On a day when gold and silver continued to consolidate their strong gains from this year, mining stocks got hit hard. This led to the all-important question: Should investors be buying right now?
By Bill Fleckenstein President Of Fleckenstein Capital
August 24 (King World News) – Overnight bond markets were weaker while equity markets were mostly higher, although stocks here decided to sit out the party and lost a tiny amount of ground through midday in continued uneventful activity...
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In the afternoon the indices leaked a bit more, led by the Nasdaq, and then actually saw some selling, losing 1% on the day. So perhaps this maniacal run has finally ended (I bought a few insurance puts, just in case).
Mining Stocks Get Hit Hard
Away from stocks, green paper was stronger, oil lost 3%, fixed income was flattish, and gold lost 1% to silver’s 1.5%, while the miners declined disproportionately (with most declining almost 10%). Obviously, the sideways action in gold over the last six weeks or so is finally taking its toll on the miners. It is quite likely that some people were positioned for a breakout over $1,350 to $1,360, which did not occur, and now you are getting folks exiting positions.
They Spelled “Razing” Wrong
According to the Financial Times, “the turn in sentiment [regarding gold] is due to increasing signals that the U.S. Federal Reserve will start raising interest rates again this year — meaning other assets, such as U.S. Treasuries, could become more attractive.”
Got that? Basically, rate hikes are good for all assets except gold. What passes for knowledge these days is beyond silly.
The Dove Can’t Change Her Feathers
It seems that folks, for some reason, are expecting something hawkish from Janet Yellen at her Jackson Hole speech on Friday. The last thing in the world she is liable to do is become hawkish and it is quite likely that she says next to nothing. Thus, expectations about what she may say will matter more than what she does say. Meanwhile, watching trillions of dollar spin around various markets based on Fed head speeches where they change their mind every 15 minutes, and can’t deliver on anything they plan on doing, continues to amaze me, but that is the world we inhabit at the moment.
Included below are two questions and answers from the Q&A’s with Bill Fleckenstein.
Bonus Q&A
Should I Be Buying Miners Right Now?
Question: Hi Fleck. Now that we have a healthy correction in miners, do you think it is a good point to add? Are you making any purchases of miners. Regards.
Answer from Fleck: “I’m not doing anything yet, though that could change quickly. But my hand is different than yours, as is everyone’s, thus each person must weigh all the data based on how they are set up.”
Fleckenstein added this in response to another reader asking about accumulating positions in the miners:
Second response from Fleck: “It all depends on how you are set up. If you need exposure then this might be a good spot to add. But from a speculative standpoint, I have no strong view about Yellen’s speech, unlike so many others.”
Question: Why do these hedge fund millionaires regardless of the wealth they have try to use the media to rip off the average investor. Druckenmiller while stating that gold is their largest currency holding was unloading GLD. All at the same time. Yes the filings cannot provide all the info etc, etc. But look at the timing. He was trying to push few dollars profit on his GLD selling using the media. Wilbur Ross is another one. While stating the banks are doomed he was buying banks in Florida during the 2007 crisis. I guess they don’t have any basic decency or value in their lives.
Answer from Fleck: “Unfortunately, a casual reading of the filings doesn’t tell you much. At one time, Stan owned GLD calls, and he owned gold futures. Thus, what you think he may be doing can easily be dead wrong, and his verbiage may very well match his position (contrary to your opinion). You have leapt to conclusions that are likely to be way off base.”
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