The most elementary rule of Mathematical Logic states that [Clause A implies Clause B] is logically equivalent to [negative Clause B implies negative Clause A]. In syntax, this reads as (A  → B ) is logically equivalent to (- B → -A). 

Our framework for the Afghan problem has been simple and historical. Afghanistan was partitioned into North Afghanistan (today's Afghanistan) and South Afghanistan (occupied by today's Pakistan) by the 1893 treaty between Afghanistan and British-administered India, the handiwork of Mortimer Durand, the then Foreign Secretary of British-administered India.

This treaty established the Durand line as the border between today's Afghanistan and British-administered India. Pakistan has maintained that it is the successor of British-administered India while Afghanistan maintains to this day that the Durand Treaty is invalid and ex-parte because British India does not exist. The part of Afghanistan occupied by Pakistan is predominantly Pashtun and so it is called Pashtunistan, or the land of the Pashtuns. Pakistan has acceded to this basic reality and recently renamed it Khyber-Pakhtunhawa.

Our core axiom is what we laid out on August 9, 2008 - The War on Terror in Afghanistan cannot be won without reunification of Pashtunistan with Afghanistan . In other words, [(Ending The Partition of Afghanistan) implies (Winning the War in Afghanistan)]. 

In Mathematical Logic, this is equivalent to [Not (Winning the war in Afghanistan) implies Not (Ending the Partition of Afghanistan)]. This is what Ambassador Robert Blackwill argues in his opinion in the Financial Times titled America must give the south to the Taliban . (Note - Not winning the war is essentially containment and very different from losing the war).

This is an important article because it spells out facts that have never been printed in mainstream media in America. Sort of facts you should have known about Af-Pak but were never told. The opening paragraph of Ambassador Blackwill's opinion states:

• In spite of the commitments made at Tuesday’s conference on the future of Afghanistan in Kabul, the current US counter-insurgency strategy (Coin) is likely to fail. The Taliban cannot be sufficiently weakened in Pashtun Afghanistan to coerce it to the negotiating table. America cannot win over sufficient numbers of the Afghan Pashtun on whom Coin depends. President Hamid Karzai’s deeply corrupt government shows no signs of improvement. The Afghanistan army cannot stand up to the Taliban for many years, if ever. Pakistan’s military continues to support its Afghan Taliban proxies. And the long-term Coin strategy and the far shorter US political timeline are incompatible.

These are self-evident statements. He then discusses the tactic of containment of the Taleban to South Afghanistan. In his words, "After this review the US should stop talking about exit strategies, and accept that the Taliban will inevitably control most of the Pashtun south". Frankly, we do not understand the future tense in his statement. Today's ground reality is that the Taleban already control the Pashtun south or South Afghanistan. 


           (Green area is the Pashtun South - src Wikipedia)


In his penultimate paragraph, Ambassador Blackwill looks at the broader implications:

• Wider threats to the region should be taken seriously. An irredentist “Pashtunistan”, and perhaps the fracturing of Pakistan, could happen. Ironically, the Pakistan military is making such a development more likely through its support for the Afghan Taliban. But why should the US be more concerned about the territorial integrity of Pakistan than the country’s General Ashfaq Kayani and his colleagues? (emphasis ours) Indeed, the spectre of de facto partition in Afghanistan might even produce the change of heart in the Pakistani military’s attitude to the Afghan Taliban that successive US administration have failed to achieve.

This is what we argued in the section Danger to Pakistan - What kills you is the danger you don't see in our August 2008 article titled Afghanistan-Pakistan - Will the Sins of England be visited Upon America? The Panjabi-Pakistani Army is still focused on fighting its dream war against India. According to the New York Times, General Kayani, the virtual dictator of Pakistan's policy, stated this unequivocally to foreign journalists earlier this year. But the history of the past 1,000 years tells all of us that the Pashtuns have always marched south into the plains of Panjab and the Pashtuns have almost always won. 

