The Peter Schiff Show Podcast

* It's been over a week since I did my last podcast there's been a lot of economic news - almost all bad * The markets have been under pressure - we're back down near the mini-Black Monday lows, solidly in correction mode * The pressure on international markets has been greater * Yet the vast majority of economists expect the Fed to raise interest rates by December * This would really mean last minute - as the Fed's messaging hints at an interest rate hike by the end of the year * If you look at the Fed's reasons it listed were: * Weakness in overseas economies * Lack of inflation, as the Fed measures it * Increased improvement in the labor markets * Why would the Fed move if all these concerns still exist? * The answer is, it would not move * No one wants to connect the obvious dots * When the Fed refused to rule out an interest rate hike in October or December it might have been the worst thing for the markets because it is admitting it is considering kicking the economy when it is down * Initially I thought the Fed would indiciate a dovish hold, but they opted for a hawkish hold, which exacerbates the issues with the markets, as the hike is already priced in * International markets assume America can handle higher interest rates; but the Fed is still talking up the economy to send the message that the U.S. can handle higher rates, even though it can't * I discussed this at length in my recently released video of my address in Jackson Hole, Wyoming * I really want discuss in today's video two people who are in the news: Donald Trump and Carl Icahn * Trump was on 60 Minutes this week and Carl Icahn recently released a video called, 'Danger Ahead' * Trump's performance really hit the ball out of the park with his delivery, not that I agree with everything he said * The typical voter will buy his bill of goods * The interview was a commercial for Donald Trump in which he promises everything to everybody * The promises to cut taxes on everyone but the hated hedge fund managers * He promises to repeal and replace Obamacare with something even better and still insure everybody * He promises to save Social Security * He promises to grow the economy * To the average voter, who doesn't really understand economics, he sounds like he can pull it off * He sounds optimistic about what the country can be like if he is elected president * The economy will grow because jobs will come back from overseas * How is he going to do that? I don't know, but it doesn't matter * He says it in a way that people are going to believe it * Who will argue against it? * He is not singling out any one interest group that will suffer * His performance was brilliant, even though much if what he promises is impossible * His tax message resonates because currently the government uses high corporate taxes so that special interests groups can be given favors by Congress, and higher taxes are held over the heads of those who do not buy them off with votes * With lower corporate taxes, the politicians lose that leverage * Trump doesn't need these special interest votes because he's spending his own money * All Trump needs to do is get the nomination, then the Republican Party will support his Presidential Campaign * His campaign for the nomination has been largely fueled by publicity * He is running a better campaign in light of public perception * Trump is throwing light on the problems who the average guy really feel - even if he is pie and the sky * Carl Icahn is in the news because he could be Treasury Secretary if Trump is elected, and he would probably not be that bad * His new video, called "Danger Ahead" starts out as a commercial for Donald Trump, giving him even more publicity, but in the second half of the video he addresses the real root of the problem in the U.S.

* Tuesday's podcast was titled, "Will She or Won't She?" referring to whether or not Janet Yellen would announce an interest rate hike for the first time in almost 7 years * Today we got the official answer: "No." * For the 54th consecutive time, the Fed has left interest rates unchanged at zero * What is even more amazing, in the Q&A immediately following the announcement, Janet Yellen admitted that she could not rule out the possibility that interest rates would stay at zero forever * A reporter asked her if the Fed may be trapped at zero forever * Among the excuses the Fed used was problems in overseas markets, which opens up a grab bag of excuses for the Fed conveniently explain why it is not going to raise rates * I said from the beginning the Fed has no intention of raising rates * They also mention that these problems may spill over into the U.S. economy * She also mentioned additional problems in the labor force: wages, people re-entering the workforce and more full-time jobs * That is not going to improve in the next three months, yet the Fed is still pretending that it could raise rates in October or December * Yellen is also no ruling out that the Fed could keep interest rates at zero forever, so who cares about what she won't rule out? * Janet Yellen answered the reporter's question by saying, " We don't think we are going to be in that situation, however I can't rule it out." * So the fact that she is not ruling out an October or December rate hike means nothing, because she also can't rule out zero interest rates forever * What else does this tell you? * She is concerned that rates will be at zero for a long time * Janet Yellen believes that the Fed could actually keep interest rates forever * They won't even stay at zero for the end of this decade because ther is going to be a currency crisis that forces the Fed to raise rates * The only reason the Fed has maintained the illusion of control for so long is that the market is believing them * When They figure what the Fed is really doing, then it is over with * Then the dollar will tank, creating upward pressure on inflation * They will have to raise rates; market will not give them a choice * Janet Yellen does not know this * Another reporter asked her if the Fed will adjust their policy if inflation gets to inflation sooner than anticipated * Yellen went out of her way to state that 2% is the target, but not the ceiling * I think the Fed does not have a ceiling, but the market does * Another interesting discussion was regarding the balance sheet * The Fed can't start shrinking the balance sheet until they raise rates * Yellen admitted that since rates are still at zero, they are pushing back the time when the Fed will begin shrinking the balance sheet * If the Fed never raises rates, then it can never shrink its balance sheet * The Fed may never raise rates on its own volition: I know eventually they will have to raise rates * And then it will be a complete catastrophe * But everybody is still pretending everything is great, maybe the Fed will raise rates in October of December * Here's another interesting development: the market was up all day but it sold off down 65 points. A pretty big reversal. * Ultimately the Fed will have to officially take rate hikes off the table * What kind of bad news will they need to do that? * We got bad news today: Housing Starts were significantly below estimates and the prior month was revised down * Bloomberg Consumer Comfort Index had its second lowest week in a year * The worst number that came out was Philly Fed - was expected to come in at +6, but actually came in at -6 * The biggest miss in 4 years * Given all this bad news, the Fed, under normal situations would be lowering rates * I believe at some point we will see weakness on the jobs numbers * I also believe this holiday season will disappoint

