On the heels of the oil market plunging 3.25 percent to $49.22, today one of the greats in the business sent King World News a fantastic piece discussing the major markets, earnings, what surprises people should expect to see, plus a remarkable bonus Q&A that covers the gold, silver and much more.
By Bill Fleckenstein President Of Fleckenstein Capital
July 22 (King World News) – Today's big news was obviously the fact that Apple did not sell as many phones as folks expected (more about that below). First, I would like to note that Microsoft's results were not that great, nor were Linear Technology's, Yahoo's, or Caterpillar's, to name a few….
Continue reading the Bill Fleckenstein piece below…
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In fact, most of the earnings reports thus far have not been all that spectacular and the one that was celebrated the most, Google, was a function of cost cutting, not revenue growth. (I'm leaving Netflix and Chipotle out because I don't think their results indicate that much about the economy.)
The latest earnings season has clearly been no great shakes, and there have been a number of disappointments, but the tape has still been able to hold itself together. Thus, one of the things I wanted to see today was how the overall market responded to the disappointment from Apple, on top of the others we have seen.
No Surprise Here – Bubblevision Pumps Apple To Keep The Dream Alive
For the first time in ages I turned on Bubblevision to see what they were saying about Apple, and I was a little bit shocked — though I shouldn't have been — at how hard they were trying to spin the idea that this couldn't possibly be the peak in iPhone sales, Apple was so cheap, and it had grown so much that it was basically "wrong" for the stock price to decline. Folks who think that way — though I can hardly call it thinking — are happy even when stocks go up for the most ridiculous reasons to ridiculous prices, but if they go down that is deemed to be outlandish.
Harvest Season Arrives Early?
Apple is not expensive on an earnings basis, but when you think of a company of its size and the kinds of growth in units and dollars it needs to generate, it is a tall order, though one that it has been able to pull off for much longer than most companies ever could, to its credit. Personally, I expected Apple to make the number last night and that the bigger problem was going to be Q3, when it will begin to go against very tough comparisons and all it will have is the new iPhone 6 S, which doesn't really have enough new features to be meaningful. Thus, I thought this fall would be pregnant for Apple and all of its suppliers, but it seems problems have already started.
Turning to the market action, initially the indices lost about 0.75%, depending on which one you were looking at, but then they marched back up near unchanged before starting to roll over again. By midday the Nasdaq had fallen back to a 0.75% loss, with the Dow just modestly red (which is pretty remarkable, given that it holds Microsoft, IBM, and Apple), while the S&P was around 0.3% lower. From there the market drifted sideways into the close.
Away from stocks, green paper was stronger and it is still remarkable to me how bullish people are on the dollar given the mess the Fed has made of our economy. In fact, there is no colored paper on the planet that is worth anything and one day folks will realize that.
Fixed income was higher, oil lost 4%, and the metals were lower, with silver off 0.2% to gold's 0.5% decline.
Included below are two questions and answers from today's Q&A with Bill Fleckenstein. The questions are from his subscribers and they get to read Fleckenstein's answers every day.
Bonus Q&A
Gold And Silver – The Inverse Bubble?
Question: 10-to-15 years ago, could you have ever imagined an environment more fertile for precious metals? And I thought Alan Greenspan's 2-year sub-2% Fed funds rate, WITH ZERO QE, was sheer madness. When I ponder the recent 4-year bear market and in particular, the carnage among the mining equities, it feels essentially like an inverse bubble.
Answer from Fleck: "It is the most mind-boggling outcome imaginable. I have no good explanation except they printed SO much money they drove the stock market to the moon, and that rewrote the economy and currency storyline.
That is starting to crack, but that fantasy outcome rules the American mindset, causing unending metal puke-age. I think we are close to the end of all this nonsense, but it could last a few more months."
Mainstream Media And Bullion Banks Bashing Gold
Question: Dear Bill, I think we have seen the lows of the gold bear. The extreme selling of the miners, the feeling of hopelessness amongst gold bulls, me included.
The fact that you are buying even though there is no obvious catalyst. Most major gold moves start with a feint in the opposite direction, and the fact that the BBC in the UK, who never talk about gold, headlined a section on gold's fall with an expert explaining that the investing environment was safer now and people did not need the safe haven of gold.
I realize I am probably wrong, but thought it would be fun to write this.
Answer from Fleck: "Just to be clear, my buying was a blind stab, as I noted, and if it doesn't start to work I will cut it back and wait some more. So do not do anything just because I did." ***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.
***ALSO JUST RELEASED: Legendary Pierre Lassonde: A Spectacular Turn In The Gold Market Is Coming – China And India Will Be The Key CLICK HERE.
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