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Hedge Fund Legend Bill Fleckenstein Reveals His 2010 Strategy
I have worshipped legendary hedge fund manager, Bill Fleckenstein, as the trading God that he is, for decades. So I thought it was time to catch up with the noted bear to get his take on the New Year.
The sky high expectations for 2010 now endemic will disappoint, with the year ending substantially lower than we are now. In a stroke of genius, Fleck, as he is known to his friends, closed his short-only fund in March ahead of the coming onslaught of stimulus he saw.
When the Dow popped above 10,000, Fleck took out his “Dow 10,000” hat and symbolically placed it on top of the six foot tall stuffed grizzly he keeps in his office. The same idiots who sold the bottom in March are now buying the top, and some fantastic short selling opportunities are setting up. He is in no rush, though, as it is tough to short against zero interest rates.
This could be the year when serious money is once again made on the short side. His favorite targets will be technology companies, where double ordering of components is now rampant, as Kool-Aid drinking managers rush to replenish depleted inventories. Research in Motion (RIMM) is a train wreck where he already has a big, successful short position. Retailers like high end department stores with weak balance sheets, such as Nordstrom (JWN), are also in his cross hairs, as are restaurant chains like IHOP (DIN). “Anything with a bad balance sheet will get clubbed,” said Bill, with the subtlety of a 20 pound sledge hammer.
Big banks are one big fantasy in a world of make believe, but are really more of a macro call here. With the government changing the rules every day, he’ll stay away.
Long Treasury bonds are a bubble waiting to burst, and the TBT is a home run staring you in the face.
He can understand why the low end in residential real estate is holding up, since the government is offering a tax free bribe of $8,000 to all comers. But the high end is in serious trouble, and it is raining McMansions in tony neighborhoods everywhere. The nightmare won’t end until the banks foreclose on everything and then puke it all out, putting in the real bottom. This could be a long time off. He doesn’t see any way commercial real estate can avoid disaster. Commercial REITS are a screaming sell, which are falling off a cliff but haven’t felt any pain because they haven’t hit bottom yet.
The current stock market bubble could continue for a few months, with Congress passing more stimulus projects to save their own skins in November. The bell will ring that the top is in when foreigners take away our printing presses by boycotting Treasury auctions, sending stocks, bonds, and the buck into a simultaneous tailspin. That will be the time to get aggressive.
What Fleck does like is gold and silver. To meet the big increase in demand, either production or prices have to go up, and he votes for the latter. Fleck congenitally despises all fiat paper currencies, but hold a gun to his head and he’ll tell you to buy the Canadian dollar (FCX), where a wealth of energy, metal, and food exports will enable the looney to outperform the others.
Buy wheat. Traders were transfixed by last year’s huge American crop and cratered prices, when in reality, 40% of the wheat producing areas of the world are suffering prolonged droughts, and $8/bushel is not out of the question. Heavy autumn rains caused much of that to rot in the field, and now a horrific winter auguring for even higher prices.
For more on Fleck’s views, go to his insightful and informative blog called the “Daily Rap” by clicking here at https://www.fleckensteincapital.com/index.aspx , which is literally worth its weight in gold. You can also catch Bill’s weekly multi market review at MSN by clicking here at http://articles.moneycentral.msn.com/Commentary/ByAuthor/BillFleckenstein.aspx .
To listen to my interview with Fleck in its entirety, where he offers a wealth of trading tips and insights, please go to Hedge Fund Radio by clicking here at http://www.madhedgefundtrader.com/Hedge_Fund_Radio.html . And of course, for more iconoclastic and out of consensus analysis, you can always visit me at www.madhedgefundtrader.com , where the conventional wisdom is mercilessly flailed and tortured daily.
