Bill Fleckenstein and Barton Biggs debate QE2 on Bloomberg TV. Fleckenstein: The Fed thinks it...


Bill Fleckenstein and Barton Biggs debate QE2 on Bloomberg TV. Fleckenstein: The Fed thinks it can print its way to prosperity, deciding things "in old Politburo fashion" - and maybe it won't be abolished, but "they'll be taken out of... the 'let's guess the right interest rate to run the world' game." Biggs: Bernanke did what he had to in order to get asset prices up; "Mr. Market's a pretty good forecaster of the economy."

Comments (13)
  • davidingeorgia
    , contributor
    Comments (2661) | Send Message
     
    Fleckenstein! Fleckenstein! Fleckenstein!
    5 Nov 2010, 01:45 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    "Mr. Market's a pretty good forecaster of the economy."

     

    Sure. Mr. Market predicted nothing but blue skies ahead in December 2007. How about oil at $140? After Barton himself shorted at $50?

     

    If Mr. Market is so right, how do you make any money? customer fees?

     

    Did Barton use one of his super logical lines like "I can never be too bearish," or "Don't bet against America"?
    5 Nov 2010, 01:49 PM Reply Like
  • davidingeorgia
    , contributor
    Comments (2661) | Send Message
     
    I think he saves those for CNBC. :-)
    5 Nov 2010, 01:53 PM Reply Like
  • eggfaced
    , contributor
    Comments (292) | Send Message
     
    When the Fed is pumping trillions into Mr. Market, it becomes a wild west casino.
    5 Nov 2010, 02:01 PM Reply Like
  • Tack
    , contributor
    Comments (15925) | Send Message
     
    There's simple rule of currency proliferation that should assist anybody attempting to ascertain the prices on anything --even equities-- denominated in that currency:

     

    If the amount of currency that's increased vastly exceeds the increase in supply of whatever good or service that is purchased with said currency, then, the price of said good or service will be adjusted upwards (i.e., inflation) in similar proportion to restore the actual supply-demand value relationship.

     

    This means that share prices will be adjusted (increased) accordingly, as they are merely another "product."
    5 Nov 2010, 02:11 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    In general you may be correct. However, History shows that other competing assets may be more attractive than equities. For instance, once people accept inflation as a fact we may see very attractive 3-month t-bill rates.

     

    I believe the lowest pe's on record in the US where registered during the inflationary 70's. Multiples in Brazil, which was a perennial high-inflation country, were in 2's and 3's.

     

    Once all assets come into play equities may not look like the only game in town.
    5 Nov 2010, 04:23 PM Reply Like
  • Tack
    , contributor
    Comments (15925) | Send Message
     
    Harry:

     

    Your point is valid . I didn't offer that comment to make a relative judgment as to exactly what sectors to select, or whether other commodities or assets might perform as well or better. My intention, perhaps not obvious, was to explain to those in a quandary why indices move higher and higher why that makes some sense, if one anticipates an inflationary adjustment to all prices.
    5 Nov 2010, 04:41 PM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    Tack:

     

    I think we disagree. Most people are saying that equities are a good hedge for inflation, History shows they are not. Margins and multiples normally shrink during inflationary periods and outright collapse with hyperinflation.

     

    Naturally, there may be sectors like natural resources that MAY benefit (depends on their inputs) but certainly inflation, other things being equal, will NOT be good the vast majority of equities.

     

    Although, nobody knows the future, this has been the case in EVERY country that has experienced inflation and hyperinflation. Our media, of course, is saturated by those who sell equities for whom ANY scenario seems to be a reason to buy equities.

     

    Best regards.
    6 Nov 2010, 07:52 AM Reply Like
  • Tack
    , contributor
    Comments (15925) | Send Message
     
    Harry:

     

    Yes, of course, some sectors will fare far better than others. Natural resources and energy would be likely candidates.

     

    Historically speaking, to examine the peak inflation years of 1973-1982, the overall SPX (not differentiated by sector and unadjusted for dividends) rose from 116 to 140. Of course gold rose from $58 to $342 in the same period.

     

    So, if one "knew," absolutely, that hyperinflation was on the docket, precious metals can hardly go wrong. Of course, none of us does, so some blended approach is probably best. As they say, "moderation in all things."

     

    It's the nature of society to hawk all kinds of things, so I don't think those promoting equities deserve any more scorn than others. I can't turn on the TV or radio without some scaremongering commercial for gold, or even commercials telling folks to buy shares in an Armageddon "seed bank." There's always somebody to pander to every idiot's fears.
    6 Nov 2010, 09:09 AM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2213) | Send Message
     
    Dear Tack:

     

    I think we discussing different things. JP Morgan, Credit Suisse, Merrill et al are recommending right now EQUITIES. That is, to them, Apple, Amazon and all the usual favorites with p/e's in double digits (some of them very high).

     

    They say they are a good HEDGE against inflation. I say History (not me) says they are NOT.

     

    I do NOT dispute that YOU, or someone else, can still make money in particular companies and/or stocks or that natural resources may fare better.

     

    In Brazil, very good companies traded in low-single digits in the 80's because of inflation and nothing else. Not to mention what the 70's did to American equities.
    6 Nov 2010, 10:00 AM Reply Like
  • Stan Piland
    , contributor
    Comments (178) | Send Message
     
    What has not been mentioned by any pundit is a simple fact: Long-term there is roughly zero chance that the U.S., Europe, or Japan can service their debts and meet their social services obligations as currently configured. There was no political will for change when a stronger economy would have allowed it. And the necessary combination of tax hikes and draconian spending cuts would severely impair the global economy for years if they were imposed now.

     

    In effect, the Fed is moving to allow U.S. debts to be paid in cheaper dollars. The initiative is likely long-term and is just getting started. Don't look now, but Japan and Europe will ultimately have to do the same.

     

    So this is not a "weak dollar" story; it is a weak developed county currency story. The moral: Own anything but money!
    5 Nov 2010, 02:15 PM Reply Like
  • Donald Ingram
    , contributor
    Comments (3481) | Send Message
     
    I think Mr. Barton had best claim his rocking chair in the sun room, and social security (while there is some left) and leave rational, objective thoughts of todays economy, to younger, more agile thinkers.
    5 Nov 2010, 02:15 PM Reply Like
  • RJKRJK
    , contributor
    Comments (187) | Send Message
     
    Biggs says: "Mr. Market's a pretty good forecaster of the economy."
    Huh? The economy is spiraling down while the market is currently making new daily highs. This is correct only if Mr. Market lives only on Wall Street. Anywhere else this is a poorly thought out concept and a giant misread. When it collapses, not if, Mr. Biggs will be very quiet.
    5 Nov 2010, 02:59 PM Reply Like
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