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Eric King:  “Bill, your thoughts on the Fed’s tapering today.”

Fleckenstein:  “I expected them to do this because they are a pretty delusional bunch in that they believe money printing solves problems, and they don’t understand that money printing precipitates bubbles and the misallocation of capital....

Continue reading the Bill Fleckenstein interview below...  


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“So since the S&P got a bid last year thanks to the fact that the Fed printed $1 trillion, now the Fed thinks everything is fine and so they are trying to taper.  Of course the only reason the market went to where it did was because of all the money they printed.

So I think this will be the last taper because the markets are going to continue to be roughed up.  A lot of hot money has been spilled around the globe, and now it’s now coming back.  One of these days the discussion is going to take place where people say, ‘The Fed can’t stop printing money.  They can’t leave ZIRP (Zero Interest Rate Policy), but what they do is ineffective.’

So at some point people will see the Fed is trapped and that’s really going to be when things get interesting.  Right now, even though markets are under pressure, people still have total confidence in the Fed and bonds are rallying.  This is an extremely important moment, even though nothing really appears to have changed, because the Fed is still revered.

The metals will do better now and stocks will do worse, but the real big moment when the Fed is discredited is still in front of us.  The stock market and the S&P were up over 30% last year and a lot of people took on a lot of risk.  Also, you could see by the sentiment polls that a lot of people were wildly bullish entering 2014.  Everything went to ridiculous levels as the S&P traded at 17 times earnings.  Now the hot money doesn’t want to be in that trade because it was all momentum-oriented.  So now things are going to get worse. 

If the Fed starts to do more QE because they think the economy needs help, there’s no real case to stop because they haven’t gotten the economy self-sustaining.  Now, you and I and the people who read and listen to KWN believe that the money printing only causes problems.  Right now that is a minority view, but eventually it will become the mainstream view.”

Fleckenstein added:  “I think stocks here and elsewhere will continue to be under pressure because at the margin the Fed has spooked people.  Remember, this was in an environment where everyone was pretty fully loaded up with stocks.  So I think stocks will continue to be weaker for a while until the Fed says, ‘Uncle,’ and I think the metals are going to trade higher.  So the bear market in the metals is over.

Last year was a year of fantasy where people were willing to suspend disbelief.  This year is going to be the year of reality.  Reality, to me, means lower stock prices, weaker bond markets, higher metals prices, and more turmoil.”

IMPORTANT - KWN will be releasing pieces and interviews all day today with Bill Fleckenstein, Nigel Farage, William Kaye, Keith Barron and others, including an exclusive guest piece from Europe.

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© 2014 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.

The audio interviews with MEP Nigel Farage, James Dines, Gerald Celente, Michael Pento, Eric Sprott, Andrew Maguire, Rob Arnott, William Kaye, David Stockman, John Mauldin, Egon von Greyerz, Art Cashin and Dr. Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf -- to listen CLICK HERE.

Eric King

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