With many investors nervous about the currency carnage in emerging markets, the world didn’t end, at least thus far.

By Bill Fleckenstein President Of Fleckenstein Capital
May 23 (King World News) – A few notable things occurred while I was away, although the stock market was on the tame side, and an argument can be made that it is still building a top, particularly if you look at the Dow or S&P (even the Nasdaq and Nasdaq 100 could be labeled that way, although they have made more progress back toward the highs)...

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Three Is The Magic Number
In one surprising development (I say “surprising” because everyone thought it would matter a great deal), the 10-year pierced 3% and the world didn’t end. I don’t have an opinion whether 3% should or should not matter, but I do recall a lot of people thinking that particular round number would be consequential for many markets and it really hasn’t been, at least thus far. (Perhaps one could say it has affected the dollar, which saw the continuation of a strong rally based on confidence in the Fed and lack of confidence in other G7 central planning organizations.)

Macro news also seemed to favor the dollar, namely because Trump was “bringing” North Korea to the bargaining table and Chinese trade tensions were going to be defused. I’m not sure that people’s expectations on those two topics will play out the way they seem to think, but nonetheless that appears to be the consensus.

How “Temporary” Are We Talking?
As for today’s action, the stock market opened a little lower, then staged a rally back to around unchanged in the wake of dovish FOMC minutes, in which they noted that, “…a temporary period of inflation modestly above 2 percent would be consistent with the Committee’s symmetric inflation objective and could be helpful in anchoring longer-run inflation expectations.” Oh, yeah? We will see how helpful it turns out to be.

By day’s end, the market was modestly higher with the Nasdaq outpacing the other indices by a large margin, as it gained 0.5%.

Holler for the Dollar
Away from stocks, green paper was mixed, with the yen finally reversing a bit and getting stronger as the euro continued to be clubbed for any number of reasons. It seems to me that any euphoria over the dollar has reached a crescendo, but until it reverses I suppose every headline will be deemed bullish for it. Oil was a nonevent, though it did manage to overtake the $70 price while I was away, and fixed income was slightly higher, particularly at the long end.

Turning to the metals, which were weak in my absence, silver, which had ignored the recent weakness in gold, was 0.5% lower today, while gold itself was $2 higher. As for the miners, all in all, they behaved pretty well while I was gone and again today.

King World News - Bill Fleckenstein - The Longer A Mania Goes, The Worse Off Everyone Will Be When It Ends - The Aftermath Of This Is Going To Be Extremely Brutal, Plus A Bonus Q&A

Included below are two questions and answers from the Q&A’s with Bill Fleckenstein.

Of Course Not
Are we longtime longs in physical gold doomed to mediocrity, obscurity and contempt?

Answer from Fleck:  Oh, c’mon. Of course not.”

Not Really
It has been difficult to be bearish since the beginning of QE, monetary distortion and FASB157 accounting fantasies. Standing aside patiently letting all the players in the great charade finish their roles while those who took on imprudent levels of risk are rewarded for their behavior. What is bizarre to me now is, with many of the Bullish tailwinds beginning to shift to headwinds, how many bears are giving up and capitulating. Can you remember a time in your career when the situation was like it is today?

Answer from Fleck:  Not really. QE has warped everything like never before.”

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