Markets Writhe Around FOMC Meeting

Of course, I may be dead wrong about all of this. In any event, I intend to watch the markets closely over the next several days, with an eye toward shorting stocks, and getting long more euros, gold, and especially silver. By extension, if the opportunity arises, folks may wish to buy some gold stocks. For now, there's no point in getting the cart before the horse. Let's see how the markets respond to the Fed's news. Having said all of that, I decided to buy some euros and a little gold today, just in case everyone has the same idea.

A Volcker Sampling: Finally, I would like to share some comments from former Fed chair Paul Volcker, whom I respect a great deal, apparently made at the London School of Economics recently. (Thanks to Rich for emailing them to me, via a story on Bloomberg.) On the subject of stimulus (the number of rate cuts produced by the Fed since January 2001), Volcker opined: "We have an amount of stimulus beyond anything I've heard of in history." On the current account deficit: "We have a record current-account deficit and we're living off the munificence of strangers. The only reason we're getting enough to fund the deficit is that Asian central banks are vigorously buying dollars."

Regarding deflation, Volcker said: "If I were setting odds on deflation in the U.S., the probability wouldn't reach 0.1 percent. I see no prospect of real deflation like we had in the U.S. and other countries in the 1930s." On the global economy: "The U.S. is doing OK, but it's difficult to feel comfortable from an American perspective when the rest of the world is doing so badly."

To that I would only comment, while the U.S. economy may be doing OK right now, I believe that beneath the surface, things are very shaky. My fear, as folks know, is that the second half of the year will be ugly. And given what's going on around the world, it could turn out to be downright gruesome.

---

William Fleckenstein is the president of Fleckenstein Capital, which manages a hedge fund based in Seattle. Outside contributing columnists for TheStreet.com and RealMoney, including Mr. Fleckenstein, may, from time to time, write about securities in which they have a position. In such cases, appropriate disclosure is made. At time of publication, Fleckenstein Capital was short Intel, long Intel puts, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy, sell or hold any security. The views and opinions expressed in Mr. Fleckenstein's columns are his own and not necessarily those of TheStreet.com. While Mr. Fleckenstein cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail].