Biderman and Fleckenstein: When will the bond and stock markets crack?

Dec
19

TrimTabs’ Charles Biderman spoke with short seller Bill Fleckenstein about the stock and bond markets and discussed why the process has already started. The two also dissect the pending fiscal cliff deal’s impact on the economy and the markets.

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One Response to Biderman and Fleckenstein: When will the bond and stock markets crack?

  1. Ed_B on December 21, 2012 at 5:40 am

    The growth rate of the moribund US economy has been abysmal under the Obama administration. This is more of the same malaise problem that we older folks saw when Jimmy Carter was president in 1976-80.

    We also have a Fed chief who cannot tell the difference between economic growth and inflation due to massive money printing schemes or between the air coming out of a Fed-created bubble and deflation. When a bubble forms, deflation is a good thing in that it reduces the impact of the misallocation of funds that creates the bubble without a terrific BANG! as it deflates, allowing the market to correct itself. We already know that central planning is an abject failure that has failed miserably every time it has been tried. Is central banking any better? No,not really. It is central planning applied to economics. We already know how well that worked for the USSR, Cuba, Angola, Albania, Cambodia, Viet Nam, and a host of other countries dumb enough to implement it. There is no reason whatever to repeat these failed experiments.

    Capitalism is not a perfect system but it does have a number of self-correcting mechanisms that allow it to get back on the right track and going again. Unfortunately, neither the Gov nor the Fed seem to want to allow these self-correcting mechanisms to work. Bankruptcy is a perfect example. By preventing bankruptcy from cleaning up the economic system, remove misallocations of capital, and put those economic resources into more efficient hands terrible distortions of what we call capitalism are introduced. I call this form of economics crapitalism or cronyism. When capitalism can no longer clean itself up, a lot of junk is allowed to build up in the system. Like cholesterol in a person’s arteries, this will eventually clog the system and cause its early demise.

    Another example of financial incompetence arrives in the form of the so-called “fiscal cliff”. We all know that a cliff is a dangerous place and that if we fall off, we can be badly injured or even killed. Well, this cliff is of our own making. We are simply spending and consuming more than we create, so we borrow and print even more money to support a higher but false lifestyle. It was created by a do-nothing congress and president who seem to think that delaying a problem is the best way to handle it. Actually, it is one of the worst ways. Like a snowball rolling down hill, delayed problems are not solved and only get bigger, nastier, and more difficult to solve. If this is done long enough, the time needed to solve the problem is wasted and the problem either becomes MUCH more difficult or even impossible to solve. So much for kicking the can down the road.Students of history are well aware, even if politicians are not, that these cans will eventually kick right back and probably in a very tender place.

    Our political system has a number of systemic problems, chief among them is that those who are elected do not have to have any special qualifications other than to win a popularity contest from time to time. Why do they not have to compete for these jobs via taking an extensive battery of tests to demonstrate their competency in various areas that would be useful to leaders, such as history, political science, geography, mathematics, science, economics, world events, etc.? Our problems are significant and the penalty for not solving them may be terrible, especially for our children and grand children. This is no place for the incompetent or the illiterate, yet congress and the administration seem infested with them. In many ways, they remind me of children playing dress-up by putting on dad’s boots or mom’s make-up and imagining themselves to be much more than they really are. Today’s and future Americans both need and deserve better.

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Charles BidermanCharles Biderman is the Chairman of TrimTabs Investment Research and Portfolio Manager of the TrimTabs Float Shrink ETF (TTFS)

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