On the heels of wild trading in global markets to start the new year, today King World News is pleased to share Bill Fleckenstein’s wrap, plus a bonus Q&A as we kickoff the early part of 2016!
By Bill Fleckenstein President Of Fleckenstein Capital
January 12 (King World News) – Overnight markets were quite mixed, with Japan off 3% and China sort of flattish, though the yuan did decline fractionally. Meanwhile in Europe the stock market bounced a couple of percent, and overnight the SPOOs initially followed Japan, then Europe, which led to a gain in the first hour of New York trading of 0.75%, plus or minus…
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Bill Fleckenstein continues: But once again this year the rally didn’t stick, and the market began to slide, such that by early afternoon the indices were slightly red. However, from there a bounce developed and with an hour to go (when I had to leave) they were back to slightly green. Please check the box scores to see the final results.
Away from stocks, green paper was mixed, oil lost another 2% after it briefly broke $30 (down 5%), fixed income was higher, while the metals were weaker, losing 0.5% (commodities across the board were smashed again today).
Let’s Twist Again, Like We Did Last Summer
One of these days the stock market will bounce, though how much I don’t know, but it most likely will not be very far (until after we see real panic). What I’m most curious to see is how long it takes to get back to the August lows and what the trading is like around those levels. I strongly believe that when they are breached we could see a real acceleration to the downside, but that is just speculation on my part, based on the fact that people mentally just aren’t prepared for what is liable to be in store for them in equities.
On a related subject, I thought it was interesting from a psychological perspective to see a headline in the business section of the New York Times today that read, “Oil Plunges, and Bottom Is Not Yet In Sight.” This is often what happens when something experiences a big decline. It seems that from about $130 down to here many people were of the opinion at various steps along the way that oil had bottomed.
I have made no secret of the fact that I have not been friendly to oil essentially for the last 10 years, if not longer, simply because its prices are predicated on GDP demand, which I have not exactly been positive on, as well as China, whose economic truth is impossible to ferret out, and the fact that OPEC was running a rig. Now chaos has obviously hit the oil patch and there will continue to be upheaval.
After an asset, or stock, for that matter, has declined by about 75% is not the time to start talking about the fact that there is no bottom in sight. It is, perversely, exactly the kind of headline that is written when a bottom is being made, although I am not trying to suggest that oil is done declining. I don’t really have an interest in oil, but I think it is worth pointing out how price action changes people’s thinking.
Bottoms Up?
We’ve undergone something similar in the precious metals arena, and although the price decline has been more on the order of 40%, I think the psychology is much more advanced, i.e., the bear market in metals is much later in the day, if not actually over, as folks have given up on calling for a bottom and just walked away shaking their heads.
The same could happen in oil, or at some point there could be an event and some kind of V bottom, I don’t really know, but what I would suggest is that folks contrast the psychology in either the oil market or the metals market with the stock market. It is quite clear that we haven’t even begun to start changing people’s psychology about what’s ahead in the stock market, but the market action will do that for sure.
Included below are two questions and answers from today’s Q&A with Bill Fleckenstein.
Bonus Q&A
Question: Regarding the statement, “there is no boom so there is no need for a bust”, you wrote, “It is an incorrect premise.” Can you cite some historical examples showing the premise is false (it would take me a while to research this and you might know it already)?
Answer from Fleck: “It is a nonsensical statement, “there was no boom.” There was a massive bubble in Treasuries and government paper worldwide as central banks printed money and that fed into stocks, real estate, unicorns, junk bonds, art, etc. Massive amounts of misallocated capital are now imploding. It will be a huge bust. The quote is nonsense, period.”
Question: Good Morning Bill, the charts are starting to look bottom-y for a lot of the mid-tier gold and silver producers (Ex. LSG, MUX, NGD, NMI.TO, WDO.TO) as well as the quality larger ones (Ex. PAAS, AEM, AG). So, my question is, what would you look for in their price performance to signal that the trend has turned from bearish to bullish; and give you conviction to meaningfully add to your positions? Thanks!
Answer from Fleck: “I don’t like the smaller names. I’d like to see them act better consistently, I’d like to see gold do the same, and I’d like to see the gold ETF take in ounces regularly.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
***To hear more on the gold market from the man who advises the most prominent sovereign wealth funds, hedge funds, and institutional funds in the world, Michael Belkin, CLICK HERE OR ON THE IMAGE BELOW. Belkin covers the historic rally he expects in gold and the mining shares as well as what he expects to see in global markets for the rest of 2016.
***ALSO JUST RELEASED: Legend Art Cashin Warns Panic In This Key Market Will Shock The World CLICK HERE.
***To listen to the powerful KWN audio interview with Egon von Greyerz CLICK HERE OR ON THE IMAGE BELOW.
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