Podcast

Bill Fleckenstein: Hold Tight To Your Gold

Why it's going to go "one hell of a lot" higher
Sunday, April 21, 2013, 12:35 PM

The bond market is an accident waiting to happen.

When the bond market finally does crack, it is going to be one epic nightmare that is going to make 2008 and 2009 seem like a picnic. It will be a different kind of a crisis; but it will be an enormous crisis. These people that are bullish about stocks and bonds and the bond market, they do not understand anything.

We will hit a moment in time where there will be a rapid acceleration of the perception that people are being cheated via inflation by these money-printing policies. Why Americans seem to think there is no inflation just because the CPI says so, when their checkbooks every day ought to tell them there is, I cannot explain that. But there will be a change in psychology, and there will be a massive stampede into gold here and everywhere else around the world, because it is the only way you can protect yourself against these policies.

Pity the wise money manager these days. Our juiced-up financial markets, force-fed liquidity by the Fed the other major world central banks, are pushing asset prices far beyond what the fundamentals merit.

If you see this reckless central planning behavior for what it is - a deluded attempt to avoid reality for as long as possible - your options are limited if you take your fiduciary duty to your clients seriously. 

Bill Fleckenstein of Fleckenstein Capital has a difficult time seeing other assets to own besides the precious metals. There are confidence bubbles in stocks, bonds and the fiat currencies that will break - not may, but will -  and when they do, he sees no safe harbor for investment capital save gold:

If you saw the stock bubble coming in the late 1990s, why did you see that? Because you could see what the Fed was doing and the response people were having and the misallocation of capital and all the problems that that was going to lead to. If you saw that coming, you could not buy stocks. Your only real choice was to do nothing or short stocks. Shorting stocks is tricky, but those were the responses.

Fast forward to 2008; if you saw an even worse and more problematic real estate bubble, again, you could buy stocks or you could short them. You could not buy real estate if it was difficult to short list it. What were the proper responses?

Well, in the interim of those two, you also could have the response to buy gold, because we knew what the central banks’ response was going to be.

Now here we are today. If you understood those problems, you cannot buy stocks, because they are only up because of money printing. You cannot really short them, because it is so hard to fight that money printing. 

The financial world has never existed like it does today. Where the Bank of Japan and the Fed are printing the enormous amounts of money that they are, and so is the Swiss National Bank, then let us not forget, there are dollar pegs all over the planet.  Whether it is in Asia or South America. So there are lots of places where they are also stimulating, printing money. So we have never been here before. There is no chance they are going to get the genie back in the bottle.

Maybe you can short stocks now because they are about to crash; I do not know. You cannot really short the bond market yet. But you ought to be able to buy gold. These policies will continue until the bond market croaks. In the interim, you ought to be able to make money in gold.

Now the gold market has been under pressure  for like 18 months, and we had a huge break off the top in September of 2011 when Bernanke did not do QE2 when they thought he would. Now we just had an immense crack after having had, for a year and a half, central banks go hog wild. I cannot believe that there is not going to be an enormous rally, prospectively, in the gold market, once it stabilizes and starts flying higher. It is going to go one hell of a lot higher, I think.

I just do not know whether we have a train wreck in the bond market first or somehow gold goes into orbit first. It is hard to play a step forward on this, but what we do know is that we have never seen this before. It is guaranteed to shred the purchasing value of current currencies over time, and what exactly it takes to change psychology, I really cannot predict. We will just have to see what it is.

He sees the recent takedown in gold as engineered and short-lived, a tactic perpetrated in the paper markets while it still can be. But he sees a day soon where the physical bullion market will reassert itself as the primary driver of the price of gold and silver, and the corrupt manipulation suppressing PM prices finally is no longer possible.

In the interim, don't let the current battery in price shake you loose of your PM positions, as it's designed to do.

Click the play button below to listen to Chris' interview with Bill Fleckenstein (28m:26s):

Transcript: 

Chris Martenson: Welcome to another Peak Prosperity podcast. I am your host, of course, Chris Martenson, and today I am really pleased to have Bill Fleckenstein back on as our guest. Bill is the President of Fleckenstein Capital, a money management firm based in Seattle. He writes a daily market-wrap column for his subscription-based website, Fleckensteincapital.com, as as the popular column Contrarian Chronicles for MSN Money.

