As the Dow remained above 21,000 and the price of crude oil tumbled nearly $3, today a legendary short seller discussed the wild, wild west trading action in Bitcoin and what that means for gold.
By Bill Fleckenstein President Of Fleckenstein Capital
May 25 (King World News) – My exhaustion watch has officially ended (at least this phase), as clearly the idea that the S&P’s inability to push through 2,400 has been rendered moot by the market action. Today that index wasted no time trying to put 2,400 in the rearview mirror, as it gained about 0.5% through midday. In the afternoon, the S&P gave back a little ground, while the Nasdaq added the most, gaining 0.75%…
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Away from stocks, green paper was stronger, oil lost 5%, fixed income was a tad higher, and the metals were fractionally lower.
Bitcoin Riders Are Pulling a Lot of “Geez!”
In the parabola watch department, Bitcoin at one point was up nearly 15%, to 2,780, before it reversed to a decline of 10%, only to rally back and close roughly flat.
Even though I was prepared for it to do something “stupid” on the upside, I must admit I have been rather blown away by the size of the advance since I pointed out it was going parabolic back on May 9.
Having said that, I believe the upside has now most likely exhausted itself, although today’s action wasn’t absolutely conclusive, and it may have one more upward twitch left in it (which makes a point about how exhaustion just comes out of the blue, even if parabola timing is somewhat predictable).
Steady As She Doesn’t Go
It always amazes me how high these parabolas can climb, and this is supposed to be a currency! To think that people could believe that routine 10% to 15% moves would be tolerable is crazy, but then again, we have a long list of absolutely mind-boggling observations these days. An unprecedented $13 trillion of worldwide QE has provided plenty of fireworks, and Bitcoin is just the latest example.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Question About The Action In The Mining Stocks
Question: Hi Bill, with yesterday and todays relatively sharp down move, is this move a typical bull market move. In other words are the miners trying to sucker us in letting go (or shorting) our positions. Thanks Bill, Take Care!!
Answer from Fleck: “It’s just ebb and flow of the money, combined with lack of interest. Not sure it means much.”
Question: Hi Bill, could you please discuss the balancing of some of the gold stocks. Which MIGHT be interesting of the ones taken out. Thanks Bill
Answer from Fleck: “Are you referring to the GDX/GDXJ re-balancing? Unless it is one of the stocks I already care about, I’m not going to look to buy something new just because it is being underweighted in an index.”
Wild Bitcoin Trading & What It Means For Gold
Question: Fleck, this parabolic move in Bitcoin is fascinating to watch. If BTC follows historical precedent and does indeed roll over/collapse next week, what are the odds that the assets (that don’t get vaporized by the drop) in BTC or the assets that were headed that way divert to precious metals? In some ways BTC, like gold, is an investment against the monetary policies imposed on us by the world’s central banks. If BTC and the other Cryptocurrencies (which I think will fall with BTC) are no longer seen as a safe harbor for these types of assets, then I would think investors would find their way to gold as a last refuge of safety against these absurd monetary policies. Thoughts? (just kidding) Thanks for all you do….
Answer from Fleck: “No way to speculate on what the end of the Bitcoin parabola may mean to anything else. Money doesn’t leave to go somewhere else, it evaporates. Yes, some people sell and they can do what they want, but others just lose capital. I assume there is a lot of hot money just chasing prices. I doubt that money heads to gold.”
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