Chapter 6Fleckenstein: Strategies and Tactics
Bill Fleckenstein slammed the door to his black BMW 740i and rode the elevator to the 4th-floor offices of his most famous client, Paul Allen's Vulcan Capital, the private firm that oversaw the Microsoft co-founder's $5 billion fortune. Fleckenstein, whom friends call Fleck, was there to see Vulcan president Bill Savoy. In late 1999, the end-of-millennium Internet bubble was inflating at mach speed, generating billions for technology stock investors like Vulcan. By contrast, it was open season on Fleckenstein's eponymous bearish firm, which had nearly been wiped out over the previous two years as wagers against market darlings like Micron Technology, Compaq Computer, and Gateway hemorrhaged cash.
Intel was trading at a price-earnings multiple of 80. An analyst had just hung a $450 price target on a money-losing online retailer called Amazon.com. And the stocks of personal computer makers were spiking, even as the price of desktops fell below $1,000. The very name of Fleckenstein's own hedge fund mocked him—RTM, for Reversion To the Mean.
There was no reversion—only surging stock prices as investors bet their life savings on something called the new economy. Now, in Savoy's office, which looked out onto shimmering Lake Washington, Fleckenstein told his favorite client he was ready to quit.
“I'm thinking about throwing in the towel,” he said. “I need to maintain my sanity.”
Savoy held a Louisville Slugger baseball bat, taking practice ...
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