On the heels of global market continuing to plunge, today one of the greats in the business warned King World News that the stock market plunge will accelerate, and he also compared this week’s action to the 1987 crash.
Don’t Expect An Orderly Decline In The Stock Market
Eric King: “Bill, you’ve been warning for quite some time that we could see the stock market crash. KWN noted that you had already gotten 50 – 60% short the stock market as you had restarted your short fund. That certainly turned out to be impeccable timing on your part. We’ve started this downdraft in the markets, is there no end in sight to the decline or do we get a bounce from here?”
Bill Fleckenstein: “I have told you in the past that the stock market was crash-prone for a variety of reasons. I did not think there was going to be any way for an orderly decline to actually take place — orderly being what people who are bullish think that the decline ought to look like….
Continue reading the Bill Fleckenstein interview below…
No Reason For Hemorrhaging In Stocks To Stop As Fed And Market Are Trapped
“So this is a chance to really see things break loose to the downside as the stock market already broke below the 200-day moving average two days ago and since then it’s been straight down. I don’t see any reason why the hemorrhaging should stop.
If my premise was correct, which was that money printing doesn’t work but does misallocate capital and it can drive financial markets to the moon, which it did, and then all the bullish conclusions about how the stock market and the dollar were going to keep rallying and the economy was going to get better and the Fed was going to tighten — all of that was a false premise. So I think people are in the very early days of having to unwind a lot of incorrect investment decisions and trades they have been put on.
The stock market and the Fed are trapped. The market can’t go up because it was only going up because it had QE. That ended. The vapors from QE were so strong that they held the market up for almost a year. Now it (the stock market) is tanking and the Fed can’t initiate more QE because they’ve been talking about a rate hike because they don’t understand the economy either.
Nothing Can Be Done Until The Stock Market Crashes
But now the Fed can’t do anything until the stock market crashes hard enough that they are forced to say, ‘Oh gee, maybe we need more QE.’ So I think the market is probably not even going to have a decent bounce until they hint that maybe there is no rate hike. But these people at the Fed don’t understand that not hiking rates is not like more free money. So there’s not going to be any real rally until they start hinting at more QE, and that can happen in a short space of time because the stock market could go down (crash) so hard.
Parallels From Today’s Stock Market Plunge And The 1987 Crash
This week everyone was mispositioned because everyone said it was an options expiration week so the market usually goes up. And that’s been the case but that’s no guarantee and people forget about that. And they probably don’t know that the Friday before the stock market crash in 1987 was also an option expiration that worked to the downside and fed on itself. And that was before everyone and his uncle positioned themselves bullishly on option expiration week back in 1987.
So there are a whole lot of reasons to think that this could get rather nasty very quickly to the downside. I don’t see any reason for the market to rally but remember that nobody really has a good feel for how to operate in this algo-infested and momentum-oriented world that we inhabit. So I think people should expect surprises to the downside, even though there may be some violent bursts (countertrend rallies) to the upside.” ***KWN will be releasing written interviews all day today and this weekend, including audio interviews.
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