http://money.msn.com/bill-fleckenstein/default.aspx Bill Fleckenstein writes weekly on the market and the economy. http://money.msn.com/bill-fleckenstein/post.aspx?post=6f26569b-6654-4f71-8bb6-6095a58da9dc Our markets have a recent history of missing important warnings. It's no different now as investors deny the obvious and the economy stumbles along. Tue, 15 May 2012 09:12:55 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de 6f26569b-6654-4f71-8bb6-6095a58da9dc BlogArticle E5DED4DF1BF4E3F7 219 168 2012-05-11T18:41:23.643 I have been in the investment business for more than 30 years now, so I have grown accustomed to seeing lunacy, naiveté and just plain stupidity more often than one would think possible, given that investing is supposed to be about being smart.   It seems extraordinarily obvious to me that the economy is, in essence, broken because of the stock and housing bubbles we have experienced, and that the Federal Reserve is trapped. It also seems clear that at some point we will have a funding crisis (bond yields will leap and/or the dollar will tank) due to excessive government borrowing. (Click here for more on this funding crisis.)   However, that's not going to occur until certain attitudes shift, so I can see why this is taking some time to unfold. What I cannot understand is how folks don't recognize the fact that, since the economy has been unable to create jobs for three years now, it isn't going to start magically generating them now.   Nor do I understand why there is such denial about inflation. The everyday cost of living has been increasing steadily, and at an increasing rate. Just because house prices have collapsed and certain products that folks buy, especially those heavily laden with technology, are cheaper does not change the fact that we are experiencing inflation, and that the environment is really one of stagflation. It is obvious, as are the consequences.   Nevertheless, to a large degree in the investment community, Goldilocks rules.   Déjà eww   The mindset seemed familiar to me, and about a week ago I was thinking of past moments in time where the obvious was there for all to see but maddeningly few seemed to see it. What popped into my head was the spike in first payment defaults leading up to the housing crisis. When that started occurring, as early as August 2006, it spelled the end of the housing bubble (while at the same time proving it was bubble behavior, since people were missing their first payments).   I actually decided to search my subscription site, www.fleckensteincapi ​ tal.com, for references to "first payment." Lo and behold, one of the headlines that popped up was "Goldilocksters see oil prices as bullish, up or down," which ran on Jan. 11, 2007 (that is, more than a year before Bear Stearns' liquidity problems came to light). Here are some key excerpts:   "I wanted to share an email from my insider friend in the subprime arena, whom I've quoted so liberally. It's sort of incongruous to read his thoughts on a day when subprime and other financials were going wild, but this (first payment defaults) is a problem that I guess won't matter until the day it matters -- and then boy is it going to matter.   "He wrote: 'We had a loan that was FPD (first-payment default) on a home in So Cal. It is a very nice high-end town that had a section of new homes built, but it was in the low end of town. Normal homes sold for $1 million in value. In this new seven-home development, (homes) sold for $1.3 million to $1.5 million each. The homes you had to drive through to get to this place were worth $400,000 to $500,000. The market topped out, and now most of the seven homes are vacant -- worth no more than $900,000. Thus, all the lenders are sitting on losses of $400,000 to $600,000. This is just one of many that are happening daily.'   "'The commentary I am getting from field and legit brokers is that fraud is an out-of-control locomotive. Stated-income loans are now finished for all the unemployed people around. We will quickly see cash-out loans curtailed. This vicious cycle has yet to play out. We are in the second inning of the unwinding.'"   Note that I received that email on a day when subprime and other financial stock prices were rallying big time, the market completely oblivious to what lay ahead.   Selling yesterday's news   Just as folks were late in figuring out the severity of the housing crisis, I think they still tend to be late in facing current realities. Case in point: For most of this week, it was as if markets in Europe and the U.S. had suddenly realized that the government in Greece was in disarray; that we were about to have a socialist running France; and that Spain, Portugal and Italy are each a teetering financial house of cards, even though none of that should be "news," especially to supposedly sophisticated market participants.   In the old days, markets tended to discount events (that is, they reflected expected negative outcomes through lower asset prices, or vice versa). If that were still the case, markets should have declined into last weekend's European elections as they anticipated the results, as well as other problems. But what we saw were markets that appeared not to have discounted the seemingly obvious news.   I have commented on this phenomenon a number of times over the past 10 years: that only after an important event happens (which was usually pretty obvious) does Mr. Market have a heart attack. I don't really know why that is, although I think a lot of it has to do with how the government's money printing has warped the markets by causing people to expect to be bailed out.   You can see a million trees and still not recognize the forest   Where our current path is taking us has been predictable for quite some time, and I think that continues to be the case. Unfortunately, we have elected officials who are completely incompetent, if not criminal, and the Fed is even worse. None of that is going to change until change is forced upon us (i.e., them) by a crisis. So while events seem to play out at a glacial pace, where we are headed couldn't be clearer.   On the air   I participated in a rather timely interview with Eric King this week. Those who are interested can listen to it here. My problem with Bill Fleckenstein is that all his posts are doom. He has become like the boy crying wolf so often that no one pays attention any longer. BlogArticle Bill Fleckenstein bonds Federal Reserve http://money.msn.com/bill-fleckenstein/post.aspx?post=67905720-6e3e-4ca0-87e8-c35735f12303 Is the market too hot, too cold or just right? Recent data are sending mixed messages, but the likely endgame still seems crystal clear: more money printing. Fri, 11 May 2012 08:15:19 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de 67905720-6e3e-4ca0-87e8-c35735f12303 BlogArticle E5DED4DF1BF4E3F7 16 15 2012-05-04T19:51:25.013 This week has been a good illustration of the stock market wanting to have its cake and eat it too. On Monday, the ISM Manufacturing Index showed better-than-expected ​ optimism with a reading of 54.8, versus a reading of 53.4 last month. That sparked a rally of about 1%, plus or minus, in the major indices.   