Despite what has been a strong countertrend rally in the US dollar, gold appears ready to assault $1,350.
Buffett & Apple
By Bill Fleckenstein President Of Fleckenstein Capital
May 8 (King World News) – The market continued its recent rally, led once again by Apple and the Nasdaq, with the former gaining 2% and the latter 0.75% in the first couple of hours of trading, while the S&P and Dow added 0.5%...
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Fleckenstein continues: On Friday afternoon, given Buffett’s recent increase in his Apple position, I paid more attention to the news flow and even turned on Bubblevision to see if perhaps he might be interviewed at the Berkshire Hathaway shareholders meeting over the weekend and shed some light as to why he’d bought more. Not that it matters much, but I am sort of curious, much as I was when Buffett bought (and continued to buy) IBM when it was such an obvious disaster and the truth was right there in the financials, you didn’t even have to know anything about technology (although Apple and IBM are very different beasts).
And for Dessert, How About Some BlackBerry Crumble?
I did see Buffett interviewed on CNBC and I’m going to paraphrase because I didn’t record it and was unable to find a clip. (Perhaps a more search-savvy reader can track it down.) In any case, he stated something to the effect that it was absurd for folks to be worrying about how many Apple Xs had been sold in a three-month period. My reaction was, how can you not wonder about that given the nature of these products? And I thought of a perfect example of why you should be concerned about what goes on beneath the surface, that being the monopoly BlackBerry had and how impregnable people thought it was.
Buffett then said that worrying about Apple X sales would be like worrying about how many BlackBerries were sold. In other words, he used the exact same example to support his argument that folks shouldn’t care about how many phones Apple had sold that perversely proves why they should pay attention to such things. As I said, I don’t have the exact verbiage, and I wish I did, but the point is, while Apple may be more deeply imbedded in people’s lives and more impregnable than BlackBerry was (although I certainly wouldn’t make — or refute — that case), it is still quite possible for Apple’s margins to be deeply disrupted, even if it is able to keep its market share, which is not guaranteed.
I don’t mean to make too big of a point about Apple, but just as I could never understand Buffett’s lack of concern over IBM’s financial statements, I don’t understand his rabid ardor for Apple at this particular time. I have no position in Apple, nor do I feel like fighting Buffett on this subject (right now), but I do intend to continue to use Apple and Tesla as my litmus test for the health of the market and the ability of research-oriented shorts to work.
Turning back to the action, in the afternoon the market pushed higher, with the Nasdaq up about 1% when I had to leave, with an hour to go. Away from stocks, green paper was stronger again, oil rallied a bit, fixed income was a little weaker, and the metals were ever so slightly weaker as well, although the miners once again gave a pretty good account of themselves.
Looking to Flip the Script
I think currently gold is in the best position it has been in over the last group of years to make an assault on $1,350 for a number of reasons. First of all, the positioning in the Commitment of Traders report is the most favorable it has been at this price, while at the same time sentiment as measured by the DSI is lopsidedly bullish on the dollar and negative for precious metals.
Thus, you have a lot of potential for those things to shift and obviously it wouldn’t take a whole lot for gold to break out finally. Of course, every time I mention the possibility of a breakout the opposite seems to happen, but nothing can change the fact that the setup we have now is the best we’ve seen in a while.”
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