The Peter Schiff Show Podcast

Recorded August 20, 2019 The Day the Yield Curve Inverted I am finally back in the United States - well, in Puerto Rico, technically is part of the United States, it's a territory - after my extended trip through Italy. I recorded that one podcast, and on the very next day, we had probably the most volatile day in memory. What happened that morning was that we got some weak economic data that came out of China and then we got some more weak economic data that came out of Germany and that immediately caused yields to drop around the world. In the United States, for the first time, the yields on the 10-year treasury dipped below the Fed funds rate. So the entire yield curve, out to 10 years was inverted. In fact, the 30 year yield hit a new low for this whole "quantitative easing - zero percent interest rate" cycle. The 10-year did not quite do that yet, but the 30-year did, and as soon as this happened, as soon as the curve inverted, I think it triggered a lot of sell programs in the stock market. The Media was Waiting to Flip the Narrative Stocks got clobbered, in fact, by the end of the day the Dow Jones was down 800 points; one of the worst point drops in Dow Jones history - not one of the worst percentage drops, but 800 points is a lot of points. And of course, as soon as this happened, the media began to cover the possibility of a recession to a much greater degree than they had in the past. If you remember, I said that this was coming. I said that I thought that maybe the media was waiting to flip the narrative on Trump, which is exactly what they've done. Fake News? All of a sudden, a media which was pretty much buying the booming economy narrative now is questioning whether the economy is actually strong. In fact, now you have Donald Trump accusing the media of being involved in some kind of conspiracy to make the economy look bad. In other words, a lot of the data that's been coming out indicating that the economy is weak, that it is slowing, that this is just Fake News.

Catch Peter on Simon Black's podcast, "Sovereign Man" recorded yesterday in Italy. https://www.sovereignman.com/category/podcast/ Catch Me on Sovereign Man There's been a lot of action over the last couple of days in the U.S. stock market.  In fact, the market just closed a few minutes ago, as I am recording. It is now after 10pm in the evening here in Italy. If you don't already know by now, I am out here in Italy with my son, and that's why I'm not recording as many podcasts as I normally would.  Although, I did record a podcast with my friend Simon Black, of Sovereign Man. I'm actually staying with Simon and some other guests of his for a few days in Umbria.  We leave tomorrow for Florence, then Venice and then home. So I recorded a podcast with Simon yesterday.  We talked for about an hour.  So if you want more material, just go ahead and have a listen to that.  You'll get over another hour discussion. Check out my Debate with Art Laffer on YouTube Also, I put up the YouTube video this morning that I meant to put up a couple of weeks ago. I uploaded

Recorded August 6, 2019 Trade War: New Tariffs and Accusation of Currency Manipulation Yesterday was the worst day of the year for the Dow Jones.  At one point, we were down about 950-odd points.  I think we closed down under 800; 767 points.  But it was a follow-though from the weakness that we had on Friday and the news, too, that we had on Friday about the escalation of the trade war, where Donald Trump announced the imposition of new tariffs on China. Normal Movements in a Currency Market But what happened overnight in China was the yuan went below 7:1 against the dollar. This is the first time it has been that low since China started to allow its currency to appreciate against the dollar. It had been appreciating… now 7 is not that much weaker than it was when Donald Trump became President.  The Chinese yuan is only down 2-3% since Trump took office. That's not a whole lot, when it comes to a currency. Everybody is up in arms; now Trump is upset that the Chinese are weakening their currency, when the currency has not weakened very much.  In fact, the U.S. dollar is down about 2 or 3% against the Swiss franc since Trump became President. So what's the big deal? Switzerland isn't accusing the United States of manipulating its currency, just because the currency dropped a few percent. These are normal movements in a currency market. Dow Trading Higher after China Blinks? But the minute the yuan dropped below 7:1, everybody was saying, "Currency War!"  and "Who knows how much further the yuan is going to drop?" And so that sparked a lot of selling in the Chinese market.  And so the U.S. market went down… I think the futures went down maybe about 300 Dow points or so before we opened.  But then, as soon as we opened, we sold off hard and we did have a little bit of a rally into the close, so we closed off the lows, but as soon as the U.S. stock market closed, the futures sold off again. I think at one point last night, the Dow was off another 4-500 points before reversing on the Chinese yuan having a fix, I think, that was a little bit higher than the markets were worried about, so that caused the traders to breathe a little sigh of relief that the yuan didn't fall again. So that sparked a rally.