Obviously, a better ISM report is a vote for the "Goldilocks" mindset that the Federal Reserve is keeping the economy "just right." As such, it is also less of a catalyst for more help from Fed Chairman Ben Bernanke's money-printing machine.   However, the market did not dwell on that report, as attention quickly turned to other data points.   One came from the Australian central bank, which cut its interest rates by 50 basis points (versus expectations of only 25) because the economy was "somewhat weaker" than forecast. Most people believe that Australia is doing quite well, and it certainly is on a relative, if not absolute, basis. But the speed at which the Reserve Bank of Australia acted shows how little tolerance there is for any slowdown anywhere. (Australia does have rates higher than most, but the point survives.)   (Column continues below video.) Still working on it   A sign that the economy might be "too cold" rather than "just right" was the midweek ADP employment report, which showed only 119,000 jobs created versus a forecast of 170,000. Obviously, this suggested that this week's nonfarm payroll report, released after this column's deadline, could be on the weak side. (Editor's note: Friday's payroll report was indeed weak, with hiring slower than expected. Read a full report here.)   On the other hand, we all know the ADP report is not always a perfect harbinger of the nonfarm payroll report, which was due out today (after this column was written). If it is right, and the private sector was on the light side while the public sector is shedding jobs, then the government data could be a decent-sized disappointment. (But it is hard to have a big opinion in advance, because of how the Bureau of Labor Statistics data are put together.)   We're owe in it together   Throughout the history of the world, the currency printing press was often not available to solve crises, and in those cases where it was, it was usually abused, which resulted in inflation, currency/bond market collapses, etc. However, as long as people believe -- as they currently do -- that problems can be solved via money printing, why would anyone ever want to take any pain?   Europe is dealing with all of that right now. The Germans are doing fine and don't want to use the printing press, while those who are suffering (Greece, Italy and especially Spain at the moment) don't see why they shouldn't be allowed to. In the end, I think the majority in Europe will win, we will see more money printing and the experiment with austerity will be over.   Here in America, of course, we don't experiment with austerity. We just print money and roll out government bailout programs. I believe we will not make any attempt at serious austerity until the printing press is taken away, via the bond market or currency market. (This is what I call the " funding crisis" ).    Having said that, we have the best brand of capitalism, and despite government attempts at cronyism and socialism, the creative-destruction ​ process is allowed to work here better than most places. That has helped to some degree. But I expect to see the printing press trump austerity until it is no longer a viable option.    Mining stocks second that emotion    Regular readers know I believe in gold and gold-related ideas as protection against the constant money printing, and this week the last two major gold companies reported their earnings results: Barrick Gold ( ABX) and Yamana Gold ( AUY). Both were in line with estimates, or even slightly better, which means that all the major gold mining companies made their numbers or exceeded expectations, with the exception of Goldcorp ( GG).    Thus, it wasn't horrible operations this quarter that have seen mining stocks get destroyed; it is purely market sentiment. That will change when it changes, but it is a good example of the huge role psychology plays in where stocks trade, both on the upside and the downside.   At the time of publication Bill Fleckenstein owned stock in Yamana Gold and Goldcorp, as well as gold. I agree with a lot of this article, except where he says "we have the best brand of capitalism".  Really?!?  I don't know how anyone could even quantify that statement because when the gov't is funneling trillions of borrowed money into an economy that's still flat-lining, something's not right.  Capitalism....where companies are "too big to fail" and where the gov't has mailed out free (borrowed) money "stimulus checks" (Bush 2).....and where we allow illegal aliens to come in and do the work "that Americans won't do" (while they're home unemployed and watching Judge Judy and getting a check every month)  Where companies won't ever raise workers' wages, but expect the gov't to keep printing money and distribute it via EBT cards and 100 other forms of free (borrowed) money, because we want American citizens to retain their buying power, as long as employers aren't supplying that buying power.  Freakin' ridiculous....."best ​ brand of capitalism" HA! BlogArticle ABX AUY GG gold stock market stocks http://money.msn.com/bill-fleckenstein/post.aspx?post=213455bf-c0a9-4f7b-9d79-dbb6e707ea67 The Fed's most-recent meeting offered no hint of stimulus and no sign anyone recognizes the economy is slowing again. Also: The Apple gets bruised. Mon, 30 Apr 2012 13:13:38 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de 213455bf-c0a9-4f7b-9d79-dbb6e707ea67 BlogArticle E5DED4DF1BF4E3F7 48 39 2012-04-27T19:01:33.457 After a rough spell recently that saw it almost 14% off its recent high, Apple ( AAPL) enjoyed a moment in the sun this week, bouncing 8% Wednesday as it once again announced earnings that made it a huge winner at Wall Street's favorite game: beat-the-number.   With that out of the way, we can turn our attention to whether its stock price can make a new high, or if this rally turns out to be of the failed variety.   Again, I have no position in Apple, but since it is leading the Nasdaq ( $COMPX) around by the nose, I believe it merits our continued attention. For more of my thoughts on Apple, take a look at " Is it time to bet against Apple?"   Looking for work   Somewhat more germane was this week's Federal Open Market Committee meeting, as well as Chairman Ben Bernanke's news conference afterward.   I was especially curious to see to what extent, if any, the committee members would recognize the signs of economic weakness that I see percolating beneath the surface. In particular, given the Federal Reserve's current focus, initial jobless claims -- which have been creeping higher after bottoming out at around 350,000 in February -- and, as of April 26, were not all that far from the supposedly important level of 400,000 (at 388,000).   (Column continues below video.) (I say "supposedly" because I don't think any specific number means that much. In fact, initial claims, as well as jobs data, probably get more scrutiny than they deserve, but that is the environment we are dealing with.)   Given that we are basically three years past the low in the economy, you would think those claims figures would be declining regularly, even if the recovery wasn't all that potent. Unfortunately, that isn't the case.   The reason I bring this up is because, as we know, the Fed is now quite focused on jobs and the lack thereof. Thus, as we approached this week's FOMC meeting, my expectation was that the Fed would give itself enough to room to maneuver (i.e., it would hint at a third round of economic stimulus via quantitative easing) in the event that jobs data were not as "accommodative" as Fed monetary policy.   Fed tries on its poker face   As it turned out, the committee's communiqué was pretty much as the masses had expected. The net of it was not a tilt toward easing, as I had suspected.   In hindsight, I realize that I had given the Fed too much credit to be able to take the pulse of the economy. Considering the track record, that is not too surprising, as the Fed is often wrong in its assessment of what the economy is liable to do. So I suppose it's par for the course that it doesn't realize that the economy is weaker. (Just like no one at the Fed saw either the stock or housing bubbles, etc.)   Thus, it will react to the weaker data at some point and have to deal with that implied U-turn when it happens.   Dutch bonds 'in Dutch'   Checking in on Europe, the latest wrinkle in that continent's political Rubik's Cube was the Dutch Cabinet submitting an offer to resign to Queen Beatrix due to a disagreement regarding its proposed austerity package.   The reason this is worth pointing that out is because the Dutch are considered to be one of the more prudent financial entities in Europe, and one of the few countries left with a triple-A debt rating. If they can't (or won't) pursue the austere policies that Germany wants, how will Spain, Italy or even France manage to do so? Expect more activism on the part of the European Central Bank.   The beneficiaries of worldwide money printing, however, continue to be punished. In fact, the mood in the metals market is currently so wounded that, while stock bulls seem to have no fear, participants in the metals have nothing but fear.   As gold and silver continue to test people's convictions, and the worse psychology gets, the bigger the rally will be once folks finally get it in their heads that QE3 is coming, or they wake up to the already problematic rate of inflation.   On the air   I participated in an impromptu interview with Eric King on Wednesday, just after Bernanke's news conference. He wanted me to weigh in on the Fed, and I agreed, since I was pretty disgusted with all the hoopla. And, apparently, it showed. Interested readers can find it here.   At the time of publication, Bill Fleckenstein owned gold and silver, as well as gold and silver mining stocks.   You'll can find Bill Fleckenstein's latest columns on this page.You can still find his older columns here. No hint of QE? Why dont you call it what it is,dollar devaluation.The Feds head in the sand ? We would be better off with the Feds head cut off. BlogArticle AAPL http://money.msn.com/bill-fleckenstein/post.aspx?post=bb514b3b-a500-4c57-8bd6-c21a7906cd3b Some of the tactics and rosy scenarios emanating from Wall Street are reminiscent of the dot-com heyday. Plus, notes from the spring Grant's Conference. Fri, 04 May 2012 06:00:17 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de bb514b3b-a500-4c57-8bd6-c21a7906cd3b BlogArticle E5DED4DF1BF4E3F7 50 38 2012-04-20T18:04:09.24 It's early, but earnings season has already brought us two throwbacks to the late-1990s stock bubble.   First came the stories waxing rhapsodic about Google's ( GOOG) wonderful 2-for-1 stock split. Lest we forgot, that was a tactic used to drive stocks wild when people were in full dot-com delirium.   This time, however, it didn't do much for Google shares, which gave back all of March's gains, and then some, before recovering a bit.   The other news was the prediction from Gene Munster, an Apple ( AAPL) analyst at Piper Jaffray, that Apple would be the first trillion-dollar company, by 2014. What I found particularly humorous was that, while the article I read acknowledged that the last time this subject came up (back in 2000) the " dead fish" had predicted Cisco Systems ( CSCO) would be the first company with a trillion-dollar market cap, that error wouldn't stop Apple from achieving the valuation set by Munster. (At the time, I wrote an article explaining how preposterous that notion was.)   (Column continues below video.) Apple slider?   I would just like to go on the record as saying I think it is virtually impossible for Apple to reach a $1 trillion market cap by 2014. I don't think that the level of sales and margins required to support that valuation in a nonlunatic world can be achieved in the next few years.   People seem to forget that the law of large numbers is quite potent. It is simply much, much more difficult to grow and maintain earnings when a company is very large. If you don't believe me, just ask Warren Buffett. He points it out all the time (we may disagree with his political views, but the man can analyze businesses).   I have absolutely no position in Apple, but given the points I recently made about the company, it appears that the stock is trading just as it would if it were making a top. I am not interested in putting up money behind that statement, but we have certainly seen a lot of good ideas overdone to the upside in the past decade and a half, and it seems Apple might be among them. (Again, Apple zealots take note: I have no dog in this fight, I'm just making an observation.)   Lack of confidence is no game   Lastly, I want to report on my attendance at the spring Grant's Conference in New York and the stellar lineup of speakers who were there. I was surprised to hear so many references -- particularly by Stan Druckenmiller and Paul Singer -- to some sort of crisis of confidence that lies ahead. Both of them (and others) feel that the endgame for all the money-printing we have seen is that people at some point will lose confidence in the dollar or the bond market. It's roughly equivalent to what I have referred to as the "funding crisis."   Many people who have grown up knowing only Alan Greenspan or Ben Bernanke at the helm of the Federal Reserve cannot conceive of a market losing confidence in central bankers. But those of us who have been at this long enough (or are students of history, or both) have seen or read about it happening many times in the past, and this is where Druckenmiller and Singer believe we are headed.   It is not possible to know when that might occur, though Druckenmiller made an interesting case as to why it could be as early as 2013. As I have said, the sooner it happens, the less damage will have been done to the U.S. economy in the long run via misallocation of capital and too much debt.   Tried and true, but still trying   I was also interested to note that those two gentlemen, and others, feel that the best way to protect oneself from the predicted outcome, whenever it occurs, is to own gold.   Of course, as we have learned, that does not mean gold will go up every day. On the contrary, the nature of the gold market means having the courage of your convictions tested regularly, as we have since gold hit its high in September 2012.   It is pretty obvious that Europe is headed to another round of quantitative easing, as Spain is coming unglued. I believe weakness in the U.S. stock market and economy will push the Fed toward QE3 within the next couple of months.   So, despite the recent view that central bankers are all on hold, I expect that will change quickly. Another week of stock-market declines and all the Goldilocks believers who were feeling so confident a week or two ago will be begging Bernanke to print more money.   At the time of publication, Bill Fleckenstein owned gold and silver. I wasn't sure before but now I'm convinced that the labor department is using "fuzzy math", they really need to review the formulas being used, they don't reflect the true number which is closer to 11.5%. I understand why they don't want people to know the actual figure, Obama could never get reelected. I hope the American people are smarter than they were in 2008, if not, you will see unemployment break 16%. When President Romney takes over I believe there will be more businesses hiring and the rate will go down precipitously just like when Reagan was President. GOD BLESS AMERICA! Please, Please think before you vote! BlogArticle AAPL CSCO GOOG http://money.msn.com/bill-fleckenstein/post.aspx?post=2e8fbfd5-4c03-4896-8d5a-49fdf51a41e1 The first half of April has punched holes in the idea that the economy is becoming healthy, either here or abroad. It also raises the specter of more easy money from the Fed. Mon, 16 Apr 2012 17:03:50 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de 2e8fbfd5-4c03-4896-8d5a-49fdf51a41e1 BlogArticle E5DED4DF1BF4E3F7 26 21 2012-04-16T13:28:04.42 Even though it is not headline news, European debt markets have begun to stink up the joint again.   Italy and Spain saw their borrowing costs increase in recent days, and the spread between the yields on Spanish and German government debt increased to the levels we last saw in December -- an indication of rising relative risk.   Though U.S. investors are mostly ignoring it, the "pain in Spain" -- and Italy -- continued last week, as their debt was pounded on Tuesday, with Spanish yields closing in on 6%.   The evidence for weakness grows stronger   Early signs of weakness began showing up in the U.S. economy from corporate America earlier this month. On April 4, SanDisk ( SNDK) preannounced, which I find pretty interesting, as that company's products go into all of the red-hot electronic doodads that people can't live without.   (Column continues below video.)     Then on April 5, Polycom ( PLCM), which develops headsets and data-conferencing products, preannounced, and its stock declined about 20%. So that makes two recent company-specific data points, which may spell trouble.   Also last week, GM ( GM) missed its sales expectations, which is not that big of a deal, but its inventories have doubled over the past year or so. Obviously, if it is essentially stuffing the channel, that affects other economic data as those cars are built.   Meanwhile, on the retail front, Costco's ( COST) same-store sales were a little bit light, even with the warm weather we all know about.   QE3 to guest-star on 'The Walking Dead'   Obviously, the April 6 employment report was a giant disappointment, though folks tried to rationalize it in various ways, particularly as so many have let the stock market "write the news." By that I mean, as stocks have gone higher, people have changed their opinion about our economic situation, thinking, "Gee, the market must be telling us that the economy is better than we thought."   However, Thursday's initial jobless claims report jumped to 380,000, the highest weekly level since January, making such rationalizations that much harder to justify.   What all this portends is that the ability for the unseasonably warm weather to improve the underlying economy will cease shortly. Thus, all the economy bulls, who had concluded that another round of quantitative easing from the Federal Reserve -- including the much talked about QE3 -- is D.O.A. now will be back to contemplating just that. It is really hard to see how the U.S. economy can be all that strong, given the sorry state of Europe and the fact that China is slowing.   Granted, none of these data points by themselves are earth-shaking developments, but given that everyone is so excited and optimistic, I think the aggregate of these little negative nuggets is potentially important, especially if we see more of them, as I suspect we will.   Be careful fading into obliviousness   Were it not for the money-printing going on, I would be looking very seriously at getting short, betting stocks will go down. As it is, my enthusiasm is tempered by the fact that it still might be hard to win with that strategy in the current environment even if the market is dealt a large dose of reality in the coming month, as I suspect. I do think the market is quite vulnerable, for a number of reasons, but obviously there is a rather large, oblivious contingent out there.   However, given the setup in gold, including the fact that Indian gold dealers called off their strike, I reloaded my metals trading position this week. I expect that Indian demand for gold (and silver) will be quite supportive in the coming weeks. We'll see if that turns out to be right.   At the time of publications, Bill Fleckenstein owned gold. POLATICS. WILL NOT CURE THE PROBLEMS WHEN COUNTRIES CAN SELL THERE GOODS FOR LESS THEN WHAT IT TAKES TO PRODUCE THEM , HOW CAN WE COMPETE, FOOD, MFG GOODS, AND IN THE FUTURE CARS. BlogArticle Bill Fleckenstein economy Federal Reserve http://money.msn.com/bill-fleckenstein/post.aspx?post=e719fd05-754a-4f1c-b066-7c7db6832f97 Technology is all about staying ahead of the game, and Research In Motion is losing the battle. Plus: The market is still frightened by the Fed's shadow. Tue, 10 Apr 2012 06:01:05 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de e719fd05-754a-4f1c-b066-7c7db6832f97 BlogArticle E5DED4DF1BF4E3F7 43 40 2012-04-06T15:00:19.67 I had to chuckle recently when I saw that Research In Motion ( RIMM) missed its earnings estimate yet again and is no longer going to be issuing earnings guidance. In addition, the company's founder and former CEO, Jim Balsillie, has stepped down from the board.   Longtime readers may remember the battles I had with RIMM, a company I viewed as just a commodity masquerading as something unique. Of course, I don't know if it was doing the masquerading so much as wild-eyed stock bulls couldn't recognize Research In Motion for what it was, just as they were blind to problems at other companies that I and others of like mind have taken to task, such as Gateway Computer and Iomega.   Just for grins, I went back and looked at a column I posted on my subscription site on June 26, 2008, when the BlackBerry smartphone maker was trading at around $135 a share. (Back then, for those who don't recall, Research In Motion was one of Jim Cramer's supposed " Four Horsemen" that were supposed to carry the market higher.)   At the time I wrote, "Not only is (RIMM's) product becoming more of a consumer item (witness their crowing about consumers comprising about 60% of their phones), but the businesses where RIMM has the most penetration are in trouble. Further, serious competition continues to escalate. As I have said all along, I don't see how a closed system like RIMM ultimately wins, as that never happens in technology. . . . The fact that RIMM finally floundered says to me that it is over for the stock." Column continues below. To be fair, I had thought it was over for Research In Motion on a couple of previous occasions. But in this case, it was.   Out with the new, in with the newer The reason I bring this up is because folks often forget that technology is a game of obsolescence that requires spending a lot of money, and it is very difficult to build a barrier to entry. Microsoft ( MSFT) has a rather large competitive barrier, but that didn't stop its stock from selling at 10 times earnings last year. (Microsoft publishes MSN Money.) Google ( GOOG) has a pretty good-sized barrier to entry, but many tech companies don't.   Apple ( AAPL) has a bit of a barrier to entry in its iPod business, but in its other businesses, it really doesn't. Although I did try to take some of the bloom off the Apple rose in my column from two weeks ago, " Is it time to be against Apple?"   My point today is not that Apple is RIMM or that I am betting for or against Apple with any investments or trades at the moment. I just think it is useful for readers and investors to see where problems may come from.   Again, I want to be clear: I don't think that Apple is as vulnerable as RIMM was, because clearly it isn't. But it could stumble, as today's hot consumer item turns cold down the road. The moral of the story is that, oftentimes, products are just commodities. They are not the unique items people think they are.   Rational compared to what? Turning to this week's action, Wednesday's swoon in particular, on the release of the Federal Open Market Committee's meeting minutes, found me looking at my screens and marveling at how simply mind-boggling it is that multitrillion-dollar ​ stock markets worldwide, supposedly full of millions of sophisticated investors, can behave as idiotically as they do.   Our market, for example, ignores any and all bad news, is particularly uncritical of good news (such as weather-boosted activity in the gross domestic product), then dies of fright because the Federal Reserve reiterates what it said a month ago -- i.e., that it is not inclined to take any more easy-money action until it sees more signs of weakening.   Of course, that is now exactly what equities and the economic data are most likely going to provide, allowing the Fed to get back to doing what it does: print money.   Scrambled Eccles It is sheer folly that we have markets and economies that totally revolve around what the " politburo" of the Fed's interest-rate-settin ​ g committee (and other central bankers) decides. It is incredible what an all-paper dollar and the lunatics at the Fed, in the form of Alan Greenspan and Ben Bernanke, have created.   Meanwhile, it is almost comical that so much attention is focused on presidential races when the morons at the Fed have all the power, yet are left unchecked to do trillions of dollars' worth of damage and ruin lives as they warp the economy and financial markets.   The reason markets are the theater of the absurd is because fiat money is no better than confetti, and all kinds of bizarre events take place when money means nothing. This makes the stock market somewhat uninvestible, even though there are plenty of equities that aren't very expensive. Of course, there are pockets of lunacy -- largely momentum favorites, i.e., the so-called "social networking" sector.   It is likewise amazing that a company such as Apple has such cultlike admiration that idiot analysts' price-target upgrades are treated as legitimate news items. To be sure, this is the environment we've been in for a long time, and the one we must deal with. But occasionally events conspire to make it seem so absurd that it provokes a rant like this one.   Everything to be gained One of the potential positives from the pending potential stock market selloff is that we will see how high bonds can rally. Perhaps the bond market is going to have a failed rally somewhere along the way that will be instructive and allow us to get our teeth into the idea that a bear market has begun.   After all, that is what we are going to need to eventually get rid of the Fed and establish some sort of sane monetary standard in this country. We need inflation and a bear market in bonds, which will also weaken the dollar, all of which will help people come to the realization that the Fed is the problem. We can only hope we get there sooner rather than later so that the insanity will end.   On the air For my latest interview with Eric King, regarding stocks, the Fed, and the metals market, interested readers can listen in here.   At the time of publication, Bill Fleckenstein owned stock in Microsoft. @havasu46:  The PC form factor is not dead now and will not die in the foreseeable future. There are millions of jobs being performed on PCs that simply cannot be done on netbooks, notepads or phones. I'm about to replace several PCs in my own company, and guess what I'm going to replace them with? Ummm....did you say smartphones? Netbooks?  iPads? Uh-huh, the day I want production to come to a complete halt. BlogArticle http://money.msn.com/bill-fleckenstein/post.aspx?post=ed435fa0-3d5d-44f8-962f-46b6af539cf3 How to find the contrarian's columns, old and new. Thu, 05 Apr 2012 21:45:57 -0700 MSN Money partner 4914d456-2411-4705-a67e-bdfdfba658de ed435fa0-3d5d-44f8-962f-46b6af539cf3 BlogArticle 090E0091D074D799 0 1 2012-04-06T04:45:57.83 Dear readers:   Starting this week, Bill Fleckensten's column will appear in a different format, with the same great contrarian analysis you've come to rely on.   You'll be able to find all his new columns on this page, in addition to the usual headlines on our home pages. If you're a regular reader, you may want to bookmark Bill's new home and come back often.   You can still find his older columns here, on his RSS page.   In the long run, we think this will make Bill's columns easier to find. We hope you agree,   -- MSN Money Dear readers:   Starting this week, Bill Fleckensten's column will appear in a different format, with the same great contrarian analysis you've come to rely on.   You'll be able to find all his new columns on this page, in addition to the usual headlines on our home pages. If you're a regular reader, you may want to bookmark Bill's new home and come back often.   You can still find his older columns here, on his RSS page.   