With the U.S. dollar falling, today one of the greats in the business sent King World News a fantastic piece covering everything from the chaos in Greece to the Great Depression, plus a bonus Q&A that covers gold and major markets.
By Bill Fleckenstein President Of Fleckenstein Capital
June 17 (King World News) – Overnight markets were on the quiet side, as the Greek angst has been pushed to the background for five minutes while folks position themselves for the FOMC meeting (even though the likelihood of anything new coming out of it was always quite low)….
Continue reading the Bill Fleckenstein piece below…
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As for the market here, after yesterday's rally we saw a continuation of that trend, with the indices slightly higher through midday, but they sold off heading into "FOMC time." In the FOMC release the Fed was forced to reduce its GDP expectations for 2015 and 2016. After eight years of zero-percent interest rates and $3 trillion of monetization, all they can hope for at this juncture for 2016 is 2.4% to 2.7%. That's how well their policies work.
In any case, after the market digested the news it rallied, closing with the small gains you see in the box scores. Away from stocks, pre-FOMC, green paper was mixed, though stronger against the yen and fixed income was weaker, as were the metals. After the Fed reiterated the obvious, everything rallied except the dollar, which tanked.
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
Question: Bill, I've been puzzled as to why the Greece headlines impact some asset markets but not the gold market. I would think a Greek exit would be bullish for gold. Maybe the rate hike bologna is outweighing any bullish reasons for gold? Do you have an opinion as to why gold has not reacted to prospects of a Grexit? Thank you for your time!
Answer from Fleck: "Well, I really don't know, other than to say that while there has been motion in markets, nothing has been decided re: Greece. If Greece does leave, that could be deemed bullish or bearish for the euro, and thus could impact gold either way in the short run. It is definitely going to go up in value vs. any new Greek currency though, if that is where this ends."
Question: When I was a kid, my dad and I were discussing the great depression. In a moment of clarity, I said to him, "So if you bought up real estate in the middle of the depression you could get rich."
My dad responded, "Yes, but nobody had any money." That stuck with me all these years and are wise words for those sitting on cash getting an itchy trigger finger. Cash will be king when mortgage rates rise and everything becomes unimaginably cheap.
Answer from Fleck: "My mother has always said the same thing, but it is still going to be awhile before the bond market actually stops this insanity for good."
Question: About 100 years ago, in his testimony before Congress, banking giant J.P. Morgan famously stated: “Gold is money, and nothing else.”
Answer from Fleck: "These days most people think colored paper is just fine, not understanding that it is inherently worthless." ***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.
***ALSO RELEASED: Major Market Action And What To Expect Next CLICK HERE.
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