Upon What Data Does the Fed Depend? – Ep. 100

Released Tuesday, 4th August 2015
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Today a bombshell was dropped on the labor markets on Friday in the form of Employment Cost Index
Measures the cost to employers: wages and benefits
The expected increase was .6, but the actual number came in at just .2 for the quarter
This the weakest number since 1982, since they began keeping records
Janet Yellen has been saying that improvements in the labor market must precede a rate hike
This is understood to mean wages, labor participation rate and full time vs part time jobs
We're 0 for three, right now - all three are falling
As soon as this number came out, they dollar sold hard
But then, the dollar clawed its way back, and gold was down again - gold stocks got crushed - Why?
Jon Hilsenrath, the chief economics correspondent for The Wall Street Journal, came out with an article, speaking for the Fed, stating that the Fed does not need wage growth to hike rates
Really? The Fed is going out of its way to preserve the pretense that it can actually raise rates
They are seeking the psychological effect of rate hikes without the real world damage of actual rate hikes
If the Fed still believes it won't raise rates unless the labor market improves and they are taking wage hikes off the table, then what are they waiting for?
The other two remaining criteria are still down
Janet Yellen still says she's data dependent and all the data that she is depending on is negative
The stock market looks very toppy - it looks like it will roll over and when it does the Fed will bring in the cavalry in the form of stimulus
The Fed built the recovery on a stock market bubble and a real estate bubble
Ben Bernanke's goal for 7 years was to create a "wealth effect" on assets that are now at risk - they are not going to let them collapse
All of the data would argue for no rate hike in September
Janet Yellen is implying, by talking about rate hikes, that she believes that the economy is going to improve, when all signs indicate the opposite
Therefore traders are ignoring bad economic data because they trust that Janet Yellen believes the economy will improve soon
Don't pay any attention to the man behind the curtain, because Janet Yellen says the bad news is not real
We can all see the negative data, but no one wants to acknowledge it because Janet Yellen is not recognizing it publicly
They buy the dollar, they sell gold and there is a dichotomy between those who don't own gold and have no ability to deliver it and are selling gold to those who don't actually want it - they are gambling on the price of gold
The amount of gold being gambled is greater than ever before
Sales for those who want to hold gold are skyrocketing - the mints are running out of supply
We are running out of some of our silver
Schiff Gold
Our customers who buy gold and silver are not offering to sell - they are buying more
They are reacting to lower prices
On the other side of the coin, clients are reacting negatively to the high dollar weighing on the relative value of foreign stocks
This is an opportunity to use the high dollar to buy much more highly valued stocks that are not dollar denominated
The dollar bubble will burst and it is a dangerous game to hold out to the very end.
From a market point of view, the foreign stocks we recommended years ago are an even better value now, because the dollar will buy more

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30m 15s

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