In the long run, we think this will make Bill's columns easier to find. We hope you agree,   -- MSN Money BlogArticle http://money.msn.com/bill-fleckenstein/post.aspx?post=210259aa-a3a8-4aac-b0dc-0449421598ae People are beginning to realize that the inflation joke is on them, with rising prices everywhere and deflation nowhere in sight. Plus: Words of wisdom on gold. Thu, 05 Apr 2012 13:57:46 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de 210259aa-a3a8-4aac-b0dc-0449421598ae BlogArticle E5DED4DF1BF4E3F7 0 1 2012-04-05T20:57:46.397 I have owned gold and gold-related investments aggressively since 2001 for one main reason: the mismanagement at the U.S. Federal Reserve, with its unplanned and unarticulated determination to debase our currency and promote inflation.   Though we have had long periods of apparent stability, since 1971 stability has really been the case only when Paul Volcker was Fed chairman and immediately after his tenure.   The money-printing at the root of our problems essentially intensified exponentially under Alan Greenspan, and now Ben Bernanke, fueled particularly over the past four or five years by worldwide fears of deflation. The irony, of course, is that the fear of deflation guarantees inflation as central banks are willing to use the printing press with reckless abandon.   I think it is highly probable that the fears of a deflationary accident have passed, so folks might be more receptive to signs of inflation, which would certainly change the landscape in many markets.   (Post continues below video.) No substitute for common sense In Canada, where the Consumer Price Index is perhaps slightly less sanitized than in the U.S., inflation was reported on March 23 to have accelerated again in February due to higher costs for gasoline, electricity and meat. I thought it was interesting that a Bloomberg story blamed those items, because here in inflation-denying America, we discuss inflation only ex food and energy. In fact, one could argue that the Fed and those who worship it like to look at inflation only after stripping it ("ex" stands for excluding) of anything that has gone higher in price.   Of course, many companies have been affected by higher inflation already, not the least of which is ConAgra ( CAG). I liked The New York Times' rendition of the company's recently lowered outlook: "Like all food companies, ConAgra, the maker of Banquet frozen meals, Chef Boyardee pasta, and Hebrew National hot dogs, has been hurt by soaring costs for grain, meat, and fuel."   The Fed: Giving credit where credit is due As everyone knows, the cost of almost everything you need has been rising for some time, while certain assets, such as real estate, have declined. (The prices of electronic consumer products have also declined, because that is what technology does: get cheaper). In any case, it should surprise no one when I say that the problem facing us prospectively will be inflation, not deflation.   The Fed is going to be very slow in accepting any responsibility for that, as it has a long history of denying its role in past disasters. Just witness Greenspan's denial of his sins, not to mention Bernanke's remarks during his so-called University Lecture on March 22: ". . . the evidence I have seen suggests that monetary policy did not play an important role in raising house prices during the upswing."   Someone who can reach that conclusion is going to be rather disinclined to take any blame for a rise in consumer prices. Of course, given the way the U.S. CPI is constructed, it is very difficult to get it to register higher prices in the first place. Thus, inflation will be raging wildly long before any attempt is made to stop it.   Naturally, that will affect the bond market, which will eventually take the printing press away from the Fed, and hopefully bring a happy ending to this horror story.   Required reading As for protecting yourself against the evils of inflation and currency debasement, this week I received a compelling email from a longtime friend and extremely successful professional investor. As a very smart guy with more than 40 years of experience in the investment world, his frank (even blunt) opinions are uncommonly valuable.   His email contained a brilliant perspective on the gold bull market, and I found it so relevant I am including a lengthy excerpt below (he uses a fair amount of "inside baseball" terminology, but hopefully you will get the gist):   "I think it might be important to put gold in a more easily understood form. Assume this was a persuasive growth stock with a compelling long-term story, priced within a very long, multi-year base between approximately $4 and $6 per share, with a convulsive 'bear trap' dip briefly below $3. This dip was widely attributed to Clinton's Treasury secretary (Robert Rubin) trying to drive the stock's price (i.e., gold's spot price) down to mask Greenspan's activity at the Fed.   "The bear trap snagged one of the slowest learners in the game. That slow learner had accumulated its position over about 500 years, but when the position finally bored the holder to death, he simply sold out -- on the exact low (i.e., the Bank of England selling gold around $260 -- $280 [finishing in 2002]; or in our illustration, around $2.75 per share).   "The newly 'discovered' stock finally broke out of its long-term trading range and began to attract interest. A long, multi-year, steady climb carried it to about $19, followed by a much-needed 'correction' back down to the $15-$16 area. Along the way, it saw several corrections of similar size and duration (20%-30% over several months). For example, a few years ago it declined from about $10 down to $7, scaring the wits out of long-term holders. The $7 sellers likely bought back in when it cleared the former high around $10.   "Therefore, I see no logical reason to assume any change in the long-term story -- crazed central banks, or that a normal 25% 'correction' signals the end of a very powerful, long-term chart pattern. The long-term trend definition remains intact, unlike the picture presented in 2006 when the thing broke 30% and turned down several trend definitions. In addition, I think recent sentiment surveys validate the idea that the gold complex is 'sold out,' leaving the line of least resistance up.   "Finally, from a fundamentalist point of view, the best thing that could happen would be a simultaneous rise in both gold and long-term interest rates. That would signal a long-awaited realization that inflation and not deflation was the boogey man. But we'll just have to stay tuned for that one."   I couldn't -- and didn't -- say it better myself.   On the air On March 23, I did a short, impromptu interview with Eric King rebutting some of the positions Bernanke offered in his March 22 speech. Interested readers can find it here.   At the time of publication, Bill Fleckenstein did not own or control shares of any company mentioned in this column. He did own gold.   