Bill Fleckenstein: Buying Financial Stocks Akin to Going to Casino

By on May 18, 2012

Bill Fleckenstein - Fleckenstein CapitalNoted short seller and hedge fund manager Bill Fleckenstein was interviewed on Bloomberg TV a couple of days ago.  He touched on the topics of JP Morgan and financials in general, along with his view of the European dilemma.

Fleckenstein had been quoted as saying he wouldn’t buy JP Morgan if a gun was put to his head before the recent trading losses were exposed.

Fleckenstein said the state of accounting at financial firms is such that the financial statements mean nothing; something he pointed out 10 years ago. If you are an outsider looking in you don’t know what you own at a financial institution according to Fleckenstein. Supposedly Jamie Dimon didn’t know what was going on at JP Morgan so how would an investor know, he added. Add in the semi gun-slinging mentality of the management and you’re just making a bet. Fleckenstein said he didn’t understand why anyone would want to own a financial stock.

When pressed by the attractive interviewer why investors are willing to invest in financial stocks, Fleckenstein said he didn’t know, but he sees people going to casinos even though they are almost guaranteed to lose. He added that he didn’t understand how people could be so stupid not to see the housing bubble, but they didn’t.

Regarding the economic recovery, Fleckenstein said seasonal adjustments made the economy appear brighter than it was. The economy now is weaker than people think and Europe’s economy is weak as we know; along with Asia slowing down, he added.

When asked if he would buy anything in Europe, Fleckenstein said he didn’t think so because another crisis is building over there. He said government bonds are starting to back up in Spain and Italy, there is disarray in Greece, and France elected a new leader. A point will come where people are scared to death and the ECB and Fed ride to the rescue.

The interview continued with Fleckenstein speculating on what happens next in Europe and comments about stocks he finds attractive (Microsoft, gold mining stocks, Pan American Silver, and Mongolia).

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