Guru Grades
Bill Fleckenstein: Apocalypse Soon (Last Updated 5/9/08)
As suggested by reader (and guru) Jason Kelly, we evaluate here Bill Fleckenstein's weekly commentary in the "Contrarian
Chronicles" at MSN Money since August 2002 (the earliest we can find).
Bill Fleckenstein, president of Fleckenstein Capital, manages a hedge fund based
in Seattle. The chart below extracts those highlights from his commentary most
indicative of the direction of the overall stock market and shows the performance
of the S&P 500
index over the 5, 21, 63 and 254 trading days after the publication date
for each item. Red plus (minus) signs to the right of specific items indicate
those the market subsequently proves right (wrong). We conclude that:
- Bill Fleckenstein has been consistently and confidently very pessimistic
about the U.S. economy, and especially disparaging of the Federal Reserve's
management of the money supply. He believes the economy must experience much
more pain to work off the excesses of the Internet bubble, often comparing
current financial conditions to those of the most disastrous in U.S. history.
- He has been mostly a short-seller of stocks in recent years, based on his
belief that the stock market is grossly overvalued and therefore doomed to
fall significantly in a continuing bear market. His pronouncements sometimes
tend toward the apocalyptic, making it difficult to judge him correct at any
point over the past four years. (From his 1/10/05 commentary: "I don’t
believe that there has been a moment in time in the last 50 years where the
stock market has been more lopsidedly tilted toward all risk and no reward.")
A typical investor might well have interpreted his advice to mean staying
out of the market, or shorting the market, for practically all of the period
examined.
- Mr. Fleckenstein has been especially negative toward the technology sector.
He has consistently been vocal about the severity of the housing bubble and
favorable toward gold and silver.
- With respect to market timing, Mr. Fleckenstein's long-term view is as described
above. His forecasts of short-term and intermediate-term stock market behavior
are more circumspect, focusing on deception, delusion and momentum as drivers
of doomed market rallies.
- Based on subsequent stock market performance and our judgments about his
forecasts for overall stock market direction, Bill Fleckenstein has been right
30% of the time, a very poor record. His forecast sample size is moderate,
as is therefore our confidence in this conclusion.
In summary, Bill Fleckenstein's stuck-on-pending-disaster outlook has resulted
in a very weak stock market forecasting record over the past few years. Confidence
in this conclusion is moderate. When disaster does strike, he will have
warned us, and warned us, and warned us...
See Guru Grades for a snapshot
of the accuracy of various experts in predicting the direction of the U.S. stock
market, including links to evaluations of the commentaries of other individual
market pundits and gurus.