This post is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital. ​ com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles. I have owned gold and gold-related investments aggressively since 2001 for one main reason: the mismanagement at the U.S. Federal Reserve, with its unplanned and unarticulated determination to debase our currency and promote inflation.   Though we have had long periods of apparent stability, since 1971 stability has really been the case only when Paul Volcker was Fed chairman and immediately after his tenure.   The money-printing at the root of our problems essentially intensified exponentially under Alan Greenspan, and now Ben Bernanke, fueled particularly over the past four or five years by worldwide fears of deflation. The irony, of course, is that the fear of deflation guarantees inflation as central banks are willing to use the printing press with reckless abandon.   I think it is highly probable that the fears of a deflationary accident have passed, so folks might be more receptive to signs of inflation, which would certainly change the landscape in many markets.   (Post continues below video.) No substitute for common sense In Canada, where the Consumer Price Index is perhaps slightly less sanitized than in the U.S., inflation was reported on March 23 to have accelerated again in February due to higher costs for gasoline, electricity and meat. I thought it was interesting that a Bloomberg story blamed those items, because here in inflation-denying America, we discuss inflation only ex food and energy. In fact, one could argue that the Fed and those who worship it like to look at inflation only after stripping it ("ex" stands for excluding) of anything that has gone higher in price.   Of course, many companies have been affected by higher inflation already, not the least of which is ConAgra ( CAG). I liked The New York Times' rendition of the company's recently lowered outlook: "Like all food companies, ConAgra, the maker of Banquet frozen meals, Chef Boyardee pasta, and Hebrew National hot dogs, has been hurt by soaring costs for grain, meat, and fuel."   The Fed: Giving credit where credit is due As everyone knows, the cost of almost everything you need has been rising for some time, while certain assets, such as real estate, have declined. (The prices of electronic consumer products have also declined, because that is what technology does: get cheaper). In any case, it should surprise no one when I say that the problem facing us prospectively will be inflation, not deflation.   The Fed is going to be very slow in accepting any responsibility for that, as it has a long history of denying its role in past disasters. Just witness Greenspan's denial of his sins, not to mention Bernanke's remarks during his so-called University Lecture on March 22: ". . . the evidence I have seen suggests that monetary policy did not play an important role in raising house prices during the upswing."   Someone who can reach that conclusion is going to be rather disinclined to take any blame for a rise in consumer prices. Of course, given the way the U.S. CPI is constructed, it is very difficult to get it to register higher prices in the first place. Thus, inflation will be raging wildly long before any attempt is made to stop it.   Naturally, that will affect the bond market, which will eventually take the printing press away from the Fed, and hopefully bring a happy ending to this horror story.   Required reading As for protecting yourself against the evils of inflation and currency debasement, this week I received a compelling email from a longtime friend and extremely successful professional investor. As a very smart guy with more than 40 years of experience in the investment world, his frank (even blunt) opinions are uncommonly valuable.   His email contained a brilliant perspective on the gold bull market, and I found it so relevant I am including a lengthy excerpt below (he uses a fair amount of "inside baseball" terminology, but hopefully you will get the gist):   "I think it might be important to put gold in a more easily understood form. Assume this was a persuasive growth stock with a compelling long-term story, priced within a very long, multi-year base between approximately $4 and $6 per share, with a convulsive 'bear trap' dip briefly below $3. This dip was widely attributed to Clinton's Treasury secretary (Robert Rubin) trying to drive the stock's price (i.e., gold's spot price) down to mask Greenspan's activity at the Fed.   "The bear trap snagged one of the slowest learners in the game. That slow learner had accumulated its position over about 500 years, but when the position finally bored the holder to death, he simply sold out -- on the exact low (i.e., the Bank of England selling gold around $260 -- $280 [finishing in 2002]; or in our illustration, around $2.75 per share).   "The newly 'discovered' stock finally broke out of its long-term trading range and began to attract interest. A long, multi-year, steady climb carried it to about $19, followed by a much-needed 'correction' back down to the $15-$16 area. Along the way, it saw several corrections of similar size and duration (20%-30% over several months). For example, a few years ago it declined from about $10 down to $7, scaring the wits out of long-term holders. The $7 sellers likely bought back in when it cleared the former high around $10.   "Therefore, I see no logical reason to assume any change in the long-term story -- crazed central banks, or that a normal 25% 'correction' signals the end of a very powerful, long-term chart pattern. The long-term trend definition remains intact, unlike the picture presented in 2006 when the thing broke 30% and turned down several trend definitions. In addition, I think recent sentiment surveys validate the idea that the gold complex is 'sold out,' leaving the line of least resistance up.   "Finally, from a fundamentalist point of view, the best thing that could happen would be a simultaneous rise in both gold and long-term interest rates. That would signal a long-awaited realization that inflation and not deflation was the boogey man. But we'll just have to stay tuned for that one."   I couldn't -- and didn't -- say it better myself.   On the air On March 23, I did a short, impromptu interview with Eric King rebutting some of the positions Bernanke offered in his March 22 speech. Interested readers can find it here.   At the time of publication, Bill Fleckenstein did not own or control shares of any company mentioned in this column. He did own gold.   This post is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital. ​ com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles. BlogArticle Federal Reserve interest rates investments http://money.msn.com/bill-fleckenstein/post.aspx?post=fe76e66b-36c6-48e7-ba3a-102a6199ad76 I wouldn't short it just yet, but it might be time to take some profits. Apple stock has everything going for it at the moment, but the price is getting out of hand. Thu, 05 Apr 2012 13:54:15 -0700 Bill_Fleckenstein 4914d456-2411-4705-a67e-bdfdfba658de fe76e66b-36c6-48e7-ba3a-102a6199ad76 BlogArticle E5DED4DF1BF4E3F7 0 1 2012-04-05T20:54:15.47 The white-hot speculation in Apple ( AAPL) shares continues to intensify. The price topped $600 a share briefly two weeks ago, ahead of the release of the new iPad, and regained that territory on the March 19 news the company would pay a dividend and buy back shares.   