Mike Maroney Interviews Aftershock Investor co-author Bob Wiedemer - June 2017
Bob Wiedemer and Mike Maroney
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Mike Maroney: Hi! My name is Mike Maroney and I am coming to you today from the Monex Precious Metals Studios. We'll be interviewing Bob Wiedemer, the author of Aftershock, Aftershock Investor, and Bubble Economy. Bob has been working with Monex on a new Uncertainty Index, which we feel is without a doubt a very, very positive tool for investors to not only have, but to understand.
Bob, how are you today? Good chatting with you.
Bob Wiedemer: Doing great Mike.
Mike Maroney: Good. Now, we had an opportunity to speak a little bit at the beginning of the week. Obviously, you were looking at the jobs numbers being an important number and everyone thought that we were going to see 185,000 or maybe even 200,000 jobs and then the jobs numbers disappointed, but you're still a believer that the Fed is going to potentially raise rates.
Bob Wiedemer: Yeah, I just think it's hard for the Fed to back off raising rates when the unemployment rate just hit a 16-year low. So, I think they are still going to raise rates, but let’s be clear that that job number was a disappointment, especially because ADP just a couple days ago or earlier in the week had a... they said that we had 240,000 jobs created and whereas the government says 130,000. So, 130,000 is slow, but again unemployment rates down. I think we're going to see a FED rate hike. However, it does open the question of how many more we're going to see this year, especially if some of this slow job growth continues.
Mike Maroney: Well, now the interesting thing after the jobs number was released, today, we've seen gold and silver pop to the upside--silver hitting a high of about $17.55, gold all the way back up to $1280. So, it looks like this uncertainty is causing some safe haven money to come back into the precious metals markets.
Bob Wiedemer: Oh, no question... there's no question there's still a continued feeling of uncertainty. Yeah, the markets going up and nobody is sure exactly why, but there's uncertainty out there after President Trump's trip to Europe. He comes back, pulls out of the Paris Climate Agreement. That clearly is something that has riled up businesses and a lot of people. Although, I don't think unexpected, it is not exactly what a lot of companies wanted. Certainly, those involved in green energy, which are very much a part of the stock boom and the stock bubble like Tesla. So, I think there is uncertainty out there even if it's not reflecting in the market. The stock market right now, gold is showing it. Clearly an uncertain environment still, no question.
Mike Maroney: Now Bob, you're in Washington D.C. and we get some of the information, some of the news, if you watch certain channels as far as what's happening in our political arena, but the more I listen to any sort of news station, obviously, there is some extreme volatility out on the horizon as far as this whole political situation and what's going to happen with Trump, what's going to happen with these investigations, this isn't something that you see stopping anytime soon?
Bob Wiedemer: No. Certainly, I'm afraid that the Trump administration doesn't either. There's been a big shake up in the administration. Some of the investigations are now focusing on Trump's Son-in-law, Jared Kushner, and that's got to be upsetting to him personally. That's got to be upsetting to the administration, because he's been the one person that's kind of been a rock of sorts for Trump to lean on, that's sort of been above all the problems. Now that he's under investigation that's just another bit of uncertainty. So, no, I don't think these political issues are going to stop or the political uncertainty. We're still not seeing movement on tax cuts. So, certainly that political uncertainty is going to continue and if anything with a special counsel now being appointed, Robert Mueller, being appointed to look into the Russian investigations, probably you're going to see more problems not less for at least in the next few months on that regard.
Mike Maroney: So, what we have is a situation where our President made a lot of promises in order to be elected and none of those promises have come to fruition, yet the price of the stock market is at extreme all-time highs. Many people said that, "Oh, well, it's the Trump Bump and now we don't need Trump any more. Now, it's based on earnings." But we're not seeing this massive amount of growth here in the U.S. based on the jobs and everything else. So, if things start to slow down, what's in the Fed's game plan on the long-term if that were to take place.
