Thursday, February 14, 2013
As the collective worldwide equity rally continues, the public seems to believe that the world’s problems have been solved—they haven’t.
As for gold, when equities are flying high people conclude they don’t need the yellow metal. For the moment, currency printing has supported debt markets and boosted stock prices, but none of the negative consequences from the flood of currency has been seen. No currencies have been drastically weak, because all G-7 currencies are bad, and inflation hasn't really started to run.
So we are at a moment in time where money printing no longer causes gold to move higher, since it is boosting stock markets and lulling people into a false sense of security. However, all the drastic consequences are staring us in the face and will soon start to matter.
To sum it up, the majority of investors are being head-faked, as the effects of money printing have "helped" markets and economies, but the consequences have yet to be felt. Thus, they have erroneously concluded that stocks are the place to be, everything is OK, and who needs gold?
That conclusion is incorrect, just like the idea that you will always make money in stocks over time, or that home prices never go down or other crazy notions that large groups of people cling to from time to time.
But that's where we are, and it will end only when it does. Fleckenstein is pleased that we have at least reached the phase where the bond markets are no longer abjectly cheering currency printing, because that is the first sign of the beginning of the end of this insane epoch in financial history.
Posted by Unknown at 2:16 PM