Smackdown: Fleckenstein vs Yardeni

Friday, April 21, 2006 | 03:00 PM

Interesting smackdown between Bill Fleckenstein and Ed "Y2K" Yardeni:"

"Even if the Fed can't strip the inflation measurement of all items going up in price, it has a built-in excuse, provided recently by economist Ed Yardeni: One must decide whether prices are going up because of "excess demand" or supply disruptions. As Yardeni wrote in his morning piece April 11: "Raising interest rates when supply shocks may be the main reason for higher commodity prices could be a mistake, especially when there is no evidence that core-inflation rates are rising too."

Got that?

His explanation: "Rising commodity prices resulting from supply disruptions -- rather than driven by demand -- may take the steam out of the global boom, and slow U.S. consumer spending and overall economic growth."

See? Rising prices will correct themselves if they're due to supply disruption, an argument that he leans toward. (Rising prices couldn't possibly come from too much money-printing, could they?) The Fed need do nothing. Thus, I believe (for not just this reason, but others that I have articulated) that only one more rate hike remains in the Fed's quiver.

That said, I still think we could see data that would persuade the Fed not to even give us that much. If there is a nasty sell-off into earnings season, if we do in fact see some negative economic data, coupled with problems in the real-estate market (none of which would shock me), the Fed might be inclined to stand down on May 10. Either way, the rally that we get when the Fed decides it's done will be the last one before serious downside action occurs.

Good stuff!


Does the Fed really 'know' what’s going on?
Bill Fleckenstein
MSN Contrarian Chronicles,  4/17/2006

Friday, April 21, 2006 | 03:00 PM | Permalink | Comments (18) | TrackBack (0) add to | digg digg this! | technorati add to technorati | email email this post



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The term permabear get's thrown around a lot these days, and used on people who have only been bearish since the tech collapse. But, Fleck qualifies for permabear if there ever was one. Reading his articles, I wonder if he won't be happy till we bump into each other at the soup kitchen a few years from now, getting our lukewarm cabbage broth and stale bread.

At the same time, I'm paying a lot more attention to Fleck lately, due in part to my own portfolio. I trade both ways with my fun money, but the IRA money stays long/short till it doesn't. What is especially frustrating is that I am at the same place in my NDX index funds as I was on January 3. As you showed in your charts a few days back, all your money was made in the first week, but if you're indexed to the Naz, all your $$$ was made in the by Thursday.

Posted by: Bynocerus | Apr 21, 2006 3:11:30 PM

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