Seductive Head Fakes by Mr. Market
Overnight markets were a nonevent and the early going saw the indices flopping around unchanged, though they spent most of the time slightly lower in totally dull trading, especially considering the epic run that has taken place thus far. A little leakage set in around mid-morning, and with an hour to (when I left) the S&P/Nasdaq had lost about 0.5%, with the Dow flattish.
Away from stocks, in the colored paper wars it was a mixed affair, though in general the pound and the yen continue to be the worldwide losers. Treasuries managed to eke out a bounce and oil quietly gained a buck. The precious metals finally had a pulse, gaining 1%, and the miners sprang to life as well.
Given the action in the metals last week and the current sentiment, this may be part of a turn higher after the rejection of lower prices we have seen recently. But to feel like any real turn is at hand we would need to see aggressively higher prices pretty soon (which we could easily get).
Consider It a Hostile Takeover
I have been involved in the investment business for over three decades and I don't believe I have ever seen an asset market (I'm speaking of the metals themselves, not the miners) become so hated when so little has changed and price damage has been so minor. Yes, the world hated stocks at the bottom in 2008, and in 1982, but the environment was much different. People were scared to death in 2008, and in 1982 they were pretty frightened, and had alternatives, like CDs and bonds in double digits. Today there is really no alternative to owning some gold, unless you happen to have the perfect inflation-protected business, which perhaps some do.
Yet here gold is being scorned, laughed at, puked up, all why central banks are trying to double inflation to around 2% from the 1% or so they claim it is when it is already at 4-5%. How anyone can forego having exposure to precious metals to protect them from the eventual destruction of G-7 money is beyond my comprehension, but that is what markets do. They get you horribly negative on something at a moment in time when you should be wildly bullish about it, and vice versa. Note the attitude toward stocks in general right now. The latter should be sold and the former should be bought, yet people are doing the opposite in size.
About Bill Fleckenstein
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