data on unemployment rates have prompted the Fed to raise rates * The Labor Force Participation Rate stayed at 62.4% which matches the low of this so-called recovery * So we are not seeing more people entering the labor force * This is not a sudden accelleration in the pace of job growth * Let's look at the quality of the jobs: * Most of the jobs, about 200,000 of the 271,000 jobs added are low-paying service sector jobs * In second place, at 45,000, is temporary help * Third place, at 44,000, is retail trade * The fourth largest category is leisure and hospitality * Manufacturing, mining, logging, transportation sectors lost jobs * Where it really gets bad is in the demographics: * All job gains went to people 55 and older * People under the age of 55 lost 35,000 jobs * If you look at the gender, men from 25 - 54 lost 119,000 jobs * What would explain this? * Older people can no longer afford to be retired, and are supplementing their retirement incomes * Some of the older people are taking better jobs because they are more experienced * Why are more women getting jobs? * Women who were previously homemakers also need to supplement their incomes * When you look at the demographic numbers, it is further proof that the Fed's explanation of the labor force participation rate is wrong * The Fed claims the participation rate is due to retiring Baby Boomers * The people who should be buying houses are the younger ones who are not getting jobs * Freddie Mack reported its first quarterly loss in 4 years * This is with rates still at zero

* Here we go again; Janet Yellen was on Capitol Hill testifying about the banking system * Forget about all her comments about how solvent the banking industry is - of course it's not * The banking system is more vulnerable and more highly leveraged than before the bailout * I am focusing on what she did or did not say about the Fed's intentions to raise rates in December and how the markets reacted * Headlines following the testimony were about the probability that the Fed will raise rates in December * The December meeting will be a live meeting with a rate hike on the table * The official probability of a December rate hike rose from 50% to 60% * When the Fed did not raise rates in October they removed language referencing concerns about international markets * This was interpreted as a more hawkish stance on the part of the Fed * The global economy was used as an excuse, but the Fed had no intention of raising rates in October * In December when it doesn't raise rates, it'll use another excuse * The markets wants to believe that the Fed will rates, and as soon as Yellen's comments were released, the dollar soared and gold tanked * Let's look at what Janet Yellen actually said: first I am going to go to a Reuters story, Fed's Yellen sees possible December rate rise * That's all it takes, just the mention of a possibility makes everybody jump to the conclusion it is going to happen * Here's Yellen's quote directly from the artice: * "What the committee has been expecting is that the economy will continue to grow at a pace that is sufficient to generate further improvements in the labor market and to return inflation to our 2 percent target over the medium term," * "If the incoming information supports that expectation then our statement indicates that December would be a live possibility." * She is saying, if we get the improved data we're expecting * The labor market has been weakening and the last two jobs numbers have been quite weak * Yellen says it is possible if we get improvements we expect we will raise rates * Anything is possible... it is more probable that she is not going to raise rates in December * She actually says it's a long shot * She's been saying this all year and it has not meant anything * Reuters omitted from the article that Yellen followed up the above statement by reiterating that at this point, the Fed still has not made up its mind * Another story from CNBC:Janet Yellen: December rate hike a 'live possibility' * Here's a Yellen quote from this article: * "Now no decision has been made on that and, what it will depend on, is the [Federal Open Market Committee's] assessment at the time. That assessment will be informed by all of the data that we collect between now and then," * This implies that they intend to collect data from now until the December meeting and make their decision on that data * If the Fed does not know now, how different can the data be? * If nothing is going to change, why not make a decision? * Yellen's monetary policy is to pretend to raise rates and then not do it * If you actually listen to what she is saying, it is far more probable that she won't raise rates, because thus far, we have not seen an improvement in the data she is tracking * Even if the Fed sees improvements, they still might not raise rates * Here's the one thing that Yellen is not doing: she does nothing to alter the false perception that a rate hike is likely * This shows me that it is by design. They are tightening by rhetoric * Here's an illustration of how an interest rate hike would be disastrous * Freddie Mac issued its first quarterly loss ($475 million) in 4 years