Quite frankly, since I have not been too interested in individual short positions (or non-money-printing-r ​ elated long ideas), I haven't spent much time focusing on Apple. However, a recent question from a subscriber to FleckensteinCapital. ​ com about what I thought the company might be worth caused me to examine it more closely.   Has Apple bitten off more than it can chew? I am sort of embarrassed to admit how shocked I was to realize that Apple has gained almost 50% this year, and, of course -- given its heavy weighting -- that is a big reason the Nasdaq ( $COMPX) has done as well as it has. And since the Nasdaq has been strong, Apple's momentum has probably spilled over to help boost the price of other shares as well. Opposite view: Why Apple will hit $1,650 While I don't know what the price of Apple stock ought to be, it does seem rather crazy that the company has added almost $200 billion to its market capitalization this year (it now stands at about $560 billion).   To put those incomprehensibly gigantic numbers into perspective, the increase in the price of Apple shares alone is equal to two-thirds of the value of Microsoft ( MSFT). (Microsoft publishes MSN Money.)   (Post continues below video) I know Apple aficionados hate to hear this, but there is really no comparison between Apple and Microsoft in terms of sustainability of the enterprise. Apple is a consumer products company, and a damn good one. But consumers are notoriously fickle. There is no guarantee that people will want to continue to replace (or "refresh," if you prefer silly modern jargon) their hardware as often in the future as they have in the past, or even choose Apple products, for that matter.   Nevertheless, at the moment, the market has to some extent become "all Apple, all the time," with this week's action being driven by that announcement of a fairly aggressive dividend policy. It will be interesting to see how smart that decision looks in a couple of years.   Ripe for the picking? As successful as Apple has been, probably some time in the next couple of quarters, if not sooner, I think it is much more likely to make a great short sell (for those who feel lucky, brave, or both) than a great investment from the long side. Given the money-printing environment we have been in, I may or may not try that tactic (it all depends on the setup).   Owners of Apple stock would be well advised to carefully evaluate the risk/reward picture. The risks may be higher than you think.   I think it is important to recognize just how momentum-oriented and speculative the stock has become, for the very reason that it exerts an outsized influence on the tape.   As a result, if Apple does roll over, it could precipitate a correction in the market that other fundamental bad news has been unable to produce. We will just have to see how it plays out, but I, for one, can't help but pay a little more attention to Apple prospectively than I have recently.   At the time of publication, Bill Fleckenstein owned shares of Microsoft.   This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital. ​ com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.   Originally published March 23, 2012 The white-hot speculation in Apple ( AAPL) shares continues to intensify. The price topped $600 a share briefly two weeks ago, ahead of the release of the new iPad, and regained that territory on the March 19 news the company would pay a dividend and buy back shares.   Quite frankly, since I have not been too interested in individual short positions (or non-money-printing-r ​ elated long ideas), I haven't spent much time focusing on Apple. However, a recent question from a subscriber to FleckensteinCapital. ​ com about what I thought the company might be worth caused me to examine it more closely.   Has Apple bitten off more than it can chew? I am sort of embarrassed to admit how shocked I was to realize that Apple has gained almost 50% this year, and, of course -- given its heavy weighting -- that is a big reason the Nasdaq ( $COMPX) has done as well as it has. And since the Nasdaq has been strong, Apple's momentum has probably spilled over to help boost the price of other shares as well. Opposite view: Why Apple will hit $1,650 While I don't know what the price of Apple stock ought to be, it does seem rather crazy that the company has added almost $200 billion to its market capitalization this year (it now stands at about $560 billion).   To put those incomprehensibly gigantic numbers into perspective, the increase in the price of Apple shares alone is equal to two-thirds of the value of Microsoft ( MSFT). (Microsoft publishes MSN Money.)   (Post continues below video) I know Apple aficionados hate to hear this, but there is really no comparison between Apple and Microsoft in terms of sustainability of the enterprise. Apple is a consumer products company, and a damn good one. But consumers are notoriously fickle. There is no guarantee that people will want to continue to replace (or "refresh," if you prefer silly modern jargon) their hardware as often in the future as they have in the past, or even choose Apple products, for that matter.   Nevertheless, at the moment, the market has to some extent become "all Apple, all the time," with this week's action being driven by that announcement of a fairly aggressive dividend policy. It will be interesting to see how smart that decision looks in a couple of years.   Ripe for the picking? As successful as Apple has been, probably some time in the next couple of quarters, if not sooner, I think it is much more likely to make a great short sell (for those who feel lucky, brave, or both) than a great investment from the long side. Given the money-printing environment we have been in, I may or may not try that tactic (it all depends on the setup).   Owners of Apple stock would be well advised to carefully evaluate the risk/reward picture. The risks may be higher than you think.   I think it is important to recognize just how momentum-oriented and speculative the stock has become, for the very reason that it exerts an outsized influence on the tape.   As a result, if Apple does roll over, it could precipitate a correction in the market that other fundamental bad news has been unable to produce. We will just have to see how it plays out, but I, for one, can't help but pay a little more attention to Apple prospectively than I have recently.   At the time of publication, Bill Fleckenstein owned shares of Microsoft.   This column is a synopsis of Bill Fleckenstein's daily column on his website, FleckensteinCapital. ​ com, which he's been writing on the Internet since 1996. Click here to find Fleckenstein's most recent articles.   Originally published March 23, 2012 BlogArticle AAPL Bill Fleckenstein MSFT stock market technology