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

Data Be Damned. Rate Hike Ahead?  Video Blog

Summary: Every tax cut is temporary. Ryan's premise that we can't get the stimulus we need without a permanent tax cut is complete nonsense.  Congress has no idea what the budget's going to be next year, let alone 10 years from now. The only budget that really counts, and even then they can't get it that accurate, is the current year. When the government cuts taxes it doesn't come with a guarantee that the rates are never going to go up.

    We had a bit of a turnaround Tuesday today; all of the major U.S. stock market averages were higher in the morning and we closed broadly lower on the day
    In fact, the Dow Jones did make an all-time record high this morning before closing down about 60 points, although the decline in the NASDAQ was greater
    We had a .082% decline in the NASDAQ; the Dow was only down by about .03%
    S&P 500 though had a bigger decline, it was down about .07%
    So the broader averages took a bigger decline than the Dow
    I don't think the technical damage is extreme
    Yes, we made new highs and closed lower, but it really wasn't an outside day
    It didn't close below Monday's lows, which would have been an outside reversal
    But when markets are as extended as they are, they can top on just about anything
    I put up an interesting article on my Facebook page that tried to draw a comparison between Amazon and Whole Foods merger and the big high-profile AOL-Time/Warner in 2000
    You had a big, internet darling making a big brick and mortar purchase and that marked the peak of the internet bubble
    And the author was making the case that this is another major internet company buying a brick and mortar company, a lot of fanfare, a lot of hype and maybe this is also going to mark a major top
    It's an interesting analysis, because I think we're at about the 15-year anniversary of the purchase
    It is an interesting comparison, not a perfect analogy; some things are similar and some things are not
    I do believe that the U.S. stock market is substantially overvalued, in fact a bubble
    The only reason I believe that the air is not going to come out of the bubble is because the Fed is not going to let it
    I am pretty sure that any significant decline in the stock market is going to be met with an aggressive Fed rate cut, quantitative easing
    I don't believe the Yellen Fed to allow the market to implode the way it did in 2008

The Peter Schiff Show Podcast

Ep. 260: All Tax Cuts Are Temporary

Let the SS ObamaCare Ship Sink

The Republicans in the Senate finally unveiled their version of ObamaCare Repeal & Replace.  It's very heavy on replace, but there really isn't any repeal. They are replacing it with something that may even be worse. Regardless, we still should let the ObamaCare ship sink while it's called the SS ObamaCare.
Senate Bill Leans Toward Socialized Medicine

The House already passed their version. The Senate version is even worse; it takes away all penalties for not buying insurance. At least the House version tried to create some kind of penalty. Now, a penalty of any sort would not be necessary if the government did not mandate insurance companies to cover people with preexisting conditions. The only way insurance companies can survive, if the Senate bill were enacted, is with massive government (taxpayer) subsidies.
Moral Hazard

Of course the Senate does not consider the moral hazard of offering a "medical bill-paying service", so the cost will be enormous. This solution will collapse the health insurance industry and lead to socialized medicine. If the Senate Republicans really want socialized medicine, they should just come out and say it. If you don't believe in the free market, just come out and say it.
Something For Nothing

If the government can deliver healthcare cheaper and better than the free market, then why not socialize everything? Republicans are afraid to say that they don't believe this because they want to get elected and they know that the voters don't understand that capitalism works.  They just want something for nothing.  The Senators want to get elected so they are going to provide it for them.

Ep. 261: Senate Plan Makes ObamaCare Worse

Summary:

Once again the solution doesn't work.  As with the Democrats' solution, the penalties are too low.  In both the House and the Senate, trying to force people to buy insurance won't work because the penalty for not buying insurance is not stiff enough. The reason they aren't doing that is, politically, it is a losing proposition. This is why the Republicans never should have touched this issue. If they did not have the guts for outright repeal, they should have never done anything. They should have left it alone and the Democrats would have owned this disaster. The best thing the Republicans can do, politically, is do nothing. In this way any collapse cannot be attributed to ambiguity in the market.
Downward Pressures on the Dollar

