Rick Santelli: Hold Onto Your Wallet - The Entitlement Society Now Being Adopted as US Economic Policy
Austerity is the worst word in the English language for politicians
Jim welcomes back Rick Santelli, On-Air Editor at CNBC and veteran trader and financial executive. Rick refers to current central bank policies as a world-wide “money fest”, given by the Central Banking Country Club. Rick sees the US adopting the “entitlement society” as current economic policy, which he asserts has never worked globally. He advises taxpayers to hold onto their wallets. Taxes will be going higher to pay for ever increasing government spending.
There is no energy silver bullet
Jim is pleased to welcome back Dr. Oliver Inderwildi PhD, Research Fellow at Smith School of Enterprise and the Environment, University of Oxford, UK. Dr. Inderwildi speaks to the high degree of oil price volatility over the past four decades, and its damaging and destabilizing effects on the global macro-economy. He discusses the main drivers of oil price volatility and how it has influenced both the level of inflation and the level of unemployment within economies affected by it. Dr. Inderwildi notes while there is no energy “silver bullet”, he discusses economic policies that could help prevent or minimize oil price volatility.
A VAT tax is coming unless we change our politicians
Jim is pleased to welcome back Steve Forbes, Chairman, CEO, and Editor in Chief at Forbes Media and an internationally respected authority in the worlds of economics, finance, and corporate leadership. They cover a number of issues, including the recent plunge in gold, the Fed’s manipulation of the economy and the potential for future inflation, and the government’s relentless search for more revenue to raise federal spending. Mr. Forbes believes there is a determination in Washington to increase taxes on wealth, following the French model.
Natural gas inventories dipping below 5 year average
Jim welcomes Dan Steffens, the President of Energy Prospectus Group (EPG), a networking organization based in Houston, Texas. Dan publishes EPG’s newsletter, “The View From Houston”. Dan discusses his views on natural gas, and lays out the case for higher natural gas prices ahead. Dan and Jim also discuss the energy stocks, and Dan advises investors to look for companies that balance natural gas and oil production, and can switch back and forth as market conditions warrant.
The dividend game is not over
Jim is pleased to welcome Jeffrey Saut, Managing Director of Research at Raymond James Financial. Jeff mentions that many investment managers and other professionals are feeling “performance pressures” from having missed the recent rally, as well as others that have underperformed by emphasizing international equities over US-focused equities. Jeff does not think the dividend play of recent years is extended, as payout ratios average only 32% of earnings on the S&P index, compared with historical norms of 50% payout ratios.
Gold collapsed over 14 percent in two days in the sharpest tumble since 1983 raising fears that the twelve year bull market is over. Some blame the collapse on the fear that Cyprus and other weaker European countries would have to dump their gold reserves. Wrong.
In this week’s Q & A, National Numismatics’ Tom Cloud updates his near-term precious metals price targets and explains why silver will rise faster than gold once the bottom is in.
In contrast, the Labor Force Participation Rate discussed in this commentary is based on large enough numbers that historical revisions are quite small. For example, if we study the revisions of the 16-and-over LFPR since 1948, the earliest changes date from 1994.
It's easy to spot a Fed-sponsored housing bubble if you look in the right places. The best place to start is an analysis of price inflation as measured by the BLS as compared to a CPI-variant that takes actual housing prices into consideration instead of rent.
Just recently the April employment report was released by the Bureau of Labor Statistics (BLS) which showed a surprise jump in employment for the month of April of 165,000 jobs. The general consensus for the report was 153,000 jobs so the "better than expected" news was credited to the surge in the financial markets.
The two major US core inflation indices have diverged. The explanation for this divergence has to do with the difference in relative importance of housing in the indices. And recent increases in the cost of shelter accentuated these differences.
Greece received 100 billion euro bailout, Cyprus got shafted
Jim is pleased to welcome back Michelle Caruso-Cabrera, an award-winning financial television journalist working for CNBC. Michelle and Jim discuss her on-the-ground reporting from Cyprus during its financial crisis. She believes Cyprus was treated unfairly by the European powers, and didn’t receive the same treatment as Greece, which was kept afloat with massive bailouts. Michelle notes that Cyprus runs on its banking system, and Cyprus was treated as an off-shore tax haven, not a sovereign country. She also points out that Cyprus did not cut government spending, but raised taxes instead. Michelle also discusses the European economy and the chances of the Euro surviving longer term.
