* On Friday we finally got the Non-Farm Payroll numbers for July * The consensus is that this reports indicates that an interest rate hike is inevitable * This is the rate hike that everybody has been expecting and this report see * The report is weak, relative to previous months, but slightly ahead of the consensus * It seems like we are going in the wrong direction * Labor Force Participation Rate is stagnant at the lowest in decades * Q2 GDP was much lower than expected * the Atlanta GDP Now Forecast for Q3 at 1% - a third of the official forecast * If the Fed was not willing to raise rates last year, when the economy grew at 5%, why would they raise rates now? * The Fed may have backed themselves into a corner where they have to raise rates * If so, Yellen has already prepared the market for a tiny raise * They recognize that the market is fragile * It would be a more credible move for the Fed to not raise rates at all * The market's reaction to the jobs data and the "certainty" that rates are going up * The dollar sold off somewhat * Gold rose slightly * Higher interest rages are expected to be bullish for the dollar - Why didn't the dollar rise? * The old adage, "Buy on the rumor, sell on the fact" * If the Fed raises rates in September, it will be the most highly anticipated rate hike ever * If the market buys on the anticipation of a rate hike, the actual rate hike will be the sell signal * The market is telling us it has gained all that it is going to gain from any future rate hike * The Fed will deliver much less in the way of rate hike than the market expects * The reaction in the stock market was more interesting - The market was down again * The longest losing streak in the Dow in about 4 years * The fact that the U.S stock market is still falling indicates whereas the currency markets may have factored in a rate hike, the equity markets have not * I have been hearing the refrain,"There is no reason to fear a rate hike!" * This is a very naive to look at the market because there is no historical precedent for interest rates to stay low for so long * These are not "normal" times * More importantly, the market only expects a rate hike if the economy get better * But now the data shows that the economy is continuing to slow down * The crowd that believes a rate hike will not harm the economy should reassess their thinking * Corporate earnings, already under pressure will be further weakened by an interest rate hike * The consumer is barely surviving with rates at zero * 2015 is probably going to be the weakest year of the entire so-called recovery * If the Fed really begins to raise interest rates, what is going to happen in 2016? * We will be in a bear market, the real estate market will drop and a recession will follow * The Fed's only medicine at that point will be QE * The truth is, the economy did not need the first round of QE and it nees QE4 even less * This is going to be the mother of all money drops and all the people who have been saying,"The Fed was right!" are taking a premature victory lap * Hopefully it will shock the Keynesians into abandoning central banking and central planning * And finally embracing a real market recovery based on free market principles * Those of us who have seen the writing on the wall will be rewarded in the investment front * For having the fortitude to maintain our positions and not throw in a winning handOur Sponsors:* Check out Infinite Epigenetics: https://infiniteepigenetics.com/GOLD* Check out Justin Wine and use my code SCHIFF20 for a great deal: https://www.justinwine.comPrivacy & Opt-Out: https://redcircle.com/privacy

Ask this episode

“What did the council decide on item 42?” — answered with the speaker and the moment.

Transcript

Related