U.S. Dollar: Forex Market Intervention Ahead?

Given Trump's accusations against Europe and China regarding currency manipulation I would not be surprised if the Treasury intervenes in forex markets to drive the dollar lower. The dollar's demise will happen on its own anyway, so intervention will only accelerate the process.

Gold, Gold Stocks and Inflation

The price of gold is falling, this is the new low for the price of gold this year. Gold stocks are continuing to hold up very well in the face of the decline in the price of gold. Gold stocks are not making a new low for the year at least not yet and though they are down today they are not down nearly as much as you would assume with a 10-12 dollar drop in the price of gold. 

I still think that traders have this wrong. They're still looking at the the trade war as somehow being dollar positive. It's dollar negative. That is impacting gold. 

They are dismissing the increasing inflation numbers that we're getting as transitory because they think the Fed is gonna hike rates more to fight the inflation which is going to be good for the US Dollar and bad for Gold. 

The reality is they're not gonna fight the inflation they're gonna surrender. Inflation is going to win because if they fight inflation they cause the worst financial crisis since 2008 and they don't want to do that.

The Economy Is Going To Fall Into a Severe Recession

Peter Schiff: "I think the economy is going to fall into a severe recession."

Markets: Interest Rates, Federal Reserve

The Federal Reserve is raising interest rates and the higher rates are going to be problematic even more so now than they were back then because we have a lot more debt. But I don't think they will succeed in raising rates as high as they did before. I think the tipping point is going to come much lower if it hasn't already come.

I do think that they're gonna abort these interest rate hikes much sooner than people think. Potentially they could use the trade war and it's unexpected negative effect on the economy as the excuse to do what they were gonna do anyway, which is  to call the whole cycle off and start cutting interest rates again and going back to quantitative easing. That's where we're headed.

The Perfect Excuse For The Federal Reserve

What's gonna happen as a result of the tariffs in the trade war and again this is a perfect excuse for the Federal Reserve I mean this is like a gift from heaven because now when the Federal Reserve has to cut interest rates, the Federal Reserve has to do QE 4. 

They can just blame it all on the tariffs on the trade war they could say everything was great, we were going to normalize interest rates, we were going to shrink our balance sheet but Trump went and started a trade war and it unexpectedly sent us into recession. So now we've got to cut interest rates again and do QE 4. 

They were gonna do that anyway whether or not we had the trade war, whether or not we had any of these tariffs but now this gives them a perfect excuse to blame something on which they had no control.

Gold: The Last Safe Haven Standing

Even though gold has made a move down with the breakout in the dollar – or the move up in the dollar – I think that’s the last safe haven standing. I mean, once you run out of safe havens, where are your going to go? That’s where people are heading because nobody is looking there now. People don’t even think they need a safe haven. In fact, I don’t even know if money is moving based on a search for a safe haven. It’s just going where the momentum is.

Most Banks Would Fail A Stagflation Stress Test

Peter Schiff explains in this podcast why most US banks would fail a stress test in a stagflation scenario.

Markets: Trade War, Small Caps

Traders have convinced themselves that America is going to win a trade war or at least take the fewest casualties because the reason that the Russell 2000 is doing better than the Dow or the S&P; is that you don't have the multinationals. And the theory is that the domestic economy can easily weather the trade war. That it's no big deal, that trade is a small part of the US economy and so we got nothing to worry about but if you are worried well maybe worry about the multinationals that stand to lose so just focus on all these small companies that are just benefitting and basking in the glow of the greatest economy in the history of the world. If you don't believe it just ask President Trump and he will tell you. But this is all a bunch of nonsense and the nonsense continues to drive the dollar higher.

Trump Is Right About Trade

What Donald Trump is saying about trade is correct. But what he fails to mention is that eliminating the deficit means much higher consumer prices and interest rates in the United States.

So to receive the long-term gain, Americans will have to suffer through a lot of short-term pain!

Markets: This Is What Everybody Is Missing

This is what everybody is missing: there is no way that the Federal Reserve is going to be able to shrink its balance sheet. There's no way that the Treasury is going to be able to find private buyers for all this debt at interest rates that are low enough not to collapse the US economy.

Video: Gold Investment Strategies

Peter Schiff talks about gold at a mining conference in Canada.

Precious Metals: A Spike In Silver?

If global industrial growth soften or even plunge, so would lead/zinc and copper mining, which together accounted for 59 percent of silver extraction in 2017. That could also cause the price of silver to spike.

Related trading instruments: iShares Silver ETF (SLV)

The Federal Reserve Will Not Save The Stock Market Again

If the stock market gets cut in half again, the Fed is not going to bail you out with another round of quantitative easing. 

They’re not going to bail you out with rate cuts because the next time the Fed tries to do that, it will destroy the dollar. I am confident of that. The next time is the last time. We will have a dollar crisis and a sovereign debt crisis.

Banks: Deutsche Bank (DB) Could Be The Weak Link Of A Chain

Deutsche Bank (DB) could be the weak link of a chain. If you remember back to when we had the financial crisis 2008, first, you had the sub-prime mortgages blowing up, and everybody was like don’t worry about it. It’s contained. I said it’s not contained, it’s just showing up first in the sub-prime market because these are the weakest mortgages. 

I think the banking system has a huge problem because it’s lived off of the life support of artificially low interest rates. As that is removed, it’s like pulling the plug off of someone who has lived off life support. The irony is you have so many analysts that think higher rates are good for the banks...

