Don’t fall for this rally if you’re a convservative buy and hold investor.
Bill Fleckenstein, 8/17/06:
“The point I want to make: This rally is just a rally, a head fake, and what comes next is going to be unbelievably brutal on the downside. So, I am discussing my actions to make my belief clear: Folks who listen to the siren song of the bulls, or whatever passes for knowledge on Bubblevision, are liable to get badly trampled in the not-too-distant future….
I continue to believe that the coming months will see an all-out rout in the dollar. At some point, what is now just a trickle lower will become a flood, which ought to be beneficial to precious metals.
For the moment, folks believe the economy is fine, and that the Fed is extremely credible and in charge (though done tightening). I disagree. The other side of that view is where I expect big gains will be made, and I am setting my position accordingly.”
Question:
Can this no-news fed-is-done bounce morph into a Fed easing rally that continues into year end?
Fleck’s answer
• They can only get away with such fantasies in the absence of news. So I don’t see this lasting more than a couple more weeks at the most, but come October could they try a new round??? Sure, but to contemplate easing by the Fed, the data will need to be very weak. And stocks won’t like that by then, and neither will the dollar.”
About short selling:
“I advise against short selling for folks at home, way too many ways to get tripped up.”
About currencies:
“foreign currencies will rally as the dollar tanks… the metals will rally with them… that is my view.”
Question:
What is the difference between now and 1987? I see a lot of similarities.
Fleck:
• Don’t get me wrong, there are many similarities-but the big unwinding will be caused by the collapse of the housing bubble and all that entails. The big fear in ’87 was just speculative overheating and inflation, thus when the market crashed, those fears abated.
This time a collapse of house prices and stock prices coupled with debt problems will add to instability-NOT alleviate the problem.
I am data/fact dependent to form opinions. Till now, data seem to be pointing that folks like Bill Gross in bonds are right (till now). Sorry, but I just see Fleckenstein’s opinion/view in the original post without any facts/data to back him here.
Fleck doesn’t see this lasting more than few weeks but actually stocks had been preparing to rally and had been off their worst lows since mid/end june. If this rally continues for one more month then the charts for averages will not look like any bearish market but a correction. The next few months will clear things up as we actually see how bad will the economy will actually do and how it will affect inflation.
.