When I last interviewed Bill back in early 2011 we were both concerned by the interventionist actions the Fed had taken in response to the 2008 crisis. If we were concerned then, our hair should be on fire right about now, because since then we have had the announcements of QE 3 and 4. We had Operation Twist, and we have what is going on in Japan. We have had a lot of volatility in the precious-metals markets. All of this increasingly looks like there are big players definitely working their way through the markets, and I am real excited to get Bill’s views on this. Bill, welcome back.

Bill Fleckenstein: Thanks for having me, Chris.

Chris Martenson: So let us begin with gold and what happened on Friday, and then maybe move to Monday. So on Friday I noted, as everybody did, that there was this huge gigantic volume, a lot of downside pressure in the gold markets, and the open interest on those contracts really spiked. What do you take from that?

Bill Fleckenstein: Well, there is a handful of comments that one could make. First of all, we have to remember that gold and silver, while being stores of value, are also commodities, and the commodities futures market allow for a whole lot of game-playing and what might be construed as manipulation, where guys try to push each other or try to push the market around. It is still kind of the wild, wild West. And so it is a market where you can see wild price swings a lot.

Now, the prices can go to the “wrong place” and only stay there for a while, because eventually what goes on in the physical market will change things around. So obviously the mammoth size of the sell-off on the mammoth volume, and the proximity to Goldman Sachs “let us get short gold” part, has to raise an eyebrow amongst any sane person, . It is unusual for Goldman Sachs to say “let us short” anything. The report that they had was certainly flawed, but nonetheless, the tactic worked. Whether one believes that the market was vulnerable to the downside because of the prior decline that we have experienced in the last year and a half, or whether one believes that the idea was to “break the market,” the fact of the matter is, a gargantuan amount of contracts were sold and the price has cascaded.

So the question is, what happens next? I suspect that because of this onslaught of selling, the gold market now finally made a low. The gold market has been declining since September of 2011. So basically the gold market has been in a bear market, if you will, for a year and a half. This is the end of that leg, and the next leg up will be the fact that people will recognize that the policies the central bankers have pursued have had consequences.

Basically, gold peaked when Bernanke did not start QE2 on time. Since then he has been “QE2, QE3, QE4,” and the Japanese have gotten involved. Swiss National Bank has gone crazy. He has never had an environment that demands more that people own gold than what we have now, and as that has occurred, the gold market has declined. The markets will go down on good news like that. They will set their mark. I did not see it coming. I did not understand it. But here we are.

Prospectively now the market is going to rally because the consequences of all of this central bank action, besides just raising stock prices, are going to be felt. And that will lead to higher prices, and all the vociferous bears will be forced to stop yapping about it. So anyway, that is a long answer to a short question.

Chris Martenson: I love the answer. Before we move on to some of the more fundamental reasons why gold makes sense here, I want to backtrack to this idea that there is a disconnect now in the paper markets. I agree with your assessment. They are very big players that are very deep-pocketed. We saw in the lead up to that historic plunge on Friday that the large specs had one of the largest open short positions on record. I mean, you have to go back, I think, to 2008. So these are the big boys and girls. They have got the giant hedge funds. They have got a lot of capital. And so they were very short, and, of course, these are the ones who would have made out like bandits in this whole thing because this was a basic wealth transfer from a lot of people who were long to people who happened to have been short.

The shorts won, and as they play that whole battle out, one of the things you would have expected, given what I saw in the newspaper, what with Paul Krugman’s comments and sort of this gleeful noting that gold bugs had been smashed. You would think, well, that should be a pretty dispiriting moment and lo and behold, as I gather information from around the U.S. and Japan and China, Australia, the whole world basically went on a gold-buying spree, at least at the retail level. So it looks like there is a disconnect between what happened in the paper markets and how people responded to it.

Bill Fleckenstein: Yes.

Chris Martenson: Are you seeing the same thing, or has something shifted in the market?

Bill Fleckenstein: Yes. Here is the thing people need to understand the following: The physical market in the end is the real market, and that is going to dictate the long-term price, because that is going to dictate the demand side of the supply-and-demand equation. However, in the short run, the paper market is so much bigger that there is no amount of physical buying I would hate to have to think about what would happen in the world to have enough physical buying to push the market up as much as it went down on Friday and Monday.

Chris Martenson: Yes.

