With so much propaganda surrounding the Fed’s decision to raise interest rates last week, a legendary short seller just warned “gold could very easily get crazy” and lots of people will be hurt when stocks plunge.
By Bill Fleckenstein President Of Fleckenstein Capital
June 26 (King World News) – Today (and last night) saw a tremendous amount of motion, at least compared to what we have been experiencing lately. The biggest early mover last night was Bitcoin, which gapped down about 7% to 8%, then proceeded to trade lower still, losing something on the order of 15% today…
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So Long, Stratosphere
I would say that the exhaustion of that parabola is now complete (with the gap and huge move lower), especially considering the amount of destruction seen (i.e., losses of 15% to 25%) across the board in “Crypto Land.” Again, not that Bitcoin (or the other 800-plus alternatives) has any important consequences, other than it is a market and it is educational to see exhaustion in real time. It also helps make the point that, like chain letters, manias just exhaust themselves for no particular reason and news stories are attached to them later.
Also, in the middle of the night, gold dropped about $20 in one trade before recovering about half of those losses. Silver saw similar trading, as it dropped from $16.70 to $16.25, literally in one trade, before cutting its losses. More about the metals below.
As for the market that is never supposed to decline, that being U.S. stocks, the S&P futures (as a proxy) were about 0.5% higher before giving up all of those gains about an hour into the session. Even more interesting was that reversals and decent-sized losses were seen in the FANG and other momentum-oriented tech stocks.
Moving Day?
So for the first time in a very long time, ex perhaps June 9, the action had my attention, in that today could be the resumption of the FANG decline that started two and a half weeks ago, which would be a meaningful development in my opinion. As long as those FANG highs aren’t taken out, there is still a chance that the market has exhausted itself.
In the afternoon, after the morning reversal the market just traded sideways to slightly higher, closing with the small changes you see in the box scores. Away from stocks, green paper, oil, and fixed income were flattish, despite all the commotion, while the metals closed about 1% lower.
Meanwhile, the miners behaved very well during the entire onslaught, which is interesting, but obviously my observation last Friday that the gold correction was over now seems incorrect.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
“Lots of people are going to be carried out, again.”
Question: Lots of chatter about no retail participation in this market, yet I am getting numerous anecdotal evidence of end-zone dancing, dismissal of (my) conservative advice, and total novice type’s confidence in market, not to mention absolute ridicule of any gold related talk as right wing fanatic ideology. The most recent: my English professor friend lit into me for advising him (last year) to currently use TIAA traditional instead of CREF stock for his retirement plan. He wants to move it all into the stock market now because “even if it goes down, it always goes back up.” Apparently he learned this deep lesson from his fellow academics who are very happy with their wonderful returns and think my advice was foolish. At least I know I have an indicator of when to start buying, when he calls me and tells me he is moving it all back into the (fixed) traditional bucket.
Answer from Fleck: “Lots of people are going to be carried out, again.”
Question: I was pondering the amazingly low commodity prices yesterday while thinking about the great global economic expansion our friends at the central banks have engineered. It gave me a brilliant idea, all the FED, BOE, ECB, BOJ and the PBOC have to do to meet their inflation targets next time is to print another 13 Trillion dollars and use it to pay all the oil, timber and base metal producing countries to NOT produce anything! It will also allow them to tell Goldman Sachs and the gang to go long commodities beforehand so the 1% will still be able to walk away with enough profits to ensure they do not have to curtail their ravenous greed or discretionary spending (TESLAs for everyone!!!). This will guarantee the central banks meet their dual (???) mandates of:
1) 2% inflation;
2) screwing the responsible people who save and avoid debt;
3) making sure no one can afford anything;
4) colluding with Wall Street to maximize their profits while creating highly toxic, innovative investment instruments; and
5) make damn sure the taxpayers are left holding the tab when the dust settles.
Let’s just hope someone from the FED subscribes to Fleck! Problem solved.
Answer from Fleck: “I think you have demonstrated that YOU are the perfect candidate for Fed chairman.”
“Gold Could Very Easily Get Crazy”
Question: Hi Fleck, One thing I’ve learned from watching the bitcoin/cryptocurrency mania is how fast and furious it can move. When gold does finally get its moment, we could possibly see a similar increase in the same timespan or even faster. Possibly too fast to even get in unless you are really watching. This is why I have my gold now and am content to sit on it and wait. Better years early than minutes late.
Answer from Fleck: “Gold could easily get very crazy, but remember there is very little market cap in the crypto currencies, so they can have extremely large fluctuations.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
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