But the Pakistani Panjabi Army and its arm chair generals led by Kayani are the MIP* (most important player) of the Af-Pak theater. This MIP status has made the Panjabi-Pakistani Generals the most powerful and the richest clan in Pakistan. Losing this MIP status is an existential* threat to them. If they do go, they will go the traditional Pakhtun way by getting killed by soldiers they consider their own. 

But as Ambassador Blackwill contends, why should the US be more concerned or spend US lives, money and political will to protect the territorial integrity of Pakistan? Let the Panjabi-Pakistanis and Pakhtuns fight their own battles the way they have for the past 1,000 years. 

Ambassador Blackwill concludes "With its many flaws, de facto partition is hardly a utopian outcome in Afghanistan. The overriding virtue of this concept is only that it is better than all available alternatives."


* Read the section An Existential Danger for the Pakistani Army in our December 2009 article The Ignatius Opinion - A Virtual Blueprint of Convenient, Myopic & Wrong Analysis about Af-Pak.




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Editor's Note: Our previous article on this topic was New York Times vs. Washington Post - IV - Pakistan-Afghanistan. This article is, in a way, an extension of the previous article.


We have written four previous articles about the differences we see between the New York Times & the Washington Post. The quality of these newspapers is very good and we have a high regard for the reporters who write for these newspapers. But there is a distinct difference between how these two newspapers approach stories and the mindset of the reporters.

We summarized the differences we see in our fourth article on December 26, 2009: 

• "The two newspapers seem to derive their own ethos & approach from the characteristics of their home city...... New York is a stunningly diverse city with a global outlook. New York is a builder of its own success.
• In contrast, Washington DC is a very parochial city in its power base, ethnicity and outlook.... It inherits its standing from the White House and the Congress. 
• As Helene Cooper said, New York Times reporters strive to present new & different outlooks, they disagree with each other as individuals based on their backgrounds or views. They are more likely to travel globally and bring stories that  differ from official consensus.
• Washington Post reporters and opinionators seem to disagree, if they ever do in public, based on their party affiliations or ideology. Their sources are politicians, lobbyists and US or Foreign Government Officials."

This above article was titled New York Times vs. Washington Post - IV - Pakistan-Afghanistan. In this article, we presented evidence from articles published in these two newspapers and wrote:

• Consistently, it has been the New York Times that has broken new stories or presented the reality underneath the public facts.
• Given their proximity to Governments, Embassies & lobbyists, Washington Post writers tend to reflect the positions of these sources rather than explore the reality on the ground. This is particularly true of the Post articles on Pakistan.

 

 

We were again struck by this essential difference between the New York Times and the Washington Post in their articles on Afghanistan-Pakistan this week.

The first NYT article is Afghan Deadline Is Cutting Two Ways by David E. Sanger on July 21. This is a serious article in which Mr. Sanger discusses the problems with President Obama's strategy in Afghanistan, especially his declaration to a deadline to begin drawing down troops by next summer. Mr. Sanger writes:

 

 

• But over the past two weeks — on Capitol Hill, in Kabul and even in conversations with foreign leaders — Mr. Obama has been reminded how the goal has become what one senior American military commander called a “double-edged sword,” one that hangs over the White House as surely as it hangs over President Hamid Karzai.
• All this has made it harder than ever for Mr. Obama to convince the Afghans and the Pakistanis that the West’s commitment is enduring.
• “Politically, the support is absolutely crumbling,” said David Gordon, a former top official on the National Intelligence Council and at the State Department who is now at the Eurasia Group. “You can’t hide that from the players in the region, and when they see it, it makes them hedge even more, preparing for the post-American era.”.

 

The second New York Times article is Army Chief to Serve 3 More Years in Pakistan by Salman Masood on July 22, 2010. Mr. Masood writes from Pakistan:

 

• The government extended the term of Pakistan's army chief by three years on Thursday, a move backed by the United States as it seeks to encourage Pakistan as a more reliable ally against Taliban and Qaeda militants.
• The Americans have praised General Kayani for his army’s campaigns against the Pakistani Taliban but, behind the scenes, the Americans have been disappointed with the general’s failure to disown the Afghan Taliban, who benefit from sanctuaries in Pakistan’s tribal areas.
• In a presentation to foreign journalists earlier this year, the general made it clear that a richer, bigger India remained Pakistan’s chief enemy and that he would not allow the effort against militants to distract Pakistan from its vigilance against India.

