• Big day in gold today; gold broke over $1200 for the first time in almost over a year, in fact we hit a new 1-year high
  • I saw gold trading above 1260 at one point in the morning, that was up better than $60 on the ounce; It closed up 49.10, I believe at $124.90
  • Remember, I was on CNBC “Futures Now” earlier in the week and gold was around $1180-$1190 and they were trying to press me on where I thought it would go, and I said, it’s going to go higher, I’m bullish in the short term, the medium and the long term
  • But I’ll tell you one thing: when gold brakes through $1200, it’s going to move to $1300 very quickly and people are going to be surprised
  • It’s just been one day and we’re halfway there
  • Gold stocks still reflect a lot of skepticism on this rally; Gold stocks were up about 7% on the day
  • Gold stocks have a long way to go to catch up
  • I mentioned on the last podcast, Dennis Gartman, who got bullish on gold, told people not to buy, he said wait for a pull back
  • Well the people who are waiting f or a pull back are still waiting and they missed this entire $50 move
  • The stock market was the mirror image of the gold market today; at one point, with less than an hour to go, the Dow was down 400 points again, the NASDAQ was maybe down about 60
  • Then all of a sudden there was a rumor floated that the United Arab Emirates was considering meeting with other OPEC nations about a production cut and all of a sudden the market rallied
  • The NASDAQ actually rallied positive; the Dow got to  about -170 and then they rolled over on the close, Dow down 254, NASDAQ down 16.76 – horrible close
  • Of course the weakest stocks on the day continue to be the financials getting decimated to new lows
  • Goldman Sachs down about 4.5%,  Morgan Stanley down 4.5%, Bank of America down 6.8% – many of these companies making new 52-week lows
  • But outside the financials, the debacle du jour, in the stock market is Boeing, which is a Dow component, was down 7% on the day, near a 3-year low; the lowest I saw inter-day was -12%
  • The news is that the SEC will investigate their accounting practices – that can’t be good
  • Also they reported that they are going to be laying off workers in an effort to contain their costs
  • It’s not just about bad oil loans, that’s part of the story, that’s just the tip of a huge iceberg
  • In fact, the market rallied because of the rumor of OPEC is making moves to support oil prices
  • We hear people saying that what the stock market needs is higher oil prices.  No we don’t!
  • Higher oil prices will help oil stocks, but they’re not going to help the overall market market because some guy writes an algorithm that runs a program that says, “Buy stocks when oil goes up”
  • Steve Liesman said on CNBC recently that he never would have believed the market would be so dependent on oil prices
  • A lot of people make that mistake, assuming that oil is driving the stock market but the same factors are dominating both:  fear of higher interest rates and weakness in the U.S. economy
  • But eventually, I think oil prices will go up, and the stock market will continue to go down
  • Many people are hopeful that Janet Yellen’s second trip to Capitol Hill, this time talking to the Senate, might save the market; apparently that was not the case
  • Janet Yellen, this time, in the Q&A was closer to admitting that negative rates are coming
  • She actually said they would consider doing it if the economy needed it
  • All the discussion is going straight to negative rates and skipping over zero interest rates and QE
  • There was no discussion about reversing December’s .25 rate hike
  • If Janet Yellen is thinking about negative rates, she has ready considered zero rates and QE
  • She obviously can’t be as confident in the economy as she appears to be
  • Some people are asking “Is this an over-reaction to global market troubles and oil prices?”
  • No one considers that the U.S. Stock market is going down because there’s a problem with the U.S. economy
  • Our economy is sick and we’re the reason everybody else is sick
  • The other thing I thought was interesting was one of the senators asked her about the bearish stock market –
  • The senator asked if the decline in the stock market was somehow related to the December interest rate hike?
  • Janet Yellen then channels Scott Nations by saying:”I don’t think so, when we raised rates for the first week or two, the markets were up, therefore the decline has nothing to do with the rate hike
  • For two weeks the stock market didn’t go down, but then it collapsed; we had the worst start of the year in the history of the stock market and Janet Yellen and Scott Nations somehow think the Fed had nothing to do with the decline
  • The markets had convinced themselves incorrectly the single rate hike would be OK, that the little rate hike would work, but then the Fed came out later announcing 4 more rate hikes in 2016 that’s what pushed the market over the edge
  • The market wasn’t prepared for that.  The main reason the market didn’t collapse is because it was expecting “One and done”
  • Then all of a sudden the Fed comes out and says it’s raising rates 4 more times in 2016 and the market said, “WHAT?” and everybody hit the sell button and it’s been sell, sell, sell ever since
  • If the Fed doesn’t think the rate hikes had anything to do with the stock market sell-off, then they must think that cutting rates won’t help the market
  • But we know they don’t really believe that, because every time the market has fallen in the past that’s exactly what they have done
  • The Fed puts so much stock in the wealth effect, how can they watch all that wealth evaporate and assume it has no impact?
  • For those who think the economy is in great shape and there will be no recession:
  • If we had .7% Q4  GDP growth (which will be revised down) and that was before the market crashed
  • Now we have a market crash, and this quarter halfway over who knows how we will finish up Q1 GDP?
  • By the way this is the best quarter for gold in 30 years.  You don’t think there is a coincidence?
  • This is the biggest the dollar has had against Japanese yen since the long-term capital crisis in 1998
  • This is a huge decline in dollar-yen
  • The Fed is so sure we’re not close to a recession that they are trying to figure out if they have the legal authority to do negative interest rates
  • The Fed has another card they can play:
  • All they have to do is say, “We’ve put rate hikes on hold.”
  • They could announce that they are officially taking March off the table; take June off the table
  • If that doesn’t work, then they can lower rates to zero
  • Going negative is so far down the chain, yet they’re already talking about it because they know that they are going to get there