Weak Holiday Sales Confirm The Best Bargain Is Gold – Ep. 121

The Peter Schiff Show Podcast

I am recording this podcast on Cyber Monday Cyber Monday first got its name because e-commerce wanted its own version of Black Friday It's losing some significance, given it is losing some of its competitiveness because of the strong online sales during Black Friday Online sales were up about 20% over last year, but the brick and mortar retail sales were down about 10% The retailers' inventories were positioned for a big increase I think this holiday sales season will be weaker than expected, just as last year was I think we may see more returns on the online sales this year When the after Christmas sales start, we'll see more aggressive pricing in the brick and mortar stores, getting rid of excess inventory What is the Fed going to do with weak Black Friday sales data? We got more data out this morning, the Chicago PMI, horrible number Last month we got a bounce up to 56.2 It turned out to be a dead cat bounce - November's number was expected at 54 and delivered 48.7 We are back in contraction mode If the Fed does raise interest rates in December, it will prove that it was not data dependent, and that the Fed's credibility was the primary reason for the hike This Friday, the Non-Farm Payroll number will be the last number before the Fed's December meeting, making it once again, the most important jobs number ever Former Fed Governor Lawrence Lindsey recently pointed out on CNBC that the Fed has created another bubble He stated that asset price inflation is going to end badly In response, Joe Kernan questioned the assumption that the asset bubble will end badly Historically, all bubbles end badly I also wanted to comment on a WSJ article today predicting that the Fed would continue to raise interest rates, while the ECB would continue to ease rates into negative territory, and that U.S. interest rates would be 2.75% by early 2018 How can they know that this will happen? If this is the case, it also assumes that there will not be a recession between now and 2018 This would make it the longest recovery in history, while also requiring the most stimulus The WSJ article also assumes that the European economy will remain in recession for two years The article's logic is that the dollar is going to go up and the euro is going to go down Which brings me to gold Gold was down about $15; however gold stocks did not make a new low - up about 2% today This is a positive technical divergence The gold stock price may be anticipating a dovish December Fed meeting The ECB and Japan is talking up inflation, which is bullish for gold The problem is that if the ECB is more dovish than the Fed, it depresses gold prices in dollars The dollar is still losing its value All fiat currencies are being debased In the U.S. economy, M2 is growing at 6% a year Even if you believe the government's GDP numbers, it is growing at 2% a year So the money supply is growing three times the GDP That is as inflationary a monetary policy as we've ever had We have money supply growth, negative interest rates and no ceiling on the national debt This is an extremely bullish environment for gold, but the market is simply looking at the price of the dollar vs. the euro At some point the dollar is going to be weaker than the euro This looks a lot like the 1960's when the price of gold was constant because of artificial intervention There was a lot of demand for physical gold at that time Eventually when the artificial constraints were removed, the price of gold skyrocketed There are some artificial influencers on the price of gold right now, even as demand is booming My father recognized this early and collected all coins manufactured prior to 1965, because they were made of silver He eventually amassed a sizable fortune in silver coin, even as his contemporaries thought he was crazy for not turning the into dollars and earning interest.