On the heels of the Dow surging nearly 300 points, today one of the greats in the business sent King World News a fantastic piece discussing the the road to QE4 and why the stock market is headed lower, plus a bonus Q&A that includes questions on gold, mining shares, the action in markets and money printing.
China Closed, Time To Party
September 2 (King World News) – Overnight markets were on the calm/friendly side, as China managed to lose only 0.2%, and will now be closed for a couple of days. It therefore won’t be the excuse for any negative market developments here, at least until next week…
Continue reading the Bill Fleckenstein piece below…
The overnight S&P futures were sporting a gain of 0.75% to 1%, which is where our market opened, and roughly where stocks traded through midday before gaining a bit more ground in the afternoon, closing 1.5% to 2% higher. Away from stocks, green paper was mixed, oil gained 1%, fixed income was lower, and the metals were mixed: silver gained 0.5% while gold lost a similar amount.
Like Treading Water In Midair
There is not much else to say about today’s action, except to repeat that I think the path of least resistance is down, though I don’t expect any sort of a decline to be orderly. Once stocks become weak enough, there will be plenty of folks begging the Fed to commence QE4.
At some point there is going to need to be a realization amongst investors that they won’t get any help from the Fed until stock prices are much lower. That thought process ought to make people attempt to raise cash, which in some sense would be self-defeating, though it would get the Fed back into the game.
Included below are four 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: Hi Bill, considering the recent 30% spike in crude, what odds do you think gold can have a similar move at any time over the next couple months? It’s got me think that the odds for such a move have greatly increased. Thanks
Answer from Fleck: “It is certainly possible, but how likely is it? I can’t say.“
Question: Bill, is there a scenario in your mind in which everything goes the way that you are expecting (stock markets fall with no QE, investors start buying gold as an alternative to stocks and as they lose faith in the central bankers) but the miners themselves continue to move down (and stay down) with other equities?
I know that you have answered the question of whether gold will do well or not in a big market swoon many times and i am not asking you to repeat your answers to that — I am really trying to get at whether you think there could be an increased divergence between gold and gold mining equities (even though it is already at a record wide divergence) if your expectations on the rest of the picture of the markets come true.
Thanks very much.
Answer from Fleck: “No, I do not think that is possible. From these levels if gold does well the best-positioned miners will do even better, that is what I believe. To be clear, if stocks fall far enough, we will have QE4. THAT is the big catalyst for gold because it ought to illuminate that the failed policies will continue.“
Question: Fleck, a quote for you:
“I believe that Fed policies got us into the situation we are in now. The ONLY thing they control now is the front end of the curve. They’ve lost control over everything else, and the policies put in place by our Federal Reserve have emboldened other central banks to act in kind…. central banks that do not have the wherewithal or the intelligence to do so. Look at the currency swings…. the currency swings we are seeing across the world are the direct result of the policies put in place by our Fed. To think that they control anything but the front end is a fool’s folly.”
See? If you don’t watch CNBC (Guy Adami) these days, you miss gems like that.
Answer from Fleck: “I knew Guy before he was on Bubblevision. He understands the problem.“
Question: Hi Bill, here’s an anecdote ‘from the streets.’ My wife and I were looking at houses with our realtor yesterday when the conversation turned to investments. He said he’s getting his retirement money out of the market and ‘getting into gold.’ His father in law is doing it, so he decided to do so, too. It’s the first time in my day to day conversations someone has taken gold seriously!
Answer from Fleck: Well, if a few hundred thousand more people make that same decision, we can have a real free-for-all. 🙂
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
***ALSO RELEASED: This Black Swan Will Be A Global Event That Shocks The World And Rocks The Financial Markets CLICK HERE.
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