 

This week, the Washington Post published the article Afghanistan builds up strategic partnership with Pakistan by Joshua Partlow on July 22, 2010.

• At the Pakistani Embassy in Kabul these days, a visitor is likely to be handed a booklet about the two countries by Ambassador Mohammad Sadiq titled "The Conjoined Twins."
• "Pakistan and Afghanistan are brothers," Pakistan's foreign minister, Shah Mahmood Qureshi, said in Kabul on Monday. "We have improved our relations considerably."
• "It's a paradigm shift," Sadiq said in an interview last week. "We see a lot more confidence in each other, a lot more cooperation in very sensitive fields."
• "We now have a better relationship with Pakistan," a senior Afghan official said. "There is a new willingness on both sides that we should resolve the [Taliban] problem. We are both suffering from this menace."
• Critics of Afghan President Hamid Karzai remain skeptical, however, that Pakistan will commit to destroying elements of the Taliban network, which senior U.S. officials think is supported by Pakistan's Inter-Services Intelligence agency to some degree."We know that Mr. Karzai is in a very dangerous game that he cannot win. It's impossible," said Saleh Mohammad Registani, an Afghan lawmaker. "This game is controlled by Pakistan."
• "Everyone's focus at the moment is to help these two countries," NATO's senior civilian representative in Afghanistan, Mark Sedwill, told reporters Saturday. "There has been nothing in the dialogue between the two countries with which we're uncomfortable, and all of us would like to see them working more effectively together."

 

 

We recommend reading all these three articles to see the difference between reporters who write with insight & analysis and those who write to report what their sources tell them and what their governmental sources would like to see in their newspapers. The first characterizes the New York Times and the second, unfortunately, the Washington Post.

Finally, the strategic partnership between Afghanistan & Pakistan. Wasn't it in place before September 11, 2001? 


Send your feedback to editor@macroviewpoints.com

        

Until recently, we had never heard of the American Journal of Clinical Nutrition. But a few days before the Fourth of July weekend, a reader from Mumbai sent us a Times of India article about a research paper on the health benefits of eating Chocolate published in this august Journal. (A journal that lauds eating chocolate has to be termed august). So we wrote an article titled Could You Eat Chocolate Without Feeling Guilty? A New Chinese Study Says You Should.

This week we came across another article about a paper published in the American Journal of Clinical Nutrition. This article was from the Hindustan Times. This research paper, however, may anger or disappoint many readers. Because the title of the Hindustan Times article reads Meat lovers gain more weight . 

According to this article, this study was conducted by researchers from Imperial College, London and,

• The research involved more than 100,000 men and 270,000 women from 10 European countries who took part in a study of cancer and nutrition and other lifestyle factors.
• The study found that avid meat eaters gained more weight over 5 years than those who ate less meat but same amount of calories.
• According to the researchers, the strongest association with weight gain was poultry, followed by processed meat and red meat.

The article concludes with:

• The researchers led by Dr. Anne-Claire Vergnaud said while this is a relatively small amount of weight from an individual's point of view, gaining an average of 4 pounds in 5 years "could have an important effect from a population perspective."

We refuse to make any editorial comment about the findings of this study or the contents of this article. To each his own, we say!        

Getting back to our article about the benefits of Chocolate, we recently found that not only could Chocolate lower bad cholesterol but it could potentially make people rich.

We offer the case in point of Anthony Ward, the British Hedge Fund Manager who bought about $1 billion worth of cocoa beans. Unlike most players in commodities futures, Mr. Ward took delivery of the cocoa beans. Why? Listen to Erin Burnett of CNBC explain in her videoclip Cuckoo for Cocoa.

