After the Chinese stock market fell more than 2 percent to trade near the recent lows, one of the greats in the business sent King World News a fantastic piece about the downside fireworks and major markets, plus a bonus Q&A that includes questions on everything from problems the central planners face to questions on ETFs.

King World News - Bill Fleckenstein On China, Gold, Inflation And The Mining Shares

By Bill Fleckenstein President Of Fleckenstein Capital

September 23 (King World News) – China produced some fireworks last night, as its PMI was reported to be around 47.5, which was a big disappointment. That release sent the SPOOs reeling for about 1% almost instantly, while the Chinese market was clipped for roughly twice that…

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Bill Fleckenstein continues:  However, the SPOOs recovered over the course of the evening, helped by a 1%-plus gain in Europe, and by the time our market opened the losses had been eradicated. The indices then spent the next couple of hours trading around unchanged before leaking a bit in the afternoon, in a rather dull end to the excitement from the previous evening. Away from stocks, green paper was flattish, oil fell 4%, fixed income lost a little, and the metals were slightly higher.

All’s Well That Trends Well

It should be clear to most people that the trading pattern in the market has changed to some degree, whereas periods of trading sideways were constantly resolved by higher prices over the last six years, we are now starting to see sideways motion giving way to lower prices, and now bolts from the blue are to the downside rather than the upside.

I suspect the next big data point will be how Wall Street handles the August lows. In other words, does it bounce there, with people proclaiming it was a successful test, or does it just blow through that level? I don’t have a strong opinion about that, and it presupposes that I am correct that the path of least resistance is now downward. 

King World News - Bill Fleckenstein - The Longer A Mania Goes, The Worse Off Everyone Will Be When It Ends - The Aftermath Of This Is Going To Be Extremely Brutal, Plus A Bonus Q&A

Included below are four 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: Do you think this history is indicative of how long our current financial repression will last?
“Ken Rogoff and Carmen Reinhart have meticulously documented periods of “financial repression”, long stretches of years and in some cases decades where short-term and even long-term yields were capped and suppressed below the level of inflation.
In the U.S. the most recent repressive cycle extended from 1930 to 1979, nearly half a century during which investors on average earned 1.5% less than the rate their principal was eroding due to inflation. It was a savers nightmare.” – Bill Gross

Answer from Fleck:  I don’t think it can last anywhere near that long, and remember, this Fed activist regime is nearly 20 years old already and problems are becoming more severe.

Question: Bill, I used the search on “Fiorina” and saw that you were pretty down (“a disaster”) on her performance at HP. I know you don’t want to turn “Ask Fleck” into a political blog so maybe an off the record answer is best, but have you seen or read anything from or about her which has changed your mind and am I safe to assume you would not support her POTUS aspirations? I am intrigued by her being the only candidate to talk about supporting small businesses like mine, but I know words are cheap. Thanks for whatever additional insight you can offer as I value your opinion highly.

Answer from Fleck: She was awful at HPQ and Lucent. I don’t trust her very much.

Question: Hi Bill, with the fascination of NUGT, reminds me of UVXY on the vix. Perhaps the large one day moves dazzle people (greed factor). But why not just use options? You can leverage up, lose lots of money, but at least the risk is defined. Or buy 3xs the position? Why does it HAVE to be NUGT?
Similar Q for you. Regarding the short ETFs (ETNs), would one benefit of using those be that you maintain your position exposure without having to add? A successful short position gets smaller by definition. I haven’t crunched numbers but I’m curious if the position size maintenance offsets +/- the cost to carry. Thanks

Answer from Fleck: I don’t think most people can handle leverage, so why try? I never use ETFs. I don’t know how many times I have to make that statement for people to no longer ask me about which ones to use.

Question: Bill new customer that enjoys your comments.I used Yellen as my time to buy as every time she talked the market went UP!!! Last week after the Fed announcement the market went up initially but closed down.I think this is a sign of things to come.Any thoughts.Let’s see tomorrows reaction to her comments.

Answer from Fleck: Not hiking doesn’t equal QE. She will be faded regularly now, I suspect. BTW, “thoughts” isn’t a question. 🙂

***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.

***ALSO JUST RELEASED:  Gerald Celente Just Predicted Fed Will Launch QE4 As Global Meltdown Worsens CLICK HERE.

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