In his 100th podcast, Peter Schiff looks at the latest lousy data from the labor market. Last quarter’s wage growth is the worst since the government started recording it in 1982. He also discusses the disparity between the paper and physical gold markets, and the reactions his brokerage and metals clients have had to the growing bubble of the US dollar.

You have more paper gold trading relative to the actual physical supply than ever before… But in the real, physical [gold] world, the actual buyers – it’s skyrocketing. The mints are running out of supply. Orders are getting backed up… Nobody is calling to sell. Everybody who’s calling is calling to buy more… On the other side of the coin, people who have brokerage accounts and asset management accounts, most of the calls I’m getting now are from clients who are wanting to sell…

“My Canadian clients who hold the same stocks as my US clients, their statements are going up. Because their statements are in Canadian dollars… But people should react the same way, because this is a bubble in the dollar. This is a bubble in confidence in the US recovery that doesn’t exist. Confidence that the Fed has finished QE, when they’ve only just paused. Confidence that they’re about to embark on a rate tightening cycle, when I don’t think we’re anywhere near that…”

Audio Length: 00:30:16

Highlights from the podcast:

“What I want to talk about in this podcast is this bombshell – it should have been a bombshell – that was dropped on the markets by the Labor Department on Friday in the form of the Employment Cost Index. This measures the cost to employers to hire people. There are basically two components. There is the wages and salaries, and then there’s the benefits. Salaries – they were looking for them to be up 6/10ths of a percent for the quarter. The prior quarter it was up 7/10ths. Instead, we got just 2/10ths. This is a nominal number. This is not adjusted for inflation. So even if you adjust it for the government’s version of inflation, that means real wages were down for the second quarter.

“To put into perspective how weak this quarter was, this was the weakest quarter, the smallest growth since 1982. That’s a long time ago. I graduated high school in 1981. This is the smallest increase in wages in a quarter since 1982. The reason it’s the smallest since 1982, is because 1982 is the year they started keeping the records. So who knows when the last time there was a quarter when wages were up this little? …

“Janet Yellen has been saying that before she can raise rates, we have to have an improvement in the labor market. I’ve always understood the improvements to be wages, participation, and full-time versus part-time work. Basically, we’re 0 for 3 right now. All three are falling. Real wages are falling. Labor force participation is falling. And full-time employment is falling. It’s only part-time employment that is on the rise…

“As soon as this number came out, they sold the dollar hard. The euro skyrocketed… Gold even managed – it was down 5 or 6 bucks before it came out, then it was up like 10 or 11 dollars right away. There was a knee jerk reaction to this really bad news…

“Everything that’s going on – the economic data being lousy, the market looking toppy – all of this would argue for no rate hike in September, yet they’re still saying it’s going to happen. Or worst case, December. But the odds makers are still saying it’s a better bet we get it in September. It’s kind of like the Wizard of Oz. Janet Yellen is say, ‘I’m only going to raise rates if the economy is strong, if the labor market improves. And we think we’re going to raise rates sometime later this year.’ Ergo, the Fed must believe the economy is going to improve, otherwise they wouldn’t be stating that they’re likely going to raise them. This is what people are thinking. Therefore, when traders see the bad economic news, they think, ‘Well, it doesn’t really matter about this bad news, because the economy is going to improve. If this isn’t the news that shows it’s improving, that good report is obviously right around the corner.’ …

“By the way, I wanted to mention on what is going on in the gold market. You’ve got this dichotomy between the paper market, where people who don’t own gold and have no ability to deliver it, are selling gold to people who don’t actually want it. People are gambling on the price of gold. The amount of gold being gambled – all the contracts where people have agreed to buy gold that they’re never going to take delivery of from people who don’t have gold and no ability to deliver it – we now have more paper speculators… than ever before… You have more paper gold trading relative to the actual physical supply than ever before. So you have all these people betting on the direction of gold.

“But in the real, physical world, the actual buyers – it’s skyrocketing. The mints are running out of supply. Orders are getting backed up. We actually have a special now. I don’t know how much silver we have. We might be out of it already. We got a deal. We bought some of these half-ounce silver rounds. We’re selling them at I think the lowest price you can find half ounce silver on the internet. We’re limiting the number to customers, because we know clients want these coins and there’s not that many. We’re going to run out this week.

“We buy a lot of gold and silver from the Perth Mint. They’re stretched to the max. They’re at capacity. The US Mint is as busy as it has ever been. SchiffGold, we’ve just had our busiest month in years. In fact, things are so buys, I got to hire somebody. We need another salesman. The phones are ringing, people are buying. The price is going down, and even though it’s making new lows, people want to buy…

“I have people who have bought gold and silver from me at much higher prices, because gold got as high as $1900. Silver got as high as $50. I have clients that bought gold from me in the $300s and silver from me in the $4s and $5s, but not from SchiffGold. They bought it through the Perth Mint through Euro Pacific Capital. SchiffGold started much more recently. The prices now are at the lower end of where they’ve been since SchiffGold has been in business.

“So I’ve got a lot of people who bought at higher prices. Nobody has called up to sell. Nobody is saying, ‘Hey, I bought gold at $1800 and it’s now down at $1100, and I want to sell it back to you.’ Because we buy it back. We buy back everything that we sell. Nobody is calling to sell. Everybody who’s calling is calling to buy more…

“About 60 percent of our business is repeat customers… But we’re also getting new customers. People are reacting to lower prices by buying. Which is what they’re supposed to do…

“On the other side of the coin, people who have brokerage accounts and asset management accounts, most of the calls I’m getting now are from clients who are wanting to sell. ‘Hey, I looked at my statement, my account’s down 20% from where it was or whatever. I want to sell.’ Why do you want to sell? ‘My account’s down, I want to sell.’ No, they should want to buy. It’s interesting, because gold is down for the same reason that our stocks are down. Our stocks are foreign and the dollar is way up. That’s what’s driving gold down. That’s what’s driving our stocks down. My brokerage clients, my asset management clients should be acting like my metals clients. They should be calling with smiles… It’s not because we’re picking a bunch of bad stocks, it’s because the dollar has gone up…

“My Canadian clients who hold the same stocks as my US clients, their statements are going up. Because their statements are in Canadian dollars. So my US clients, their statements are in US dollars, so the accounts are going down. Even if my stocks are going up, they’re not going up as fast as the dollar. The dollar is going up faster… But people should react the same way, because this is a bubble in the dollar. This is a bubble in confidence in the US recovery that doesn’t exist. Confidence that the Fed has finished QE, when they’ve only just paused. Confidence that they’re about to embark on a rate tightening cycle, when I don’t think we’re anywhere near that…”