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Gold Sacks Goldman Sachs – Ep. 144

  • What a difference two days make! Two days ago I recorded my podcast, “Goldman Sachs Sacks Gold”, and that was because Goldman Sachs’ comments about shorting gold were partially responsible for the severity of the drop in gold over the holiday weekend
  • Today, gold is fighting back, at one gold was up better than $30, although as I record this the price has pulled back a bit, still above $1230 – up about $22 on the day
  • Gold stocks, the GDX index I mentioned in my last podcast, was up 6% on the day, the biggest move up of the year
  • That index has recovered everything it lost on Tuesday
  • GDX would have been up a lot more, except that Newmont Mining came out with lower than expected earnings for the 4th quarter; so that stock was only up about 1% after dropping  7% in the first hour of trading
  • Several gold stocks made new 52-week highs today and several others are at the highest point of this calendar year
  • A very strong day for gold and gold stocks just a couple of days after Goldman Sachs recommended selling the metal short
  • People would have been much better off shorting Goldman Sachs
  • One of the other catalysts for the rise in the price of gold may well have been the comments made overnight by Jim Bullard, president of the Federal Reserve Bank of St. Louis
  • After I read his comments, I expected the price of gold to rally right away, but it didn’t begin until later this morning
  • Bullard was one of the real Hawks on the Fed, he wanted to raise rates much earlier, citing concern about a stock market bubble
  • Talk about closing the barn door after the horses have left!  They have left the stables, the property, they’re barely on the planet!
  • His comments last night about why the Fed should slow down the rate hikes are ironic, because his reason is the volatility in the stock market
  • Let me get this straight: He wants to raise rates because we don’t want a stock market bubble;
  • They raise rates, the bubble is deflating and he wants to stop the rate cuts
  • You can’t have it both ways.
  • Do you want to use monetary policy to prop up the stock market or not?
  • Bullard has not turned dove, do who’s left? The FOMC minutes came out Wednesday and they showed that only a couple of governors did not show concern over the weakness in the stock market
  • What really should get the Fed governors nervous is the economy
  • Today we got the Leading Economic Indicators and last month they were down, in fast the original estimate for December was-.2 – instead, it was revised to -.3
  • January is now -.2, so that is the second consecutive month of declining Leading Economic Indicators
  • That has not happened since August and September of 2011
  • Here’s the interesting part: QE2 ended in June of that year, so 2 months after the end of QE2, the economic indicators flashed recession
  • What did the Fed do? In September of 2011, the second month of the back-to-back declines in LEI, the Fed launched Operation Twist
  • That’s what happening now, they just raised interest rates, we got back-to-back declines in LEI, what’s the Fed going to do? They are going to come back and save the market
  • We got more bad economic news today; the Philly Fed, this is the 6th consecutive monthly decline
  • January was down 3.5%; February was down 2.8%
  • They were expecting -2.5%, so we got a bigger decline than expected
  • We got weak news on the housing market; housing starts dropping to a 3-month low, much lower than the 1.175M – instead we got 1.099M
  • Permits were also light; they were looking for 1.334M and we got 1.202M on starts
  • I think we are just getting started when it comes to the fallout in the housing market
  • One thing keeping it afloat is the ultra-low mortgage rates, which are the lowest they’ve been at any point in a cycle
  • Despite all that, the market is just barely hanging on, at best we’ve got a big pickup in refinances
  • Cheap prices didn’t do much to benefit Walmart
  • They came out with earnings, which managed to beat estimates, the revenue was below estimates, one of the reasons Walmart stock was down on the day
  • I think the real problem for Walmart was its guidance: Walmart was predicting sales +3-4% in 2016, and now they are predicting flat sales
  • That is a huge difference, and Walmart is blaming the weakness on the strong dollar
  • The strong dollar is an excuse with regard to their overseas earnings
  • Walmart is not talking about how the strong dollar helps their domestic earnings
  • First of all, cheaper gas puts more money in Walmart customers’ pockets
  • More importantly, Walmart’s cost of goods sold benefits from the strong dollar, as almost everything they sell is imported
  • As labor costs are going up with a higher minimum wages, the strong dollar is keeping them afloat
  • Once the dollar starts to tank, going to Walmart will be like going to Neiman Marcus
  • Walmart is the world’s biggest retailer and the world’s biggest importer, so a strong dollar is key to their success
  • The real problem is their customers.  Their customers are broke.
  • Their customer base is hurting because this recovery is phony
  • I read an article in a local paper here in Connecticut about Gov. Malloy saying he’s not going to raise taxes again
  • Maybe G.E. leaving the state, taking a lot of jobs and tax revenue caused Malloy consider saving the state’s remaining golden geese
  • Connecticut has been raising taxes every couple of years; when I first moved to the state of Connecticut, the income tax was 4.9% – now it’s 6/99%
  • They raise income tax because there’s a budget deficit because they never cut spending
  • Malloy’s comments prompted outrage from the teachers unions, demanding that instead of these draconian cuts, in government spending, we should just tax the rich, because they’re not paying their fair share
  • This is the Bernie Sanders mantra: “Tax the rich, they’re not paying their fair share.”
  • First of all, what is fair share?  The highest 1% of Connecticut’s tax bracket pays more than 40% of all income tax – that sounds like they are paying more than their fair share
  • There’s nothing fair about soaking the rich
  • This article has a quote: “Instead of firing teachers or cutting government services, we should ask the most fortunate among us to pay their fair share.”
  • That’s why so many of the rich are leaving the state, because they’re tired of being mugged by the democracy of Connecticut
  • Think about the semantics: this implies that the rich obtained money by sheer luck and not through hard work and risk-taking
  • The vast majority of wealthy people in Connecticut who worked damn hard building up businesses without the help of the government, in fact they succeeded in spite of  barriers imposed by the government
  • They are entitled to everything they earned and the electorate should not take their money away with votes
  • The article also says, “We should ASK the fortunate few to pay more taxes – the government never ASKS for taxes, they take them, and if we don’t pay, we go to jail
  • If the government were to just ask me, I would ask, “Is this a trick question?” No! No, thank you.
  • The left wants to steal our money with votes and they want to make the crime sound less criminal by couching it in language
  • All it is is theft: Bernie Sanders’ whole campaign boils down to, “Vote for me and I’ll steal for you”.
  • Bureaucrats want to steal from the rich so they don’t have to take a pay cut
  • The truth is that they want the over-taxed few to turn over an even larger share of the income they earned
  • They want to use the power of the state to rob more money and divide it up among the bureaucrats because they have the votes
  • As a result of that, I have moved my asset management company to Puerto Rico.  Several of my employees have left California, where it was formerly based
  • It’s now in Dorado Beach, Puerto Rico, where the tax environment is much more favorable
  • I also have a condo in Puerto Rico, and my long-term plan is to move there full time
  • So money that was earned in California is now earned in Puerto Rico
  • Much of my income is being earned outside the U.S. as a result of the unfavorable corporate tax code in the U.S.
  • This is the way people react to oppressive taxes. Bernie Sanders thinks he can fund his ideas with additional taxes, and he does not realize he will just drive away more of the wealth that creates jobs
  • If you would like to find out more about Puerto Rico and visit my condo, you can check out the video I just put up on my YouTube channel.