We Have A Reverse Bubble In Gold

Big banks simply pursue their own self-interest and certainly Wall Street does not want the price of gold going up they want the price of stocks going up, they want the price of bonds going up that's where they generate all their fees so they have a vested interest in being negative gold. 

But it's also a kind of a self-perpetuating prophecy if they keep selling into the rallies and you have so much gold that trades in paper markets where it's not real, you have people buying gold from people who don't even have it and they're selling gold they don't own to people who don't want it but you have this huge paper market and there's a lot of selling pressure there. 

But I think ultimately the price of gold is going way up and the fact that maybe it's suppressed maybe it's intentional maybe it's just a result of people pursuing what they think is right but all bubbles are like that. You had bubbles in the dot-coms, you had bubbles in the housing market. 

This is almost like a reverse bubble in gold. We have a bubble in fiat currencies, we have a bubble in the US Dollar and when that bubble pops, those currencies are going to crash and you're going to see the collapse in the price of gold because the price of gold rising will be the collapse of the fiat currencies.

Trump: Tariffs On German Cars?

If they're going to slap tariffs on cars made by Germans it's because the government is trying to say we want a different outcome than the outcome that the free market is determining. In the free market Americans are choosing to buy these German cars, we don't want them to make that choice we want to alter the free market by artificially raising the cost of buying a German car relative to the cost of buying a different car. And now we have a different outcome not the outcome that would be determined by the free market but the outcome that is determined as a result of government intervention. (General Motors (GM), Ford (F), Tesla Motors (TSLA), BMW)

Markets: US Dollar, Gold and Interest Rates

If the Federal Reserve doesn't raise interest rates in June it is going to shock the markets. In fact I think the US Dollar is poised to decline even if the Federal Reserve raises interest rates. I think gold (SPDR Gold Trust ETF (GLD)) is poised to rise even if the Federal Reserve raises interest rates but if it doesn't obviously those moves will be even bigger because the markets are completely prepared for a another hike.

U.S. Economy: Recent Weakness Likely To Persist

The economic data that has come out recently including this week has been pretty bad on balance in fact the data that we're getting confirms to me that rather than being transitory the weakness in the first quarter is likely to continue.

Markets: Gold, Silver, US Stocks

So far in 2017 the S&P 500 Index (SPDR S&P 500 Index ETF (SPY)) is up just under 7 percent but the price of gold (SPDR Gold Trust ETF (GLD)) and silver (iShares Silver ETF (SLV)) are up about 7.5%

Now despite the fact that both precious metals and the US stock market have performed about the same thus far in 2017, Americans are rushing to buy US stocks yet they're completely ignoring precious metals. This despite the fact that the Dow Jones Industrials (DJIA) or the S&P 500 Index (SPDR S&P 500 Index ETF (SPY)) is at an all-time record high and the valuations are clearly in bubbled territory. Yet when it comes to gold and silver even though they're doing well this year, gold prices are about 30 percent below their peak price in 2011 and silver is better than 60 percent below its peak price. 

So despite the fact that gold and silver are outperforming the S&P 500 Index (SPDR S&P 500 Index ETF (SPY)) this year they have a much further way to go to get back to their highs.

US Dollar: The Decline Has Just Begun

The US Dollar continues its losing streak. The US Dollar Index was down for the 8th time in nine days. The US Dollar Index actually traded below 97 for the first time since Donald Trump was elected President, so we have wiped out 100 percent of the ill-gotten dollar gains that were racked up in the wake of that victory. and if you remember when the dollar was rallying as a result of the Trump victory I said it was a sucker's rally that it was a head-fake rally and sure enough that's exactly what it was but the US Dollar decline has only just begun.

SALT Conference: Gundlach on Stocks

His conclusion was that the US stocks are very expensive and that people should sell US stocks and invest in foreign stocks. In particular Gundlach likes the emerging markets. He was also very bearish on the dollar saying the same kind of stuff as me saying that the crowd is wrong, that this is a crowded trade (that the US Dollar is going to go up) because the Federal Reserve raising rates is wrong.

