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))