Bill Fleckenstein: However, in the paper market i.e., the futures market there is almost an infinite amount of supply, or theoretically demand, that can be created. So the tail wags the dog. The derivative market in the gold complex and in almost all commodities maybe not oil; I do not know that much about oil, but certainly in the precious metals the tail wags the dog in the short run. So what happened is, the paper market got bombed and set off all kinds of panic, and there was selling in the ETFs and things like that. But in the physical market what happened was lower prices created buyers, not sellers.

So there are all kinds of stories of physical buyers inhaling metal, and I think that is why this is going to turn out to be the low. Because they have gotten it to a price where demand is coming out of the woodwork. I am sure that central banks in Asia are buying metal. Over time, the physical demand will push the prices higher. At some point guys that are short are going to have to cover. We do not know how much they covered on this break or how much they pressed. We do not know. We will see the commitment of trader’s report on Friday night, but that will only be through Tuesday. Although that would be an interesting snapshot certainly given what happened.

Chris Martenson: Yes.

Bill Fleckenstein: I believe the short interest is probably bigger than people think, because that it is not just what you see in the futures market. Probably with some short selling of GLD, as well, because the single most popular thing to hate in the whole world if you are a stock bull or what I call the Goldilocks crowd that never seems to see any problems coming the single thing you want to hate most is gold. So it does not take much when the market action and the price action of gold is weak to get a lot of people to jump on the bandwagon. So all of these people that got short are liable to find out that, while they had some fun for a little while, it did not work out so well; some of them will wind up losing money.

Chris Martenson: Let us talk about some of the more fundamental reasons. I note that the all-in average cost of production for gold is a little over $1,100.00 per ounce across the world, and that means that that is average; some do better than that, of course; some do worse. So we are probably already at the break point for a number of producers that are out there. So we have got that fundamental reason. You mentioned what we saw with Japan doubling its monetary base. We have got North Korea still doing some very crazy things over there, Europe, Cyprus, negative real interest rates. Really, when you say fundamentally, gold is a good buy from here, what is on your radar screen as being most important?

Bill Fleckenstein: If you saw the stock bubble coming in the late 1990s, why did you see that? Because you could see what the Fed was doing and the response people were having and the misallocation of capital and all the problems that that was going to lead to. If you saw that coming, you could not buy stocks. Your only real choice was to do nothing or short stocks. Shorting stocks is tricky, but those were the responses. Fast forward to 2008; if you saw an even worse and more problematic real estate bubble, again, you could buy stocks or you could short them. You could not buy real estate if it was difficult to short real estate. What were the proper responses?

Well, in the interim of those two, you also could have the response to buy gold, because we knew what the central banks’, the Fed’s response was going to be. Now here we are today. If you understood those problems, you cannot buy stocks, because they are only up because of money printing. You cannot really short them, because it is so hard to fight that money printing. The only thing you can do to protect yourself is to buy gold. But the little bits of misallocation in caps we saw in 1999, and even in 2007 and 2008 at the tail end of the housing bubble, were nothing compared to what these central banks are doing now with the their balance sheets. A person to have no choice but to own some metals to protect himself against what these lunatic central bankers have done.

Now, the central bankers have gotten away with their policies here with little criticism, because that is taking up stock prices and no one seems to mind. But it has not precipitated enough inflation for people to say, hey, wait a minute, you are killing us here. So I think the fundamental reason to own precious metals is, it is the only way to protect yourself against the debasement of the paper.

We will hit a moment in time where there will be a rapid acceleration of the perception that people are being cheated via inflation by these money-printing policies. Why Americans seem to think there is no inflation just because the CPI says so, when their checkbooks every day ought to tell them there is, I cannot explain that. But there will be a change in psychology, and there will be a massive stampede into gold here and everywhere else around the world, because it is the only way you can protect yourself against these policies. You can depress a negative view by being short stocks or bonds, but that may or may not work, because they are buying so much paper.

Chris Martenson: I completely agree this brings to mind Kane’s famous quote that not one man in a million can diagnosis inflation is how it is commonly put actually what he was referring to there was the mechanism by which this inflation happens. So can you think of a single period in time where money-printing, which is essentially creating purchasing power out of thin air and transferring that purchasing power to governments, government deficit spending is the largest single beneficiary of that increased out-of-thin-air purchasing power. But if you study this even just for a half an hour, you will find out that that purchasing power that was created out of thin air had to have been transferred from somewhere else. So this is really one of the largest wealth transfers in all of history, at least by the trillions and trillions printed.