* Tomorrow we have the most highly anticipated Fed meeting ever, but this will not be the last time I'll say this * We'll also be anticipating October and December if the Fed does not raise interest rates in September * The odds are they won't do it * I put a Bloomberg story on my Facebook page: Yellen's former aid says a rate hike would be a serious error * Why? The official target for the Fed Funds Rate now is at a range of 0 to .25 basis points * The Fed is contemplating a rate of .25 which is the high end of the existing range * If they decide to keep the rate at .25, all they've done is fixed the rate at the high end of the range * This is not even a rate hike * Why would this be a disaster? * Isn't that an admission that the economy is fragile? * When Alan Greenspan lowered interest rates to 1% after the dot com bubble and after Sept 11, people though, this is ridiculous! * Now we are talking about raising rates to a quarter of that and it is considered a disaster * What is going to change between September and October and October and December - unless they get worse * The serious error is to prick the bubble economy * The more serious error is for the Fed to raise rates and then admit that it was a mistake they lose credibility * We're going into recession regardless * If they raise rates, they will have to launch QE4 sooner * Any rate hike will sow the seed of a rate cut * On the topic of a recession, let's talk about the economic news we got today * The first release we got was August Retail Sales * A rise of .3 was expected and we got a gain of .2 * These are not great numbers * The worse number of the day was Empire State Manufacturing: last month's horrible number was -14.92 the lowest since 2009 * Wall Street was looking for -.5 * September was -14.67; barely an improvement * Back to back the worse numbers since the great recession * The media barely reported on this number at all, but if it were good, it would have been in the headlines * The Redbook Year over Year Same Store Sales Index has collapsed - right now it is at 1.3 * Previous years ranged between 3% and 5% * Industrial Production was expected to fall by .2, but fell by .4 * Capacity Utilization dropped from 78 last month to 77.6 * Manufacturing output dropped as well to -.5 * Auto manufacturing had its biggest drop in 4 years * I have been talking on this podcast about the Auto Bubble and we are getting more evidence that the bubble has burst * The biggest decline in manufacturing in 4 years is pretty good evidence * The fact that there is a huge inventory of unsold cars on dealers' lots is evidence that the market is saturated * We got more news from business inventories: up .1 as expected * Sales are also falling, so the inventory to sales ration is still 1.36, a notch below the record high from the '08 financial crisis * Inventories have to come down a lot more because sales are not there * They are not there because the economy is weak * Earlier strong GDP growth was from inventory buildup * All the evidence points to recession * Employment numbers, which are theoretically good, are a lagging indicator * All the leading indicators of the economy are flashing a warning * Yet the media is ignoring the warnings and paying attention to Janet Yellen * She is pretending the economy is strong so she can pretend to raise rates * We need to allow the economy to go through that unfortunate crisis and allow the bubble economy to burst and the real economy to heal * The Federal Reserve shot us up with all these monetary drugs so unfortunately we have to check into monetary rehab * The alternative is to die of a overdose in the form of a currency crisis * In any event we will find out on Thursday and you will get my take on it late Thursday afternoon here on my podcast

