With continued volatility in global markets, today one of the greats in the business sent King World News a fascinating piece about the gold and silver plunge, U.S. dollar surge, his plan to short U.S. stocks, plus a bonus Q&A.
By Bill Fleckenstein President Of Fleckenstein Capital
May 26 (King World News) – While Asian stock markets continued their frenzied rampage higher, Europe was weaker as European bonds were roughed up due to the latest machinations in Greece and election results in Spain. Interestingly enough, Portugal's bonds in the last couple of days were hit much harder than Spain's, but for the moment all of the countries formerly besmirched as the PIIGS are seeing their debt under pressure. Equity markets over there, however, have barely noticed.
As for our stock market, it wasted no time heading straight down, as the indices lost about 0.75% in the first hour. There was no proximate cause for the decline that I could see. In other words, I don't think investors here were really responding to Europe; it is kind of hard to believe that the U.S. stock market was reacting to European troubles when European equities were essentially shrugging them off. In any case, with the tape red virtually across the board early on, the market leaked a bit more, but couldn't rally, nor accelerate lower, and closed with a loss of about 1%.
Silver Plunges 2.5 Percent, Along With Gold, As The Dollar Surges
Away from stocks, green paper was red hot, as the yen made new lows and the euro (and every other currency) was back to declining versus the dollar. Supposedly, this was in reaction to comments from Fed heads in the last couple of days, but I can't really believe the dollar strength was a function of that, especially since our bonds were aggressively higher today was well. Green paper did appear to pressure the metals lower, with silver losing 2.5% to gold's 1.5%, as once again an option expiration saw them spanked.
Stock Market Listing to Leeward
Given the unstable structure of the market, any time I see any real weakness it feels like it could accelerate to the downside, though that has obviously not occurred, since we haven't been able to have even a 10% correction since 2011 (though we came close in 2012). Thus, bulls have shown that they can contain any sort of decline. However, given how everyone is leaning the same way and we don't have any QE, if we did manage to get a decent decline started, it really could accelerate quickly.
I bought a slug of Intel puts late last Friday, as I think that company is vulnerable to another stumble this quarter and in some ways it is kind of on probation. People are giving it the benefit of the doubt, but if it trips up again it might be punished disproportionately. I think it is a good way to capture a company that has problems, the low VIX, and the potential stock market swoon with one-stop shopping.
Here Is My Plan
I plan to add some other puts if it looks like weakness can develop, although the longer one waits to act the more expensive the puts become. On the other hand, there has been no rush to do anything for so long, it is kind of hard to get really worked up about the downside — which is, of course, often the time when you should do exactly that.
Bonus Q&A
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 these every day.
Question: Just a little anecdote: the money velocity in Weimar Germany plummeted twice before it finally took off and destroyed a country and eventually a continent.
Answer from Fleck: "Money printing only causes problems. It is a solution to nothing."
Question: Bill: Just read your 5/22 comments and couldn't agree more with most of what you wrote. The psychology of the market is not even close to shifting to the bear camp according to the behavioral finance model I follow. I tend to think the catalyst for change will come from some sort of debt default, be it in Europe (Spain, Greece, or some other sovereign) which leads me to my question.
Is not debt destruction a deflationary event that in some measure offsets all the printing?
Thanks for your clear thinking and you considerable talent at condensing complicated issues into readable commentary.
Answer from Fleck: "The decline in bond prices is hardly debt destruction and not deflationary, nor is a decline in stock prices." ***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.
***Gerald Celente's extraordinary audio interview has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW. Celente discusses the newly released Spring Trends Journal, the new trends for the rest of 2015 and much more.
***Eric Sprott's remarkable audio interview has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW. The written interview only contains a tiny portion of what Sprott had to say in his outstanding audio interview. Sprott discusses the greatest danger facing the world today, the coming financial collapse, the gold and silver markets, what surprises to expect this year and much more.
***ALSO JUST RELEASED: U.S. Scared To Death As China Just Secured Larger Flow Of Gold As Part Of Its Plan To Back The Yuan With Gold CLICK HERE.
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The audio interviews with Gerald Celente, Eric Sprott, Robert Arnott, David Stockman, Chris Powell, Andrew Maguire, Rick Rule, Bill Fleckenstein, John Mauldin, Michael Pento, Egon von Greyerz, Dr. Paul Craig Roberts, 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.