Recorded August 2, 2019 July NonFarm Payroll Report: Great? Not so Great This morning we got the release of the July NonFarm payroll report, and the general consensus among the analysts seem to be that it was s strong report, a solid report. I saw Larry Kudlow this morning on Fox Business talking about another "solid performance" in job creation.  But once again, once you look beneath the surface, and you don't have to look too deep, this is not a good report. The Bar Was Set Pretty Low First of all, the bar was set pretty low.  The consensus was 151,000 jobs.  That's not a lot of jobs, so it's not that hard to beat it, and we did.  We got 164,000 jobs.  But the reason we beat it was because we created more government jobs than the market expected. For private payrolls, the consensus was 160,000 jobs and we only created 148,000 jobs.  So we created 12,000 fewer private sector jobs than had been expected and we made up the difference by creating government jobs, whether they are for the Federal government or state government. Public Sector Jobs vs Private Sector Jobs But there's a very big difference between private sector jobs and public sector jobs, in that the taxpayer isn't on the hook to pay the salaries of the private sector workers. They're working in companies that are generating profits, so the salaries are paid for by the profits that the businesses generate. The Government Does Not Generate Profits The government doesn't generate any profit. It just has to suck up tax revenue; we have to pay for these.  So it's not a good thing that government gets more bloated and hires more people.  Especially since a lot of government bureaucrats tend to complicate things. They make everybody less efficient.  If we're hiring more regulators to slow down the economy and get in everybody's way, that's not a good thing. I'd rather have a lean, mean government. Of course, that's not going to happen.  

Recorded August 1, 2019 Trifecta Podcasts this Week I hadn't planned on recording a podcast today; I did one yesterday and I figured I'd wait until Friday, get the … payroll numbers and finish up the week with a Friday podcast.  But so much action in the markets today, that I just couldn't resist.  I knew there would be a lot of people who would be excited to get a podcast today, so we're going to have a trifecta - we're going to have three days in a row of podcasts. Nobody on CNBC saw the Rate Cut Coming… But I Did Before I even get into a lot of the market action today, I want to talk a little bit about what I heard on CNBC this morning. They're still talking about the rate cut that we got yesterday and the host said, "Six months ago, nobody could have possible predicted… nobody would have believed that we'd be here today and the Fed would be cutting rates. And nobody could have possibly believed that the Fed would be ending the quantitative tightening program, because it's now over!" So, according to CNBC, nobody could have possibly predicted this, yet it happened anyway. Wait a minute: what about me? I predicted it. I said it was going to happen.  I didn't say it on CNBC because they won't let me on, but I said it on my podcast.  I even said it on their competitor network, Fox Business. Maybe if they watched Fox Business they would've known about this. I Predicted, Live, That December Hike Would the Last Hike So, really, what they meant is nobody on CNBC saw it coming. None of their anchors, none of their regular guests saw an end to quantitative tightening. None of them saw the rate cut. But I did. Not only did I predict that the Fed would cut rates, I predicted, live, that the December hike was the last hike. and that the very next move by the Fed would be a cut. And that is exactly what they did.  