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"Based on subsequent stock market performance and our judgments about his forecasts for overall stock market direction, Bill Fleckenstein has been right 37% of the time, a fairly weak record."
http://cxoadvisory.com/gurus/Fleckenstein/
Yo Leo:
Who's been consistently correct in his predictions, Ben Bernanke or Marc Faber? Who has it been most profitable to trust? What gives you confidence in Benocchio and the other morons now? Buying gold is probabaly a better idea than believing averything will be just fine.
I don't think the world is coming to an end, I am not buying canned food and guns. But I think the current overleveraged, dishonest, bullshit economy will have to adjust and will go through a period of lower growth and hogher monetary inflation. I don't believe in a dollar collapse like Mr Faber. but I certainly don't think financial assets are the best way to go in the next say five years. That's not a doomsday scenario, it is a realistic one.
Great article. This blog also has a lot on the subject: www.valuehuntr.com
buy a barber shop in seattle .. invite fleck to be the first customer ,, and watch the hair fly
I'm amazed how so many people on here are more interested in there opinions being right then making money.I love fleck but he has been on the wrong side many times.Tice...Please, that guys a bafoon.
Quick, buy gold, Marc Faber says that despite Fed profits, the U.S. is doomed! As these doomsayers crawl under their rocks to warn us of the upcoming apocalypse, I am getting more confident that things will be just fine.
I think you and Mr. No More Bubbles should stay in the shallow end. My bet is the two of you have missed most investment opportunities and have blown yourselves up many times over. Leo thanks for the actionable pension commentary.....zzzzzzzzz.....
2006 is calling, wants its post back.
Ok MHFT, granted long bonds are a bubble...but I really wish you would quit pumping the TBT. The levered garbage is exactly that --> garbage. With the long bond between 4.60% & 4.70%, TBT ought to be in the $57.50 area like it was in early June 09' when rates were in the same ballpark. But it's not, it's below $50 because it's a decaying piece of crap that should only be traded on a very short term basis.
For those of you interested in avoiding the decay factor but still picking up the exposure to being short the long end of the curve, have a look at the 1x instrument which tracks the exact same index: TBF If you prefer to be long the long end, get on board TLT.
This is spam. Fleck is hardly a god, and this butt-licking sycophantism is appalling. If you followed all his advice you shorted way too early, got stopped out, missed all the rallies and lost more than your net worth.
One the the greatest investors of the last decade, Bill Miller, shares his strategy:
http://cosmos.bcst.yahoo.com/up/finance?ch=4043681&cl=17581025&lang=&sec=topStories&pos=6&asset=&ccode=
URGENT
Leo please tell me your comment is the ultimate in sarcasm
No, Leo is one of the sheep that actually believes the hype about Bill Miller. Miller absolutely blew up his investors in the last decade.
Fleck is at least two years early on shorting Treasuries since as the no-growth low-growth house of cards collapses again, there will be no other shelter. Wait for the
10 year bond to hit 2.5%, then short em.
I already take Fleck with a grain of salt, Leo, but I
take you with the whole shaker:)
Oh wow, another Treasury bubble preacher at the pulpit in the temple of Capitualism. (Oops, that was so Freudian, I had to let the SIC stand)
Thanks No More Bubbles. You have just handed me the holy grail i.e Do what fleck says............2+ years later. Mad props dude!
two quick things:
1) Never put your faith in a perma anything
2) Never put your faith in a perma anything
Things like cycles and seasons indicate that perma anythings are unnatural
Hey,
Lets pipe down the Fleck worship a bit (a LOT) shall we? Oh, and lets clarify a few things.
First of all, he closed his Short fund in November, NOT MARCH! I have the e-mail personally congratulating his decision to step aside from what had been a painful decade fighting bubbles.
Bill is notoriously early in his decisions to do things, and he'd likely admit as much. He has had his fair share of VERY bad decisions over the years. He was shorting Japan well before their bubble blew up. He was shorting INTC and DELL (and others) before they each had moves of 200 to 300%. He did the same with RIMM. He naysayed GOOG when it IPO'd to watch it go up 8 fold. The guy even sold his house and began renting in 2000. He missed the biggest RE price jump in history.
