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BookmarkWith many people wondering what’s next for gold, Bill Fleckenstein addressed Harry Dent’s comments on gold, as well as what Super Mario (Draghi) is up to over in Europe.
– Overnight markets were mixed and sort of a nonevent, with Asia 1% lower and Europe modestly higher, and the SPOOs trading higher as well. The U.S. stock market was essentially a nonevent as well, though it did trade higher and some of the beta names doing even better. (You can see the modest gains in the box scores.)…
“Risk” Versus “We’re Bored”
As I noted yesterday, the real question is where this rally finally fizzles. I think the upside is very minor relative to a decent amount of downside, but that doesn’t mean I can tell in advance when the trend will reverse. And of course that downside is going to be interrupted at some point by the Fed, but that’s getting a little ahead of ourselves. So today was really just an exercise in marking time.
Away from stocks, green paper was mixed, strong against the yen and weak against most everything else. Oil rallied 5% and fixed income was weaker, as were the metals, with silver 0.5% lower to gold’s 1% loss. Nonetheless, the miners rallied, I suspect because yesterday was way overdone.
Today was really just one of those day’s, like we saw before the breaks we had, where basically the market needn’t have opened.
– 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 three questions and answers from the Q&A’s with Bill Fleckenstein.
Bonus Q&A
Question: What is your opinion on the wisdom of NGD’s hedging strategy and its effect on the stock price?
Answer from Fleck: “Given their profile and how important higher prices are for Rainy River and Blackwater, I think doing what they did for 2016 makes good business sense. As a shareholder, the upside comes in the next couple of years with higher prices and those projects on stream. So I think it was a good idea for them specifically, so they are protected against a decline in prices (which I don’t expect), but still have tons of upside.”
Question: Hi Fleck – Guys like Harry Dent argue that Gold is a commodity (not a currency) and will suffer along with all the others in a global deflation spiral. He says history shows no support for Gold as a hedge against market crashes, citing it’s poor performance during the ’08 financial crisis. It only rallied after QE on expectations of massive inflation.. Very interested in your thoughts. I did search your site but was unable to find specific commentary on this debate. Thanks!
Answer from Fleck: “He is a gasbag, not even worth listening to. It isn’t a hedge against a market crash, but it is a hedge against policies that a crash would trigger. It may also rally in a crash, it all depends what the setup is for these things.”
Question: I am starting to get the feeling that the ECB’s move this week will backfire – whatever that move is. There seems to be a pattern emerging: 1) the Fed’s December hike created a more significant risk-off period than they were expecting, 2) the Japanese negative interest rate move a couple weeks ago sent the currency up and their stock market down (whereas the reverse was intended), I am wondering if 3) Draghi’s move this week whatever it is will be seen as negative (if too dovish, investors might focus on all the unintended consequences of negative rates, etc; if not dovish enough, investors focus on that lack of stimulus – in either case, it results in risk-off).
So if Draghi’s move backfires this week, we’ll be 3 for 3 in the last 3 months – then possibly the Fed will be under even more pressure. Seems like this might be a potential inflection point to get short depending on how markets react. Does the above make sense to you as a working hypothesis?
Answer from Fleck: “I agree with point 2 and I think point 3 is possible, but I don’t agree with point 1. The rate hike was meaningless, it has been the absence of QE that has made the stock market in America vulnerable. But easing that backfires is a much bigger deal, in any case. So if that happens to the ECB it may really matter. Let’s see what happens.”
By Bill Fleckenstein President Of Fleckenstein Capital
March 9 (King World News)
