As we kickoff trading in 2017, here is the key level in the most important market in the world, plus a Q&A about the gold market.
By Bill Fleckenstein President Of Fleckenstein Capital
January 10 (King World News) – Overnight financial markets were flat to slightly weaker, but that had no bearing on anything. The indices here limped around unchanged through midday in trading that, as noted in yesterday’s headline, has become rather dull. That may indicate that the euphoria is slowly waning and exhaustion may be setting in. I only throw that out there as a possibility. Unfortunately, I have no strong reason to say that is in fact the case (yet)…
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Once again the afternoon saw a little upside pressure for the Nasdaq, which gained 0.3% as of an hour to go, when I had to leave (the Dow/S&P were flat). Away from stocks, green paper and bonds were weaker, oil lost 2%, and the metals were higher, led by silver, which gained 1.5% to gold’s 0.5%.
Peak Trump?
In the news this morning I saw something I wanted to comment on, namely that small business optimism saw a jump that was only rivalled by the leap that took place in the wake of Ronald Reagan’s victory over the incredibly inept Jimmy Carter. Back then the confidence index rose from 80 to 96, and today it was announced that it jumped from 95 to 105.
Obviously, the absolute level is much higher now, but what is interesting about this data series — which I hadn’t really followed before — is that it has only been higher than this a couple of times since the 1980s, with the most recent peak of 107 in 2004 only two points higher than today’s reading.
His Word Is Your Bond
Shifting to the bond market, Bill Gross has made it clear that if the 10-year trades through 2.60% it will indicate that the secular bond bear market is underway, which will be a very big problem. I certainly agree with that conclusion, but whether 2.60% is the magic number I don’t know. I just thought it was worth putting on people’s radar.
Included below are three questions and answers from the Q&A’s with Bill Fleckenstein.
Bonus Q&A
Fleckenstein On Gold And Bonds
Question: Bill, I wrote, ” By “Now, coach?” I was using an old sports phrase when a player keeps asking the coach if now is the time for him to go into the game with the winning play. Fleck: OK, I get that, but what specifically are you asking? I wrote that on the day the PMs leaped upward so what I meant was this the breakout you were waiting for and was it time to get into the game. Sorry for the obtuse football lingo. (My football days were too many years ago to contemplate ,)
Answer from Fleck: “I was not waiting to get in the game, I’m in it. I have room to add, which I will do, as I anticipate that the $1,180-$1,220 zone will be taken out.”
Question: Bill Gross on “the key to interest rate levels”: “this is my only forecast for the 10-year in 2017. If 2.60% is broken on the upside – if yields move higher than 2.60% – a secular bear bond market has begun. Watch the 2.6% level. Much more important than Dow 20,000. Much more important than $60-a-barrel oil. Much more important that the Dollar/Euro parity at 1.00. It is the key to interest rate levels and perhaps stock price levels in 2017.”
Answer from Fleck: “I agree that the bond market is more important than all those other markets. Is 2.60% the magic number? If Gross says so, we can use it as a guide. IMO, it WILL BE taken out!”
Question: Hi Bill, I know you have been asked this a million times, but how strong do you feel that we have made a true bottom in the metals? Thanks.
Answer from Fleck: “I think it is very likely, but as Mr. Skin recently noted, it takes higher prices to confirm that. I think clearing the $1,180-$1,220 level will indicate that the bottom of the correction was seen in December. That doesn’t help much today, but that is the way it goes with gold.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
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