In Erin's discussion with James Cordier, her guest "expert", light was shed on this mysterious purchase:

• This is a much larger bet than most people are familiar with; if in fact he has the staying power with this size of purchase, it is going to be a huge market mover later this year.
• Demand for cocoa is excellent; here in the United States it is thought that as economic worries mount, the consumption of chocolate actually goes up,
• As far as the BRIC nations, demand for cocoa right now is exploding,
• So time is certainly on his hands, if in fact he has the financing for this in place, all he has to do is wait for the market to come to him.

We wish Mr. Ward good luck.  We would never put on this trade even if we could rent the brains and the financing to do it. Our love for chocolate is such that we could not allow for our cocoa beans to sit in warehouses. We would convert them to chocolate and eat it. 

But as Erin's co-anchor Mark Haines wondered how could a single buyer amass such a large stake when there are position limits on most futures contracts in the USA? The answer, Mr. Ward bought his cocoa in London, where unlike the USA, there are apparently no position limits. An eye-opener for those blithely assume that the British are more conservative than the risk-taking, cowboy Americans?


Send your feedback to editor@macroviewpoints.com.

        

Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.


Who's Your Daddy?

The Stock Market said, China, you are our Daddy. Last week, there was such gloom about the US economy that we ourselves felt the story about the weakness was too pat. No, we do not mean that the US economy was not weak but that the gloom about the weakness was perhaps too thick.

In any case, China indicated on Tuesday morning that they had taken their foot off the brake a wee bit. And the resource stocks said Thank You, Daddy. Look at the results. In 4 trading days, CLF went from 45 to 55; FCX went from 60 to 70 and X went from 40 to 48. Then, Dow companies delivered good earnings, especially companies like CAT, the beneficiary of emerging markets spending on infrastructure.

On Wednesday, the market dropped like a rock when Chairman Bernanke began his Humphrey Hawkins testimony. In retrospect, this was a boon for any one who bought the weakness. Actually it need not have been in retrospect. This has been a pattern since the days of Greenspan. The decline on the first day of Humphrey Hawkins is almost always followed by a rally on the second day of Humphrey-Hawkins.

The European news was just as important. The European data, especially the PMI, came in stronger than expected, yes weak expectations. Then on Friday, the sort of meaningless stress tests came in benign. Regardless of the curve on which these tests were graded, the markets saw that the prospect of Sovereign defaults had faded and that was enough for a rally on Friday afternoon.

The stock rally took S&P 500 just above 1100 and the 30-year bond yield just above 4%. Next week is the end of July, usually a positive week. So the skies seem clear at least as we write this note. This of course does tally with the clips we featured last week of Mary Ann Bartels and Charles Nenner who sort of conceded a rally into August.

So Risk was deemed on by the end of the past week. How long it remains on remains to be seen!

Currencies & Treasuries

The Euro, the Pound and the Aussie Dollar kept their rally going this week. Who would have thought a few weeks ago that the Euro would see 1.30 so soon. Of course, it has not seen that level yet, or at least for more than a fleeting moment. We remain doubtful about the Euro rally well past 1.30. Perhaps, because we remember the admonition of Robert Prechter to Maria Bartiromo.

Treasuries finally weakened on Thursday and Friday after reaching new lows (barely new lows) in yield on Wednesday during the Bernanke-inspired selloff in stocks.  If risk is on, then Treasuries might not be.

We would not be surprised to see a moderate selloff in Treasuries, perhaps the 10-year going to 3.20% yield as Larry Fink of BlackRock said on Bloomberg TV. That is really a refresher and not a sell-off, a refresher we would gladly welcome.

After all, we saw this sort of risk-is-back rally in August-September 2007. Such a rally rises when the gloom has become too thick and fears too debilitating. Then after a few weeks of the risk rally, the gloom turns into euphoria and the outlook seems exuberant. Then reality strikes.

As we have said before, we are naive simpletons. But we would not be surprised to see such history rhyme again, perhaps by late August or early September.


