As we head into the final trading day in the third week of October, here is a look at $15 trillion of worldwide QE, the stock market, gold and making history.
By Bill Fleckenstein President Of Fleckenstein Capital
October 19 (King World News) – Last night a news story broke indicating that Apple had to cut orders to its suppliers as much as 50% because the Apple 8 was not selling well. Of course, that should not be surprising to anyone who has been paying attention. I myself have discussed the fact that the Apple 8 was an air ball upon its release, as there has been little demand for it. The bulls have tried to suggest that Apple 8 demand is as poor as it is because everyone is waiting for the Apple X, which is obviously a rationalization, and, oh, by the way, they are having trouble producing the X…
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They’re Soaking In It
The fact of the matter is that we have saturation in cell phones of all types. Apple is running into that problem itself and can’t really spark demand with a me-too product that carries a big price tag. This has been knowable for some time, yet Apple saw its stock price rise 40% this year in anticipation of this epic dud. Similarly, its suppliers have seen their stocks rally in recent weeks, even as this huge disappointment became obvious.
In real markets, as opposed to the skewed one we have to deal with thanks to $15 trillion of worldwide QE, Apple and all the suppliers would have been torched in the last couple of months. Likewise, other companies that have been levitating for no good reason — Tesla being a great example, although there are many others — have been more or less immune to bad news. Recently, however, disappointments have mattered to some minor degree, as we saw with Netflix two days ago, but overall bad news has been ignored, as I pointed out, also two days ago. In any case, that is pure psychology and can change at any time.
I have commented fairly frequently lately about the lack of “oomph” in the market, and recently it has been rallying on no volume, which means that if psychology changes, for any reason, we could see a decent decline almost at time. On the other hand, starting a decline has been virtually impossible.
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That is all a long way of saying that when I saw the Apple news last night, I was very curious to see whether it would have any legs when the market opened. Lo and behold, it did initially, as Apple fell four points in the first half-hour and all the suppliers were under pressure, while at the same time other stocks that had been levitating simply because they were going up were also affected. Of course, what I was really looking for was whether this dip would be laughed off and bought or would it accelerate. (I shorted some Skyworks and bought Apple puts just in case sanity wanted to break out.)
As it turns out, it was basically laughed off, as the dip was bought such that, with an hour to go, when I had to leave for a conference, the Dow/S&P were hardly down at all, although the Nasdaq was 0.5% lower. Away from stocks, green paper was weaker, oil lost 1%, fixed income was fairly strong, and the metals saw a bounce, led by silver, which gained 1% to gold’s 0.5%.
Included below are two questions and answers from the Q&A’s with Bill Fleckenstein.
Making History
Question: IBM is the perfect example for this time-falling revenues for 22 straight quarters but they promise it will change and up it goes over 8% and is a big help with pushing up the DOW. Too scary to go long,too dangerous to go short. It does feel like it will never end-and when it does it will be really bad. I guess it is different this time-can’t find anything like this in the history books. All there is to do is wait until faith is lost at last in the Central Banks.
Answer from Fleck: “There is nothing like this in the history books. Massive money printing has never been done before.”
The Stock Market & Gold
Question: Hi Fleck: Do you think that the next leg up in gold is dependent on a stock market break? Thank you.
Answer from Fleck: “No, but that outcome might help metals if it casts doubt on what the Fed might do.”
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