With the global markets awaiting the Fed decision tomorrow, one of the greats in the business sent King World News a fantastic piece discussing the wild trading in China and what to expect from the Fed, plus a bonus Q&A that includes questions on gold and the Fed.
September 16 (King World News) – China was 5% higher last night, aided by a last-minute burst of buying (no doubt by the government). Europe gained a bit of ground, but the market here spent the first half of the day flopping around unchanged as folks prepare themselves for tomorrow’s FOMC announcement, and in all likelihood a “nothing done” from that tragically clueless band of central planners…
Continue reading the Bill Fleckenstein piece below…
The indices popped about 0.75% in the afternoon and closed on the highs again. Away from stocks, green paper was weaker, fixed income was flattish, oil gained 5%, and the metals were firmer as well, led by silver, which added 3% to gold’s 1%. The miners were also fairly strong.
If They Hike, Things Are Good, If They Don’t, Even Better
There is not much point talking about today’s action because what really matters is how the market responds to the Fed’s verbiage tomorrow. I think a lot of people are expecting the market to rally if the Fed doesn’t hike rates. While we could see such a kneejerk response, people who believe that don’t seem to understand that the lack of a small tightening is not the same thing as QE, which we haven’t seen in a year, and is the reason the market is struggling.
As far as I am concerned, we can’t get the Fed’s bloviating out of the way soon enough so we can focus on whether the market can deal with sky-high expectations at the exact moment when they are unlikely to be met, and there is no cavalry (i.e., easy money) riding to the rescue.
Included below are three questions and answers from today’s Q&A with Bill Fleckenstein. The questions are from his subscribers and they get to read Fleckenstein’s answers every day.
Question: If the economy is doing good the Feds will be comfortable raising rates which I’m guessing won’t be good for the stock market? Even though the entire premise of raising the rates is a strong economy. On the other hand if the Fed doesn’t raise rates because they feel economy isn’t strong enough this will be bullish for stocks? I’m just trying to figure out the logic behind this all important 25 point rate hike and the hysteria around it.
Answer from Fleck: “It’s all silliness. Twenty-five basis points don’t matter, but they probably won’t have the nerve for even that. Their policies are a failure.”
Question: I have heard many experts from the bigger banks saying that a rate hike will be positive for the market because it shows confidence from the FED about the economy. Is there any truth to this or is this another example of the Wall Street’s permabull stance?
Answer from Fleck: “That is just nonsense. The Fed has essentially failed so why care what they “think.” It is also 100% lunacy that we “need inflation to create economic growth.” That, too, is 100% garbage. A lot of pure fabrications pass for fact these days, for now.”
Question: Bill, if the Fed does not hike rates on Thursday, and the dollar index still stays elevated and the price of gold stays at these depressed levels, do you think that takes away from some of the bullish gold thesis at all? Or would you still consider it intact? I ask since gold has clearly been hurt for at least the last year, maybe more, on speculation that the Fed was going to raise rates. I found today’s action in stocks and gold astonishing — that stocks went to the races on the bad data (which implies, potentially, that no hike is coming) while gold stayed at its depressed levels on the same “no hike” concept made no sense and made me wonder if this negativity on gold is going to just continue no matter what the Fed does. Thanks!
Answer from Fleck: “Let’s not borrow trouble. Let’s see what they do and how the markets behave, then you can ask questions. All these hypothetical questions are a waste of time at this juncture.”
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