As we kickoff the second week of trading in the month of November, what is happening in the gold and silver markets is remarkable. This piece also takes a look at the insanity taking place in major markets.
By Bill Fleckenstein President Of Fleckenstein Capital
November 6 (King World News) – Despite an overnight dip in the SPOOs, the market was slightly higher through midday, led by the Nasdaq, which was led by the chip sector. The latter was kicked into gear by the proposed takeover of Qualcomm by Broadcom. Without opining on the merits, or demerits, of the merger, what matters most is that the stock prices of both companies spiked higher (initially), just as they did late Friday…
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Maybe They’re Just Out of Ideas
I have been through any number of M&A cycles and it is always telling when speculative juices run so wild that folks anoint the acquirer with a premium just because it managed to pay up for some other company. There are other signs of late-stage antics, but those are really no good from a timing perspective, as I have mentioned many times, even while that does mean we are very late in the game.
For anyone who has endured the last 10 years and been on the outside looking in, as I know many readers have been, even a wait of a few more days seems interminable. People are frustrated and worn out (all you have to do is take a look at Ask Fleck), but rather than focus on what has transpired, it may be more productive to think about what lies ahead as the game changes, which it most certainly will. For starters, if I didn’t know that I didn’t know, I would say that the first quarter of 2018 looks particularly pregnant, but we shall see what happens.
Turning back to the action, in the afternoon, the indices went nowhere and with an hour to go, when I left, they were still fractionally higher. Away from stocks, green paper was lower, oil gained 3%, fixed income was higher, and the metals rallied as well, reversing last week’s losses. Silver added 2.5% while gold popped 1%.
Mined Over Matter
I received a few frustrated emails from folks who seem to think that geopolitical machinations, from Saudi Arabia to Bill Dudley to even the latest insane massacre in Texas, ought to have meant something for the metals market. But none of those events had any effect on any market, so I don’t know why specifically they should have impacted the metals. Today, nearly the entire commodity complex bolted higher, for no real reason I could see, which often is the best reason of all from an investment standpoint.
Included below are four questions and answers from the Q&A’s with Bill Fleckenstein.
What Is Happening In Gold & Silver Is Remarkable
King World News note: The following Q&A’s address some fascinating things taking place in the gold, silver and cryptocurrency markets.
Question: Saturday:
– Lebanon PM resigns
– Iranian-backed Yemen Rebels Fire Ballistic Missile at Saudi Capital Riyadh
– Saudi Cabinet reshuffle, 11 princes arrested
Sunday:
-gold trades down
Answer from Fleck: “Yeah, gold is down $1 (as I type Sunday night)… Stock index futures are flat, as are bonds and the dollar. In other words, nothing has moved on this news, so why should gold??? The level of angst and whining has gotten so high that we must be close to an inflection point soon.”
Gold & Crypto Camps
Question: Hey Bill, as someone living in both the gold & crypto camps, I can say that you are mostly correct about bitcoin stealing demand from the metals. Yes, I know several people that 1) have already sold some/all of their metals to buy crypto, 2) plan to do so in the near future, or 3) have diverted new money into crypto that would have otherwise gone to metals. So, yes, there is some of that going on. I’m sure this is happening around the world, especially the diversion of new funds into crypto. IMO, however, the level of this activity is pretty marginal, and since this level of buying/holding did nothing to boost metals prices significantly prior to crypto, I don’t thing the lack of this small piece does anything to hurt the metals, either.
As you have said here many times, what we really need is a change in overall sentiment in the western investor to realize he needs more exposure to metals in his portfolio. When that happens, the small crypto-induced flow out of metals will be overcome by a hurricane of funds coming in. While I’m just as frustrated as everyone that a massive rally doesn’t occur immediately, i’d encourage everyone to draw a straight line on the gold chart from either the correction end in Dec ’16 or from the bear market end in Dec ’15 to today, trying to average gold prices above & below the line. Tell me what direction the line is going? It’s going up. We’re in a rally. We’ve had the major trend change, but it may take awhile before people recognize it (including us!). We shall prevail.
Answer from Fleck: “I looked at bitcoin long and hard and did plenty of research when it was $600 and concluded that it just wasn’t worth anything (the currency – not the blockchain – which you don’t own as a bitcoin holder). Of course, I might be wrong, but I don’t think so. Now people are buying bitcoin because it is going up – people chase price in lots of markets. I understand that and there is nothing wrong with that if you know what you are doing. As for gold, you are also correct, but the sentiment is so bad that people just hate themselves for being involved, which is silly of course – but, it happens.”
Huge Mistake
Question: Bill, just to give you a data point….I am liquidating my physical gold and silver and will redistribute it to real estate and bitcoin. I might keep a smaller portion in physical gold but just a fraction of what I’ve been holding on since 2011. I’ve given up trying to short, or understand this new financial and economic paradigm we are in. Really appreciate your site and candor.
Answer from Fleck: “Not shorting I get, as I have had that idea for many years now… To sell metals for bitcoin and real estate is a huge mistake, IMO – but, it is your money.”
Not Just A Book Entry
Question: “In all my years in the investment business I don’t think I’ve ever seen an idea quite as nonsensical as crypto currencies.”
What is sensible about gold, that is nonsensical with Bitcoin? Sure gold has more history but for most buyers and sellers it is nothing more than a bookkeeping entry, just like bitcoin.
Answer from Fleck: “Several thousand years of more history, and you can take delivery of gold – it is far more secure than a bitcoin. And, for most of the world, it isn’t simply a book entry as you claim.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
Speaking of gold…
In The Footsteps Of Giants
One of the top questions KWN receives from investors about the mining industry is always: “How do you know out of the thousands of companies there are to choose from which will take-off and which ones will falter?” The answer for smart money investors is always to look for proven leaders with previous success as a good indicator of future success. One individual that fits this description is pictured below with multi-billionaire Robert Friedland.
Multi-billionaire Robert Friedland chose this man to lead his expoloration team and it turned out to be a brilliant move because he was responsible for two of the largest and most important discoveries the world has ever seen while leading the team at Ivanhoe Mines. Investors across the globe are now following this man into his latest venture where he will help lead an exploration team where the CEO believes the team will deliver drill results that will send the stock price soaring more than 1,000 percent! Also, a legend in the business just made a 7-figure investment into this relatively unknown company. To get in on the ground floor and learn more about this remarkable company simply CLICK HERE.
***To listen to legend Pierre Lassonde discuss $12,000 gold and the coming global shock CLICK HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Billionaire Pierre Lassonde – This Is The Real Reason Why Gold & Silver Are Surging Today CLICK HERE.
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