Markets: Trump Scandal, A Crash In Brazil

So this should rattle confidence as should the drop in the stock market if it continues. But despite that this drop is not very large, I mean look at what's happening in Brazil.  The Brazilian market is getting obliterated, it's crashed, I mean you got a lot of these Brazilian stocks today are down 10 to 20 percent based on a political scandal in Brazil where they they have a recording of the president of Brazil offering a bribe and they've got that on audio recording. 

The market is crashing because they're calling for resignation or impeachment there now of course it's the same problem here although I guess they've got a better case against the Brazilian president.

This shows you what can actually happen with a market that's smaller when everybody wants to get through the same door at the same time, the liquidity is not there and prices collapse.

The same thing could eventually happen to the United States but of course if we had a drop today like they're experiencing the Brazil the Federal Reserve would be out there, they would be cutting rates they would be telegraphic QE4 they would be doing whatever they could to try to reverse the decline in the market. (SPDR S&P 500 Index ETF (SPY), SPDR Dow Jones Industrial Average ETF (DIA), Nasdaq 100 Index ETF (QQQ), iShares MSCI Brazil Index (ETF) (EWZ))

Video: Retail Stocks Bloodbath

The retail bloodbath. Retails stocks have been hit hard recently. (Kohl's Corp (NYSE:KSS), Nordstrom Inc. (NYSE:JWN), Macy's Inc (NYSE:M))

Stocks: The Retail Apocalypse (JCP, JWN, KSS, M)

Let me get into what I want to talk about. First of all it's the retail apocalypse which I have been talking about that from my perspective and not just my perspective, I think in reality the retail sector is in worse shape worse shape today than it was in 2008 during and immediately following the financial crisis.

And you know we got a lot of bad news from the retailers this week including J. C. Penney Inc (NYSE:JCP),  and Nordstrom, Inc. (NYSE:JWN) horrible sales from these companies and we had other retailers earlier in the week that came out with with bad news as Kohl's Corp (NYSE:KSS) department store.

If you look at some of the stocks like Kohl's Corp (NYSE:KSS),  trading at $36.50 - that stock was at $75-80 in the summer of 2015, so it's down 60 percent or so.

Dillard's which is at a 52 week low at just under $47 that was over a $120 more than a 50% decline.

Macy's Inc (NYSE:M) was down another 3 percent today, a new 52 week low. Macy's Inc (NYSE:M) is at 23.60 and Macy's Inc (NYSE:M) was like a $70 stock in the summer of 2015.

These are huge markdowns for these retailers.

Gold: Holding On To Some Key Support

The last time I was talking I thought gold looked really good short-term on the chart,  I thought it looked like it was going to go up to 1300. Instead it went the opposite way, it went down towards 1200. Well it didn't get that low, it's just below 1220.

But you know it shows you that you know technical analysis doesn't always work. You know you're not just going to automatically get rich because you're looking at a chart. I thought the weak economic data would be a catalyst for gold. We got the weak economic data but gold went down anyway.

Now, it still looks like it's holding on to some key support. Gold is still doing well this year it's still beating the US stock market considerably this year as is just about every other market in the world I mean the out performance that I've been talking about so far this year between foreign develop markets and especially emerging markets is widening continuing to gain on the US market. (Market Vectors Gold Miners ETF (GDX), SPDR Gold Trust ETF (GLD), Market Vectors Junior Gold Miners ETF (GDXJ), Newmont Mining (NEM), Barrick Gold (ABX))

The U.S. Economy Will Not Grow At 3% This Year.

Wilbur Ross came out this week and admitted that the US GDP is not going to grow at 3 percent this year I mean that's why they pay this guy the big bucks right I mean you don't need to have that much information you know to be that's smart to figure out something that's that obvious but they finally admitted that the economy is not going to grow by 3 percent this year in fact it may even be in a recession this year so it's not only not going to grow by 3 percent it may not grow at all.