It is the price of paper gold that has plunged, not gold itself
Jim welcomes Ronald Stoeferle, publisher of the respected annual report, “In Gold We Trust”, and a gold fund manager in Vienna, Austria. Ronald tells Jim that we were close to a run on the bullion banks during the recent chaotic drop in gold. He also sees a growing movement to remove gold from the financial system, as paper gold is creating too much counterparty risk, as witnessed by the Dutch bank ABN Amro’s recent gold default. Ronald sees the divergence between paper gold plunging in price and record demand for physical gold as a loss of confidence in the banking system by the public. The next issue of “In Gold We Trust” will be published in June.
Energy producers have substantially underperformed the S&P 500 Index in the last 12-24 months
Jim welcomes Joseph Dancy, Manager LSGI Venture Fund, and Professor at SMU Cox School of Business in Texas. Joe sees a discrepancy between energy company performance and share prices, as most major oil producers have underperformed the S&P 500 Index. Joe notes that the global demand for oil is rising relentlessly through industrialization and growth in China, India and other developing nations. With record oil company revenues and growing global demand likely to continue, Joe sees a much more positive performance for the energy sector looking ahead.
The European Union is a basket-case and can’t survive long-term
Jim welcomes back Martin Armstrong of Armstrong Economics. Martin and Jim cover many important topics, including Washington’s need for more revenue, the future of the European Union, the current outlook for gold, the Cyprus banking situation, the pension system in the US, and how Congress is working hard to exempt itself from Obamacare. Martin also touches on economic trouble brewing in Europe, Japan and Argentina. As to the banking system, Martin advises to avoid large banks involved in proprietary trading and stay with the regional banks.
2012 – A turning point for digital media
Jim welcomes Alex Daley, Chief Technology Investment Strategist with Casey Research. Alex and Jim discuss Apple, and if it is a buy at current levels. Alex also discusses Apple’s transition from a rapidly growing tech company to a Blue-Chip company with a growing dividend. Apple’s share of the smartphone market is shrinking, and that will likely continue. But Alex also notes new catalysts for Apple with the coming “I-Watch”, the deal with China Mobile to produce and sell inexpensive smartphones in China, and Apple’s sizable and growing dividend.
Frank Holmes of U.S. Global Investors: Paper Gold Is Short-Term and Leveraged - Physical Gold Is Long-Term and Cash
The Old Mining Model of Acquisition and Production Is Broken - A New Model Is Emerging
Jim welcomes Frank Holmes, CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in gold, natural resources and emerging markets. Frank believes the two main factors determining gold demand are the Fear Trade (of inflation or economic crisis) and the Love Trade (gold jewelry demand- primarily from India and China). Frank also discussed why gold stocks have underperformed the metal; the old model of acquisition and production is broken. Frank sees a new model emerging, one that is more shareholder-friendly. After the recent hard landing, Frank sees the price of gold likely to remain in a consolidation period, until demand overwhelms supply.
The Fundamentals For Precious Metals Haven’t Changed
Jim welcomes back Ross Hansen, founder of Northwest Territorial Mint, now the largest private mint in the US. Ross discusses the recent high demand for physical precious metals, and notes that the fundamentals of the market have not changed. At the moment, there is a shortage of product, specifically gold and silver coins. Ross advises to not pay the current higher premiums on coins, but just buy the rounds or bullion. He sees the “fast money” crowd trading in and out of the paper gold market, but the demand for physical precious metals continues to rise. Jim and Ross also discuss the current situation in Cyprus.
Recent Whiff of Deflation, But Plenty of Money Floating Around to Create Inflation
Jim welcomes back Eoin Treacy, Global Strategist at Fullermoney, a division of Stockcube Research Ltd. in London. Eoin is favorable toward US markets, noting contracting P/E’s and rising dividend yields on US stocks. He believes the US has an advantage over other countries, and sees US multinational stocks leveraged to the global economy as the best place to invest. Bond investors are reluctant to change their strategy, and Eoin doesn’t see them moving into stocks until they start losing money in bonds.
Doha - The first Peak Oil conference initiated by Gulf State oil producers
Jim is pleased to welcome back Dr. Robert Hirsch, Senior Energy Advisor at Management Information Services Inc. and an authority on Peak Oil. Dr. Hirsch has just returned from an historic peak oil conference in Doha, Qatar, the first ever initiated by Gulf State oil producers. Dr. Hirsch believes there will be a “sea change” coming to the Middle East, once peak oil is reached. The timing of its arrival is difficult to predict, but it will likely be sooner than the global economy is prepared for. He makes the point that most people don’t understand that peak oil is a “liquid fuel problem”, and thus wind and solar technology will never solve the problem. Dr. Hirsch also sees the current projections of future US energy independence as “pure fiction”.