    Very big day in the market today; the most significant being the breakdown in both the NASDAQ composite and the U.S dollar.
    The dollar was down sharply and broadly today, led lower by a rally in the euro
    The catalyst for the euro rise was statements by Mario Draghi early in the morning where he commented that downward pressures on inflation were transitory
    A somewhat hawkish stance on inflation and the markets took that to mean that QE will come to an end sooner rather than later
    But I think the markets are looking for any reason to trade the dollar lower
    I have been talking about that on this podcast, that the dollar has been looking weak
    It broke down again today, the dollar index down just over 1 full percentage point on the day
    The dollar trading at its lowest level in 8 months
    I think this was the lowest closing level in about 9 months
    The euro is trading at a 113 handle

NASDAQ Woes

    At the same time the dollar was breaking down, so were tech stocks, the FANG stocks were particularly weak
    The NASDAQ composite down just over 100 points on the day
    That's a pretty big move; a 1.6% decline
    The Dow was only down about 100 points, just under a half percent
    So the NASDAQ experienced about triple the decline
    I talked about that on this podcast a couple of episodes ago when we had that one really big reversal day in the NASDAQ stocks
    When the NASDAQ stocks made an all-time record high and then closed negative
    We had that kind of flash crash coming into the final hour of trading
    To me, there was some big money that decided to get out of those stocks

Ep. 26: Republican Replacement Won't Fix ObamaCare

Summary:
Blue Apron Holdings IPO

The Blue Apron Holdings IPO today is reminiscent of the dot com boom.  The market is saying the 5-year old company is worth close to $2 billion. This IPO represents a "down round" which may occur after a company suffers a decline in valuation after it has received initial rounds of capital investment. The initial offering was $10/share, and by the closing bell it only managed to close at $10. This stock may go below $10 as early as tomorrow, as many investors were planning to flip the stock. The concept of this company is not proprietary; indeed the recent merger of Amazon and Whole Foods could pose a serious market threat to this company.
Rand Paul

In more news on this ever-evolving Republican Health Care saga. the Republicans are caving in to media and left spins the Republican Healthcare bill as a re-distribution of wealth from the poor to the rich.  You are not taking from the poor by stealing less from the rich. For some reason, the voting public expects American profit-seeking companies to sell insurance to people who are already sick. This would be the equivalent of selling home insurance for a house that has already burned, or car insurance for a car that has just been in an accident.   Rand Paul is getting a lot of press recently because he is the only Republican who opposes this on principle. He believes in the freedom for Americans to purchase the kind of insurance they need. They can pick their deductible; they can pick their co-pay. They can have the freedom to buy or not to buy health insurance.  But this can only happen in a market where insurance companies are allowed to make a profit and are free to compete for insurance business without government intervention.
U.S. Dollar Continues Decline

    The U.S dollar continued its decline today falling to a fresh 8-month low, closing to about 95.60
    The dollar is being led lower by a surging euro; the euro is actually at a 12-month high against the U.S. dollar
    Trading just below 114.5
    It wasn't too long ago the euro was down around 105, and there was a lot of talk about parity with the dollar
    I was saying that the euro has bottomed; that the euro is going to rise
    And the rise is just now beginning for the euro, I think there's a lot more to this move
    Other currencies are also following the euro's lead, but ultimately I think they will surpass it
    The dollar has a substantial ill-gotten gain that it needs to surrender
    The dollar got bid up for years based on a misunderstanding of the true state of the U.S. economy
    Of the efficacy of Fed monetary policy
    The market was factoring in far more rate hikes than the Fed was capable of delivering
    Meanwhile the economy is rolling over
    I mentioned on my last podcast Mario Draghi's statement about the deflationary threat subsiding
    About the drop in inflation being transitory and the euro rose on that
    The very next day, the ECB went out to do damage control
    Why is it "damage" when the currency is going up?

Strength in Financial Markets

    The only segment of the market that was strong today were the financials
    The banks feel they are going to benefit from higher interest rates, higher spreads
    And here, we had those bogus stress tests where the Federal Reserve supposedly stress-tested all the banks
     And, what to you know? The all passed
     So that is creating a bid for the banks
    I have said this before, when it comes to higher interest rates and banks, be careful what you wish for

Ep. 263: Blue Apron: All That's Missing is the Sock Puppet

Summary

Independence Day is a great American holiday, but it fills me with joy and sadness.  I love to commemorate what America was, and the whole idea of what made America different. Once we declared our independence in 1776 the people created a government.  We the people had all the power and we surrendered some of our power to form a limited government.  The government was a creation of the people and they ceded some power to the government. This was unique. As a result of this limited government, this uniquely American way of life, America prospered and created the wealthiest country in the history or the world. So we celebrate the beginning of this experiment in freedom and limited government. Benjamin Franklin famously responded to the question, "What have you given us, Mr. Franklin?": "A republic, if you can keep it." We have become what the founding fathers feared most, a democracy.