So what you are saying is that eventually people, their wealth is being transferred out. All they have to do is look at their checkbook to understand that wealth is being transferred away from them. That is what inflation really is it is a tax. It is being transferred to somewhere else, and sooner or later that dynamic feeds on itself and people just well, you said stampede into gold, but maybe they stampede away from dollars or whatever their currency is. Is there any period in history where this has not been true, where this wealth transfer process has been kicked off and somehow we got it back under control without some unpleasant moments, at least speaking currency-wise?

Bill Fleckenstein: The financial world has never existed like it does today. Where the Bank of Japan and the Fed are printing the enormous amounts of money that they are, and so is the Swiss National Bank, then let us not forget, there are dollar pegs all over the planet. Whether it is in Asia or South America. So there are lots of places where they are also stimulating, printing money. So we have never been here before. There is no chance they are going to get the genie back in the bottle.

I just do not know whether we have a train wreck in the bond market first or somehow gold goes into orbit first. It is hard to play a step forward on this, but what we do know is that we have never seen this before. It is guaranteed to shred the purchasing value of current currencies over time, and what exactly it takes to change psychology, I really cannot predict. We will just have to see what it is.

Chris Martenson: Let us talk about that bond market for a minute, because this is another asset class firmly on my radar screen. It really popped into high relief when I read that junk bonds had hit an all-time record low in yield or high in price. That really caught me because speaking of psychology, talk about not learning your lessons. Since when were junk bonds at 5.6%, are you crazy? So your thoughts on the bond market, I would love to hear those. I know we have got PIMCO’s Bill Gross saying that eventually they will be burned to a crisp but everybody is still dancing as long as the music is playing and nobody seems willing to really articulate what that risk is. But what do you see in the bond market in terms of risk structure?

Bill Fleckenstein: I see the same thing any sane person sees. The bond market is an accident waiting to happen. The only thing you know about the bond market is eventually they are going to give you your principal back. What it will actually purchase vs. what it purchases today we cannot say. So the bond market is just a vehicle by which you can get your money back over time at some debased amount, and in the interim they will pay you next to nothing, not even equal to the inflation rate. When that changes, I cannot say. If the world is worried about inflation, which it ought to because of what is going on, I think the bond market is going to start crack up. People would start to demand more in terms of yield and they would slowly be starting to take the printing press away from the central banks, which is what needs to happen in the long run. But until inflation psychology changes, I do not know what is going to cause the bond market to be derailed given how much is being purchased by the Fed and the financial system on the backs of the Fed and guys playing the carry trade. When the bond market finally does crack, it is going to be one epic nightmare that is going to make 2008 and 2009 seem like a picnic. It will be a different kind of a crisis, but it will be an enormous crisis. These people that are bullish about stocks and bonds and the bond market, they do not understand anything.

Chris Martenson: Well, I guess they understand the central bank put and they are counting on more money-printing creating more of the same. You would be saying that nothing like this can continue forever, because it just does not make sense.

Bill Fleckenstein: But that is not an investable thought, either. Saying it cannot go on forever does not mean that you cannot short stocks or bonds in the back. Maybe you can short stocks now because they are about to crash; I do not know. You cannot really short the bond market yet. But you ought to be able to buy gold. These policies will continue until the bond market croaks. In the interim, you ought to be able to make money in gold.

Now the gold market has been under pressure for like 18 months, and we had a huge break off the top in September of 2011 when Bernanke did not do QE2 when they thought he would. Now we just had an immense crack after having had, for a year and a half, central banks go hog wild. I cannot believe that there is not going to be an enormous rally, prospectively, in the gold market, once it stabilizes and starts flying higher. It is going to go one hell of a lot higher, I think.

Chris Martenson: I would agree. One of the comments that I have been reading a lot lately, whether it has been printed by somebody writing the article or in the comments section below, some of these articles which drives me a little nuts is saying, oh, look; the gold bubble burst. I can still go to parties and talk to 100 people and find maybe one.

Bill Fleckenstein: Did any of those people that said, oh, the gold bubble burst, also talk about the Apple bubble that burst?

Chris Martenson: No, that never comes up in polite conversations.

