After their recent gyrations, there isn't a lot of motivation to either buy or short stocks. Plus: What's next for the tumbling euro?
The market has been no stranger to stepped-up volatility and treachery. How else to explain the not-infrequent recent sessions whereby it jumped 1% in an instant or dropped 1% to 1.5% in essentially another blink of an eye?
As to what this market action means, I sort of defer to Jason Goepfert of SentimenTrader.com. His data appear to suggest that in the worst-case scenario, we will see a trading-range market without any clear direction. (In my opinion, that will be followed at some point by a failing rally, but he currently does not share this view.)
Investing in a gold mine
I certainly see no reason to disagree with that, though I don't see much of a reason to have an opinion either way. From a risk-reward standpoint, it seems too dangerous, and not really all that attractive, to buy stocks right now, and it still seems too dangerous and tricky to short stocks. Mining-business-friendly versus mining-business-clueless That puts me back to focusing on assets that benefit from government money printing. Gold, for example.
If you're a mining company in Australia that turns a profit digging up the ore, the administration of Prime Minister Kevin Rudd wants a greater piece of the pie. Compare his recent and wrongheaded mining-tax proposal to the well-reasoned view of Canadian Trade Minister Peter Van Loan, who in a speech last week said:Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 304, 314, {"configCsid": "MSNmoney", "configName": "player-money-4x3-articles-inline", "player.vcq": "videoByUuids.aspx?uuids= f1ed61b6-76dd-45c3-a4eb-25b2e588b9ef,56051416-771a-4852-a0a9-edf54f071339,f20a3a65-9b5e-4adb-9080-2c06d9c5e9a4,bb8741a9-da50-4f83-ad1f-8cb0ddeed52e,4478196a-affd-4a82-bfb9-99809ea7c757,d57250fa-7dd0-4d15-8ee1-63251819ba45,99321784-7d5f-448d-9269-5dc9a6375679,aeb66ea6-e8c6-4871-9704-f8563143b67a,c0d63566-3d69-4555-9ffc-8bddb012e017,76da7024-2407-4a8d-a3b1-e4c6b3323cbf,698428dc-e896-44e9-aec8-13a4f4801b84,b2e50067-1ab9-4fa0-8985-df407560ddf2", "player.fr": "iv2_en-us_money_article_Investing-ContrarianChronicles-inline"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=f1ed61b6-76dd-45c3-a4eb-25b2e588b9ef,56051416-771a-4852-a0a9-edf54f071339,f20a3a65-9b5e-4adb-9080-2c06d9c5e9a4,bb8741a9-da50-4f83-ad1f-8cb0ddeed52e,4478196a-affd-4a82-bfb9-99809ea7c757,d57250fa-7dd0-4d15-8ee1-63251819ba45,99321784-7d5f-448d-9269-5dc9a6375679,aeb66ea6-e8c6-4871-9704-f8563143b67a,c0d63566-3d69-4555-9ffc-8bddb012e017,76da7024-2407-4a8d-a3b1-e4c6b3323cbf,698428dc-e896-44e9-aec8-13a4f4801b84,b2e50067-1ab9-4fa0-8985-df407560ddf2;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');"Our Canadian economic strategy has been low-tax low-cost to attract (my emphasis) business investments. Canada has, if not the best, certainly one of the best mining sectors in the world, and we will continue to ensure that Canada remains as competitive as possible for those companies to do business. So, I am confident you will not see a tax like that in Canada."
Other countries may also decide that the carrot works better than the stick. From what I hear from my friend Comrade Kuppy, who's been visiting in Australia, Western Australia is nearly ready to secede in revolt over the proposed mining tax, but the country's eastern regions have more votes. How the tax situation plays out is not knowable at this juncture. But I continue to feel it's unlikely to become law in as onerous a fashion as the Rudd administration has proposed. (Learn more about the proposed mining tax through Bing.)Where is the euro headed? Finally, some thoughts on the euro. Just over a decade ago, the currency made its debut to great fanfare. Now it's come to this: What will the endgame for the euro be?
I've given that question quite a lot of thought. It's been my belief that the European Central Bank, or ECB, will have to print money, or that Greece or Germany will have to leave the European Union. That the presses have already started to roll illuminates what might come next.
A long, lingering death is one possibility, whereby no decisive action is taken -- for example, a strong or a weak country leaving the EU. Perhaps we'll just see bickering or partial solutions while, slowly but surely, the ECB prints even more money to try to bail out the banking system in Europe.At some point, the restructuring of weak sovereign credits seems likely. But that can't happen fast enough. Consequently, it could be some time before the euro finally falls apart or some country leaves the EU.
That is just another reason people the world over are choosing gold.A last note Finally, I participated in another Eric King interview a couple of days ago. As always seems to be the case, Eric found new thought-provoking questions for me to answer.