He has given picks that utterly detonated (MRNA). He also bought what I consider to be absolute trash early this year (ELOY, TLR, OKOFF, ANMCF, AQSFF, EGDFF) and even recently bought NVTL in the mid-teens right before it blew up.
Then, after the biggest collapse in the market in decades, he blessed readers with his wonderful blue chip picks for the coming decade. Hold your breath - here they are - MSFT & LLY. WTF! I'm sorry, but he's a joke.
While I have always agreed with Fleck on his ranting against Greenspan and the FED (and now Bernanke, etc.) - he is at best an average investor / trader and not some deity. Some of his clients have done well, while many (most) others have not. He however, like most money managers has lived well regardless of his performance as he gets paid every day, even when he loses money - something he's done a lot of in the last 30 years..............
No more,
agreed. was with so called "fleck" for 9 months went in with $125k came out with $35k.
he doesn't have a clue, follows everything Fred Hickey writes, don't know if he has any original ideas.
A $90k loss??? It takes me almost 4 years of working
to save that much money!
Why do you people do this??? Does ANY retail investor
ever come out ahead?
You know, it all boils down to how much money you have made and not whether you have had bad call or good calls. We all have bad calls, some of us have good calls. I had a bad three quarters, down 39% and some people with short memories poo-poo that as bad performance. Stretch back from 2007 and I am up over 400% cumulative return while the S&P is down -14%. Stretch back to the beginning of the decade and my returns look even better.
Long story short, picking out bad calls or a few bad quarters is useless and tells us nothing, just as picking out good calls and good times. What matters is, on average, has the man (or woman) made money.
Just my 22 cents (yes, I levered up 11x!)
how do you invest in wheat?
what would be the best option for a retail guy to short cmbs?
WOA!!!!
I read Bill's stuff everyday, and some, no alot, of what you have written here I think Mr. Bill would take issue with, big time. In fact, I would welcome his reply to your post to correct some misleading items you have stated as coming from him and not your own thoughts and or positions. You got the gold thing right anyway. Wheat???? please show me the link to his page on that. Shorts, he is not short anything (or recommending anything) because of money printing and WARNS if you are so inclined to be careful if you think you can win at that game. RIMM...that was many MONTHS ago, along with buying the Canadian dollar (when it was 80 cents), (put some US dollars into a Canadian bank he suggested around November to hold value, but where does he recommend (no sorry he never recommends anything, suggest yes) any buys on the currency since Spring?). And, please do tell me what energy stocks he recommends?
I think you need to reread your post and Bill's columns for the last few months. And, stop paraphrasing his thoughts and mixing in your point of view as being his.
I'm also a Fleckenstein subscriber, and Bill linked to the interview on MHFT's site a while back, so I assume he approves of it. He spoke quite highly of his writing and investment thinking, actually.
blind are you responding to Leo or MadHedge?
In December 2008, Fleckenstein closed his short-only hedge fund:
His timing to close his fund was perfect but his track record is less than stellar. Very few short-sellers consistently deliver good risk-adjusted returns. His call for more gold and more silver is what all bears are calling for. I like his call on wheat, however. You should read what some other gurus are calling for in 2010.
Fleck's call is/was not solely precious metals. He has recommended numerous short ideas over the past years. He's not currently short anything because of the Fed's money printing. He's long precious metals because of the same. As for his short recommendations over the years here are but a few: Countrywide went to 0, Downey Financial went to 0, Fannie, Freddie, Citi,he called all the financial black boxes what they were. I won't bother all the tech. suggestions. He made any reader a great deal of money. Subscribers to his site can never repay the debt they owe to him. I trust many have invested, gambled much more than the $100/yr subscription cost for much, much less.
You can't have stellar returns shorting stocks because the criminal, Satanic Federal Reserve keeps illegally buying stocks.
As you look at your excruciating shorts, think "replacement power" and then Zimbabwe...