Bob Wiedemer: Well, long-term... I think the Fed's game plan. Well, let's just say, the Fed never has a game plan. I mean, they never predict a recession. I don't think they have a game plan if the stock market falls. I think, they will just react out of panic as they have in the last 7 to 8 years. There was no game plan to... to print another $3 Trillion in the last 7 to 8 years. So, again, game plan, none. Reaction to a stock market falling, they're going to print money. I mean, it's really the only tool they have to do anything. They will print money when the stock market goes down and as you said there are a lot of issues out there that I think make it likely the market is going to take a fall. Trump has not come through on any of his promises, yet. Although, it's certainly quite possibly he will. It could be awhile before that happens. Earnings were up in the first quarter, but whether that can continue in an environment where you have a slow retail sales, not just in department stores, but across the board. We've been losing jobs in that area now for three or four months in a row. You have automobile sales slowing down. You've got restaurant sales. You've got other consumer spending slowing down. You know, it's not clear we can keep up earnings growth as we saw in Q1. Again, most of the Trump bump came before we knew of earnings growth. They're always expecting hirings growth. So, this time they got it for a quarter. I don't think they're going to get it going forward. I think the likelihood is that the market will fall here at some point, probably dramatically. We've already seen difficulties in oil. We can talk about that more later, but oil is not doing well. Obviously, last year that's what kicked off a big fall in the stock market in February or January and February of last year. So, when that happens, yeah, the Feds going to print money. That's their big tool. That's their big weapon. That's what they're going to do to pump it back up.
Mike Maroney: So Bob, what we've seen in the last few years is the... Japanese, the European, the US Central Banks have basically printed about $13 Trillion worth of additional paper money and the amazing thing in many people's eyes is they thought that would cause inflation, but the bottom line is stopping and potentially pulling back on the number of bonds or selling some of the bonds that are in the Feds portfolio. That actually may be the catalyst that makes interest rates go higher, makes it much more difficult for the U.S. government to borrow money, to sell bonds, and inevitably the Fed has to come back and start buying paper. Is that when the jigs up and people finally realize that it's broken and I better own precious metals?
Bob Wiedemer: I think that's better said the beginning of the end. Yes, maybe not immediately. I mean, I think, when the Fed prints money to push up the market the reaction is going to be, "Hooray! The markets going up, that's great," but there is an underlying uncertainty, an underlying unsettling context for that market increase that that is they're printing massive amounts of money to do it. Yeah, Bank of Japan and Europe is doing the same thing. In fact, they've now printed as much money as we have. Remember, we stopped a little while ago, about a year plus ago. They've kept printing right along, every month, $60-$70 Billion a month. So, they're getting up there. We've held for a while. If we go back to it, I think an initial hooray, but yes, absolutely, that's the beginning of the end, because that's really what people are hoping will never happen again. When it does, it kind of says the problems not just an emergency or short-term, it's chronic, if the Fed has to constantly keep printing money to keep the market up. So, yeah. That's the beginning of the end. You've got it Mike.
Mike Maroney: Well, I'll tell you what, we've seen gold, which pulled all the way back down to $1217; silver pulled back down to $16.10. Gold is up $70 off the lows; silver is $1.50 off the lows and investors are starting to pile back into the precious metals market. I think a lot of bond buying was being actually held as safe haven buying, whereas I think investors are starting to realize those bonds are not a safe haven. If anything, I need to have a non-correlated asset and precious metals definitely fills that bill.
Bob Wiedemer: Let me add one thing Mike, a bullish sign... I hate to interrupt... but just a bullish sign on gold is a fact that it went up as you said, but it's going up... it started with the market going down in mid-May, but it's kept going up even though the market has rebounded. I find that very interesting and I find that a bullish sign for gold right now, the fact that it can continue to go up even though the market has gone up as well. Again, I think underlying that fundamental uncertainty in as you say not seeing bonds as the alternative safe haven, but something like gold as a non-correlated asset as a safe haven.
Mike Maroney: Fantastic! Well, Bob, great speaking with you today! Needless to say, we're doing everything in our power to try to get people to diversify somewhat out of maybe some of those overvalued stocks they own into something that in our eyes is undervalued for the long-term, both silver and gold. I think, if investors understand your Uncertainty Index better and really take a deep look into the different variables that you talk about, I think everybody will realize now is a great time to own precious metals.
Bob Wiedemer: Thank you, Mike!
Mike Maroney: Alright. Bob, have a great weekend and we'll chat with you soon.