At the time of publication, Bill Fleckenstein owned gold. More from MSN Money
Investors waking up to the golden ruleEurope's dilemma: Print money or cut debt?China's Ponzi-like banking policyIn Europe, recklessness wins againWhy your 401k hasn't fully recoveredRate this Article Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowHigh var avgRating=0;avgRating=; if(avgRating!=0){avgRating=avgRating/2;avgRating=Math.round(avgRating*100)/100;var sDisplayText="Average rating: " + avgRating + " from ";var usersCount=;sDisplayText = sDisplayText + usersCount;if (usersCount==1)sDisplayText=sDisplayText + " user";else sDisplayText=sDisplayText + " users";avgRatingElem=document.getElementById("averageRating");avgRatingElem.innerText=sDisplayText;} View all top-rated articlesE-mail us your comments on this article Discuss in a message board MSN Money InsightNew Investor CenterMarket DispatchesJubak's JournalTop Stocks blogCompany FocusContrarian ChroniclesSmart Spending blogFast AnswersDecision CentersStart InvestingMutual FundsFind Hot StocksSimple StrategiesPower ToolsInvesting for IncomeReal Estate InvestingRecent Contrarian Chronicles ArticlesMarket spinning but going nowhere 06/04/2010Waking up to the golden rule 05/28/2010Europe's dilemma: Print money or cut debt? 05/21/2010More . . .Contrarian ChroniclesAbout Contrarian ChroniclesLearn the Contrarian Chronicles lingoSubscribe to Market Rap on Fleckenstein CapitalFund data provided by Morningstar, Inc. © 2009. All rights reserved.StockScouter data provided by Gradient Analytics, Inc.Quotes supplied by Interactive Data.MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.Msn.Video.createWidget('Gallery8Container', 'Gallery', 500, 230, {"configCsid": "MSNmoney", "configName": "gallery-money-article-site-wide"}, 'Gallery8');msft.msn._ic.cid='yfy3t2uwxgrxksip83k8auqa7ittfvcj';msft.msn._ic.pst=false;msft.msn._ic.pgn=1; Join the discussion!Add a commentShow commentsSort by:Newest firstOldest first_uc2f12('iucGo');1 - 5 of 5PreviousNextb_capp #1Saturday, June 05, 2010 1:43:11 PMIn the late 1970s ... say '78-'79 ... the market was 'flat to slightly up' while inflation ( and GOLD ) went through the roof. I don't see that same exact outcome as a likely scenario this time around in 2010-2011.
Why?
For starters, interest rates were much, much higher in the late 1970s before the Fed chief, Mr. Paul Volcker, jacked rates sky high to take the wind out of 'inflationados' in the 1980-1982 recession. In the present day, Bernanke has rates at 0%. During the past year, banks and hedge funds ... and anyone with a heartbeat with access to essentially 'free money' ... has taken advantage of the situation to 'prop up' the stock market and make a quick dollar. Obviously, with such low costs to borrow money ... leverage has gone through the roof. The May 6th 2010 selloff in the stock market is an example of what happens when one of the 'big boy' banks gets a margin call ... do to being overtly overleveraged ... and can't sprint down to the Fed's discount window in time for another handout.
My opinion is there is still debt to 'wrung out of the system' due to default rather than the 'printing press' as Bernanke and the banks he works for would prefer. As such, I believe the market is overextended and way above 'fair value' of ballpark 900 on the S&P. $60 per 'share' earnings of the S&P 500 in 2009 times a fifteen multiple. The market will likely go below fair value ... because I doubt the U.S. political environment leads to a path that would allow Bernanke to enforce a Japanlike ZIRP policy FOREVER ... I suspect he will be forced to jack interest rates sky prior to U.S. oil stockpiles becoming critically low.
That crude oil ( 60 million barrels above the prior two years for this time of year ) stockpile may be depleted this summer ... but no later than next summer. When that happens the Saudis, Canadians, and Russians can charge whatever they'd like for their surplus crude.
The situation in Europe also indicates the U.S. market will sell off ... about 40% of S&P 500 profits come from oversees ... half of that from the Euroland ... and a stronger U.S. currency makes U.S. made items more expensive for Europeans and less profitable for U.S. companies. Also, the Chinese stock market ( ticker FXI ) is rolling over and Dr. Copper ( google kitco copper ) is indicating no one wants to build anything.
My target for the S&P 500 is ballpark 600 during Q2 2011. During 2011-2012 is when the 'oil game' gets going ganbusters ... I expect the Fed to become Volckerized when oil prices start to get out of hand ... and the 'inflation' Mr. Fleckenstein speaks of becomes evident in natural resources which are rising in price due to WORLD WIDE demand outstripping supply. Even though electric cars are on the way ... it will be several years ... before this new transportation concept becomes viable.
Of course, GM ... and the socialists which allowed GM to keep the doors open ... would argue otherwise.
ReplyReport Abusechalanan #2Saturday, June 05, 2010 8:45:50 PMI have a great deal of respect for Bill F. But the gold trade looks too crowded for me, Gold it's going higher according to the charts but Bill and the majority in agreement makes me think that one more big exhaustion push higher and lower Gold goes.We'll see money is hardly made in a trade when EVERYBODY is in agreement this late in the move irregardless of described outside factors.Good luck Goldbugs.ReplyReport Abusewordfrominside #3Sunday, June 06, 2010 3:52:10 PMThe gold trade is starting to sound more and more like Internet stocks in 1999. Everyone is piling in but there are few voices in the woods who are saying it is "speculation".