An Amazon of a comeback

On Thursday, Amazon reported its earnings. The stock dropped like a stone from the $120 close to near $100. Then as if on a dime, the stock began recovering. It closed the after-market (if there is indeed such a close) near $106. It opened on Friday just below $106 and rose steadily to $119 at Friday's close without any meaningful intra-day decline. Frankly, we do not recall seeing anything like this before.


Featured Videoclips

1. Donald Straszheim & Ian Bremmer on CNBC's Closing Bell on Monday, July 19
2. Doug Kass on CNBC's Fast Money on Wednesday, July 21
3. Walter Zimmerman on CNBC's Closing Bell on Thursday, July 22
4. Richard Kinder on CNBC's Mad Money on Thursday, July 22
5. Tony Crescenzi & David Lutz on CNBC's Street Signs on Wednesday, July 21
6. CNBC's Jane Wells on CNBC Closing Bell on Friday, July 23

1. Tougher Times Ahead for China? - Donald Straszheim & Ian Bremmer with CNBC's Maria Bartiromo - Monday, July 19

Since the apparent easing of China's posture proved to be the trigger for this week's rally, it seemed natural to let a China clip get our pole position of the week. Donald Straszheim is a veteran China-hand and we always like to hear his views. We remind readers that Mr. Straszheim was bearish when he needed to be, for example on Monday, July 27, 2009 when he told Maria Bartiromo "I would caution that part of this growth that China is enjoying right now seems a little artificial to me.because it is an enormous push through the state owned banks to push lending to state owned enterprises and an enormous push through state owned enterprises to invest in capacity that I don't really think either China or the world needs". (see clip 6 of our Videoclips article for week of July 26-August 1, 2009 ).

This pair of Straszheim and Bremmer gave an insightful interview to Maria Bartiromo on Friday, February 5, 2010 (see clip 3 of our Videoclips article for February 1 - February 6 week ). We like to go back and see what CNBC guests said during their prior appearances. That often tells us whom to listen to and whom to ignore.

• Bartiromo - Don, China's second quarter GDP growth 10.3%, not in line with what you are seeing; what is ISI group's research and number-crunching tell you about the direction of China's growth and whether that has real implications to the rest of the world?
• Straszheim - China is slowing, Maria. The first quarter was extraordinarily rapid, too hot in fact. That's why China launched a series of measures to slow their economy; they have accomplished that; we see a second half of 2010 in which the growth rate is 7-8%, that's still I think pretty good. Most important, the inflation story is over. China does not have an inflation problem. We can all be happy about that.
• Bartiromo - you know, 7-8% growth obviously, think about where we are in the United States, is a fantastic number, but Ian, what kind of implications does an economy that goes from almost 12% growth to 8% growth have on the rest of the world? We are all betting on China, here as far as the demand picture and that's a huge move.
• Bremmer - We are betting on China and a lot of our multinationals are now coming out and saying they are concerned because they are having a harder time investing in what should be the most exciting market for them anywhere, given that the West is problematic. There is no question that this downturn is going to have an impact; everyone is looking at where the big numbers are - in the United States, the consumption is going down particularly at the high end, in Europe, everyone is defensive on the Euro because it has to have years of serious fiscal austerity and now China's very good clip but it is supposed to be the world's best story and it still is but it is not an exuberant story., it is a story that will allow them political stability and very strong economic growth. That by itself is not going to be moving us as a world economy motoring ahead.
• Bartiromo - I am trying to figure out what this means for US investors, and what this means for multinational corporations that are based in the United States. Is this going to be another negative?
• Bremmer - It is a negative. There is no question. If the Chinese are actually trying to cool down what has been overheated growth and at the same time, their own state champions, their own state-owned as well as privately owned companies, the ones that they are seriously preferencing and they don't need outside capital the way they used to; certain multinationals will do incredibly well in China, health care for example, a booming sector, green alternative energy, a booming sector but the big US multinationals, the GEs, the Microsofts, the places where you see CEOs publicly fulminating; those are going to have a much harder time in what should be and what is the world's most exciting economic story.
• Bartiromo - Really, an unbelievable development here. Don, A nation depends on its exports. We know that China is trying to transition, I am going to get into that with both of you, from an export-led economy to a consumer-led economy. But right now, it is about exports, lets face it and the two biggest buyers are US & Europe. They are not in a buying mood.
• Straszheim - That is exactly right, Maria and this is why China's growth rate is slower and why there is not a great deal we can do about it. If China's export markets are weaker, China's economy is going to suffer because
• Bartiromo - How do I want to invest around that?
• Straszheim - Well, one of the things China is trying to do is to take a long time is lift their consumer sector relative to the trade and the export sector. Remember there are 500 million people in China who have made about 8% or so annual yearly income gains for the last 25 years. They want to work and consume.
• Bartiromo - you are saying invest in the consumer sector?
• Straszheim - That is a market still available to western companies; it is one that all of Europe and all of America focused on..
• Bartiromo - Do you think China ultimately becomes the largest economy in the world? David Rubenstein of Carlyle told me that in 15-20 years, the US drops to number 3.
• Bremmer - I take the other side of that. Economists love to do path-dependency. A lot of my economist friends in the 70's & 80's used to say that the Soviet Economy is going to be the world's largest but the Soviet economy does not exist right? I don't think that Chinese Government exists in this form in 30 years time; the inability to engage in indigenous innovation given the nature of their education system based largely on rote; the fact that the West isn't willing to provide the same level of technology that gets ripped off; so they are going to have to do it internally; fighting with the Indians over scarce resources, massive demographic problems as labor gets more expensive and non-competitive, the environmental problems, water, land aggregation and air not to mention the fact that an authoritarian government that requires 8% consistent growth with climate change and the rest going on. As a political scientist, I don't see that happening in 20 years. 
• Bartiromo - I understand your point and it is really an important point. But as far as an investor out there what do I want to do? 
• Bremmer - First of all, I buy Don which is Long Don. There is no question we want to see the consumer sector. We want to see all of those areas in the Chinese economy where they need the West, health care, alternative energy.