Bill Fleckenstein: I wrote a column about this time last year about the potential top in Apple shares. The Apple bubble burst and nobody says anything, and it was not really a bubble. It was just an insane price. But all the people that think gold is a bubble, almost to a man, are the same people that did not see the equity bubble or the real estate bubble. They would not know bubbles if they hit them in the face. They lived through two, but now they are sure gold is a bubble. I mean, come on; all an objective person has to do is consider the source. Does the guy who says, I have to buy gold because of these policies that the central bank is pursing, does that man or woman have a good track record at having understood the economy in the last decade or so? Or if they say, sell it, does that person have a good understanding? Or more likely the people that are saying sell it are the same idiots who did not see anything coming, and the person that says buy it are most of us thoughtful types who did. That does not mean somebody that says buy gold is going to be right today, tomorrow, or the next day. It means they understand what is happening in the big sweeps of time and are going to be right over time at an important inflection point.

People laughed at me during the equity bubble and the real estate bubble when I was trying to point it out. But guess what? That was the correct analysis, and anybody who laughed about that got hurt badly. People do not want to laugh at the gold bubble are going to get hurt just as badly.

Chris Martenson: Let us talk about what the inflection point might be. You mentioned it. Who knows when the psychology will break. But just to get a quick anecdote around this: Looking at Spain, in the past eight months Spain’s borrowing costs have been more or less steadily falling; some sawtooth pattern in it, but it went from a high to a low over the past eight months. Spain has done nothing but deteriorate from a macro perspective in any statistics I can find, whether it be bank bad loan reserves that they have to book for bad loans, or the rates of failure, or what is happening in the real estate market, or the deficit spending of the government compared to GDP because GDP is falling, or unemployment. It looks like a complete train wreck to me, and yet borrowing costs have fallen because and only because the central bank over there, the ECB, is enabling and encouraging the purchase of sovereign bonds by all sorts of parties. So how long can that really continue? I know that is unknowable, but in your mind, what might cause it to crack, and what will you be looking for to know that those cracks have started?

Bill Fleckenstein: There are so many places catalysts could come from. It could be Italy, it could be France, it could even be something going on in Germany or Spain or Portugal or Japan. One of the reasons why I believe that the sovereign debt market has done better in Europe in addition to Drahgi’s promise of OMTs, which they have not had to use, is because the world’s biggest yeild pigs, the Japanese, have been turned loose. They all know their currency is going to be debased and the Bank of Japan is going to buy bonds. I am sure the Japanese are buying all kinds of this high-yielding crap in Europe because they make money on the currency and they are going to make money on the yield and they do not even worry about risks.

So it is not possible to know where the problem is going to be. It could be a failed bond auction in Great Britain. Who knows which is going to be the canary in the coal mine? That policy is being pursued on a gargantuan scale everywhere. I do not know what will be the catalyst. We just have to be alert that these policies are insane they are going to lead to trouble and decide when it is going to matter. I did not know what was going to end the housing bubble. It turns out the first sign of the end is when the subprime lenders started experiencing first payment default. That was March of 2007.

Chris Martenson: Yes.

Bill Fleckenstein: The stock market rallied in August. The subprime companies were getting destroyed. They said it is just subprime. They did not even understand that all day was the same thing in the whole food chain. Even Bernanke did not understand. But that was the tip-off. That was the first catalyst. I do not know what it will be in this go around. We just have to be alert and try to understand, okay, that is it. And if you understand the mosaic, you say, well, that means it ought to happen next. When that starts to happen next, then you can start to draw a bead on the fact that the thing is unwinding. But I cannot possibly predict; no one can, and I do not know when. We just have to be alert to clues. You have to understand what is happening to know what clues to look for and what one thing here means over there.

You were a dope if you did not understand the housing bubble. Then when the first payment defaults happened, you would have just said, gee, that is kind of odd. What does that mean?

Chris Martenson: Yes. So turning to the equity markets, quickly. I have gotten into a number of debates. One of them with Morgan over at Motley Fool. He thinks that putting money into the stock market makes a lot of sense. And I just noted some simple, what I thought fairly fundamental, things. Such as with corporate profits now at 11% of GDP, it is just way, way above the long-term average. And of course you cannot really just mathematically have corporate profits that are running hotter than your nominal GDP growth for very long. The only way you can do that is because the profits, the surplus in corporations, means there is a deficit somewhere else. Well, that is our government; that is our savings rate, among other things.

I am sure you are going to have a great answer for this, but what happens when people are looking at 11% of GDP corporate profits and then extrapolating those into the future? How is it that this is what I am flabbergasted about did we not just have 2008, did we not already have 2000? How is it that we are back in this moment where what seems to me to be a completely obviously unsustainable position is being not only defended but marketed really aggressively, and people are buying it? I am not even sure what the question is. I mean, as a contrarian, are you just shaking your head, or is there some way that you can understand these people?