Ep:264: Dependence Day. Americans Celebrate Free Stuff, Not Freedom

Summary:

One of the key differences between Americans and citizens of other countries is that in most nations of the world, individuals gradually won freedoms and privileges from a monarchy. In the U.S., however, we started with all of our rights.  Then, Americans created government by surrendering some of their power, empowering government.  These rights are spelled out in Article 1 Section 8 of the Constitution.
Free Stuff Rather Than Freedom

We have government not to give us stuff, but to secure our freedom. Americans today really don’t want freedom.  They want free stuff. When the government gives you something they take away your choice; they tell you what you are going to get and how you are going to get it. When the government gives you something, however, they must take away from someone else, diminishing that person’s freedom.
Article 1, Section 8 of the Constitution

Ep. 265: What It Means To Be An American

Summary:

There wasn't much of a market reaction to this Nonfarm Payroll report; the dollar index was only up .2% on the day. It closed up flat on the week. The Canadian dollar closed at a 10-month high against the dollar. Also bond prices continue to fall; this is a bad week if you own bonds, worldwide.  Yields are rising across the board.  The trend looks like we are about to break down in the bond market and break out in yield.

Ep. 266: Another Weak Jobs Report Portrayed as Strong

There are market indicators of a major top as illustrated by the Blue Apron IPO, as it represents the failure of a very weak company attempting to raise money my means of an IPO when the market may have lost its steam. The stock is trading at $7.14, down from its initial $10/share offering. Wall Street has lost control of this IPO. A smaller bank actually issued a price target of $2/share. The point is that they brought the IPO to the market and they could not keep the air in the bubble. SnapChat, another Wall Street darling, went public at $17 not too long ago and although it had a big pop initially up to $29, now trades at about half that price. The point is that this process is coming unglued. The inability of Wall Street to maintain the air in these bubble stocks is an indication that we're nearing the end of this bull market.

Ep. 267: Market Ringing Lots Of Bells

More weak economic data today sent the U.S. stock market to record highs; at least the Dow and the S&P hit new records. NASDAQ not quite, but very close.  The dollar hit a new low for the year.  The dollar index, settling in at 95.10, right on the low for the day.  That's down .63.  Some of the other currencies are strong.

Aussie Dollar Strong

The Aussie dollar was up about 1.3% on the day; one of the strongest of the currencies today. The Aussie dollar is very close to a 2-year high.  The Canadian dollar was very strong this week on the back of a rate increase by the Bank of Canada. But the dollar falling across the board.

Foreign Stock Gain

Foreign stocks did better than U.S stocks, given their tailwind from appreciating currencies.  Gold prices were up just over $11. Given the weakness in the dollar and the weak economic data, gold should be moving up a lot more than it is; I still think there is still a lot of short selling going on, but I smell the mother of all short squeezes coming.  Silver is up about .30; back up to $16. remember was a low as $15.10 earlier in the week.

Dollar Index Weakening

The dollar index index at 95.10, just down over 7% on the year. It ended last year just above 1.02. In fact, in January, hit almost 1.04, so we're down 8-1/2% since the January high, and the year is only half over. So I think there is a lot more momentum coming, especially in light of the economic data I'm about to get to.

Retail Sales Disappoint

The big report was the Retail Sales numbers, were supposed to bounce back from May's -.3, and they did manage to revise that to down only .1%;but instead of getting a .1% rebound we had another drop.  We had -.2% in June, so that is back-to back declines.  In fact that is 3 consecutive months of falling retail sales. The picture gets worse when you strip out car autos. Last month, we got -.3%. That was unrevised.  They were looking for June to be +.2% - instead we were down another .2%. And if you strip out gasoline, it's even worse than that. They were looking for +4% and we got -.1%.  So very very weak retail sales. This was supposed to be the quarter of the big bounce back! How are we going to bounce back in GDP without retail sales?