* I am recording this podcast from New Orleans, where I am attending the Investment Conference * Today, I am going to talk predominantly is the FOMC statement that came out yesterday following the conclusion of their 2-day October meeting * It was largely expected that the Fed would not raise interest rates in October and that's exactly what happened * I predicted this a long time ago * What is amazing is that, as a result of this announcement, more people expect the Fed to raise rates in December * Going into this announcement, the dollar was on the defensive, silver was up about .50, gold was up $15.00 * It sure looked like people were expecting a more dovish tone from the Fed * After all, a lot of bad economic news has come out since the September meeting * When the Fed statement was released, there was no such change in language * This now leads people to believe that the statement was hawkish * They still don't understand the game: Nothing has changed. * the Fed has to pretend that a rate hike is right around the corner in order to pretend that the recovery is real * They can't admit that the economy is weak because they want to take credit for saving the economy * They have to keep pretending, and they have to keep making up excuses * Steve Leesman was asking why we need emergency rates when the emergency is over * The emergency is not over, as far as the Fed is concerned because there is no real recovery * If we had a legitimate recovery, of course the Fed could raise rates * Thus the game: they continue to talk as if they might raise rates, and the markets buy it * As soon as their statement came out, gold tanked, it ended up down about $10, silver gave up most of its gains, and the dollar was broadly higher * If you actually read the statement, there is nothing hawkish about it * It is basically the same as the September * The only thing that stands out is an absence of concern * The FOMC is not worried about all the bad news * "In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. " * None of that is going to happen. The labor market is deteriorated - the labor force participation rate is still shrinking * These are metrics Janet Yellen needs to see improve * The Fed knows that these minutes will be misinterpreted * They want to preserve the illusion that a rate hike is possible so they can preserve the illusion that this is a legitimate recovery and not a gigantic bubble * But, what's going to happen when the Fed doesn't raise rates and ends up launching QE4 the Fed is going to have zero credibility * The U.S. economy is in worse shape now than it was leading into the 2008 financial crisis * Now everybody is talking about how important the jobs number will be - the Fed has not raised rates in 7 years. How can one jobs report make the difference? * Meanwhile we've had months of stronger jobs numbers and the Fed did not raise rates * I think the truth is the Fed has decided not to raise rates * But they still need to maintain the perception that they might raise rates and that's the only explanation for the Fed's rhetoric * Now let's get into this week's data, including today's release of Q3 GDP numbers * They were looking for 1.7%, which is a sharp slowdown from the Q2 3.

* This is the first podcast I've been able to record since the death of my father, Irwin Schiff, who passed away on Friday * If you're interested in learning more about him and the circumstances surrounding his death, I would encourage you to read my commentary, "The Death of a Patriot" * There also links to many other articles written about him on my Facebook page * You can also find on my YouTube channel, my father's debate for the 1996 Libertarian Nomination for President * You can also find on the internet a video he created called, "The Secrets of a Tax Free Life" * He died in jail because of his political beliefs and for standing up for his Constitutional rights * While in prison, my father got insufficient medical care, he lost all his teeth, lost his eyesight and eventually died of cancer * In my father's case, even if he were wrong, the penalty should have been a civil case * My father was steadfast in his beliefs, and did not want to be released unless he won his appeals * The Dow was up more than 300 points today * The strength came from the ECB, as Draghi suggested that the ECB was considering expanding QE * The ECB is trying to talk the euro down * The ECB did not actually do anything, they just jaw-boned the markets with the idea of more QE * This was a euro story - the dollar was only up against the euro * The New Zealand dollar was up 1.3% against the U.S. dollar * Gold was up 2% in terms of euros * Silver was up .15 in dollars despite the big jump in the dollar index * This lays more foundation for the Fed not to raise rates * At some point, I think the Fed will another round of QE * The reason Draghi suggested QE was over fears that inflation is too low * It is running at .9%, but according the ECB, the holy grail is 1.9% * Draghi was asked why he is spending so much money to raise inflation when he earlier said that low inflation is good for purchasing power * How does the ECB think they can pinpoint inflation to exactly 1.9%? * Draghi's answer was that low inflation makes debt harder to repay * What Draghi is saying is that it doesn't reduce debt enough * Why is it good to transfer wealth from creditors to debtors? * He also said that with low inflation, real wages will rise * Why is this a problem? Because the government artificially boosted wages in the first place expecting inflation to mitigate their true effect in the economy * What's really too high is not so much wages as labor costs, due to government mandates * We want workers to have higher wages in a free market based on their productivity * All that is undermined in the ECB's quest to generate inflation * Draghi also questions the accuracy of is numbers * Central bankers are trying to prop up the stock market and the government * The real debt the central banks want to wipe out is government debt * This is not what central banks are supposed t do, they're supposed to be independent * Another reason the U.S. market might have been strong is because of all the weak economic data that came out * Housing was stronger than expected, but everything else was pretty weak * The Chicago Fed National Activity Index, which was -.41 came in at -.37 - back to back bad months * Also leading economic indicators experience their biggest drop in almost 3 years to -.2 * Last month was also revised down * Also the Kansas City Fed Manufacturing Index negative again * Bloomberg's economic expectations index is at its lowest level since 2013 * All these indicators suggest recession on the horizon * This is music to the ears of Wall Street traders because it means the Fed will continue to play the cheap money tune

