With continued uncertainty in key global markets, today one of the greats in the business sent King World News a fantastic piece discussing the action in major markets, plus a bonus Q&A that covers patients on the "gold couch," Alan Greenspan surfacing and much more.
By Bill Fleckenstein President Of Fleckenstein Capital
July 30 (King World News) – China lost 2% to 3% last night, though Europe was slightly positive. Our stock market fell a bit less than 0.5% in the early going, for no particular reason that I could see. Last night's crop of earnings reports saw plenty of disappointments, from high-flyer Facebook to Whole Foods to BorgWarner, but I don't think that had much to do with this morning's weakness….
Continue reading the Bill Fleckenstein piece below…
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Today's macro data, in the form of the GDP report, is a perfect snapshot of where the economy actually is. According to the government, GDP growth for the second quarter was 2.3%, while prices rose 2%, so if you accept those numbers at face value they essentially equal stagflation.
But Who's Counting?
I would suggest the reality is worse, because the actual inflation rate is undoubtedly higher than 2% (especially if you are a renter), and we have basically been in a stagflationary environment for at least several years, though it continues to be viewed as a deflationary one. When that psychology changes and the environment is recognized for what it really is, I think equity valuations, and bonds, for that matter, will be drastically different, but that change still lies ahead of us.
Turning back to the action, with a couple of hours to go (when I had to leave), the market was back to unchanged (though the Nasdaq was 0.5% higher). Please check the box scores to see where the indices finished. Away from stocks, green paper was stronger, oil was slightly higher, fixed income was mixed — with the short end lower and the long end higher. The metals declined about 0.5% apiece.
On the mining earnings front, Detour Gold, Goldcorp, and Agnico Eagle all had reasonably decent reports. However, the market's response was disjointed, as Detour rallied over 5% and Agnico declined a similar amount. I couldn't begin to tell you why.
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: How did you view the FED statement? More or less "dovish" than you expected?
Answer from Fleck: "Totally innocuous. They said nothing."
Question: Hi Bill, this is probably just noise…Have you noticed the bond/treasury markets seem to rally when the Fed blows smoke and sounds hawkish, yet sell off when they sound dovish? I also noticed (as charts seem quite silly these days) if you look at the 30 year "wrong bond" its made an absolute perfect reverse head n shoulders top…
Answer from Fleck: "Noise, IMO. Wake me up when Treasuries really break a big level, like say 2.50%-ish on the 10-year, for starters."
Alan Greenspan Surfaces
Question: Dear Bill: I am really not trying to raise your blood pressure but I accidentally had on bubblevision today (I wanted to hear the blah, blah, blah after the Fed). One of their guests was your favorite, Alan Greenspan. He said that bonds are in a bubble. When did Sir Ease A Lot start pontificating about a "bond bubble." I must have missed that one. The man has never been accurate and now I have to be on his side on this….Ugh..
Answer from Fleck: "Ugh is right."
Patients On The "Gold Couch"
Question: Can't help this, but after the last couple of months….when did you get your PhD in Psychology? Seems you have an awful lot of patients on your "gold couch". Painful bear market and like many, the evening break from the noise when I open your letter is a welcome relief. Seems there is enough bad news in gold and enough tap dancing on gold's grave in the mass media for two bear markets.
Answer from Fleck: "Boy, there sure has been, I totally agree."
***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.
***ALSO RELEASED: Gerald Celente – Fears Of A Full-Blown Global Panic Increase CLICK HERE.
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