Today the man who closed down his short-only hedge fund right at the bottom of the 2008/2009 collapse warned King World News that 2015 is the year the fantasy dies. Bill Fleckenstein, who is President of Fleckenstein Capital, also cautioned that the U.S. dollar “is an internet stock that's on borrowed time.”
Fleckenstein: “People are going to lose confidence in the central banks and there is going to be an ugly dislocation when that happens. Will they come back for another round (of money printing)? I’m sure the Fed will come with QE again when it turns out this one doesn’t work….
“But for the moment the people who believe in the fantasy of central banks delivering economic Nirvana, and that they can levitate financial markets forever, those people who believe that are winning the battle, and those of us who say that this is going to end in disaster aren’t.
Cascading Dominos And A Stock Market Rout
But I think it (disaster) will (start to unfold) pretty soon because the dominos that are going to fall from the oil patch will mean credit problems in fixed income markets, be it government or fracking, exploration or drillers — anyone who used too much debt because they thought it was so cheap and ridiculous and nothing could go wrong. I think there are going to be a lot of dominos that will cascade on the back of that.
The reason I alluded (earlier) to how fast oil broke (to the downside) was because that shows you in this environment that we live in, especially with algorithmic and computerized trading — how quickly you could have a rout in the stock market. In the space of virtually no time you could see stocks drop 25 or 30 percent. I know the whole thing is a fantasy.”
Death Of A Fantasy And U.S. Dollar An Internet Stock
Eric King: “Is 2015 the year the fantasy dies?”
Fleckenstein: “I think so. You cannot monetize your way to prosperity and you can’t monetize your way to zero interest rates. I don’t see how people are going to be happy with whatever Q1 earnings reports turn out to be, given the strength of the dollar and the weakness in the world, which is (only) going to get worse.
I don’t know about the strength of the dollar. I think the dollar is an internet stock that’s on borrowed time. We’ve never seen the world’s central banks do what they are doing. …At some point this fantasy dies. The stock market used to rise and the value of assets rose because of the underlying economy.
Now they are trying to run it in reverse. They are trying to make the stock market go up and drag the economy along with it. It’s not going to work. There’s going to be a big accident. When people realize that it’s all a charade, the dollar will tank, the stock market will tank, and hopefully bond markets will tank. Gold will rally in that period of time because it’s done what it’s done because people have assumed complete infallibility on the part of the central bankers.”
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