With trades now measured in nanoseconds, Wall Street is out of control. A couple of days off like we had this week -- without the accompanying hurricane, of course -- wouldn't hurt. Also: 5 years off the highs.

By Bill_Fleckenstein Nov 2, 2012 2:00PM

Male Stock trader © Flying Colours Ltd, Digital Vision, Getty ImagesSo much for a scary October. While the major indices gave up some ground this month, for the most part they were fairly stable in the face of a couple of nasty sell-offs and fears of an October stock collapse.

 

Even Hurricane Sandy, which, as we all know, hammered a huge chunk of the East Coast, didn't do any lasting damage to the stock market, despite the two-day closure.

 

As the market goes digital, sound quality declines

I don't know about anyone else, but I for one enjoyed the two-day market shutdown. We would probably all be better off if it was open less often, without an accompanying natural disaster, since so much of what happens on a daily basis is noise. And the noise seems to be getting worse.

 

No matter who wins the presidency, Federal Reserve policies and players are unlikely to change much, and Bernanke will be with us a while longer. But Wall Street seems to think change is on the way.

By Bill_Fleckenstein Oct 26, 2012 2:00PM
Federal Reserve Chairman Ben Bernanke © Sipa USA/Rex FeaturesI have noticed a great deal of chatter recently about the prospects of how different the Fed might look if Mitt Romney prevails over President Barack Obama. This, to me, seems not well thought out at all, but there is no doubt it is adding to the crosscurrents and uncertainty precipitated by the election and the coming federal budget crunch known as the "fiscal cliff."

 

The thinking seems to be that since Romney doesn't like quantitative easing -- the Fed's efforts to inject money into the economy -- Chairman Ben Bernanke won't be able to take the heat of being easy if the Republican wins.

 

However, I submit that if former Fed Chairman Paul Volcker could take the intense political heat precipitated by his aggressive fiscal tightening in 1980 to '82, then Bernanke could withstand the infinitely easier-to-deal-with flack that being "too easy" (in terms of low interest rates and monetary policy in general) might cause.

 

The blasé reaction to reports from 2 tech leaders proves that sometimes the market likes what it doesn't see and ignores what it can't miss.

By Bill_Fleckenstein Oct 19, 2012 2:02PM

Wall Street signUnderstanding markets is a constant battle between what you think should happen and what you think will. Not only are they quite often not the same, they can switch places out from under you, and the more you lose sight of the distinction, the more likely you are to lose money.

 

As a result, in order to be "right" (whatever that means), it is not enough to analyze a company correctly. You must also be correct in your analysis of how the market may react to what you find.

 

For example, you may spot what you deem to be a sign of positive growth tucked away in a company's financial statements, and you may conclude that the stock is undervalued. The market may view the exact same information in a negative light and punish the stock price accordingly.

 

Thus, you can be right about the company's prospects, but if you are wrong about how (or when) the market will respond, it may do you no good.

 

Surprising strength in employment seems not to fit with fundamental economic weakness. The iPhone maker may be a clearer sign of what lies ahead for US companies.

By Bill_Fleckenstein Oct 12, 2012 2:00PM

Red arrow (digital) © Riko Pictures, PhotographerThe employment data released on Oct. 5 certainly raised some eyebrows. First off, the number of jobs created in September was almost exactly as expected, at 114,000, while the August number was revised up by better than 40,000 jobs.

 

But the big news was that somehow the unemployment rate dropped from 8.1% to 7.8% (expectations had been that it might tick up to 8.2%).

 

There appears to have been some sort of, shall we say, aberration in the data, as the household survey suggests that 873,000 jobs were added last month, an annualized rate of 10.5 million.

 

(That survey is used to calculate the unemployment rate, while the number of jobs created that gets focused on every month is a function of the establishment survey. So if you're scratching your head at how headline job growth of 114,000 generated a sizable drop in the headline unemployment rate, now you know.)

 

One of the world's most successful investors doesn't mind holding cash, if the time and the price are right. You shouldn't either.

By Bill_Fleckenstein Oct 5, 2012 1:58PM

Close-up of Dollar bill © Steve Allen/Brand X/Getty ImagesLet's talk about cash for a bit. Last week, the friend I refer to in my columns as the Lord of the Dark Matter pointed me toward the following comments by Alice Schroeder, a former insurance analyst and the author of the Warren Buffett biography "The Snowball." As reported in the Globe and Mail:

 

"Ms. Schroeder argues that to Mr. Buffett, cash is not just an asset class that is returning next to nothing. It is a call option that can be priced. When he thinks that option is cheap, relative to the ability of cash to buy assets, he is willing to put up with super-low interest rates, said Ms. Schroeder, who followed Mr. Buffett for years before she became his biographer . . . .

 

"'He thinks of cash differently than conventional investors,' Ms. Schroeder says. 'This is one of the most important things I learned from him: the opportunity of cash. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.'"

 

Americans may finally be waking up to the realization that their best defense against more than 20 years of Fed mismanagement is a shiny yellow metal.

By Bill_Fleckenstein Sep 28, 2012 2:01PM

Gold bars © Stockbyte/SuperStockThese days there is no shortage of chatter about the Federal Reserve's latest round of quantitative easing (aka QE3), and I detect there is a small, yet growing, level of dissatisfaction with the Fed's policies. It seems that savers have finally begun to find their voice -- somewhat in light of the fact that their money is slowly being stolen by the Fed's money printing.

 

From the stock bubble of the late 1990s, to the even bigger and more devastating housing bubble, to its recent policy of guaranteeing inflation and offering little reward to savers, the Fed has eviscerated the middle class and made poor people poorer.

 

Though it could be argued that people with wealth have benefited, that is not something that they necessarily asked for (excluding the Wall Street banksters).  In sum, the Fed is a devastatingly powerful organization, and it is hellbent on a path of continued destruction.

 

We may look back on QE3 as the long-awaited 'beginning of the end' of the great bond bull market.

By Bill_Fleckenstein Sep 21, 2012 1:58PM

© Hisham Ibrahim/Corbis
After months of speculation and anticipation about how many bullets he might have left, Federal Reserve Chairman Ben Bernanke finally pulled out a bazooka.


On Sept. 13, the Federal Open Market Committee released a statement revealing that the Fed was going to buy $40 billion of mortgage-backed securities a month unless job growth doesn't improve, in which case it might buy more.


Thus Bernanke is going to pursue an essentially open-ended program of asset-buying (aka "quantitative easing," or QE) that can become even bolder if he doesn't get the kind of economic performance he wants.

 

A look back at the past 30 years of investing tells us something about what it takes to be a successful investor in today's market. And why, in a bubble-free market, it seems so hard.

By Bill_Fleckenstein Sep 14, 2012 2:01PM

After reading a Tuesday article in the Financial Times headlined "End to 'alpha' spells trouble for fund managers," by Dan McCrum (registration required), I found myself writing so many comments in the margin that I thought it might be worthwhile to step away from market minutia a bit and subject readers to some of my broader thinking on investing.

 

What the article seems to say is that, for some reason, it has become vastly harder in the past decade, and most especially in the past few years, to make money as an investor.

 

It has become harder, because we have been in a secular bear market. But McCrum puts the blame elsewhere: "The skills needed to select securities that worked as stocks and bonds rose in value for much of the preceding three decades have become out-of-date." While McCrum has put his finger on something, he is not correct, for several reasons.

 

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ABOUT BILL FLECKENSTEIN

Image: Bill Fleckenstein, MSN money

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.

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