Dennis Murphy: Forget about Wm. Fleckenstein.
If you had taken his "advice" seriously, you would not have been invested in the market over the past five years because it was "overvalued" and just about to duplicate the 1929 stock market crash. Of course, you would have missed the greatest bull market of the century, but, oh well... he doesn't ever seem to mention that aspect of his perpetual bearishness.
Fleckenstein has never seen a market or stock he likes or would invest in and really thinks you should buy T-bills or stuff your money in a pillowcase and bury it in your back yard. Maybe if a stock has a P/E of 1 or 2 it might pique his interest but, even then, I'm not sure. He has nothing creative or insightful to say and is best ignored. With regard to accounting issues, there certainly are come companies (Lucent, Cisco, Tyco,..) where this is an issue and should be carefully considered. To paint every tech stock with a broad brush and say this is "de rigeur", that everyone does it, is ludicrous.
As for his opinion that we are on the precipice of a stock market crash, this is highly unlikely. The housing market, which is the largest industry in the U.S. (not the auto makers), continues to do well, inflation remains tame, and productivity remains high. A combination of tax cuts and further interest rate cuts, along with adding liquidity to the market, will eventually find its way into the market and stimulate venture capital and financing of new technology and broadband/telecommunication buildout. The real problem, as Nortel has reminded us, is that no one is clear as to how long this will take.
Although the NASDAQ may well go lower in the near term, perhaps down to 2000-2100, many tech stocks (as Rande has pointed out) have been in a stealth bull market. While the large cap and most highly valued (overvalued) stocks such as BRCM, AMCC, BRCD, JNPR, EMLX, etc. have plummeted, and will continue to have their multiples contract, many small and mid cap tech stocks are still much higher than they were at the beginning of the year. I keep praying for NVLS, IRF, IDTI, etc. to return to their lower levels so I can buy them, but this is unlikely to happen.
The key is to be patient, track a select number of quality small and mid cap stocks that are leaders in their field, with reasonable valuations, and buy them during panic selling. The REAL trick is to then have the confidence to hold them through the volatility and hysteria that false prophets like Bill Fleckenstein thrive on. This is where I was shaken out and regret selling IDTI and IRF after having bought them at $30/$31 dollars.
I am beginning to think that there are two ways to play a market with the hypervolatility and schizophrenia that this one currently has. One can be a day-trader, sit by the computer all day, and make lightning quick short and long trades, or one can invest for the next 6-12 months, ignore the day-to-day gyrations and have confidence that good stocks bought at low prices will eventually be profitable. The losing course is to invest week-to-week, which (in my hands) results in buying as stocks are nearing a peak and then selling when they are at a near-term bottom.
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