* We finally got some economic news today, all of it bad * All of it "unexpected"... * Hope springs eternal on Wall Street * That's why the Federal Reserve can maintain its forecast of an interest rate hike before the end of the year * Although...

* The Dow Jones finished up almost 140 points - back over 17000 * The Dow has now rallied 1,000 points since its lows on Friday following the lower than expected Non-Farm Payroll number * The market originally sold off until traders realized that b...

* It is the first Friday of the month, and that means that this morning we got the September Non-Farm Payroll number * Anyone who has listened to my podcasts and video blogs knows that for months I have criticized these so-called strong jobs reports * I think what's going on is a transformation of the economy from full-time jobs to part-time jobs and that necessitates creating more jobs that you destroy, but the real story is beneath the surface * The report we got today was one of the weakest reports relative to expectations than we've had in years * This may be the final missing piece to the economic puzzle that shows that the economy is not as strong as everybody, including the Fed pretends it to be * And that the rate hikes expected to be around the corner are a distant blur on the horizon * Soon more will join me in recognizing the more QE is coming * Of course QE is not medicine; it is toxic * Let's get down to the tale of the tape with the jobs numbers * First, the bigger number is the August number, which was expected to be revised up, was revised down to 136,000 jobs * July was also revised down * The September number was expected to be 203,000 and actually came in at 142,000 * This is an average of 163,000 jobs for the last 3 months * Six of the last 8 jobs numbers have been revised downward * The August labor force participation rate was 62.6, which was the lowest of the "recovery" * The September rate dropped another .2 to 62.4, which is the lowest since 1977 * Another 579,000 left the labor force in September - now there are 94.6 million Americans not working * Average hourly earnings, expected to rise .2, remained flat * In fact, the average work week declined from 34.6 to 34.5 * If you remember, what has Janet Yellen stated as a requirement for a Fed rate hike? - An improvement in the labor market. * The labor market was singled out as a reason why rates remained at zero in September * While others speculated that rates might hike in October or December, I said the labor market is not going to improve, so the Fed will not raise rates * Janet Yellen is looking at labor force participation, which has declined to a new low * Yellen is also looking for an improvement in wages - that is going the other way * If you also look at the details of this jobs report, you'll see that jobs created are low-paying jobs and jobs lost are higher-paying jobs * For example, we lost jobs in wholesale trade, manufacturing and logging - those are good-paying blue collar jobs * We gained jobs in leisure and hospitality, education and healthcare, retail trade - and a lot of these jobs are temporary or part time * This is why there is not real recovery, why people can't save or buy houses * This weak jobs number is another excuse for the Fed not to raise rates * Some are pointing to this jobs number as proof of the Fed's wisdom in not raising rates in September * However, Yellen stated that rates would go up if the economy continues to improve as the Fed expects - but the economy is getting worse * I've always said that the Fed does not want to raise rates because it does not want to look foolish if it has to back down from a rate hike * We got more economic data today: factory orders wer down 1.7% worse than the expected number of -1.3% * Also, last month's number was revised down, making this the tenth month in a row that factory orders have been down, year over year * This only happens in a recession * Maybe we are in a recession * We don't have Q3 GDP numbers yet, but yesterday the Atlanta Fed reduced its Q3 estimate to .9 * The consensus on Wall Street and at the Fed is still 2.5 * I think that given this jobs number, the downward revision of the previous month and the factory orders number in addition to economic data we're likely to get next week, the Atlanta Fed may reflect a negative estimate for Q3 GDP * If we get a negative number for Q3,