Podcast

Bill Fleckenstein: The Race to the Bottom Will Be Won by the Dollar

Tuesday, January 18, 2011, 10:06 PM

"This printing money is going to lead to huge trouble. It’s going to lead to higher interest rates. It’s going to lead to more inflation, and at some point there is going to be a train wreck in the currency and the bond market."

Market commentator and money manager Bill Fleckenstein sat down for a recent interview with PeakProsperity.com and excoriated the Fed and the monetary policy it's pursuing. He and Chris discuss the factors that enabled Bill to be one of the first to accurately identify and warn of the housing and credit bubbles - and how history is now repeating itself via the profligate printing of U.S. dollars. The interview covers a wide range of topics meaningful to the investor trying to make sense of where things are headed from here - including central banking culture, bubble psychology, high-frequency trading, inflation/deflation, and the true relative value of the dollar vs. the euro.

In this podcast, Bill sheds light on why: 

  • The culture of the Fed reinforces a belief in its infallibility. This blinds it to the fact that its interventions cause market players to adopt irrational behavior leading to misallocations of capital that eventually need to be corrected by the system (e.g., busts). 
  • Correlation between asset classes is the highest it's been in 60 years. This is a result of the Fed flooding the market with liquidity. It makes it very hard for investors to be anything besides speculators.
  • The SEC has been asleep at the switch for the past 15 years, leaving the system vulnerable to exploitation - of which HFT programs are just the latest example.
  • A funding crisis looks inevitable: At some point the bond market or the currency market will revolt, resulting in a weak dollar and increasing bond rates - despite whatever the Fed wants.
  • It's perverse for the U.S. to be rewarded for using a printing press indiscriminately without making any fiscal changes, while Europe is painfully adopting austerity and getting penalized.

In Part 2: Outlook for 2011 (for enrolled PeakProsperity.com members - click here to enroll), Bill gets specific about what he predicts will happen in the bond and currency markets, as well as his specific outlook for 2011. 

Click the play button below to listen to Chris' interview with Bill Fleckenstein:

About the guest

Bill Fleckenstein

Bill Fleckenstein is author of Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve and the president of Seattle-based Fleckenstein Capital. He also writes a daily Market Rap column and a weekly Contrarian Chronicles column and has his own website. In 1980, he left the computer business to become a stockbroker. He founded a money-management firm in 1982, and has been bullish (and bearish) on almost every industry group, commodity, and asset class at one time or another during his investment career. His time horizon as an investor is long-term (three to five years).

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6 Comments

Rector's picture
Rector
Status: Gold Member (Offline)
Joined: Feb 8 2010
Posts: 348
Re: Bill Fleckenstein: The Race To the Bottom Will Be Won ...

I want to hear Chris interview Paul Krugman.  I would love to understand what exactly he is thinking.  While you're at it, what about Ben?  You might as well ask. . .

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 1878
Re: Bill Fleckenstein: The Race To the Bottom Will Be Won ...

We've extended the offer to Mr. Krugman (no word back yet). 

As for Mr. Bernanke (I like how big you think) , we're trying. The Fed is not the easiest door to crack, but we'll keep working on it...

Marteen's picture
Marteen
Status: Bronze Member (Offline)
Joined: Sep 29 2010
Posts: 40
Re: Bill Fleckenstein: The Race To the Bottom Will Be Won ...

A very interesting person for a proper interview without defending herself is Damisa Moyo

The interviewer is a typical keep the status quo baby boomer. She cannot tell her story unfortunately.

Watch her interview at 

]

Second part

timple's picture
timple
Status: Member (Offline)
Joined: Jan 21 2011
Posts: 2
Re: Bill Fleckenstein: The Race To the Bottom Will Be Won ...

Chris,

Can you provide the podcast info in an xml feed so i can auto download these interviews on the podcast app on my Nokia? (Please provide a proper xml and don't just use itunes - we are not all Appleised). The feedburner xml stream doesn't put the audio in an enclosure.

i.e. http://www.christchurchchester.com/sermons/Sermon_podcast.xml

Apologies if you've already done it.

timple

SingleSpeak's picture
SingleSpeak
Status: Gold Member (Offline)
Joined: Dec 1 2008
Posts: 430
Re: Bill Fleckenstein: The Race To the Bottom Will Be Won ...

Marteen,

Great post. I'd never heard of Damisa Moyo. He never got a glove on her the whole time.

SS

fundmanagernews's picture
fundmanagernews
Status: Member (Offline)
Joined: Feb 5 2011
Posts: 1
Re: Bill Fleckenstein: The Race To the Bottom Will Be Won ...

Fleck has been wonderful at understanding and explaining the macro-economic backdrop.

Even though he sees a "funding crisis" there really is no way to profit from this from the short side. To Fleck's credit he has not been short in years.

http://fundmanagernews.com/fleckenstein-no-shorts

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