Bill Fleckenstein: It is staggering, as you mentioned. People seemed to have learned so little after going through 2008 and the prior equity bubble. But the TV is full of people who cheerlead and do not seem to understand what has transpired. I cannot say exactly why that continues to be the case, but it does. The stock market has been fluid because of all of the money printing that is going on, and so the fundamentals do not necessarily make any sense. But they do not really have to make any sense when they are printing money like this. So you cannot really fight it. All you can live with is that it is a misallocation of capital; people will get hurt, but that does not mean it cannot go up.

Chris Martenson: All right. Well, speaking about how things go up, the final question here is around the impact of high-frequency trading robots. I see their fingerprints all over the markets constantly now. I saw them in the gold market on Sunday night, where normal-sized lots would be going through it when humans are pressing them in; five contracts, ten contracts. And then, all of a sudden I am watching ticks, here, so this might be eight seconds long I will watch 12,000 contracts blast through a bid structure.

Bill Fleckenstein: You cannot make sense of any of this stuff. These computers, they have all kinds of crazy strategies, and it just means that at any given moment in time almost anything can trade anywhere. Some day computers will blow themselves up, but I do not know when. It creates for all kinds of crazy price movement and insanity. There is nothing that we can do about it.

Chris Martenson: Well, what is the risk there?

Bill Fleckenstein: The risk is a flash crash. We can have a flash crash any time. Any time.

Chris Martenson: So it is a fragile market structure.

Bill Fleckenstein: Yes, of course; of course. You have got computers making decisions. It is only computers that would do the crazy things that have happened. So we could have some wrong things happen and we could have a crash. For all we know, some computer has some big hand in those gold breaks. I do not know. It just means you have to be more careful because the prices are fragile.

Chris Martenson: So outside of gold, do you have any other investment area sectors, ideas that you think make sense in this particular environment?

Bill Fleckenstein: Not really. I think that is the most sane way to protect oneself against these irresponsible and financially destabilizing policies the central bankers are all following.

Chris Martenson: So it is time to take some chips off the table, go get a drink, and wait and see how the rest of the hands get played out?

Bill Fleckenstein: If someone has big exposure to the stock market and has done well, they need to ask themselves, do I feel lucky today? Because you are going to have to be lucky from here. People are going to lose lots and lots of money, but I would not advocate trying to be short either. The only reason I closed my short fund in 2009 was because I knew these guys would pursue these crazy policies and make it very difficult to make money on the short side.

Chris Martenson: Absolutely; indeed. I have not been short the market since December of 2009. It took me a little while to figure out that I was fighting the wrong battle on that one. I have actually been dead flat the market the entire rest of the time. So I have just been sitting back, watching, and I am a little surprised it has taken this long for things to play out, because what we have just been talking about seems so completely obvious to me. How this is going to turn out and it ends in tears.

Bill Fleckenstein: Look how obvious the housing bubble was, and people set things back and it went on forever. This, you have to know a little bit more about finance and about central bank actions and monetization of debt and all that. So look how long that lasted.

Chris Martenson: That is true. This is a slightly more subtle conversation, but really it seems completely obvious once you just spend an hour on it.

Bill Fleckenstein: I totally agree with you about that.

Chris Martenson: So that is the mystery to me why, when your entire future is hanging on the balance, why people do not take the hour to figure out what is going on here. But if I could summarize, this only can end in tears. We do not know when, and it is going to be precipitated by something. Bubbles always find a pin. We cannot predict where that pin is going to be. Japan; some random comment a German finance minister makes. Maybe it is Portugal’s bank; who knows? In the meantime, we just watch, maybe shaking our heads a little bit, and sit back and protect ourselves as best we can. Gold being one of the best ways, is that about it?

Bill Fleckenstein: Yes, that is a pretty good summation.

Chris Martenson: All right. Well, Bill, thank you so much for your time. I really do appreciate it, and I hope we can do this again. Hopefully after something interesting has happened in the markets where we can see some sanity and maybe some fundamentals and common sense return.

Bill Fleckenstein: All right. That is a deal. Talk to you then.

Chris Martenson: Thanks. Bye.

Bill Fleckenstein: Bye.

