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To Repeat: "Dislocations R Us"

Daily Rap 11-12-2018

Today's headline refers to the fact that, as I have noted often (for a variety of previously discussed reasons), I feel the market is very brittle, and I have believed there would be no real backdoor when it was time for stocks to decline. It has now become fairly commonplace that, when companies stumble, they get slaughtered, whereas in the past it would have been extremely unlikely to see a multitude of mega-cap companies all gapping in a meaningful way.

Drop and Give Us 50 One need look no further than Pacific Gas and Electric, which at one point was down about 30% today, making it about a 50% decline in three days (that is quite a lot for any company, let alone a big utility). Of course, that was something of an anomaly given it was...more

Last year's posts for Ask Fleck

Q: I was recently doing some research and looked up the total number of equity precious metal mutual funds in existence according to Morningstar data. Surprisingly, or perhaps not surprisingly, there are currently only 19 mutual funds. Any mutual fund family that offers a fund in multiple share classes I counted as 1 fund (ex: First Eagle Gold has an A, C, I, R3 and R6 share class).

I also ran a screen on the number of equity precious metals ETFs and there are only 12 (not including the few leveraged and inverse leveraged ETFs). GDX and GDXJ are each substantially larger than the combined other 10 ETFs.

Not that you needed any confirmation, but apparently there isn't a lot of demand for precious metal equities. I am hoping that in the future more fund families will be adding equity precious metal funds due to increased demand and higher stock prices!

Fleck: You and me both!
(posted: 11/9/2018)

Q: Are you familiar with Brent Johnson and Daniel LeCalle? They both have Austrian viewpoints but seem to come to completely opposite conclusions as to what outcomes to expect in the short term. Mainly against inflation. Both forecast near term dollar strength due to rising rates and a maturity wall across the world that will force many debtor nations to buy dollars.

Daniel adds the additional observation that China is exporting deflation to some of these debtor nations by lending them dollars under the condition that they provide China with raw materials...

So my question to you is do you agree in the short term? If not, why? Their logic seems pretty sound.

Fleck: No, I do not. That is a very simplistic analysis. Rising rates are only a factor at this moment in time. It is historically not the case. Just because lots of people say that does not make it true. As for the maturity wall, what does that actually mean? It is a concept. Meanwhile, the U.S. deficit is set to explode. As for his China contention, it is just a bizarre theory, and it doesn't make much sense to me as to why it matters even if it is true.
(posted: 11/9/2018)

Q: Good morning Fleck, If CPI numbers come in higher than expected (higher inflation) why is this bad for gold?? This is what I have been waiting for for the last decade I thought.

Fleck: No one is really worried about inflation, but for the moment, at the margin, people seem to feel that higher rates are bad for gold. They are't historically, but right now that is the storyline. Also, the yuan was weak, too, which also matters currently, for some bizarre reason.
(posted: 11/9/2018)

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