For anyone who is wondering what is really happening, here is a look at stunning real world inflation, gold and Fed week.
“Your Call Has Been Disconnected”
March 15 (King World News) – Bill Fleckenstein: The market was higher from the get-go, led by the Dow, which gained over a percent compared to 0.5% for the S&P and not much at all for the Nasdaq. Then again, the Nasdaq held up much better yesterday.
“Your Call Has Been Disconnected” To repeat, I don’t know that the differences in the indices on any given day really matter all that much, although the fact that the Dow and S&P have not made new highs, while the Nasdaq did, does set up the potential “non-confirmation” of that recent high. But there is no question that the Nasdaq has been the upside leader, as speculation is concentrated in FAANG and other tech names. In any case, as the day wore on the market sort of just flailed around unchanged and finished there, though the Dow remained modestly higher.
Away from stocks, green paper was mixed, as much was made of the lip service Larry Kudlow has paid to a strong dollar, given that he is going to replace Gary Cohn, but I don’t think his views matter a whole heck of a lot. He is a far cry in terms of stature than Cohn was, and will likely be able to bend his opinions around to whatever his boss wants. Turning to fixed income, it was flat, as was oil, while gold fell 0.5% to silver’s 1%.
Is Spring Just Around the Corner? It is entirely possible that the metals will be boxed in until we get beyond next week’s FOMC rate hike, and computers may very well try to pressure it to the downside in front of that news item, as has happened in the past. The tendency has been for rate hikes that have already been discounted to wind up leading to rallies. Thus, it is not unreasonable to expect that outcome next week.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Question: The Federal Reserve of Atlanta has had to walk back, in a big way, its headline-making forecast that the first quarter would feature eye-popping economic growth. Where back in late January the central bank district was calling for a 5.4 percent GDP gain, it released a reading Wednesday for its widely followed GDPNow tracker that slashed that projection all the way down to 1.9 percent. Had the original forecast stuck, it would have been the best quarter since the Great Recession ended in mid-2009. As it stands, the new number puts growth closer to the 2 percent or so that has been characteristic of the glacially paced recovery. From Bubble Vision Thursday morning March 15
Answer from Fleck: “But no one cares. The mania is not really about the economy, it’s just QE-powered speculation.”
Real World Inflation
Question: I run a small commercial flooring business in Atlanta. Late last year, many of my suppliers sent out letters stating, that, in lieu of price increases (across all products), they would be eliminating their early payment discount plan. Nice way to stay competitive and keep end users happy, right? The early discount programs were typically 2-3% 30 terms. and I always took advantage of early payment discounts. Very disappointing as that was always a nice way to pick up some money over the course of a year. However, recently, several of those same suppliers sent out notices stating that in late April, price increases of 4-7% would go into effect AND freight rates would increase as well. Double whammy, in lieu of price increases, and elimination of discount program was bad. Now the price increase, freight increase and discount program are all gone. This over the span of 6 months or so. And most of these products are made in USA or not subject to the headline tariff issues.
Answer from Fleck: “Thanks for the data. People still seem to have no fear of rising prices, which are spreading.”
Gold Open Interest & Fed Week
Question: Bill, open interest is swelling in Gold as we start the turn toward FED week. Historically the gold market is bombed just in front of the meetings. Should we brace ourselves for more of the same ? The shares seem to be in a coma, while gold itself trades in a very narrow band between 1310-1330.
Answer from Fleck: “Perhaps, but the trend has been for the market to rally on the hikes. I mean, does anyone NOT know the Fed will raise rates? If you are worried then do something defensive, but be ready to reverse it.”
Speaking of gold…
In The Footsteps Of Giants
One of the top questions KWN receives from investors about the mining industry is always: “How do you know out of the thousands of companies there are to choose from which will take-off and which ones will falter?” The answer for smart money investors is always to look for proven leaders with previous success as a good indicator of future success. One individual that fits this description is pictured below with multi-billionaire Robert Friedland.
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