I Bet an Ounce of Gold that Fed would Cut Rates Today I officially won an ounce of gold! I am referencing a bet that I made back in January of this year. During a panel discussion, I said that I though that the Fed was more likely to cut rates in 2019, than hike them.  I was the only person on the panel who believed that.  Everybody else thought that the Fed would be raising rates, which pretty much was the conventional wisdom in early January. Check out My Forecasts in December and January on YouTube So today, the Fed cut rates, which is what I have been saying they would do.  In fact, not only did I put up a small YouTube video of that bet, as well as a video of the entire panel on my YouTube channel. But I also cut a minute or so segment from my interview on the Monday in December 2018 the week the Fed raised rates, 2 days later on a Wednesday.  That was the final hike where the Fed went from 2% to 2.25%, to 2.25% to 2.5%. Fed Cut Rates by 25 Basis Points I was interviewed by Liz Claman- by the way I will be on Liz Claman's show tomorrow - they've renamed the show it is the Claman Countdown. But when I was on Liz' show back in December I made the forecast then: If the Fed raised rates in December that week, which, I thought they would, (everybody believed they would - they wouldn't want to disappoint the markets) I said that it would be the last hike, and that the very next move that the Fed would make would be to cut rates. And that is exactly what they did today. They cut rates by 25 basis points. December's Rate Hike Erased So they basically took away the last rate hike and the rate is now where it was prior to the December rate hike. Now, I believe that cutting rates was a mistake.  I think the Fed should have already raised rates by more than they have. Not because the U.S. economy is in great shape, because it's in lousy shape. It is a gigantic bubble.

Two Camps: Inflation vs Deflation I did the first live stream a couple of weeks ago; that was on bitcoin. I got a lot of feedback on that one and a lot of people were coming up with potential topics for the next one.  I think the most common request was for inflation or deflation: which one is it going to be? Because there are a lot of people out there who see the world similar to the way I do, as far as the problems that are confronting the U.S. economy in particular but the global economy, but everybody seems to fall into two camps as to how it is all going to go down; whether it is deflation that is coming - we should prepare for that, or whether it is inflation that's coming and you should prepare for that.  Now I am an inflationist.  I am in that camp. Other people in that camp may be, like Jim Rickards or Jimmy Rogers or Marc Faber - there are a number of people who would be in the inflation camp. Deflation would be guys like Robert Prechter, Harry Dent, there are a number of guys that are looking for deflation. Defining Terms Now before I really get into it, I want to talk a little bit about the terms, so we know what we're talking about.  Let's define the terms.  What is inflation? What is deflation? The actual definition of inflation, the actual meaning of the word, is an expansion of the money supply. What does "Inflate" Really Mean? That's what inflation is; it's not about prices.  If you think of the word, "inflate" - what does inflate mean? It means to expand. You inflate a balloon; when you inflate a balloon, it expands. Prices don't expand - they go up, they go down; they don't expand. What expands?  Money supply. When the government creates money, the money supply expands, like a balloon.  It blows up. So that's what inflation is, it is an expansion of the money supply. What is Deflation? Deflation is the opposite; it is a contraction of the money supply. Now when you inflate the money supply-you create more money - you have more money bidding up prices. So inflation will result in prices going up. But prices going up is not the inflation they are the consequence of inflation.

Participate in my next YouTube Live Challenge next Monday, July 29, 9pm EDT The Topic: It’s Inflation, NOT Deflation What is Really Happening to Corporate Profits? Both the S&P 500 and the NASDAQ rose to all-time record highs today; nominal highs, of course.  The Dow Jones didn't quite make it to a new high, it did close better than 50 points higher - 27,192.45, but probably the most interesting thing about the record high, is what's actually happening to corporate profits. I'm talking about operating profits, which are profits before you subtract interest and taxes.  I'm looking at some new statistics that came out today.  There were some revisions that came out from the government; some of them on the GDP, which I will get to a bit later in the podcast. Corporate Operating Profits Moved Sideways Since 2014 Just looking at corporate operating profits, it turns out that operating profits actually peaked in the third quarter of 2014.  That is while Obama was still President, a few years before Trump was President. So corporate profits - operating profits peaked in Q3 of 2014.  And they basically have been going sideways ever since, although they have been dipping recently.  If you take a look at the last quarter, operating profits are now the lowest they've been since 2011. Profits Have Gone up - but Not Operating Profits Now, the Dow Jones finished 2011 at about 12,000  - 12,200, I think was the end print. Well, we've more than doubled since then, but operating profits haven't gone anywhere. How are you doubling stock values when the profits are staying the same?  Now, of course it's not the profits - profits have gone up - but not operating profits. But operating profits are really more important if you want to look at what's going on in the companies in these averages. Operating profits is how much money the companies make from operating their businesses. Tax Cuts Boosted the Stock Market So, actual profits have risen even though operating profits have not. Why is that?  One: we got the big tax cuts. Corporate tax rates went way down so that enabled after tax earnings to rise. So that provided a boost to the U.S. stock market. But these corporate tax cuts are temporary. They are not permanent; corporate taxes are going to be raised.  Especially if I'm right about Trump being a 1-termer; the Democrat who succeeds Trump is going to raise corporate taxes.

