James Turk – We Just Witnessed A Huge Wakeup Call For The World
from King World News With crude oil surging 2.3 percent as the Dow moved toward the 18,000 level and gold and silver consolidated recent gains, today James Turk told King World News that what we just witnessed was a huge wakeup call for the world. James Turk: “Commodities are moving back to center stage, Eric. Last Friday’s unemployment report was a huge wakeup call… “The shocker was how few jobs were created in May. Though signs of a weakening economy have been evident for months, Wall Street is finally starting to get the message that a recession is imminent, if in fact one hasn’t already begun. Consequently, the Federal Reserve is not going to raise interest rates in June, nor do I think will it raise interest rates anytime this year.
As I have been saying for years, the federal government cannot afford to pay a fair rate of interest because its debt load is so high. Higher interest rates would worsen the federal budget deficits. So the Fed will keep interest rates low to lessen the federal government’s debt burden. Nor will the Fed raise rates as the presidential election approaches, particularly with the economy weakening. But returning to Friday’s report, the interesting thing is what happened in the stock market. Initially the major averages sold off, which is a bit counterintuitive given that low interest rates have propped up stocks for years. But I think what happened is that the stock market sensed as a result of the wakeup call from the low payrolls number reported Friday that a recession is brewing, and a recession is bad for earnings. With valuations for the major averages already high, stocks were vulnerable. So they fell after the payrolls report. But now the major averages are rebounding. So the question is, are they rebounding because stocks will continue to benefit from low interest rates? Or is it because stocks see rising inflation coming down the road? I think it is the latter.