Fleck's Thoughts

A reader was kind enough to send in a collection of his favorite "thoughts" from Bill, which are reproduced here.

All roads lead to money printing, debased currencies and inflation until the printing press is taken away.

Booms and busts are part of capitalism. The gold standard can't stop that and the gold standard is not a cure-all, it's just the least bad option.

The stock market is as much about computers and momentum as it is about fundamentals.

I rarely trade my gold but do hedge on very rare occasions.

I can tell you that the most important things for shorting are WHEN YOU GET SHORT, WHEN YOU PRESS, WHEN YOU CUT BACK (either because it isn’t working, or it did). That is the essence of shorting. It is all timing.

Valuation is very subjective, like setting odds. It's more art than science.

Gold is the primary bull market while the miners are a derivative.

Euphoria does not equal bubbles and thus all bull markets do not end in bubbles. In fact, very few do. Bubbles are rare.

I don’t look at trading as a way to make money, but as a way to avoid losses while trying to be as well-positioned as possible in the gold bull market.

I don't have to try to capture every potential idea, nor do you. It's ideas that you really understand and fit your big picture view that are the ones to focus on.

I never use stops except in S&P futures, just mental stops and not always on every trade. When I'm trading miners I often have a mental stop. Trading is fluid and you must be flexible, though you have to stay disciplined too.

I find the best stops are a price where you feel that if a stock trades there it means you are wrong about your short-term view. The closer the stop, the less you lose, but the more you are subject to random noise. With the stuff I really want to try to be in, but manage the risk, I usually give my mental stops more room. It’s all personal and all just guesswork as you try to manage risk/reward and not take big losses.

I still think before this gold bull market is over that miners will be viewed as the place to go to own gold, but so far that thought has been dead wrong.

Nothing will change the long-term outlook for gold. The Fed is committed to negative real rates and higher inflation, as is the rest of the planet, but TRADING REQUIRES DISCIPLINE. Sometimes trades don't work and being able to admit it and deal with it is part of trading; investing, too.

You can’t short stocks on valuation, PERIOD. Print that out and paste it to your computer. You need a catalyst of some sort -- usually unexpected (by the bulls) bad news, and thus valuation-oriented pairs trades that you described usually crush you, as the longs never keep pace with the shorts. When stocks are manic like CMG, all kinds of weird stuff happens. It’s just the madness of crowds. Look back at how insane RIMM was, and look what happened to it, BUT it didn’t start to work until macro and company-specific stuff started to go wrong. Valuation just impacts how far they can fall, not WHEN they will fall. I ran a short fund for 12 years, trust me on this.

I never sell premium. It looks good, but over time most people can't make it work.

The government cannot stop the crisis of confidence that’s coming unless it deals with the out-of-control debts and politicians won’t do that WITHOUT A CRISIS. After all, if printing money solved everything no country would ever have gotten in financial trouble.

The bond market being mispriced means lots of assets may also be mispriced. Rising rates will likely pressure real estate prices.

The CPI has been rejiggered to basically NOT show inflation. If we had the old CPI, inflation would likely be 5-6% right now.

No one has next week's Wall Street Journal.

When big change starts to occur, especially when you are looking for it, you can usually tell, but it often takes way longer than you think it ought to.

Mr. Skin: I NEVER try to grasp the reason or the "why" behind a market's behavior. Instead, simply pay attention to the "what," act accordingly, and completely ignore the ego. The market always knows best and it doesn't know you own it, short it, or ignore it. It just "is" and its behavior will often telegraph its moves.

That's what markets do; they test people's resolve all the time.

You have to somehow stay disciplined, yet flexible enough to figure out when you're wrong.

It isn't just manipulation that drives stocks towards strikes on expiration, the natural process of unwinding positions also creates a powerful force.

No one I know who knows anything about silver, and I know a lot of people connected to that market, believe that it is manipulated. All markets have some degree of guys trying to push prices around.

Losing money teaches us lessons. Making money usually doesn't, but sometimes can.

Emotions have no place in investing. You need to tune them out.

The price of the stock doesn’t dictate whether it’s a trade or an investment, the environment does.

You have to pay up when you wait for more clarity.

The people (Federal Reserve) who have the incredible power that printing money bestows have no understanding of history and are criminally irresponsible. We must understand what they are going to do and prepare ourselves for those policies and their consequences.

Just because you have an idea doesn't mean it will work and you also can't capitalize on every idea you have.

All information isn't created equal, and many people fall victim to the problem of knowing the price of everything and the value of nothing. Knowing what matters takes experience, which is the price Mr. Market charges for lessons.

Position sizing is very important. As a rule, 3-5% is a meaningful position size in most cases, but some situations require smaller positions too. Having 10% positions or more has a higher risk and reward and you become a blend of investor/speculator MOST of the time, but not always. Positions north of 10%, which I don’t do often, I nearly always manage them differently, being more responsive to market action, and looking for some sort of a catalyst as well. This is not the case with gold itself, where I have a position way over 15%. I look at gold as a volatile currency, not like a stock position.

Cash is an inverse function of opportunities and risk.

When in doubt, do a little. You will get a feel and you will have flexibility.

With options, it's usually a good idea to get your cost taken out after they double or triple, as you then own them for free. You reduce your upside but always get your "bait" back that way.

Mr. Skin: Downside leverage operates at the speed of light while upside leverage operates at the speed of sound!

Dividend enticement is a little like, "More money has been lost reaching for yield than at the point of a gun."

Investing is an art, NOT a science!

What holds up the dollar is that all other major currencies have the same monetary policy and debt problems. Each one takes turns being the one-eyed man in the land of the blind from time to time.

Markets oftentimes don't discount events well anymore. Why? I don't know, but computers and paid to play are part of the answer, IMO.

A top in metals will occur about the time that fiscal sanity breaks out in this country and not likely before then.

The biggest issue is runaway entitlements. Promises, lies by politicians who may have meant well but were economic fools, have been made that cannot and will not be kept. Just like those cities that have filed for bankruptcy due to pension costs. There isn’t enough money.

Markets don't always do "what they are supposed to" exactly when we think they "should." It’s just the way it is, unfortunately.

Nothing in the mining or mining related industry has worked for quite some time and it's why things are so cheap. But cheapness won't cause change, but it will limit risk.

The real estate market is a function of 3% mortgages, IMO.