  Participate in my next YouTube Live Challenge next Monday, July 29, 9pm EDT The Topic: It's Inflation, NOT Deflation Not to Praise the Tea Party but to Bury It President Trump originally won the Republican nomination by appealing largely to what used to be the Tea Party. A lot of Tea Party Republicans ended up embracing Donald Trump; in fact I think a lot of the support that might have otherwise gone to Rand Paul (a Tea Party favorite who went to Washington in 2010 as part of the Tea Party movement); a lot of his thunder was stolen by Trump, who appealed a lot to Tea Party Republicans. Even Tea Party Corpse Seems to Approve of its Demise When Trump went to Washington, he wasn't exactly praising the Tea Party, but few people expected that he went to Washington to bury it, either. But that's just exactly what he just did by agreeing to this budget deal with the Democrats.  The Tea Party is dead! President Trump just put the final nail into the coffin, lowered it in the ground and covered it in dirt. The irony is, nobody seems happier about this than the corpse itself! The Tea Party Republicans are not up in arms against the Commander-in-Chief. Everybody still loves Donald Trump. Where is Rick Santelli? Even the father of the Tea Party, Rick Santelli, (he is credited for getting it all going) where's Rick? Where are his tears, where's the eulogy as his child is being buried? Again, no criticism, everybody thinks Trump is great… As I said, I was back at Freedom Fest, which they should have just re-named "Trump Fest". Continuation of Policies Once Criticized by Candidate Trump Donald Trump is simply continuing all of the policies that he once criticized in order to become President. When he was running for the Republican nomination,  he was extremely critical of the big deficits under Obama. He was even critical of the big deficits under Bush. That was one of the things I liked about Trump. He was criticizing big spenders of both parties. He was supposed to be different. He was rising above politics.  He was going to drain the swamp. And draining the swamp meant putting an end to the deficits.

A Podcast from Freedom Fest in Las Vegas I'm still here in Last Vegas at Freedom Fest, but I wanted to take some time out to come up to my hotel room here and record a short podcast - otherwise I'd have to wait until Tuesday.  There's been a lot of stuff that's happened over the last few days, so I definitely wanted to record something; the quality might not be up to snuff.  But I figured I'd talk a little bit about what's been going on in the market. The Action Was in the Metals Markets Really, the stock markets - not much action.  All the major markets finished the day and the week lower; bond prices a bit higher.  The real action, though, was in the metals markets.  You wouldn't really know it to look at the price of gold, which was only up maybe about a dollar or two on the week, although we did have a big $20 rise yesterday, followed by a $20 drop today. I'll get into why that happened in a minute. Strength in Silver But the real action was in silver, which finished the week better than up 90 cents, I believe.  So, a very strong week for silver - even on days when gold was down, silver was up. In fact, even this morning, silver was up for a while while gold was down. I titled my last podcast, "Is Silver Finally Joining Gold’s Party?" and, as of now, it really looks like the answer to that question is yes. We've see a lot of strength in silver. Clarida Shakes Markets with Rate Cut Comments In fact, we had the biggest two-day gain, going back several years, in the price of silver. The big jump that we has yesterday really was set into motion by some Fed comments, although that probably was just a catalyst; it probably would have moved up anyway. But in particular, we had Clarida came out and he said that the Fed should not wait for the data to turn before cutting rates. Meaning that, "We should cut rates, anyway, even if we don't get negative data; even if it doesn't look like the economy is going into recession, we should just preemptively cut rates."

