It’s no surprise to find that Bill Fleckenstein has no interest in being long stocks. He says it’s time to fade the Fed’s tough talk, since he’s convinced the Fed isn’t going to be nearly as tough as their talk (he’s probably right about that):
Another reason why I’m anxious to take the other side of the tough-Fed trade: Even though the Fed is talking tough, the Fed is in fact not tough.
Recently, we’ve seen a couple of coupon passes (i.e., Fed purchases of Treasury securities from dealers). And, as economist Carl Pellegrini pointed out last Wednesday:
“The Fed is not tightening. If it were, do you really believe that the growth in commercial paper outstanding would be 18.4% for the last few weeks; and that bank loans and commercial paper outstanding would be up a seasonally adjusted rate of 24.6% for the last seven weeks, 15.7% for the last 13 weeks, and 13.35% for the last 52 weeks?” Thus, not only is the Fed not tough, it has no real intention of being tough.”
Of course, if the Fed wants to save its reputation — while trying to act dovish — it has to talk that way. To quote my daily column last Tuesday: “The Fed knows the economy is slowing down. It’s really dying to pause. But since so many have essentially laughed at it, the Fed feels as though it has to do something to make sure it’s still perceived as being in charge.”
Fleck says if the Fed doesn’t follow through on their tough talk, it’ll be time for the metals to resume their run.