ReplyReport Abusereality9999 #4Sunday, June 06, 2010 11:11:37 PMYou can't really compare gold to an internet stock because unlike a stock you can't print or pull out of thin air more gold. There is obviously some speculation in gold but that works both ways, still some major shorts out there. India put in a rock solid bottom on gold at $1045, it may test that but if it gets a bit below that, Asian CB's will be buying hand over fist and it will come right back. ReplyReport Abusehideko #5Monday, June 07, 2010 12:13:22 AMI agree with Bill's pessimism. Except he's not pessimistic enough. He thinks printing money - inflation because its happened on many occasions. That doesnt make it cause and effect. This a global economy thats flat on its back and is on a down cycle. He should be shorting because the real issue is low demand and deflation. Economists declared that a double dip recession was off the table a few months ago....just watch.ReplyReport Abuse1 - 5 of 5PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/Market-spinning-but-going-nowhere.aspx?','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign in/*MSN PrivacyLegalAdvertiseRSSHelpFeedbackSite mapAbout our ads© 2010 Microsoft/*
Other countries may also decide that the carrot works better than the stick. From what I hear from my friend Comrade Kuppy, who's been visiting in Australia, Western Australia is nearly ready to secede in revolt over the proposed mining tax, but the country's eastern regions have more votes. How the tax situation plays out is not knowable at this juncture. But I continue to feel it's unlikely to become law in as onerous a fashion as the Rudd administration has proposed. (Learn more about the proposed mining tax through Bing.)Where is the euro headed? Finally, some thoughts on the euro. Just over a decade ago, the currency made its debut to great fanfare. Now it's come to this: What will the endgame for the euro be?
I've given that question quite a lot of thought. It's been my belief that the European Central Bank, or ECB, will have to print money, or that Greece or Germany will have to leave the European Union. That the presses have already started to roll illuminates what might come next.
At some point, the restructuring of weak sovereign credits seems likely. But that can't happen fast enough. Consequently, it could be some time before the euro finally falls apart or some country leaves the EU.
That is just another reason people the world over are choosing gold.A last note Finally, I participated in another Eric King interview a couple of days ago. As always seems to be the case, Eric found new thought-provoking questions for me to answer.
At the time of publication, Bill Fleckenstein owned gold. More from MSN Money
In the late 1970s ... say '78-'79 ... the market was 'flat to slightly up' while inflation ( and GOLD ) went through the roof. I don't see that same exact outcome as a likely scenario this time around in 2010-2011.
Why?
For starters, interest rates were much, much higher in the late 1970s before the Fed chief, Mr. Paul Volcker, jacked rates sky high to take the wind out of 'inflationados' in the 1980-1982 recession. In the present day, Bernanke has rates at 0%. During the past year, banks and hedge funds ... and anyone with a heartbeat with access to essentially 'free money' ... has taken advantage of the situation to 'prop up' the stock market and make a quick dollar. Obviously, with such low costs to borrow money ... leverage has gone through the roof. The May 6th 2010 selloff in the stock market is an example of what happens when one of the 'big boy' banks gets a margin call ... do to being overtly overleveraged ... and can't sprint down to the Fed's discount window in time for another handout.
My opinion is there is still debt to 'wrung out of the system' due to default rather than the 'printing press' as Bernanke and the banks he works for would prefer. As such, I believe the market is overextended and way above 'fair value' of ballpark 900 on the S&P. $60 per 'share' earnings of the S&P 500 in 2009 times a fifteen multiple. The market will likely go below fair value ... because I doubt the U.S. political environment leads to a path that would allow Bernanke to enforce a Japanlike ZIRP policy FOREVER ... I suspect he will be forced to jack interest rates sky prior to U.S. oil stockpiles becoming critically low.
That crude oil ( 60 million barrels above the prior two years for this time of year ) stockpile may be depleted this summer ... but no later than next summer. When that happens the Saudis, Canadians, and Russians can charge whatever they'd like for their surplus crude.
The situation in Europe also indicates the U.S. market will sell off ... about 40% of S&P 500 profits come from oversees ... half of that from the Euroland ... and a stronger U.S. currency makes U.S. made items more expensive for Europeans and less profitable for U.S. companies. Also, the Chinese stock market ( ticker FXI ) is rolling over and Dr. Copper ( google kitco copper ) is indicating no one wants to build anything.
My target for the S&P 500 is ballpark 600 during Q2 2011. During 2011-2012 is when the 'oil game' gets going ganbusters ... I expect the Fed to become Volckerized when oil prices start to get out of hand ... and the 'inflation' Mr. Fleckenstein speaks of becomes evident in natural resources which are rising in price due to WORLD WIDE demand outstripping supply. Even though electric cars are on the way ... it will be several years ... before this new transportation concept becomes viable.
Of course, GM ... and the socialists which allowed GM to keep the doors open ... would argue otherwise.
The gold trade is starting to sound more and more like Internet stocks in 1999. Everyone is piling in but there are few voices in the woods who are saying it is "speculation".
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