Mining Junkie. What do you mean?
While F seems to be on the mark....I am hesitant to believe
that one would enter only after Fed auction failure....
It would seem that there would be better entry points....
Also....what is true is that although the fiats will be compared as always.....currency is still the only way to transact....and the choice will be the least worst....
Prices are not going to be what they really should be until after debt destruction versus debt delay....
Manufacturing is the sole panacea for what ailes the developed countries ie US ...UK...but will not be attainable because China will never go 1:1 on labor costs....
..................................
The real wild card is INTEREST RATES....
This is not if....but when....
Just how natural is it that monopoly money can support a 0% interest rate ????
Just how long can this last ????
Big4 currently short Dollars and Francs
and Long Euro and Pound until Fed faces
facts and raises Fed Funds.
Speaking of leverage, Fed made
record $45 B last year in usury after paying for
art, dining clubs, expense accounts and
private helicopters and jets and claims
they will achieve monetary policy by
controlling rates on Fed Reserves. Right.
TBT rose from 35.51 to 50 now to reflect
Fed DC insanity...
http://www.jubileeprosperity.com/
You worship a false god: mammon
Son, money is everything. Freedom, power, security, and yes, even love. If you don't believe that, try picking up your next date in a beat-up Tercel instead of that BMW 525 and see how that goes...
Any woman that cares about money before commitment isnt worth having. BMW or not.
you'd do better at a craps table
Big4 also long wheat and short big stocks.
31 SmartPhones about to Dot.com high tech.
http://www.jubileeprosperity.com/
anonymous junkers are clunkers
I don't worship Fleckenstein. Only Jesus. But I do love him. As a perma-bear for 15 years, he, along with Tice were my lights at the end of tunnel, during some very tough times. I shorted the Nasdaq in 1999 and ended up homeless, briefly. My girlfriend threw me out. I was able to get an efficiency in the hood. I used to read his rap every day. One of my favorite things that I learned from Fleckenstein was that when you own stock you are owning fractional pieces of businesses. People don't understand that. I remember vividly sitting in my apartment in December 1999 on Net Zero dial up reading The Rap and Fleckenstein writing about how market caps of tech companies were growing exponentially in relation to sales. It was unsustainable. I remember also laying on my air matress in the living room thinking how in the hell can people be paying $150 a share for Palm and the Nasdaq at 5000. Oh those stupid fuckers got there head handed to them. Times, they don't change. The Dow is still at 10000. They're still long and I'm still short. I hope this fucker crashes soon. The pain is excruciating.
I'm reminded of two stories. In 1987, legendary trader Frankie Joe shorted the market as prices continue to rise. Frankie had a heart attack and died in 1987, spring or early summer, I don't remember when, but it was before the crash. Very likely the stress from the short position was a major influence in his death. Ultimately, the market crashed and his short position was vindicated, but he wasn't with us to enjoy it. The other story involves Bob Prechter. About 25 years ago he entered a trading contest to put his money where his mouth was, so to speak. He wanted to demonstrate that he could trade real time using the EW Theory. Needless to say, he won the options trading contest trading from the long side. After the contest was over, he wrote that the stress was so great, he would lay on his bed in the fetal position waiting for prices to move his direction. Recently, I too have been lying on my bed in the fetal position, waiting for the market to crack and hoping I won't suffer a heart attack in the meantime.
how much of a position should one have? not so much it keeps them up at night.
in reply: i have read many comments on ZERO HEDGE over the past year, but your comment had me rolling with laughter . it sounds exactly like what happened to me !!! thank you for your comment, it was soooo good & showed me there was someone else out there in the same situation !
Hang in there bee. I've been these evil fuckers for well over a decade. We'll have our day in the sun.
There's a good reason Bill Gates and his Cascade
Investment put BF on the board of PAAS.
QID above 18.30 could make a lot of sense and
dollars...
http://www.jubileeprosperity.com/
don't become homeless again.