With continued volatility in major markets, today one of the greats in the business sent King World News a fantastic piece discussing Fred Hickey, a coming stock market collapse and QE4, plus a bonus Q&A that includes gold.
By Bill Fleckenstein President Of Fleckenstein Capital
June 9 (King World News) – The bond-fire was back in Europe, with yields rising in most markets and the German bund back near the lows of last week. That precipitated a roughly 1% undertow in European equities. I should also state the obvious, i.e., the Greek drama continues….
Continue reading the Bill Fleckenstein piece below…
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I haven't devoted much ink to it because there is nothing insightful anyone can say. It seems to me the high-probability outcome is that the can will be kicked down the road (again), but we won't know that until the very last second when an interest payment is about to be missed.
Knowledge Is Not Always Power
On the other hand, the chance of Greece being forced out of the euro is not zero, and to be perfectly candid, even if I knew exactly what was going to happen I'm not sure what I would do about it. That is, I could argue that the euro might rally or fall on either outcome.
Turning to the U.S. stock market, it was slightly red in the early going, but the sinking picked up steam as the day wore on, and with half an hour to go had lost about 0.5% (though the Nasdaq was weaker). Away from stocks, green paper was weaker, fixed income was higher, oil lost 2%, and the metals were flattish.
I might note that there is a better-than-decent chance for earnings problems over the next couple of quarters for many stocks in the tech sector in particular, because expectations for a second-half rebound are probably higher for that group than any other. What's more, there is a tremendous amount of hot money in tech, both because the sector has done well and because a lot of people think there is going to be more and more consolidation as "merger fever" sweeps through. I think the latter expectation is particularly dangerous, especially for the chip industry.
Fred Hickey, A Stock Market Collapse And QE4
Subscribers to Fred Hickey's High-Tech Strategist should have read his latest letter, but if you haven't you should. In it he describes a potential train wreck for various companies and niches in tech, and if that starts to play out it will impact the valuations of other companies that may or may not have specific issues. Said differently, a generalized stock market catalyst could arise from the tech sector at a moment in time when the market is uniquely vulnerable because of expectations and no more free money, that is until the market collapses enough to force the Fed to start QE4.
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.
Question: Fleck, I work at a large bank and I spoke to two very seasoned credit people over the last week on what they thought of the economy, the Fed, etc. I was amazed since they both said that the economy runs in cycles, and we are in another one -and at some point there will be a recession – just like all other cycles, and on and on.
One even said that the 2008 great recession was a once in a lifetime event, and nothing like this will happen again in next few decades, etc. They didn't pay much heed to what the central banks are doing, and perhaps how the cycles I getting severely distorted, etc. Treating what we are in now as "just another business cycle". It doesn't make intuitive sense to me that this is just another business cycle, but certainly if I had invested as if this was just another one I would be doing much, much better. What do you make of this – these are not dumb guys.
Answer from Fleck: "The 2008 great recession was a once in a lifetime event, and nothing like this will happen again." They do NOT understand the Fed's role in creating bubbles. What about the prior stock bubble? Did they ignore that bust? The next one will be brutal. You say they are smart, I say they are not. During manias the believers make tons of money, the skeptics do not, they get their turn after. But what has happened to really twist people's thinking is that we have serial bubbles being blown one after another, so the Fed believers keep winning, even though the policies do not work."
Question: Bill: Sell in May and go away has been one of the most reliable rules in the gold market this millennium (and I did some selling in May this year myself, though mostly because I had to take cash, and I had profitable positions in several miners at the time of sale). Summer is slow seasonally for gold on a statistical basis, with a typical pickup in late August or September, lapse in October, and strength through the winter months (when there is any strength at all).
I recognize that some major event could change the pattern, but I guess it's shared wisdom that nothing much happens in summer. I for one am not paying much attention to the markets for now, but am certainly curious where October will take us. My question: Do you think a big move could start this summer, or are you expecting a few more months of waiting now?
Answer from Fleck: "I have no idea exactly when psychology will change. It could be at any time, but until then gold may stay moribund. FWIW, I don't think seasonality has been too insightful the last few years." ***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.
***KWN has now released the extraordinary audio interview with Andrew Maguire, where he discusses the gold and silver takedown, what surprises to expect next, how much physical gold tonnage has been taken out of the market and much more and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***KWN has also now released the powerful audio interview with Stephen Leeb, where he discusses China's massive gold hoard, what surprises to expect next, and much more, and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: The Coming Financial Shockwave And One Of The Most Ominous Graphs I've Seen In My 50-Year Career CLICK HERE.
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The audio interviews with Stephen Leeb, Andrew Maguire, Michael Pento, Dr. Paul Craig Roberts, Gerald Celente, Eric Sprott, Robert Arnott, David Stockman, Chris Powell, Rick Rule, Bill Fleckenstein, John Mauldin, Egon von Greyerz, James Turk, Dr. Philippa Malmgren, Marc Faber, Felix Zulauf, John Embry and Rick Santelli are available now and you can listen to them by CLICKING HERE.