See Peter at the Las Vegas Freedom Fest – July 17-20 https://www.freedomfest.com/ Save $50 using promo code SCHIFF 93 Ounces of Silver for One Ounce of Gold I think the most interesting development today in the market was in the metals market. I've been talking on the podcast for some time about the spread between gold and silver, and the fact that silver has never been this cheap, in terms of gold. The spread got to almost 93:1, where you can buy 93 ounces of silver for one ounce of gold - which is incredibly cheap. Some Silver Stocks up 10% or More on the Day It's a great time to be buying silver, and I've really been pounding the table on people buying silver.  I recommended it again last night last night on my live YouTube event, I recommended it to my Managed Account clients on our last webinar, encouraging people to contact their brokers and maybe buy more silver stocks. In fact we had silver stocks today; some stocks up 10% or more on the day. Very, very significant jump up in the price of silver stocks, even thought the price of silver itself did not have that big a move. It was only up 19 cents. Silver Up as Price of Gold Fell But the significance of the move is that gold was down $8. So not only did silver have a relatively large move, although not large enough to normally cause silver stock to rise by 10%, but what was significant about it was that it rose as the price of gold was falling. This could signal - and it was looking to me technically that we saw some indications of this last week (I added to my own silver stocks last week  - but it looked to me like this trend was about to change.  We're still above 90:1. We're close to getting back to 90:1 even. But this is still an incredibly good opportunity to buy physical silver; to buy silver oriented stocks. But what I think this is showing me is that the bull market in gold is getting ready to kick into a higher gear.

First Live YouTube Event Welcome to the Peter Schiff Bitcoin Challenge. First of all, I have to make a confession. I really was not familiar with YouTube live streaming and live chatting, and so the way I thought about this in my head; I thought that people were going to be able to talk. Like a Skype group conversation. People would be able to actually engage me and make their case in their own voice, and to be able to have a little back and forth. Post a Cogent Argument I didn't realize that the way I had to do this was with a chat, where people who want to make a point have to do it by chat. So I'm going to try my best.  Hopefully, this format can work. There are so many chats going by, it is hard to keep track of them. But I want to see if people can put together a cogent, concise argument.  Think of it like you're composing a tweet. I can try to address each point, and try to take in what you're trying to tell me as to why I'm wrong about Bitcoin, and why I should actually be embracing it as digital gold. Don't Forget to Subscribe to My Podcasts So, what I'm going to try to do is to see the best points that are being made on this chat, then read it out loud, and then address it, make a statement and the person who authored that particular text listens to what I have to say, if they want to do a follow up or something, they can do that, and hopefully I will see that follow up. I'm doing this chat in my home studio in Connecticut. I'm in the studio where I normally do my video blogs, so if you're new to this channel, you should subscribe it.  Two or three times a week a do these video blogs (podcasts) where I talk about all sorts of things that are relevant to people who buy Bitcoin.    

  Tune in to my first live YouTube event Monday, July 15, 9pm Eastern time U.S. Call in and convince me that I’m wrong on bitcoin! DJIA Record High Today Dow Jones set a record high today, closing above 27,000 for the first time ever.  We added 227.88 points on the day.  We closed at 27,088.08.  The record high, 27,088.45 set just before the close. You know, we added to yesterday's gains, the S&P 500 was also up again - not taking out the record that was set yesterday, but we did, for the second day in a row managed to trade above the 3000 mark, although we have yet to close above it - ever so close today: 2999.91. But a very small percentage gain for the S&P, not even a quarter of 1%. Russell 2000 Down .5% Broader market was weaker.  The NASDAQ was actually down slightly - 6.5 points.  The weakest index being the Russell 2000, down almost a half of a percent. It was lower during the day.  Again, the Russell 2000 is the index that is most sensitive to the domestic economy. I've pointed out on this podcast many times that it is the index that is the weakest, and is not even close to making a new high. And I don't believe it will. I think the broader market is going to roll over, and the small caps are going to lead the way. Traders Weren't Paying Attention to Bond Market In fact, if the traders were paying attention to what was going on in the bond market, we probably would have seen a bigger selloff today. I think we still have some euphoria left over from the two-day "Dove Fest" where Fed Chairman Jerome Powell was up on Capitol Hill basically green-lighting the July rate cut, which is coming up in a couple of weeks. Remember, when we got that better than expected nonfarm payroll report, the odds of a rate cut in July went down from about 100% to maybe 91%, and the odds really came down for the probability of a 50 basis points cut. So it was pretty much 91%, I think, 25 basis points, and that was it. Odds of Rate Cut in July Back up to 100% But after Powell released his prepared remarks, before he even made it up to Capitol Hill - just merely when the markets got a look at his prepared testimony, the odds of a rate cut in July immediately went back up to 100%, and, in fact the odds of a 50 basis point cut went back up to 20%.