The Markets Are Beginning To Look Beyond These Rate Hikes

The dollar market is acting much different than the the gold market rather than rising the dollar has been falling. Normally you get some strength of the US Dollar when the probability of an interest rate hike rises because after all higher rates everybody thinks that's bullish for the dollar and so as the probability of a rate hike increases so too does the value of the dollar but that didn't happen this time in fact the dollar closed the day at about a six-month low in the dollar index.

I think what's happening is the markets are beginning to look beyond these rate hikes to see the next rate cut understanding that the Fed is not going to come close to delivering the type of tightening that it had been indicating was coming that we are not going to normalize interest rates.

Federal Reserve: Raising Rates Into A Recession

It's quite possible that the Federal Reserve does raise interest rates in June even if it ends up that it turns out in hindsight that they raised rates in a recession. (SPDR S&P 500 Index ETF (SPY), SPDR Gold Trust ETF (GLD))

Gold Will Rally Before The Fed Raises Rates

I think the gold price is going to rise well before the Fed gets around to raising rates in June if in fact they raise rates. (SPDR Gold Trust ETF (GLD), Gold Futures, Market Vectors Gold Miners ETF (GDX), Market Vectors Junior Gold Miners ETF (GDXJ))

Why Is The Fed Willing To Keep Raising Rates?

One of the reasons this might be the case is because the Federal Reserve is more concerned about having some ammunition to fight the next recession rather than simply postponing the onset, meaning that they want to get interest rates further above zero before the recession officially begins so that once it's here they have more room to cut interest rates.

But also I think another reason that the Fed has been more willing to raise interest rates has to do with the action in the US stock market. I thought that the Federal Reserve would be reluctant to raise interest rates for fear of how the higher rates might impact the stock market but it seems like the stock market has found another prop and is no longer simply relying on cheap money. It's now also relying on hope and optimism surrounding the election of Donald Trump and the idea that somehow he is going to make America great again which includes making the stock market great again with deregulation and tax cuts and all sorts of economic stimulus.

So I think because of this the Fed may feel that it doesn't have to provide as much support because the stock market is rallying in the face of these rate hikes.

The Fed Will Raise Rates Again in June

Following Friday's slightly better than expected non-farm payroll report the probability of a June interest rate hike is now near one hundred percent. The markets are now certain that a quarter point hike is coming in June and in fact if the Federal Reserve does raise interest rates by a quarter point that will bring the floor of the official rate finally up to 1 percent. (SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 Index ETF (SPY), Nasdaq 100 Index ETF (QQQ), iShares Russell 2000 Index ETF (IWM))

Currencies: U.S. Dollar Index May Drop To 60

The U.S. Dollar can fall rather substantially from here. The last time the Dollar Index fell, it bottomed out around 70. So, I think this time it might fall as low as 60 before anybody really gets nervous. 

The Bullish Case For The Euro Currency

I think the European Central Bank (ECB) is going to move to a tightening rhetoric, to a tightening bias and they may even start to raise interest rates given how quickly the inflation rate is accelarating in Europe!

Monetary Policy: Fed Will Ease, ECB May Tighten!

The U.S. Economy (GDP) is breaking down as European inflation is breaking out. The Federal Reserve easing monetary policy and European Central Bank tightening monetary policy is not the policy divergence markets expect! (EuroStoxx 50 Index, Dax Index, CAC 40 Index, SPDR S&P 500 Index ETF (SPY), SPDR Dow Jones Industrial Average ETF (DIA))

Weakest Economic Growth in 3 Years!

First quarter GDP growth was the the weakest in 3 years for the first quarter. Why is GDP growth so weak? Well, one reason is because the Federal Reserve raised interest rates even though they barely raised them. Imagine how deep of a recession we would have if the Federal Reserve had delivered the 3 or 4 interest rate hikes in 2016!