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BookmarkWith continued volatility and fear increasing in global markets, today King World News is pleased to share Bill Fleckenstein’s fantastic wrap, plus a bonus Q&A!
– Overnight markets were basically all lower, with the exception of China, which gained about 3%. Somewhat suspiciously, the SPOOs were about two-thirds of a percent lower last night for no particular reason, which I thought was odd. After New York opened they kept sliding and by midday the market had lost 1.5%, though there was no real proximate cause that I could see…
Good To the Last Drop
I know that today many claimed that the market did what it did because of oil, but I hardly think a 5% drop back to $30-ish was responsible for this decline. More likely the short squeeze/markup that began last Thursday and Friday — and which continued yesterday on the first day of the new month — has ended and now the market is back to declining. I think that fits the action better than whatever the mainstream media might have to say.
In the afternoon the market continued its path into negative territory and was off by about 2% with an hour to go, when I had to leave. Be sure to check the box scores because it felt at the time like the last hour could be ugly!
Away from stocks, green paper was mixed, oil was 5% weaker (as noted), fixed income was quite firm, and the metals were slightly lower.
This Could Be the Momentum of Truth
There isn’t a whole lot more to say about today other than to note the path of least resistance appears to be down and that in bear markets surprises come to the downside, while the short-covering rallies we see periodically look better than the “real” thing — something we all need to keep in mind going forward.
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 today’s Q&A with Bill Fleckenstein.
Bonus Q&A
Question: Hi Bill, Just in case you haven’t seen the numbers yet for GLD. As of yesterday (Feb 1) there is a build of 12 tonnes the day. For the month of Jan, there is a build of 39 tonnes. How encouraging is that?
King World News – Another Stunning Development In The War In The Gold Market!
Answer from Fleck: “Yes, I think that is a very big deal… It is proof of demand in USD, which has been nonexistent for the last few years.”
Question: When QE first started, I remember a host on CNBC posing the question of what’s to stop them at doing $6 trillion or $7 trillion. The FED hadn’t even done $1 trillion yet. I have since heard others talk of $20 trillion in QE by our FED, that the FED can buy anything they want and take rates to whatever level they want on a specific investment.
This morning, Bloomberg showed some of the ratios of QE around the globe, an interesting segment that I think may reappear over and over perhaps. The government of Japan already owns about 40% of their Treasuries and is buying corporate debt at negative interest rates while our FED only owns about 20% of U.S. Treasuries. I understand that taking rates down does not equate to more GDP. But asset prices are what we invest in. Having said that, I agree with you that the camel’s back has been broken given recent global bond and stock market action. But I still ask you, since we haven’t even begun the political discussion of reigning in Central Banks, doesn’t the idea of QE infinity and NIRP keep you up nights and make you re-think how much short exposure to have almost minute to minute, given how desperate Central Banks might get (like heavily buying the S&P itself) particularly at moments when it seems that things are about to really fall apart?
Answer from Fleck: “There is nothing new here, these guys are so predictable thus I know what these clowns will do – hence my extremely careful short selling tactics. The masses which have been duped by the central banks, are much harder to figure out… i.e. when will they revolt against this insanity?”
By Bill Fleckenstein President Of Fleckenstein Capital
February 2 (King World News)