  Tune in to my first live YouTube event Monday, July 15, 9pm Eastern time U.S. Call in and convince me that I'm wrong on bitcoin! More Market News after Powell's Congressional Testimony The markets have been pretty quiet over the last couple of days, so I really don't feel like spending a lot of time on today's podcast talking about the markets.  I probably will have more to say, maybe on Thursday when I'll probably do another podcast because Jerome Powell is making his way up to Capitol Hill tomorrow and Thursday to testify before the House and the Senate. My guess is that some of his comments may move the markets; the currency markets, the gold market, maybe even the stock market. I'll probably have more market-oriented commentary to give you on Thursday. Laffer Curve for Dummies But there are a few things on my mind, which is why I wanted to take some time today and record this podcast.  One has to do with Art Laffer. Of course, Art Laffer gained fame back in the Reagan era. He came up with the "Laffer Curve" that he supposedly sketched out on a napkin one day and showed it to Ronald Reagan.  The Laffer Curve basically says that when you reduce taxes, or lower marginal tax rates, you actually end up collecting higher tax revenues because you incentivize people to work more, they earn more, and then they pay more taxes even if they are paying taxes at a lower rate. Obviously, the Laffer Curve bends at some point, because if taxes are zero, you collect no revenue and if taxes are 100%, you also collect no revenue.  Because if you're going to tax somebody 100% of their income, they're not going to work at all. Nobody is a complete idiot - they're not going to work for nothing. So at a 100% tax rate and a 0% percent tax rate the government collects exactly zero taxes. So somewhere along that curve is an optimal point where you would have the tax rate that generates the most amount of revenue.  

See Peter at the Las Vegas Freedom Fest – July 17-20 https://www.freedomfest.com/ Save $50 using promo code SCHIFF Markets Up on Low Volume A lot of people on Wall Street probably took today off; after all yesterday was the Fourth of July, the market was closed.  On Wednesday they closed the markets early in preparation for the July Fourth holiday.  So when you have a Friday where the markets are open, but you have a Thursday when they're closed… most people probably left for the Hamptons on Wednesday afternoon, and so were not in their offices or down at the stock market when we released the nonfarm payroll numbers today. ADP Disappointing Number Teed Up Low Expectations The June number, highly anticipated, as always, especially with a rate cut on deck now by the Fed. Most of the people who were probably handicapping the jobs number thought that it would probably come out weaker than expected. After all, most of the data we've been getting has been weaker than expected.  In particular, the jobs numbers, including the ADP report that came out on Wednesday, on that holiday-shortened trading session.  We got a disappointing number.  The consensus for private-sector employment for ADP was 140,000, and we ended up with 102,000.  So we had a significant miss in the ADP numbers. Back-to-Back Declines in Small Business Jobs But also, look at the employment components of some of the other numbers that also came out weak on Wednesday, like the ISM non-manufacturing index.  It printed 55.1 versus an estimate of 55.8.  The employment component of that index was notably weak, especially for small businesses which had major reduction in jobs, no only in this month but the previous month. In fact, I read a tweet by Dave Rosenberg who pointed out that he hasn't seen back-to-back monthly declines like this since February/March of 2008. That was the year of the Financial Crisis. He basically said that small business job growth is the weakest it's been in over 9 years. Bigger Decline in Factory Orders Now, small business job growth, that is the heart of the job market. That's where most of the jobs are created. So, if you look at a lot of the other data that has been coming out that might reflect on employment, you might have thought that there might have been a weak number. Look at the factory orders number that also came out on Wednesday. They were looking for a drop of .5% in factory orders, and instead, the orders dropped by .7%. So a bigger decline.