Tuesday, February 7, 2012

Inflation Chicken Little Bill Fleckenstein

I read an article on MSN yesterday from February 3rd  about how we're at the "inflection point" where all that "quantitative easing" the Fed has been doing is going to start causing inflation.

And, if we are finally at that inflection point, the world will then slowly begin to concern itself with stagflation and inflation, and eventually the world's bond market participants will start to demand more in interest-rate comapensation due to real rates being negative, which will shut down the central bankers' printing presses. No one will accept negative real rates and just getting their monaey back if they are no longer worried about a deflationary collapse.
In sum, I believe we are approaching (if not at) that inflection point and that deflation is about to become very old news until sometime down the road, potentially when the printing press is taken away from the central banks.

Wow!  Buckle in everybody, that inflation-stagflation is finally coming.  Bill Fleckenstein, noted investor has called it.  Just out of curiosity, I checked some of Bill's past predictive calls and found it enlightening.

Back in January, a month before this article, Bill predicted inflation and a gold rally.
The month before that  in December he made the following prediction:

Eventually, as fear of default fades -- and investors demand a return on their capital, not just return of their capital -- the bond markets will take the printing press away from the central bankers because of inflation and currency debasement.

I'll skip over another dozen articles where he complains about so-called money printing and go all the way back to February 2011, "Ben Bernanke seems to have won his imaginary battle with deflation, but he (like many others) seems oblivious to the real threat of inflation."

Back in late 2010 he predicted growing interest rates in 2011 because of all that "money-printing" and to expect lots of inflation.

His oldest article available on MSN was from September 03, 2010 and guess what?  In it he predicts inflation!

As I said two weeks ago, I believe it is more likely that we are in for a period of stagflation, which is an entirely different world from deflation. With stagflation, interest rates eventually rise, and bonds do poorly. Companies benefit when they have pricing power and barriers to entry that keep potential competitors away, as do companies that are growing rapidly.

Unfortunately I can't go back to 2009 because his articles aren't available.  However, I found 2 blog posts from 2009 each referencing a different Fleckenstein article in which he was warning people about coming inflation.  See here and here.

Since this guy has been warning us about coming inflation for at least 3 1/2 years, I'm going to take his latest warning with a grain of salt.

With all the extra demand the government has been pumping into the economy, eventually it is eventually going to heal, start growing, and may someday start causing inflation, but at over 8% unemployment and a federal government that keeps threatening austerity and deficit reductions(thankfully it's only half-a*** these things), that day is not near.  If and when it does happen, then we can start following their austerity advice.
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