Fleckenstein Plans '14 Return To Short-Selling

Oct 14 2013 | 1:57pm ET

Five years after abandoning the "stressful, nerve-wracking" business of shorting stocks, William Fleckenstein is preparing his return.

The hedge fund manager and founder of Seattle-based Fleckenstein Capital said he plans to relaunch his short-only hedge fund, predicting that the Federal Reserve's impending taper of its $85 billion per month bond-buying program will bring the fun back to shorting.

"For four years and counting, there was no reason to think about shorting," Fleckenstein told TheStreet.com. "I survived from 2000 to 2009, even when the market was going up, because I made what the Fed was doing a key variable." But, he said, once that changed, it was "impossible to make money on the short side. I knew the Fed and the other central bankers would print a tremendous amount of money and it would be impossible to be short until the time the bond market takes away the printing presses—I mean forces them to stop."

Given the yield on 10-year Treasuries, Fleckenstein says that time is now: He'll launch his RTM 2.0 fund early next year. (RTM stands for "revert to the mean.")

"I could be off by a year, I don't know. I may have to sit in cash for a year," he said. "I know the bond market will have to stop the Fed. Money printing was the problem and more of it won't fix anything. But you can't win that argument as a short until such time that the bond market stops it."

Fleckenstein will work with Wes Golby on the new fund, which will bet only on liquid stocks with a focus on technology companies, which Fleckenstein said are "prone to excess valuation."

"Most are bad businesses," he added.

Short-selling hedge funds have been battered in recent years by rising stocks. When Fleckenstein shut the fund, he said that shorting stocks had become "generally not very much fun."


In Depth

The Benefits Of Private Debt Investing

May 7 2015 | 10:43am ET

Jeffrey Haas is chief operating officer of Old Hill Partners Inc., an SEC-registered...

Lifestyle

Yale Receives $150 Million Gift from Blackstone’s Schwarzman

May 12 2015 | 12:10am ET

Yale University announced it has received a $150 million gift from Blackstone Group...

Guest Contributor

How To Generate 6% Yield In A Volatile World

May 22 2015 | 6:41am ET

Private credit comes in many different flavors, all with the common themes of over...

 

Editor's Note