With continued uncertainty in global markets, today one of the greats in the business sent King World News a fantastic piece discussing the chaos in China and other major markets, plus a bonus Q&A that includes questions on gold and real estate.
By Bill Fleckenstein President Of Fleckenstein Capital
August 19 (King World News) – China was back in “market action” news, as the indices there declined 5%-plus until late in the session, when a large turnaround took place that took them to 2% to 3% or higher. It appeared that the powers that be in China made an effort to push the tape back up….
Continue reading the Bill Fleckenstein piece below…
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When a market has been broken (and psychology changes), even the central banks don’t always get their wishes, though in the end, if they print enough money, they usually do, as we have seen here in America. As for our stock market, the early going was weaker, for no particular reason. Even more important was how the weakness went from a bit of a slow ooze to an accelerating decline until it hit the 200-day moving average for the S&P.
It’s Like “300” Minus 100
At that point the market tried to hold for a bit, then slid a little more, such that by midday the indices were down about 1% across the board, setting the stage for a battle in the afternoon over whether the market could be pushed back over the supposedly magical average.
The S&P did manage to reclaim that “line.” but not by much, as the market lost 0.75% on the day. The big question is whether serious acceleration awaits (which is my expectation) once we get under it.
Away from stocks, green paper was weaker, fixed income was higher, oil was splattered once again, this time for 5%, and the precious metals were higher, led by silver, which gained 2.5% to a 1%-plus gain for gold. The miners put in a respectable performance as well.
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: Fleck, thanks for sharing your thoughts with us it has been educational. We know that you like gold, but do you also like other traditional inflation hedges such as real estate?
Answer from Fleck: “Not especially, given the current pricing and the fact that rates will rise in that environment.“
Question: Has there been a correlation of rising interest rates and the price of gold over time? If the Fed starts raising rates fairly soon how do you think that would impact gold prices?
Answer from Fleck: “Historically , gold has often risen as rates have because usually the Fed is behind the curve on raising rates. It isn’t the fact that rates are rising that matters, but where psychology is about what they are doing — just another fact that most people have no real clue about. When Volcker jacked rates in late 1980, gold almost tripled in four months because no on believed him. The market was very wrong, however, to doubt him and subsequently collapsed for 20 years (even as Greenspan was doing everything wrong).”
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