With the dollar surging, while gold, silver and oil traded lower, today one of the greats in the business sent King World News a fantastic piece warning that U.S. are going to crash just like China's, plus a remarkable bonus Q&A that includes everything from the ultimate contrarian indicator to gold.
July 15 (King World News) – The party in China stalled out last night, as that market declined about 3%. Meanwhile, both European stock and bond markets were slightly higher, as everyone seems to have concluded that Greece will be just fine….
Continue reading the Bill Fleckenstein piece below…
Turning to our market, the early going saw the indices modestly higher. They then drifted back to unchanged and just sat there, which is where they were with about an hour to go, when I had to leave.
Away from stocks, green paper was rather firm after Janet Yellen's Humphrey Hawkins testimony continued the line that, as long as the data is strong, the Fed is going to tighten. And since so many stock, dollar, and economy bulls assume the former will be the case, they believe the latter will be as well.
The Fed Fantasy Will End In Failure
This is going to be the most over-discounted nonevent of all time. Even if the Fed does hike once, which is about all they can get away with (and I will be surprised if they are even able to do that), although that is clearly what the market expects. Nevertheless, because of this "super tough" Fed, commodities were roughed up: oil lost 2%, copper was weaker, silver dropped 1.5%, and gold declined 0.5%, while bonds rallied.
Obviously, the Fed fantasy of a second-half rebound is conventional wisdom, which is a setup for failure, but until such time as folks become concerned, belief in happy endings carries the day.
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.
The Ultimate Contrarian Indicator?
Question: This is going to end badly. No question just an observation. Couldn't this have been said about Toyko Real Estate at the peak? Read below, it's like 2007 didn't happen. Wow!
Miami real estate agent Maggie Sadowska of MegaLuxHomes had this to say about the current conditions and outlook for the Miami real estate market:
“Strong international buying (predominantly from Europeans and Latin Americans) combined with geographic constraints (Miami is sandwiched between the Atlantic Ocean and the Everglades and they aren’t making any new land) have helped the Miami real estate market rebound impressively from the Global Financial Crisis.
The future continues to look bright as the number of cash buyers from vastly different backgrounds and nationalities who are all in love with Miami never ceases to amaze me. I follow the saying ‘Don’t wait to buy real estate, buy real estate and wait’…..”
Answer from Fleck: "Lotta group-think lunacy. This is what happens in bubbles."
U.S. Stocks To Crash Just Like China's
Question: Bill, I am growing more concerned that there is a circular relationship developing here (and massively cultivated by the Fed and other central bankers) — the market believes that stocks cannot fall if the CBs don't want to let them fall, and the market defines good news as higher equity prices.
So we see a terrible Greek/EU deal that is destined to fail; we see bellweathers like INTC warn, we see AAPL flounder a bit, we see internals deteriorate; and we see economic data like retail sales miss badly. And yet, because buyers maintain faith that Yellen et al won't let the indices fall, and because they never do anymore, they buy more.
Sentiment is defined by higher stock prices. So if that's the case (particularly the last part about sentiment being defined by higher stock prices) how do people ever lose faith in these asset prices and the CBs propping those prices higher? Is there even the slightest indication at this point that the faith in central bankers is cracking in the least?
These last few days feel exactly like the entire 2012-2014 period did. We seem to be making no progress in the ultimate objective, which is getting the markets to lose faith in the CBs.
Thanks so much.
Answer from Fleck: "You don't know enough financial history is my best guess. Everyone wants to borrow trouble, i.e., what if sanity NEVER comes back, etc. China just gave you a lesson about what markets can do, despite what the CB wants. It will happen here and in the next few months, IMO."
Gold – The Best Currency In The World Over The Long-Term
Question: With regard to gold, gold isn't an investment. Gold is a currency. It's only an investment to the extent that its value as a currency is cheap relative to all other currencies.
The only value behind any paper fiat currency is the "faith" that the issuing Government will maintain supply of the currency relative to the wealth and economic output of the issuing country. We're well beyond that ability now in every currency. Right now the only "value" of the U.S. dollar is the Government's ability to print more currency in order to avoid default on the Government debt.
Why do people think Gold is going lower? It's been basing for over a year. It just gets pushed around.
Answer from Fleck: "They think it will go lower because it has been unable to go higher. But that doesn't mean they will be right." ***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.
***ALSO JUST RELEASED: Paul Craig Roberts – We Are Now Witnessing The Elites' Terrifying Endgame CLICK HERE.
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