Today a famed short seller said gold is breaking out and may be ready for another surge as indications of chaos appear.
By Bill Fleckenstein President Of Fleckenstein Capital
April 7 (King World News) – Overnight equity markets were pretty uneventful, though our stock market wasted no time surrendering most of yesterday’s gains in a little less than 90 minutes, which I found interesting. Of course, any weakness I find interesting because I think that is the next big direction, even as I have tried to be very careful not to jump the gun in concluding when the downtrend might reassert itself…
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Well, OK, Just a Bite
Today’s weakness looked a little more meaningful to me (finally) so I bought a small amount of puts on some of the semiconductor companies that supply Apple. Whether the bear market rally has ended and we are starting back down I don’t have a strong feeling, but it is certainly possible and I really don’t think the market is ready to withstand what we are likely to get during earnings season. That said, given the macho nature of the rally I want to avoid being too early in trying to capture downside action, so I am sizing my positions accordingly.
In the afternoon, the Nasdaq led the market a bit lower, as it lost 1.75%, with the Dow/S&P faring a bit better. Away from stocks was where the real fireworks were seen, as the yen saw a huge move higher of about 1.5%. Other currencies were firmer against the dollar and thus the dollar index was sort of flattish, but today was all about the yen.
Which Way Is Up?
I have no doubt that the Japanese authorities will take action to suppress the yen rally sometime soon, but it is remarkable to witness the chaos that the BOJ has engendered since the latest round of monetary madness. The Nikkei has dropped over 15%; meanwhile, after the initial decline, the yen is now screaming higher at the same time JGBs are in negative territory (which is the only part of that trifecta that I suspect they are happy about). It is just another example of how bizarre things happen as a result of QE.
Just as QE managed to collapse the oil market (as I have discussed in the past), it is causing serious problems in Japan. No doubt the move higher in the yen may be more about greedy carry traders the world over who have been funding themselves with yen and are now getting blown up than it is about Japan itself, but real chaos won’t be visited on the central planners until such time as they can no longer control the bond markets, which for now they still can.
Turning to oil, it lost 1%, fixed income was aggressively higher, and gold added 1.5%, as it might be breaking out to go on another run higher (silver gained 1%).
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Bonus Q&A
Question: Bill, new to your site but have admired you for decades. Do you believe the USD/Yen at 107 today indicates a “limit” has been reached for the currency manipulators as the carry trade is unwinding?
Indications Of Chaos Appearing
Answer from Fleck: “Welcome. No, I don’t, it is only the bond markets which can end all this central bank lunacy. A strong yen just means chaos.”
Question: San Francisco Home Prices: “This Is Troubling”
This is really stunning. It looks to me like San Francisco home prices are up about 70% from the lows in 2011 and are about 30% higher than the 2007 bubble peak. Idiocy knows no bounds.
Answer from Fleck: “How much they are up doesn’t tell you much, it’s the underlying policies and unicorn nonsense that shows the insanity, IMO.”
Question: Fleck, it’s been interesting to see Gold go up, and hold in there, even in the teeth of this massive rally. Does that bode well to you? I assume so.
Answer from Fleck: “I’m not sure how many times or ways I can say that the gold market has turned. There is no reason stocks NEED to matter, but in the past that seems to have been the case (a function of psychology, I would guess). I think it is a bull market, but I don’t feel better simply because the SPOOs have rallied and gold hasn’t fallen.”
***KWN has now released the extraordinary audio interview with legend Art Cashin discussing his greatest fear and the the implication of this for the gold market and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
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