Today Bill Fleckenstein warned King World News that we are now seeing shortages of physical gold, and the paper market continues to push gold lease rates to historic extremes.  Fleckenstein, who is President of Fleckenstein Capital, also said the stock market is nearing a crash or major dislocation, and he laid out what to expect in the weeks and months ahead.  This interview is Bill Fleckenstein at his best.

Eric King:  “Where do you see us now after the Dow has risen 11,000 points off the lows?

Fleckenstein:  “Nothing is any different than it has been.  Prices are just higher and the psychology is just more warped.  And that’s going to continue until it stops.  The fact of the matter is the Fed and the other central banks have printed so much money that it’s not comprehendible for most people.  And the consequence has been that the stock market has gone drastically higher in America and other places.

And that has written the news and caused people to think that everything is going to be fine and the problems that we have either don’t exist or are manageable.  It’s all an illusion but that’s been the case.  The fact that it continues to be an illusion doesn’t change the fact that the market has been able to go higher despite the ending of QE….

Continue reading the Bill Fleckenstein interview below…


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“I don’t think that can last and it’s gone on longer than I would have thought.  Having said that, I knew ahead of time that neither I or anyone else would have any idea when it would end because no one has ever seen anything like this.  So the stock market is going to go until it can’t, and when it starts to go the other way the recipe is there for a crash or a big dislocation.

I know this is a crazy period.  Psychology is deranged.  Markets are at valuations that leave a lot of room to lose a lot of money.  But I don’t know when that’s going to start.  The end of the year tends to force people’s hands.  So much of the money in the market now is professional — from the people who have to be involved — but to the extent that it forces people to act even more irrationally than they have been and get (even) crazier, then you could have the set up for an inflection point around the end of the year.

That does happen when people’s hands get forced in the direction of an extreme trend.  The calendar itself can set the high.  That happened in Japan in 1989.  I don’t think the stock market can stay where it is or anywhere close to it without QE, and when it starts to go the other way it’s going to be violent.  And at some point the Fed will come back and do (even) more of what they have done (in terms of money printing).

What’s been amazing about this year is the fact that QE seems now to be considered a damn fine policy that anyone with an ounce of common sense would want, instead of the opposite — some radically ridiculous policy that no one with an ounce of brains would ever want.  So psychology has swung a long, long way.  It just means that when we start to go the other direction both in terms of psychology and in terms of pricing in these markets there is a long, long way to go (to the downside). 

If you look at the Stock Market Cap vs GDP, it’s only been higher a couple of quarters in history, and that was at the very end of 1999 and early 2000.  So that’s not a great place to find yourself in from a risk control standpoint once the trend changes.”

Fleckenstein also spoke about gold and silver at length but here is just a small portion of what he said about the action in gold:  “The fact of the matter is $1,200 has proved to be a level below which the market hasn’t wanted to spend any real time.  And what’s interesting this time is that the short-term lease rates are literally 3-times as negative as they were at the lows of $1,200 in the last couple of years.  

So one of the few fundamental facts you can point to in the gold market is this phenomenon which indicates that the paper market has pushed the price to a place where the physical market has such demand that there are shortages out to six months.” This is an incredibly powerful audio interview from Fleckenstein where he continues his discussion on the gold market and also spends a great deal of time discussing silver and other major markets. His remarkable KWN audio interview will be released later today and you can listen to it by CLICKING HERE.

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IMPORTANT – KWN has many more interviews being released today.

The audio interviews with Bill Fleckenstein, Ben Davies, Greyerz-Turk-Stamm, Gerald Celente, David Stockman, William Kaye, Dr. Paul Craig Roberts, Andrew Maguire, Eric Sprott, Rick Santelli, Michael Pento, John Mauldin and Marc Faber are available now. Other recent KWN interviews include Jim Grant and Felix Zulauf — to listen CLICK HERE.

Eric King