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Warning Signs: Despite Record Highs, Everything Is Not Right on Wall Street

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The Dow cracked 22,000 this week, marking the third 1,000-point milestone in 2017. The Dow industrials are up 20% since election day.

In fact, Pres. Trump is taking credit for the rise. As the Dow approached the 22,000 mark, the president tweeted that the market has gone up 4,000 points since his election.

In his most recent podcast, Peter Schiff once again points out that the economic fundamentals don’t support this stock market bull run, saying there are cracks in the foundation.

Trump also sent out a tweet bragging about wage growth since he took office, but actual numbers released the same day as the Dow record were flat. NPR did a whole piece on “why America’s wages are barely rising.”

The US economic recovery has gone on for eight long years, and the unemployment rate is at a low 4.4%. But wage gains have barely budged.”

Recent data also indicates automakers are struggling, another sign the air is coming out of the auto bubble.

But Peter focused on a more anecdotal sign of economic malaise – a bad summer season for movies. Pundits blame a poor slate of summer films and the growth of online streaming options for the box office struggles. But Peter hit on a more basic reason.

The one thing that they never thought about was that maybe it’s the weak economy. Maybe Americans have such lousy jobs, and ticket prices have been moving up, that they just can’t afford to go.”

Speaking of jobs, Peter also pointed out that the recent “positive” jobs numbers really aren’t. Despite adding jobs, the economy shed 4,000 manufacturing jobs.

This is the same type of lousy jobs report that we were getting under Barack Obama. Right? We lost more manufacturing jobs. Those are goods-producing. Those are higher paying. We got all these jobs in the service sector, in retail and healthcare – these are low-paying – a lot of part-time jobs. Of course, Donald Trump is probably going to claim this is fantastic, and we have all these jobs that are being created, but these are the same type of low-paying service sector jobs that Donald Trump was extremely critical of – and correctly so – when he was a candidate.”

On top of all this, the Chicago Purchasing Managers Index (PMI) dropped last month.

The Chicago PMI Business Barometer declined to 58.9 for July from 65.7 the previous month and this was below consensus forecasts of 60.0 and the lowest reading for 3 months.”

And the most recent construction spending numbers showed weakness, dropping 1.3% in June.

Construction spending fell 1.3% in June, the biggest drop since a 1.8% decline in April, the Commerce Department reported Tuesday. Spending rose a tiny 0.3% in May.”

As Peter points out, the markets are simply ignoring the data.

More and more weak economic numbers. Nobody cares. Everybody ignores it – stock market making new highs. But again, beneath the surface, there are a lot of cracks there are a lot of warning signs.”

Peter also noted that a lot of new IPOs have hit record lows of late, even as the overall stock market surges ahead.

The reason I point out these stocks … these are kind of like the weak link in the chain. The fact that they’re snapping indicates the chain is under stress … When you see these marginal companies, these new IPOs that were darlings and everybody was excited about them – they’re blowing up. They’re hitting 52-week lows. This is a warning signal that everything is not right on Wall Street.”

So, what is the Fed’s tolerance for a tanking stock market? When Obama was president, the central bankers did everything possible to throw the market a lifeline if it showed any sign of going down. Peter doesn’t think Trump will get that same kind of love from the Fed.

I don’t think so. I still think that Yellen put is still there at some point, but I think the strike price is a lot lower. I mean, the Fed might be willing to allow a 20% decline before it comes to the rescue, because then, if they let the market go down 20%, that’s a bear market. And that’s Donald Trump’s bear market. He’s going to own that bear market. So, the Fed might be willing to allow a bear market on Trump’s watch, that Trump is now responsible for, because now it proves that he’s a bad president, that he screwed things  up – especially if they can get some tax cut in they can blame it on, or they can try to blame it on the deregulation that he claims has been going on … This is what happens when you vote for a tax cutting, deregulating Republican.”

In other words, as Peter said during a recent RT interview, the Fed has a perfect fall-guy in Trump.

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