On the heels of the Dow surging near 18,000, one of the greats in the business sent King World News a fantastic piece covering everything from the action in gold and silver to the problems that central bankers have created and how it impacts markets, plus a bonus Q&A.
By Bill Fleckenstein President Of Fleckenstein Capital
November 3 (King World News) – Today began in a similar fashion to yesterday, as an overnight dip in the SPOOs was erased with the Dow and Nasdaq gaining about 0.75% (and the S&P lagging), before a late selloff trimmed the gains to those you see in the box scores…
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There Now, Isn’t That Beta?
Once again, there was no particular catalyst for the rally. Macro-negative news was ignored and buying in the narrow list securities that boost the indices continued, with higher-beta names receiving a disproportionate share of the focus. After all, if bad news doesn’t matter, why not buy the wildest, craziest stocks you can?
Away from stocks green paper was stronger, fixed income was weaker, oil gained 4%, and the metals lost 1%, plus or minus, as they continue to slide in mortal fear that the Fed might actually raise rates a measly 25 basis points. The miners, however, were pretty firm.
A Misallocation of Confidence
This whole scenario about believing in the Fed if you are an S&P bull, or fearing it if you are a metals bull, is ridiculous. However, it continues to be the case that, despite seven years of failed policies in the wake of two burst bubbles, the Fed and other central banks are still the recipients of a tremendous amount of confidence on the part of investors, even though it makes absolutely no sense.
I don’t know what will change that, I only know that it will, because the policies have failed and the world is an inch away from recession, if it isn’t in one already. When folks realize that, with rates at zero worldwide, it will become obvious that central bankers have only created problems and have no answers to the enormous debts that they have allowed to be rolled up and financed at ridiculous rates, thereby kicking the can and ensuring that by the time folks wake up and smell the coffee, our problems will be next to impossible to solve.
Included below are three 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: You have remarked that rising rates don’t necessarily mean falling PM prices. Maybe so, but the recent conviction that the Fed will hike a tiny bit in December has sent PM down hard. I fear that the actual rate rise will destroy the metals. What the heck CAN push metals higher since NADA has had any effect for4 years? Only we see the dollar and stocks go to the moon.
Answer from Fleck: “That rising rates don’t necessarily mean falling PM prices,” I have stated that because it is a fact, not just my opinion. Historically, raising rates has NOT meant falling gold prices. Having said that, you’re right, nothing has mattered, as confidence in the Fed has been so high (at least that is my best guess). Can the Fed succeed in its strategy? No, but when people realize that I can’t say. “I fear that the actual rate rise will destroy the metals,” I think a rate rise would see gold bought, as a hike has been so thoroughly discounted and it would be the end of all this silly fear, but that is just my guess. However, rather than complain to me, if you don’t like your position then change it, i.e., lighten up and see what happens. It is a free country, you can do whatever you want to do.
Question: Bill, a while back (2 or 3 fed meetings ago) one CNBC moron (who’s name I can’t remember) was arguing with someone that, if the market couldn’t handle a quarter point rate hike, we’ve got much bigger issues to worry about. The idiot thought he was making his case for a rate hike but, really, it’s the flip side that’s significant. If, after 7 years of every kind of stimulus that central bankers can come up with, the world market is so shaky that a quarter point hike in the US threatens to bring it all down we do indeed have “bigger problems”.
Answer from Fleck: “It is even more ridiculous than that. The Fed blows bubbles, then does the same thing all over again, and expects a different result. Been 20 years or so of the SOS.“
Question: Bill, throughout the day today on CNBC, the tone has been very positive, and that we will see new highs in an economy that is about to take off. Is this the type of behavior you remember witnessing at tops in the past?
Answer from Fleck: “LOL. Bubblevision is always super bullish and clueless about any and all problems until the bubble bursts. Then they get serious for about five minutes before acting like fools again.“
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
***KWN has now released the extraordinary audio interview with Dr, Stephen Leeb, where he discusses the gold and silver markets, what surprises to expect from China, global markets and more and you can listen to the interview by CLICKING HERE OR THE IMAGE BELOW.
***ALSO JUST RELEASED: What Surprises In Major Markets To Expect Right Noe And At The End Of The Year CLICK HERE.
***KWN has also released the incredible audio interview with London metals trader and whistleblower Andrew Maguire, where he discuses the great unwind that is going to take place in the gold and silver markets, what traders should expect next, and where gold and silver prices are headed, CLICK HERE OR ON THE IMAGE BELOW.
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