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Fleckenstein - Gold Bullish As The Deflation Scare Has Ended
Today Bill Fleckenstein told King World News that the gold market is, “... in the process of leaving behind a bunch of sold-out bulls.” Fleckenstein, who is President of Fleckenstein Capital, also warned, “... bonds are finished.” Here is what Fleckenstein had to say: “I strongly believe that what I like to refer to as the, ‘deflation scare trade’ is finished. As you know, I’ve never been a big believer in deflation. Yes, housing prices have collapsed, but that’s not deflation. Deflation is when the cost of living goes down every year, which is the opposite of what we’ve seen.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,
rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
September 17, 2012
Bill Fleckenstein continues:
It’s the fear of the deflationary outcome that causes the money printing, which prevents it, until the printing press is taken away. The big problem which has perpetuated the deflation scare trade has not really been the United Sates. It’s been the fear that somehow Europe’s banking system would collapse, and government’s would collapse, and the euro would fracture, and all of that.
Draghi is in the process of morphing into Ben Bernanke....
Continue reading the Bill Fleckenstein interview below...
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“Ben Bernanke has shown you what he really thinks. He believes his own BS when he says that the Fed helped cause the Great Depression by not printing enough, when in fact it helped cause it by printing too much prior to it.
Thus, one of my favorite mottos in a social democracy with a fiat currency, all roads lead to inflation. I think that’s in the process of coming to pass. This doesn’t mean bonds are a short tomorrow, but bonds are finished as a place to hide. I’m not trying to make the point that it’s a precise moment in time, but in the big sweep of time, yeah bonds are finished.
It’s just me saying the deflation scare trade is over. But if that’s right, metals and inflationary beneficiaries should do better, and bonds should do worse. This is a huge shift in mentality, and it will have ramifications across broad swaths of things. If it doesn’t happen by Friday afternoon, it doesn’t mean it’s not happening.
We’re talking about a multi-year change, and if it ultimately results in the bond markets of the world taking away the printing presses from the Fed by lifting rates, say, three to five years on the yield curve and further out, then there are huge ramifications of that.”
Fleckenstein had this to say regarding gold: “I think there is going to be a real tendency on the part of everybody to fight the last battle. The correction of the last year in the metal (gold) was trying, and in the miners it was downright devastating.
Thus, I think people are going to be wounded and sell too soon, trade out of them too quickly, be reticent to buy them. The pullbacks won’t be deep enough to make people feel good, and the market is going to be in the process of leaving behind a bunch of sold-out bulls.
It seems to me when I read the papers, some other smart person or deployer of capital has a better understanding of what gold is, i.e. an alternative currency to the lunatic central bankers. Whether it’s Bill Gross, who now speaks rather warmly of gold, or someone at XYZ state pension fund, more and more people are understanding the need to own some.
There was a really interesting Ray Dalio interview last week, and he was talking about given the fundamentals, why wouldn’t you own some gold? He kind of talked about how 10% was a good number to think about. In the aggregate, there aren’t that many people that have that much gold exposure.
For my own personal interest, 10% is kind of a low number. I have a lot more exposure than 10%, but if the world tries to get to 10% (exposure to gold), the gold price could be a hell of a lot higher.”
© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. However, linking directly to the blog page is permitted and encouraged.
This was a tremendous audio interview with Fleckenstein. He lets KWN listeners know exactly where he believes we are in this cycle and how things will play out going forward. The audio interview with Bill Fleckenstein is available now and you can listen to it by CLICKING HERE.
The interviews with Bill Fleckenstein, Egon von Greyerz, Felix Zulauf, Rob Arnott, Michael Pento, Gerald Celente, James Dines and Marc Faber are available now. Also, be sure to listen to last week’s line-up of other KWN interviews which included James Turk, Art Cashin, Egon von Greyerz, and Sean Boyd by CLICKING HERE.
Eric King