Markets: Interest Rates Are Going Back Up

I think that we're going back up and making new highs on interest rates which of course is going to be problematic for every aspect of the economy that is in debt including you know the consumers who are taking on more debt to continue to spend because they're not earning that money.

Forex: The Consensus Is Extremely Bullish On The US Dollar

The consensus is extremely bullish now on the US dollar. it was quite bearish a few months ago and now all of a sudden everybody is bullish everybody is looking for the dollar to go up it's probably almost as strong the bullishness on the dollar and bearish this on the euro is probably almost as extreme as it was at the beginning of last year and of course that ushered in the worst the biggest decline in 14-year the dollar.

Video: The Next Financial Crisis

The National Debt Disaster

The 21 trillion dollar national debt which of course is now closer to 21.2 trillion and rising rapidly -  the problem there is not just the enormity of the debt but the cost of financing it. 

One of the things that candidate Trump promised was to take advantage of these ultra-low long-term interest rates by locking them in and moving the debt more towards long-term rates. Well, he actually did the opposite as President. He's actually shortened the maturity even shorter. We're relying even more heavily now on short-term financing than ever before. 

But as interest rates are rising the cost of servicing this debt is exploding and that is one of the principal drivers of the deficits now being over a trillion dollars a year is the extra cost of paying the interest on the money that we've already borrowed. Not the money we're borrowing now to fund the current deficit but the money we have to constantly borrow to fund the 21 trillion of debt that we already have. 

So this is not a disaster for the future this is a disaster that we're gonna be dealing with in the here and now.

The Highest The Fed Gets Is About 2.50%

If you look at what the Federal Reserve is saying, they're also talking about the fact that we're a lot closer to a neutral rate of interest than they might have felt in the past and that there's really not that many rate hikes left.

I mean maybe the markets are looking for two or three interest rate hikes this year but I think what people are now starting to think is that that may be it. I mean after this year the Federal Reserve is done hiking and so maybe the highest the Federal Reserve gets is about two and a half percent and then they're done hiking.

Stock Market: Celebrating The Cease Fire In The Trade War

Peter Schiff discusses the markets on this 30 minute podcast.

Record Foreclosures In The Subprime Auto Market

I just read an article that we're now seeing the biggest foreclosures in the subprime auto market that we've ever seen, even bigger than in the 2008 financial crisis. That is one symptom of what happened during the credit bubble and now you know the heroin is starting to wear off and it exposes all of the bad loans that fueled the spending binge on automobiles.

Video: Bond Breakdown Gathers Momentum

Video market update (May 15th, 2018)

Opportunities To Invest In Emerging Markets, Foreign Currencies and Gold

If you're an investor, it's an opportunity to invest more in emerging economies, in foreign currencies, in precious metals. Obviously the gold market is being suppressed a bit by the strength of the US Dollar but as the US Dollar surrenders those ill-gotten gains that is going to be particularly good for the gold market.

Related trading instruments:

• SPDR Gold Trust ETF (GLD)
• Market Vectors Gold Miners ETF (GDX)
• Newmont Mining (NEM)
• Barrick Gold (ABX)

Further reading:

The Next Bear Market

Inflation Is Going Dramatically Higher

US Dollar: A Bear Market Rally

Video: Ray Dalio @ Google Talks

Inflation Is Going Dramatically Higher

We are going to have rising inflation and a falling dollar that for political reasons the Fed will be unable to or unwilling to raise interest rates sufficiently to put out the inflationary fire and prop up the US dollar.

The Next Bear Market

US Dollar: A Bear Market Rally

The big story continues to be the bear market rally that has been going on in the US dollar the US Dollar Index today closed above 93 the low this year was just above 88 so we've risen about 5% so far in the US Dollar Index from the lows.

Is Gold Being Manipulated?

Federal Reserve: Shrinking The Balance Will Have Consequences

When Alan Greenspan took over the Federal Reserve in 1987, its balance sheet was at about $200 billion. A few years ago, it reached $4.5 trillion. Shrinking it will have consequences.

Related trading instruments: 

• SPDR S&P 500 Index ETF (SPY)
• SPDR Dow Jones Industrial Average ETF (DIA)
• iShares Russell 2000 Index ETF (IWM)
• Nasdaq 100 Index ETF (QQQ)

Inflation: The Danger To Bondholders

How comfortable are bondholders going be when inflation is above 2 percent when they're barely earning 2 percent on their bonds now? 

I mean you're not even getting 3 percent on a 10-year Treasury right now, you're getting around 2.95.

Well, if inflation is above, let's say inflation is two and a half, well you're getting two and a half percent inflation if your yield is only 2.95 you're not even getting 50 basis points. But of course after taxes you're losing money because the Treasury bond yield is not tax-free. The federal government still taxes you on the money you earn on Treasuries, so after taxes if you're getting a two point nine five percent coupon if there's two and a half percent inflation you are losing money.

Federal Reserve: Willingness To Tolerate Higher Inflation

I want to talk about what happened with the Federal Reserve this week because I think that is the most significant news of the week. In fact, I think it's the Federal Reserve's statement on Wednesday and the comments from today that's the real reason we had the 300 plus point rally in the Dow Jones Industrials Average today that's why we had the 400 plus point turnaround in the Dow on Thursday. I think it's all about the Fed and its willingness to tolerate higher inflation.

Are Rising Rates Bullish For The US Dollar?

I know people say that rising interest rates are good for the US Dollar. That's rising short-term interest rates which in theory are good for the dollar not rising long-term interest rates.