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When he Talks You STFU and Listen

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June 30, 2010 – Comments (4)

Fools,

You know the drill. Grab a beer, a seat and STFU, as Fleckenstein educates the masses.

Bill Fleckenstein Says You Can't Trust S&P PE Multiples As All The Financials' Earnings "Are Pure Nonsense"

http://www.zerohedge.com/article/bill-fleckenstein-says-you-cant-trust-sp-pe-multiples-all-financials-earnings-are-pure-nonse

A casually dressed Bill Fleckenstein was on Bloomberg TV bursting assorted myths and bubbles. First, Bill discusses how the market is no longer a discounting mechanism, noting that "after having completely ignored the bursting of the dot com and the real estate bubbles, i think this a function of the fact that since Greenspan took over the Fed and serially bailed out bigger and bigger problems with more and more easy money, the market evolved into much more of a speculative casino, and a lot more momentum type traders began to operate and everything always resolved itself on the upside... We have had much more of a speculative market that seems not to discount problems." As for Bill's forecasts: the big bounce off the lows has run out of gas, the economy is sputtering, the real estate market is still in trouble, the Fed will find a way to print more money which will give the market a bit of a boost, yet this will be offset by problems in Europe and domestically. "I don't see how the market can go up and make new highs" says Bill. As for the allegedly cheap 13x that the market is trading on, and that David Kostin likes shoving down every Goldman client's throat on a daily basis, Fleckenstein says, "13 times is only cheap relative to the last decade and a half. In the 70s and 80s, the market was trading at 8x and dividends were double where they are. I don't know how much of those S&P earnings are due to financials: all the financial earnings are pure nonsense, they are making it all up, we don't know where assets are priced necessarily and they are bailed out on the back of the Fed putting rates at zero. So I don't believe the earnings and I don't know what the multiple's going to be. It could easily trade at ten times." 

MY COMMENT: BF is a financial bad ass, having a Bear Fund at the peak into the collapse, and closing the fund before the rally.  While people were worshiping Greenspan, BF wrote a book called Greenspans Bubbles.

My question is does Chuck Norris have anything on BF? 

4 Comments – Post Your Own

#1) On June 30, 2010 at 9:03 PM, binve (< 20) wrote:

abitare,

Good call and good post. Here is my contribution. Bill Fleckenstein Interview - http://caps.fool.com/Blogs/bill-fleckenstein-interview/401191

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#2) On July 01, 2010 at 12:00 AM, stocki711 (98.87) wrote:

There is a reason P/E multiples were at 8x in the 70's and 80's. Interest rates were near 14%. Today with interest rates at 3-4% it would make sense for P/E multiples to be as high as 20 for the S&P 500. Actually, in a deflationary environment, it would make sense to buy a company losing 1% a year in net income if deflation exceeds that loss and any net income would be worth buying into. With deflation on the horizon I don't see why equities, especially strong balance sheet steady income ones, are out of style. 

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#3) On July 01, 2010 at 8:15 AM, Evlampius (< 20) wrote:

to stocki711 -  i think its never a good idea to buy a company that is loosing money dont you think?

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#4) On July 01, 2010 at 1:24 PM, stocki711 (98.87) wrote:

It depends on the environment. A deflationary environment is a whole other animal.

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