As we move through the early days of October, gold has surged back above $1,500 and silver is advancing toward $18 as the Dow Jones plunged another 300.
Optimism Is Fading
October 8 (King World News) – Peter Schiff: “Economists claiming the U.S. economy is in good shape now said the same thing just before the 2008 financial crisis. They’re wrong again. The reason we had a crisis was because the economy was actually a disaster waiting to happen. Today we are awaiting an even bigger disaster!”
“Inflate Or Die”
James Turk: “The Federal Reserve now understands what “Inflate or Die” means. It must constantly print dollars to keep banks and US government liquid, so their flawed monetary system erodes the dollar’s purchasing power and gold rises over time. When the Fed was created in 1913, gold was $20.67 per ounce.”
Optimism Is Fading
Peter Boockvar: “The September NFIB small business optimism index fell to 101.8 from 103.1 and that matches the lowest since February (see chart below).
Small Business Optimism Index Falls To Lowest Since February
Plans to Hire fell 3 pts to 17%, the least since February. Capital spending plans fell 1 pt to 27% after rising by a like amount in August. There was no change from August in inventory plans. Job openings also held at its previous month’s level but matching the lowest since last November. Current compensation plans were unchanged and fell 1 pt for future plans. The earnings outlook fell 2 pts. On the price pressure front, those that are expecting Higher Selling Prices fell 3 pts to the least since late 2017…
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Of particular note, those that Expect a Better Economy fell 3 pts to the lowest level since January and is the 2nd lowest print since October 2016. Those that Expect Higher Sales was down 1 pt to match the lowest since September 2017. Lastly on these outlook questions, those that said it’s a Good Time to Expand fell 4 pts to the weakest level since February. In a message to the Fed, “Reported credit market conditions remain among the most supportive in the 46 year survey history” according to the NFIB. Thus more rate cuts will do nothing to spur behavior that wouldn’t have happened otherwise.
I’ll also add this, “The Uncertainty index has risen 6 points over the past 3 months, as more owners are unable to make a statement confidently, good or bad, about the future of economic conditions. Tariffs are adversely affecting many small firms, with 30% reporting negative effects in NFIB’s September survey. Owners are more reluctant to make major spending commitments when the future becomes less certain.”
The NFIB bottom lined the report by saying “As small business owners continue to invest, expand, and try to hire, they’re doing so with less gusto than they did earlier in the year, thanks to the mixed signals they’re receiving from policymakers and politicians. All indications are that owners are eager to do more, but they’re uncertain about what the future holds and can’t find workers to fill the jobs they have open.”
I don’t have anything new to add here. What we’re seeing is the obvious response on the part of small business to a more cloudy economic outlook where visibility is limited and unfortunately much of it is self inflicted. As seen in the chart below, small business confidence is now only slightly above where it was the month of the presidential election where it spiked.
Looking overseas, China’s Caixin private sector weighted services PMI for September did soften to 51.3 from 52.1 and that was below the estimate of 52. That’s the lowest since February. As seen last week there was a pick up in manufacturing index which drove a slight rise in the composite index. Caixin said “China’s economy showed signs of marginal recovery in September, as the labor market improved and domestic demand increased at a faster pace. However, fluctuations in exchange rates, and rising costs of labor and raw materials increased pressure on companies, which restrained business confidence.” Again, determining what is organic business activity and what is stimulus induced has gotten really difficult but assume for now that any improvement is more due to the latter. The Shanghai comp opened for the first time since last Monday and rose .3% as everyone preps for the upcoming meeting in DC. The H share index was higher by .5%. The offshore yuan though is slipping to a one month low. Deal of some sort or no deal? The pressure is certainly intense for the former.
One last thought, on the blacklist thing now on human rights issues, not security or economics, and wanting to limit US investment dollars into Chinese stocks whose companies don’t satisfy US accounting standards, why can’t we limit these headlines until AFTER the upcoming trade discussions? Just saying. China has already said they are getting ready to retaliate over the blacklist.
KWN has now released David Stockman’s powerful audio interview discussing the gold market and much more and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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