Today a legendary short seller warned this bubble will be unwound with an epic crash. He also discussed what will be wildly bullish for gold.
By Bill Fleckenstein President Of Fleckenstein Capital
July 21 (King World News) – The early going saw the indices slightly heavier, for no particular reason and with no particular theme, near as I could tell. Macro- and company-specific bad news does not seem to matter, although yesterday Sherwin-Williams and Home Depot did see their stock prices decline, and last night Maxim was a bit weak due to auto-related issues. However, the consequences for related companies has been muted…
To hear which legend just spoke with KWN about $8,000 gold and the coming mania in the
gold, silver, and mining shares markets CLICK HERE OR ON THE IMAGE BELOW.
Out With a Bang
Nevertheless, even though bad news is being ignored, I continue to believe that the only way this bubble will be unwound will be in an epic crash. I know I have made that point for two or three years now and it is has not happened, but that does not mean it won’t. I think the structure of the market continues to get even more crash-prone the longer this goes on.
Regrettably, there is not much to do about it yet. One could always continue to buy puts as insurance, or wait for signs of weakness and then act, which of course has been the path that I have chosen. Keep in mind that serious stock market weakness will expose the central bank policies as total failures. The question then becomes whether that precipitates a loss of confidence. No one can predict that, but it is a distinct possibility, and of course would be wildly bullish for gold.
Turning back to the market action, in the afternoon not much happened and with an hour to go, when I had to leave, the indices were nowhere. Away from stocks, green paper was weaker again, with the lion’s share of the move today against the yen. As I noted last Tuesday, the FX market, has totally unwound its Trump rally even though the stock market has yet to do so. Fixed income was slightly higher and the metals gained about 1%.
Not On Their Best Behavior
I believe we are very close to an upside explosion in gold and the miners, although we could easily see one more pullback first. I have been looking for this for some time, but with the dollar having weakened dramatically it is much more fertile ground for higher gold prices. That said, I will be the first to admit that thus far the dollar weakness hasn’t mattered as much as it “should” to gold, just as the miners haven’t gone up as much as they “should” given this year’s — and the recent — gold move.
Having said all that, there will be a point where the miners play catch-up, but as I just pointed out, it could require some sort of a pullback. I just don’t know. What I do know is that for the first time in quite a while it feels like we could finally see something explosive on the upside in the not-too-distant future.
Included below are two questions and answers from the Q&A’s with Bill Fleckenstein.
Question: Hello Bill, When I saw the big price drop in both Lowes and Home Depot today it felt like a big deal. What do you think? Is it important as it pertains to investors finally recognizing the weakness in consumer spending? Regards
Answer from Fleck: “I thought it was important, but didn’t write about it because it didn’t seem to matter. I think it shows economic weakness for sure, but that doesn’t seem to matter yet.”
Question: Hi Bill It’s been a ride since last year July/August gold highs…Where would gold have to increase to to feel confident to add to current positions? 1260? 1408(;))? Thanks for all your great guidance.
Answer from Fleck: “It depends on how much risk you already have and how you like to trade. I can’t tell you what to do, but I will say that over $1,400 will be a big signal. You have to set up a scenario that works for you. If you have a specific question about what a price level means, I can try to help.”
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