On the heels of global stock markets trading to the downside, continued uncertainty in currency markets and gold and silver consolidating recent gains, today one of the great short sellers in the business discussed the action in gold, silver, the shares, and a coming black swan that will trigger downside chaos.
By Bill Fleckenstein President Of Fleckenstein Capital
May 4 (King World News) – Overnight markets were weaker, as were the SPOOs, and the stock market lost about 0.5% right off the bat. From there we had a decent rally, which trimmed the gains about in half, but by midday the indices were back to the lows. There was a lot more motion — i.e., hand-to-hand combat — than that sentence implies, just as there was huge volatility in lots of different individual stocks that I was looking at. I’m not sure exactly what the ramifications are of that, if any. I suppose it may just be the market’s way of frustrating as many people as possible…
Continue reading the Bill Fleckenstein piece below…
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Having said all that, the most important bit of news in the early going was the fact that the ADP employment report was substantially weaker than expected, with only 156,000 jobs created, versus expectations of 195,000. Though I am not sure, I suspect that the negative seasonal adjustments that I expect to see in Q2, thanks to the difference in the weather between this year and last year for Q1 and Q2, is to blame. If so, obviously Friday’s employment report could be impacted.
They’re Really In the No
Of course, anyone who is objective can already see that the economy is not that strong and that the Fed’s policies aren’t working, although those who have felt this way have been feeling so for a long time. Thus, they are not the ones who need to be convinced, it’s the folks who believe that Fed policies actually work, when in fact they do not. Slowly but surely it is dawning on investors worldwide that the “success” of central bank interventionism is an illusion.
Turning back to the action, in the afternoon the market seemed as though it had stopped trading, as it just sat there around the lows and closed down about 0.5% (with the Nasdaq worse again today). Away from stocks, green paper was stronger, oil was up 0.5%, fixed income was flat, and the metals were about 0.5% weaker, with the gold stocks once again outperforming on the downside. I’m sure some folks are frustrated that the miners have behaved worse than gold itself in the last few days, but after so dramatically outgaining gold they are just going to give more back.
Included below are two questions and answers from the Q&A’s with Bill Fleckenstein.
Bonus Q&A
Question: And then they buy 20 tons of GLD. I saw one or two headlines last week about GLD tonnage going down a bit over the past couple of weeks (4/8/16 there were 819.60 tons, 4/29/16 there were 804.14 tons). I look today (5/3/16) and its at 824.94. That’s a new high for 2016.
Answer from Fleck: “That is correct.”
Question: Hi Bill, There is much talk about the “unprecedented corporate bond binge” (Bloomberg, 1/27/16) leading to a recession. Regardless of its affect on the economy, I would think the slowing sales being reported across the board would make even “cheap” debt service, difficult, at best. Could this be a Black Swan event for the markets, without a recession?
A Coming Black Swan To Trigger Downside Chaos
Answer from Fleck: “Slowing sales won’t likely impact debt service, but serious weakness would. I think it is more a case-by-case basis, and a black swan event will likely trigger more economic and market weakness, but what you are describing won’t rise to that level of seriousness, IMO.”
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***The last time legend Rob Arnott was interviewed on KWN he recommended a specific fund to the global listeners, including the ticker symbol. In less than 3 months that fund has returned more than a staggering 26 percent! Arnott again gave specific recommendations for the global listeners and he also discussed the coming inflationary carnage that is in front of us. To hear his latest recommendations you can listen to his powerful audio interview by CLICKING HERE OR ON THE IMAGE BELOW.
***The remarkable KWN audio interview where 50-year veteran John Embry discusses what’s next for the gold and silver markets has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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