On a day when gold and silver pulled back, yes, central banks buy gold, but they are also buying mining shares.
By Bill Fleckenstein President Of Fleckenstein Capital
August 30 (King World News) – Overnight markets were mostly higher, but interestingly enough our stock market decided to spend time lower through midday before (naturally) trying to rally. However, that attempt fizzled for a change and the indices fell a bit more, which produced a rally, but in the end not much damage was done, as they only lost about 0.2%…
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Away from stocks, green paper was definitely the flavor of the day, as dollar bulls continue to trip all over themselves to capitalize on the imminent rate hikes they are certain we will see. Oil lost 1%, fixed income was weaker, and the metals were lower, with silver losing 1.5% to gold’s 1%. The miners were hit quite hard as well.
The Nth Time’s the Charm
Obviously, the precious metals have become fixated once again with what the Fed may be about to do. How we can replay this movie over and over again is a question I cannot answer. In the investment world that I grew up in the market only tended to discount something once, or maybe twice, but not n number times, where n is some larger number.
Nevertheless, it is what it is, and while the metals seem to be terrified of a whopping 25 basis points, no other markets seem to think it is even possible, with the exception of the FX fantasy favorite, that being the dollar.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Question: Do you think that the high levels of saving in Asia are A major cause of our collapsed interest rates, even though the Fed is THE major cause? If so, how do you think the two magnitudes compare?
Answer from Fleck: “No way. It is 100% a function of central bank lunacy.”
Central Banks Buying Mining Shares?
Question: Bill, NORWAY’S CENTRAL BANK FILES FOR CONFIDENTIAL TREATMENT OF ITS US EQUITY HOLDINGS seems like another data point. if norway fund has 890B then this was about 1% in 2015 do you find it interesting that the banks like norway and swiss are buying miners?
Answer from Fleck: “Yes, it’s very interesting and will cause others to follow, IMO.”
Question: Dear Bill, how dangerous is Saudi Arabia’s liquidity/ rate situation in your opinion? If you think there might be significant risk for global markets could you broadly sketch out a possible example scenario of how the problem might transfer to global markets? Thank you.
Answer from Fleck: “I can’t really sketch out a problem. I don’t have much data on it or understand it well, but the apparent problems there do seem like they could be serious, though that is just a guess by me. If it is a problem and spreads, it would almost have to be via bad credits contaminating other bad credits via banks, most likely in Europe.”
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