Bill Fleckenstein, President of Fleckenstein Capital and one of my favorite money managers, was on CNBC’s Fast Money Wednesday night giving his typical, colorful commentary on gold. I am posting an approximate transcript to his brief interview because it included what I think should be a classic moment in gold commentary.
Toward the end of the interview, host Melissa Lee asked Fleck: “When you hold gold in your portfolio, how are you hedging that.” Fleck plainly responded: “Why would I want to hedge it?” It left Ms. Lee nearly speechless for a few seconds (or several minutes in TV broadcast time!). She clearly does not yet understand the man or the reasons for his years-long stubborn bullishness on gold.
Here is my rough transcript from the interview, excluding most of the questions. You can also catch the interview starting at the 9:45 mark in the video embedded at the bottom.
INTERVIEW
Gold at $1300 doesn’t mean a whole heck of a lot any more than $1200, $1100 or $1000 did. There seems to me there is a tremendous amount of angst about gold having a correction, the implication being everyone is worried about those folks who already own gold. To me, the bigger trade is, almost no one owns gold. And, if you ask your friends, do they own gold and how much, I think the securer trade is that people have yet to understand that this colored paper is not worth anything and people need protection. There will be shakeouts as in the past, but the path of least resistance is up.
I don’t know whether parabolic move will happen in the near-term. I think before it is over, sometime it will go parabolic. I don’t think it is anytime soon.
I think it will go parabolic into the moment when change is afoot to give us some alternative to owning gold. There is nothing even close in the currency arena: yen, euros, dollars, whatever you want, they’re all worthless. So, someday we will have a parabolic move, and there will be an alternative to gold, but right now I don’t see what that is.
Bearish case for gold: prudence, responsibility, central bankers who didn’t behave like politburo members who think they can central plan their way through problems that have given us bubbles and bailouts. The dollar standard as we have come to know it is in its dying days. Whether it’s in 1 or 2 or 3 years, I don’t know. An alternative currency regime would be a bearish case for gold. As would some sort of fiscal responsibility. And I don’t mean Tea Party. I mean real, honest-to-goodness responsibility.
When the Fed tells you that they mean to jack up inflation when it is already up and running in various different things, how can you feel comfortable when you just own paper?
Melissa Lee ask the big one: “When you hold gold in your portfolio, how are you hedging that?”
Why would I want to hedge it? I have modulated my position (across gold and miners and silver). If I want to reduce exposure, I would sell miners given their volatility. Not looking to sell gold unless something really goofy happens on the upside.
END INTERVIEW
For some references on what Fleckenstein is talking about when he says inflation is “up and running in various things”, you can scan through a small blog aptly titled “Inflation Watch” (I am a contributor). He also writes once a week for MSN Money under the “Contrarian Chronicles.”
I have been a fan of Fleck ever since he helped open my eyes about the tech bubble in 1999 and 2000 at a time when much of the mainstream media was still celebrating the fun. He stayed bearish throughout the bull market that rose from tech’s ashes in the form of the housing bubble. Fleckenstein of course sounded extremely silly at times, but all his warnings eventually came to pass. He is a true master in patience, and he has applied this patience to his investments in gold and silver. He tries to avoid making specific predictions on timing and instead sticks to his understanding that certain economic forces simply cannot be delayed or forestalled forever. Over time he has saved me a lot of money and angst and taught me a lot. While I am not a Libertarian like he is, I can only hope to one day emulate his patience and sharp analysis.
Fleckenstein starts at 9:45
Be careful out there!
Full disclosure: long GG and SLV