Today a legendary short seller said people have given up on the gold and silver space and the sector may see explosive gains as a result.
By Bill Fleckenstein President Of Fleckenstein Capital
August 8 (King World News) – Overnight the stock index futures were weaker, ostensibly because of Trump’s saber rattling regarding North Korea. I say “ostensibly” because, for the most part, anything that Trump has done that might be perceived as a negative has not really mattered to the stock market for more than about five minutes, so I hesitate to ascribe any of the action to his machinations. Especially since the one thing that was completely predictable from the beginning was that he was going to be very unpredictable and create massive uncertainty. However, those two qualities have not mattered much to anything, except perhaps the dollar. Meanwhile the FAANG complex lost another leader as NFLX was pummeled on the Disney news…
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In any case, after opening on the weak side, the market started to grind higher and by midday the losses had been reduced to about 0.2%. In the afternoon, the rally fizzled, but the indices held together with the Nasdaq the weakest, as it fell 0.4%.
Away from stocks, green paper closed lower after trading on both sides of unchanged, oil was a nonevent, and fixed income was higher. The metals were stronger, led by silver, which gained almost 3% compared to gold’s 1.2%, but once again the miners chose not to respond much to the underlying strength of the metals.
With All Disrespect
When discussing psychology it is difficult to be precise, but it seems to me that the hatred for the metals complex is quite high. Maybe not in the daily poll of the futures traders, but the intense outflows from the GDX would indicate that people have completely given up on the sector. That won’t make it go higher, but it means when it finally does it could easily be explosive, even if that seems impossible to comprehend at the moment given how moribund/awful the group has been for many months now.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Question: I know it’s never “different this time” but after looking at the Swiss National Banks latest 13-F filings, it is clearly different this time. The question is how does this eventually end because it would seem the SNB (as well as the FED, BOJ, etc.) can print as many Francs as needed to keep this jig up? I mean I know it ends and ends violently at some point, but is the time line before the bubble burst extended due to the actual firepower (CB’s printing money to buy stocks) behind it? I guess I’m just curious as to your opinion b/c after seeing the SNB’s 13-F, I was shocked. It’s like these CB’s are not even afraid of being exposed for their recklessness. How in the hell can the Swiss people think this is rational? “Mystery” Central Bank Buyer Revealed: SNB Now Owns A Record $84 Billion In US Stocks
Answer from Fleck: “The timeline has already been extended for this party, inspired by free money, and is nearly 10 years old. What is different this time is exactly what you are complaining about, that the CBs have sponsored this massive, worldwide, “everything” bubble, though they don’t think it is one. Hence, they will ride to the rescue at the first big market crack, which is getting closer.
That’s why for years I’ve said the first big downside break is just a trade. Then the CBs will give you a “do over” and we will get to see how all markets like QE4/5, etc. QE has not worked for most people, and the next go-round of it is liable to have different outcomes from the prior go-round, but we can’t predict any of them with any certainty now, so we need to just see how it plays out. First, we need some downside in the stock market.”
Question: Fleck, The Fed made trillions of dollars appear out of nowhere so it could purchase bonds, lower rates, and cause assets prices to skyrocket. Given most of those assets are held by the wealthier people in the country, this has been a very good 8 years for them. They have been able to convert the money they made from the rising asset price into new homes, cars, vacations, etc. Fleck, in theory, is there any difference between what the Fed did and perhaps instead just printing money and handing it out to the poor in the streets so they could go buy mansions, cars, go on vacations, etc. In the end, its all the same isn’t it, just differs on who actually gets/benefits from the trillions printed. Do I have this concept wrong?
Answer from Fleck: “No, you are correct. When you print money, it flows to whom it flows to based on the banking system and crowd psychology. It is hard for printing money to help anyone poor, as they don’t have money with which to make money, and the other printed money pushes up prices of things they need. But it does that in a lumpy fashion. Some items go up in price way more than other items.”
Question: Bill, a group called Agora Financial placed the following ad on Yahoo finance:
“THIS $.09 “SUPERBITCOIN TO EXPLODE BY SEPTEMBER 30?”
“Turn a $20 bill into a fortune as this penny-cryto begins to overpower Bitcoin.”
I remember in 1999 when the woman who was cleaning my house was heavily investing in penny stocks. This feels the same way; sure feels like the end must be coming soon…Best regards
Answer from Fleck: “Yes, it does feel that way, as all manners of drunken speculation are manifesting themselves.”
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