About the guest

Bill Fleckenstein

Bill Fleckenstein is author of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve and the president of Seattle-based Fleckenstein Capital. He also writes a daily Market Rap column and a weekly Contrarian Chronicles column and has his own website. In 1980, he left the computer business to become a stockbroker. He founded a money-management firm in 1982, and has been bullish (and bearish) on almost every industry group, commodity, and asset class at one time or another during his investment career. His time horizon as an investor is long-term (three to five years).

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6 Comments

Oliveoilguy's picture
Oliveoilguy
Status: Platinum Member (Offline)
Joined: Jun 29 2012
Posts: 578
The Big Sweeps of Time

Quote from Bill F.  "That does not mean somebody that says buy gold is going to be right today, tomorrow, or the next day. It means they understand what is happening in the big sweeps of time and are going to be right over time at an important inflection point."

That is the key.....to position yourself on the correct side of the trade, and long Gold is correct. I am heavily  invested in PM's but honestly have not paid much attention to this latest manipulation. There is really nothing new to note. Same game. Same players trying desperatly to hold down the price of the metals.

I'll get interested the day they can no longer manipulate the markets and Gold finds it's true value through price discovery. I'm positioned to win and have bought more Bullion this week. 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Age of Robots

In an age of Robots, gold is the coin of humans.

I am unsure how much the 11% company profits are due to automation and innovation. (eg 3d printers)

Companies are replacing humans with robots and automation. Long haul trucks are going to be driverless for example, because robots don't need sleep. Traders are being replaced by robots. 

What will stop the music is Energy. Even robots need energy.

 Energy is the key ingredient in the conversation about the value of gold. If we don't find energy to run the robots then Gold, the coin of humans, might be king.

If we do find an alternative to energy, I refer you to the science fiction writers. They are better at predicting the future than economists precicely because their minds are free of models and therefore capable of holistic intergration and extrapolation.

If and only If we find an energy source. Otherwise the Limits to Growth curves should have your full attention. In which case food is the next Big Thing.

Oh. And I forgot to mention the Climate Catastrophe.

Could it be that this time it really is different?

 

gillbilly's picture
gillbilly
Status: Gold Member (Offline)
Joined: Oct 22 2012
Posts: 423
The Pot of Gold

I understand the fear that drives us to want to protect what we have, but the rainbow leading to the pot of gold may be more colorful and meaningful. Close your eyes and let this rainbow wash over you:

Peace to you all!

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
The Failure of Laissez Faire Capitalism

Dr Paul Roberts and Max.A crash is about to happen.

Max thinks Gold is going to make a moonshot. But is he talking his book?

Here is Dr Robert's website.

tiafolla's picture
tiafolla
Status: Member (Offline)
Joined: Dec 3 2011
Posts: 5
I was surprised that the

I was also surprised that the authors didn't mention the most likely reason for 11% corporate profits.  Productivity is at all-time highs (robotics, improved technologies, and fewer people working harder and harder while desperate to not get fired), while unemployment is running 15 or 20 percent, and wages are way behind inflation.  Fewer workers getting paid less and less while producing more and more is a recipe for huge and growing corporate profits (and unprecedented levels of income inequality and a drop in living standard).

Now, whether the situation is sustainable is the question.  If food and energy costs spike beyond the point where a wage-slave can sustain his family, all bets are off, and it won't be pretty.  But it could last for years--the workers of the US are as powerless and disunited as they have ever been.

expatfranks's picture
expatfranks
Status: Member (Offline)
Joined: May 11 2013
Posts: 1
Gold

 

 

 

The US Government by the tool of the giving permission to the USA The Commodity Futures Trading Commission (CFTC) to turn a blind eye, thus, the permission for the US banks (too big to fail), Stock Market and Commodities Brokers to manipulate the gold and world currencies markets. They, by electronic program trading are driving down the value of gold and currencies, and forcing the uneducated masses to transfer their money, savings into the USD by purchasing the USA stock market to the point of burst the bubble i.e. DOW all-time high of 15,000+. Then after the "BB", they will drive the money into the USA T-bills, Bonds.... USA IOU's. All, to fund the USA $20 trillion+ national debt. Plus, drive the masses to investment into the USA Oil/Gas sector to fund the requirement for additional infrastructure to be self-sufficient and export Oil/Gas. The Gold "BB" burst at $1,900 USD  and now Gold is headed to $800.00-. The world revolves on an axis of boom and bust. 

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