Consumer Prices Weaker

We also got consumer prices that actually came out weaker than expected. That is supposedly bad news, the way the Fed spins it, because the Fed's trying to get higher inflation, at least the way the CPI measures it. They were supposed to get an increase of .1% for consumer prices following last month's .1% decline and instead we came in unchanged. Year over year CPI, up 1.6% vs an estimate of 1.7%, and core, stripping out food and energy, they were looking for +.2%. instead we were up .1%

Janet Yellen Wants More Inflation

So when Janet Yellen testified before Congress earlier in the week, the only thing she expressed concern about is that inflation is not high enough.  She does not seem concerned at all about the weakness in the economy.

Ep. 268: Weak Data Sinks Dollar But Floats Stocks

My recent trip to Las Vegas for The Freedom Fest provided some interesting lessons.  My observations that we are paying more for less were illustrated by the theft of my luggage,  as there are no more luggage security checkers in baggage claim exits.  Also, for the first time, major Las Vegas hotels are charging from $15 - $18 for parking.  This is causing hotel valet workers to lose money, as customers are less likely to leave a generous tip (or any tip) if they are already paying quite a bit to park. So the Las Vegas experience is changing; we're getting less for more money.  Prices are going up and wages are going down.

Taking Credit for Phony Statistics

This is the real U.S. economy. Forget about all these phony U.S. statistics. The real world reflects the truth about the economy and why Donald Trump is President.  I wish candidate Trump would come back; I would rather see the President questioning phony government statistics instead of embracing them. I'd like to see the President talking about the stock market being a bubble rather than a bull market and claiming credit for the increase.

Weakness in U.S. Dollar

The big story is the continued weakness in the U.S. dollar, in fact this morning the dollar index hit a new low for the year. It's now back in positive territory as I am recording this podcast, but the low this morning was 93.64 on the dollar index.  Remember, the dollar index rose about 6% between the election of Donald Trump and the Inauguration, and the reason for the rally was the optimism for economic growth as a result of tax cuts, de-regulation, fiscal stimulus and a tighter Fed.

Senate Backing Away From Repeal

At the time, I argued that that was nonsense, and so far I am being vindicated.  We're six months into the Trump Presidency and nothing has happened. They haven't even been able to repeal Obamacare, nor are they going to.  The Senate already backed away from the version that I said would not work.  Trump did a press conference yesterday talking about Obamacare, assuring everybody that pre-existing ban is going to stay. The very essence of Obamacare is that insurance companies can't charge sick people more for insurance than they charge healthy people. That's the essence of Obamacare that doesn't work and that's what Donald Trump and many Republicans want to preserve.

Preserving the Essence of Obamacare

Of course, in order to achieve that goal, they had to have employer mandates and penalties.  These are the only things the Republicans want to get rid of. But they want to preserve the very essence of Obamacare and that's the mandates and penalties were designed to deliver. So now they have to come up with another way to deliver the promise of Obamacare.

Currency Markets Get the Message

The point is, the currency markets have figured this out.  The dollar has dumped better than 10% since the Inauguration, but the stock market has made new highs. The Dow Jones is at a new high today; the NASDAQ hit a new high yesterday, so it's a disconnect.  The initial rally in the stock market happened for the same reason the dollar rallied.  The currency traders have connected the dots. What's the problem with the stock traders?  Why are they oblivious?

Dollar Weakness Spark Commodities

The weakness in the dollar is also sparking a rally in multinationals, in commodities.  Look at the move today in Freeport-McMoRan a major copper producer; that stock is up better than 13%.  Oil prices are coming back up; oil is up better than a dollar today. Emerging markets are strong.

Bullish Conditions for Emerging Markets

I have been saying that a weak dollar is extremely bullish for commodities. Why? Commodities are priced in dollars and as commodity prices go down, demand goes up. This is very bullish for emerging markets because a) they export commodities and b) emerging markets have a lot of dollar-denominated debt. Every time the dollar goes down the debt is cheaper to service.

Ep. 269: Lessons From Vegas Don't Stay in Vegas

Peter Schiff is an economist, financial broker/dealer, author, frequent guest on national news, and host of the Peter Schiff Show Podcast.  He follows up his daily two-hour radio show with podcasts focusing on weekly economic data analysis and unbiased coverage of financial news, both in the U.S. and global markets.  As entertaining as he is informative, Peter packs decades of brilliant insight into every news item.  Join the thousands of fans who have benefited from Peter’s commitment to getting the real story out every week.