* The U.S. stock market finished out this holiday-shortened week on an upnote with the Dow Jones up just over 100 points * This was the best week the market has had since March * The dollar was softer on the week; the euro ended solidly above 113 * Gold was under pressure throughout the day but closed only off about $3.00 * Gold stocks earlier this morning were at the lowest I've seen in this cycle but then had a sharp reversal finishing much stronger on the day * The markets are looking forward to no rate hike in September * Michigan Consumer Sentiment Numbers may have been the catalyst to turn the market * They were looking for 91 - slight below last month; instead we got 85.7 - a huge miss * This is the biggest miss in the history of the index * The bigger number was the Wholesale Trade Number, which was expected to reflect inventories to rise .3% * Instead, inventories declined by .1% * This will notch a little off of Q3 GDP * More importantly, inventories went down, but sales also declined by .3% * This means the inventory to sales ratio rose again * It is not at the highest it has been since the 2008 financial crisis * This level has only existed twice in the last 15 years and both of those times, the economy was in recession * Another interesting chart is inventory to sales in the Auto sector * Auto inventory to sales level has risen to 1.73% - the highest since 2009 * Today's inventory to sales ratio is even higher than the recession of 2001 * This is a sign that the Auto bubble is bursting * If the Fed were going to raise interest rates in September, wouldn't we already know by now? * The longer the Fed waits to raise rates, the less likely is is to do it * If the Fed does rates and then has to go back to zero, it will look like the Fed was wrong about the economy * It would be better now to keep rates at zero, indicating they understand the weakness in the economy * The other risk of raising rates, and weakening the economy is that it may become evident that the Fed can never raise rates * The driving force behind the dollar rally is expectation of normalization of rates * The Fed has severed the legs of the economy and higher rates will expose this * The Fed has plenty of excuses not to raise rates, but now that they started zero percent interest rates, they will not be able to stop * The balance sheet has not shrunk at all * There is no way out * How can people think that we can keep interest rates this low for this long and not have problems? * Artificially low interest rates causes mis-allocation of resources * Those mistakes are corrected when interest rates go up * The next economic downturn is going to leave the Fed with no other recourse than QE * Fiscal stimulus will roll out during the election year to cover the bigger deficits caused by Keynesian stimulus package * Also the emerging markets are just starting to unload U.S. Treasuries because they no longer need them to keep their currencies from rising * When they realize that the dollar has peaked and a new bear market has begun, the Fed will have to not only stimulate the economy and monetize the growing deficit, they will also have to monetize the treasuries that are being sold by foreign central banks * QE4 for will be bigger than QE1, QE2 or QE3 * The question is, when are people going to figure this out? * When is the dialogue going to turn from when will the Fed raise rates to how big is the next stimulus package be and how soon will it be here?

* Another day, another 450-point swing in the Dow Jones * The market opened about 250 points higher off the back of overseas markets * Japan was the standout; it was up about 7% on the hope of more money printing * All overseas markets were stronger and the U.S. followed that lead, but at the end of the day, the market was down about 240 points, a lot of selling coming in the final hour * Huge swings almost daily over several weeks generally indicates a change in trend * The long-term trend of a rising market followed by extreme volatility usually marks the end of that trend * All this volatility is based on rate hike uncertainty * Sentiments range from rate hikes coming either in September, October, or December * The first rate hike is not scaring everybody, it is the consequences of interest rate normalizaion * If the Fed does raise rates, I think the market will start looking toward the next rate cut * This bubble is so big, the slightest pin will prick it * The Fed's only option will be stimulus to get out of the next recession * The cycle will be much shorter because of the amount of debt we have * Sentiment is coming from everywhere asking the Fed not to raise rates, which plays into the Fed's hand * This disguises the Fed's actual intention not to raise rates * Market volatility today was probable due to the JOLTS report today which unexpectedly jumped up to the highest level in years, indicating a huge number unfilled jobs * The JOLTS numbers have been good for years, and wages still have not gone up * This is just the raw number of jobs, so these may be a larger number of part time jobs open replacing full time jobs * Many low-paying jobs won't be filled because entitlements provide higher compensation * Everyone is on pins and needles because they know that cheap money is the only thing that is fueling the economy - it's not real earnings * The market may have sold off anyway because there has been a lot of technical damage done to this market and it is likely to go down until the Fed admits that rates are not going up * The stock market, unlike the foreign exchange market or the commodities market or the emerging markets have not discounted rate hike normalization * This means that if the Fed does rates by a quarter point, the dollar could sell off because it is too little too late * It could be the shortest tightening cycle ever * The stock market needs to know that the Fed is not going to raise rates * The U.S. will lose its safe haven appeal * One small example why the Fed can't raise rates is the sub-prime Auto Loan bubble, which is now above a trillion dollars * The short-term benefit to the economy is increased manufacturing, inventory and jobs * But the huge reduction in credit quality of these loans provides risk of fewer future sales due to longer payoff terms * It is much easier to default on an auto loan than it is to default on a home * If we have a trillion dollars in auto loans, if we go into recession next year, we would lose at least $100 - 200 billion on car loans which will further exacerbate the recession in a big way * High-paying jobs in the auto industry will be lost,and the Fed has to know this already * Another trend is a record high in auto leases because they offer lower monthly payments * Leases are not the best choice unless they are bought for a business, providing a tax write-off * Otherwise, for personal use, your payments never end - you never own the car/li> * I have already recommended not to borrow money to buy a car * Save your money and buy a used car you can afford * In the Chinese economy, most cars are purchased with cash, from savings * The world is confusing our bubble economy for a legitimate economy, and they've made this mistake before * They made this mistake in the 1990's, in the housing bubble and they're making the same mistake again * The third time will be the charm,