Bill Fleckenstein Warns This Is A Bear Market And The Buy The Dip Crowd Is Headed For Disaster

kingworldnews.com

After last week’s ongoing and ridiculous soap opera with the Fed, one of the greats in the business sent King World News a fantastic piece warning that this is a bear market and the “buy the dip” crowd is headed for disaster, plus a bonus Q&A that includes questions on Ray Dalio and the end of the long-term debt cycle.

By Bill Fleckenstein President Of Fleckenstein Capital 

September 22 (King World News) – With the exception of China, overnight markets were quite a bit weaker, with Europe losing 3%. That pressured the SPOOs about 1% lower, which is where our market opened. It then attempted to bounce, but that didn’t get very far, such that by midday the indices were around 2% lower, with virtually everything red…

There was absolutely no proximate cause for today’s weakness (despite attempts to blame it on Volkswagen), which is actually sort of big news in that it most likely means that the pressure to the downside is increasing, and the fact that this break seemed to come out of the blue is exactly what happens in bear markets, just as the opposite happens in bull markets.

Out of the Blue and Into the Red

If this is a bear market, which I think it is, it has just begun and people haven’t yet learned not to buy the dip. While that strategy worked well on the way up, it is obviously a recipe for disaster on the way down.

In the afternoon, the market slid more, losing almost 2%, but then rallied in the last hour to close with a loss of just over 1% (though the Nasdaq did worse). Away from stocks, green paper was stronger, ex the yen, fixed income was higher, oil lost 2%, and the metals were weaker as well, with silver losing 2.5% to gold’s 0.75%.

Bonus Q&A

Question: From the UK: The war on cash continues
With the Bank of England’s chief economist openly advocating abolishing ‘paper currency’ and imposing negative interest rates, the writing is on the wall for cash…

Answer from Fleck:  “Maybe, maybe not. We’ll see.“

Question: Hi Bill, how do you see emerging markets playing out until end of year? Thanks

Answer from Fleck: “I have no idea, but I’d guess probably they will stay under pressure.“

Question: I watched an hour long interview with Ray Dalio, and he mentioned that we are at the end of a long term debt cycle, but only in the middle of this current business cycle (debt cycle). Do you believe we are in the middle of a business cycle? Do you know how the pros (Wall street, FED, money managers, etc.) would determine where we are in a business cycle? Thanks!

Answer from Fleck: “I’d say we are later than that, but the Fed has distorted all market signals with their money printing. I wouldn’t count Wall Street or the Fed as “pros” on this subject, FWIW.“

Question: Hi Bill, you said……”And also an easy way to get your face ripped off if you aren’t careful. 300% leverage is very dangerous.”

YES…buyer beware….lol….As I know…I bought NUGT a few weeks back at $5.04….its now at $3.16…I`m ONLY down 37% !!

Answer from Fleck: “Exactly!“