Iso, in case you are interested here is a transcript of BillFleckenstein's appearance on CNN last week.
...The wave of poor quarterly results and weak economic reports are no surprise for William Fleckenstein, who predicts we're on the verge of the worst economic environment in 20 years. Despite that, we asked him to join us. Bill, good to have you with us.
WILLIAM FLECKENSTEIN, FLECKENSTEIN CAPITAL: Very nice to be here, Lou.
DOBBS: What in the world do you mean, the worst economic environment in 20 years?
FLECKENSTEIN: What I mean by that is we just experienced the biggest bubble in the history of the world that ended last March when the Nasdaq peaked.
DOBBS: Right.
FLECKENSTEIN: The fallout from that, I believe, will have some reciprocity to the size of the boom. The missed allocation of capital was unprecedented, and as you saw in your earlier story, we sucked in workers, we put up too much capacity, we brought too much computer hardware, et cetera, et cetera, and those changes will take time to work their way through.
And lowering interest rates won't solve the issue, which is why our six rate cuts so far have not really changed things much, and it is also why things have come apart so fast.
DOBBS: Well, you are talking about things coming apart so fast, and indeed they did in terms of the retreat in particularly the Nasdaq index and technology, but we are only beginning to see the penumbra, if you will, a point at which those rate cuts should take effect. If we were most optimistically look at six months as an impact point of interest rate cuts, we would only begin to be seeing that first cut back on January 3 enter the market, right?
FLECKENSTEIN: That's a fair point, Lou. Monetary policy does work with a lag, and I think that is a very fair point. And the other -- other -- point to make is, you know, we are going to get the tax rebates and people are going to spend them.
DOBBS: Sure.
FLECKENSTEIN: I don't think they are going to make much difference, because I think we've only seen the first wave of layoffs. I think everybody is so attuned to economic problems being sock short- lived, because their experience is just the '90s, that they don't -- no one seems to think that anything other than 90 days worth of trouble is what we can experience. But...
DOBBS: Well, let's take, Bill, if I may, let's accept the fact we have had a very bad month or two, can we agree on that?
FLECKENSTEIN: I would agree with that.
DOBBS: What would you advise investors to do now, given your outlook?
FLECKENSTEIN: I think the -- the problem with the economy is the bubble we had. The problem with the stock market is the price. If you think we are going to have tough times as I do, then any stock you buy you want to insist that the price of the business is cheap enough such that if we have trouble, you are not taking a lot of risk.
The problem with the stock market in general is it's priced as though we are about to start a boom again. And if we don't -- if I'm partially correct -- there is a great deal of risk. So I think people need to examine their stocks not from standpoint of, gee, it was 100 and now it is 10, so it's cheap. It is, what is the market cap of this business, what can they earn? Examine the fundamentals, which gets very little play on Wall Street these days.
DOBBS: Well, you have been a bear for a number of years, and your scenario, as they say, is reality now. Give us specifically your best counsel to an investor now, and in terms of his or her money.
FLECKENSTEIN: OK. What I would say is, along the lines of what I just said, make sure you know really what you own and why you own it, and lower your exposure. Everyone is saying, you know, now is not the time to sell -- if I'm correct, that is not true. You need to lower your risk profile, because stocks are expensive, and they -- there is a great deal of risk.
So I would say, cut back. Maybe we are going to have a rally in the next couple weeks because there is no news, and people that believe things will get better will cause a rally, but I could probably give you one example that would illuminate my point, if I may.
DOBBS: Quickly, quickly, if you would, Bill.
FLECKENSTEIN: OK. Take a look at Intel. Stocks down from, you know, $70 or $80 to $30. It's 50 times earnings, it's eight times revenues. Their customers -- Hewlett-Packard, Gateway, Compaq -- all have announced terrible results this week, and people say, "but I can't sell it, it's Intel, it's down from 70 to 30, but as a business, it's priced wrong." And that's the examination people need to make in their own portfolio. DOBBS: Now, you are not short Intel, are you?
FLECKENSTEIN: Yes, I am.
DOBBS: Well, I'm glad we got that out there in that case, Bill.
FLECKENSTEIN: Yes. Sorry, I should have told you first off.
DOBBS: No, that's all right, just so we get it out there.
Bill, good to talk with you, thank you. Bill Fleckenstein.
FLECKENSTEIN: My pleasure.
...
europe.cnn.com |
