Bill Fleckenstein On The Recent Weakness In The Gold, Silver & Mining Share Markets
As we move through the last trading week in September, today Bill Fleckenstein discussed the recent weakness in the gold, silver, and mining share markets.
By Bill Fleckenstein President Of Fleckenstein Capital
September 27 (King World News) – Overnight bond markets were higher, with German bunds (inching back toward their highs) at around -15 basis points. Equity markets in Europe were weaker, however, weighed down once again by the banking system there…
Yesterday I pointed out how Deutsche Bank didn’t have much of a market cap, given the size of its balance sheet, and certainly the proposed $14 billion fine from the Justice Department would wipe out all its equity should it actually be enforced. Thus, DB is in a world of hurt (as its CDS market can attest to). For some perspective, its $13 billion market cap needs to be compared to its debt, which totals around $160 billion. And to put that ratio in context, Citicorp has a market cap of around $130 billion to deal with its debt of $163 billion.
From Bad to Wurst
Of course, Deutsche Bank is not the only European bank with issues, as many Italian institutions have precarious balance sheets as well. So the most obvious catalyst to blow a hole in the nonsensical TINA party is a European bank debacle, which can then lead to something else (like Italian contagion). But for the time being, in the aggregate, markets do not seem to be too terribly worried.
Turning to our stock market, in the wake of last night’s debate the S&P climbed about 0.75%, although most of that gain was gone by the time New York actually opened. However, once the stock market backed off to around unchanged it began to climb again, led by the Nasdaq, which gained about 0.5% through midday compared to rounding error gains for the Dow and S&P.
In the afternoon the market pushed a bit more to the upside and closed 0.75% higher, plus or minus. Away from stocks, green paper was stronger (mostly against the euro, for the banking reasons cited above), oil lost 3%, fixed income was higher, and silver lost 1.5% to gold’s 1%.
There’s No Hurry
Note that I did not discuss last night’s debate, nor do I intend to discuss anything about the election until it is clear who will win and what the economic/financial ramifications of that will be.