We liked this clip. A few questions come to mind, especially regarding Bremmer's views about multinationals. Every guest on CNBC, especially the equity-fee-collector stock managers, tell us that US Multinationals are cheaper today than they have ever been. After hearing Bremmer, we wonder whether that is justified. Most of these multinationals depend on foreign markets, especially markets like China's. Why should China allow these companies to come in and profit on China's growth? Look at the United States. It has been a protected economy for so long. Ask foreign banks how difficult is it to get permission to open a bank in the US. Ask television networks how hard it is to get a broadcast license and then a space on cable network platforms. Then compare with say CNBC which is in virtually every market in the world, compare with P&G, with Colgate.

So far, other countries and their corporations have stayed silent because the USA has been the largest market and making the US angry would be counter-productive. But this is changing. Countries around the world and especially China are going to get much tougher on foreign multinationals. Think of other growth markets, the Middle East and the Gulf countries, they might do the same. This we think is a secular problem and perhaps the market in its infinite wisdom has begun pricing this in.

Perhaps Maria Bartiromo should read this week's Washington Post. The paper had two articles that focused on how the USA is embarked on an effort to "contain" China the way it did the Soviet Union in the 1960's & 1970's. These 2 articles focus on Vietnam and on Indonesia. Vietnam is already a hot frontier market and a traditional competitor of China, both militarily and economically. Indonesia is the largest ASEAN country and the world's largest Muslim country, so dear to President Obama's heart. But Indonesia is enormously strategic with its position near the Malacca Straits and its economy is growing at a rate that is persuading some analysts to talk about BRIIC (BRIC plus Indonesia).

China sees this clearly. How China reacts to this and to its own deep problems remains to be seen. Do we see China accelerate its plans to favor its own companies and limit the growth of US Multinationals? It is going to be a very interesting story to watch, perhaps too interesting. We recall that the moves to "contain" Japan in the 1930's led Japan to attack Pearl Harbor and occupy most of South East Asia.

So Maria, don't stop with this one clip. Begin a series of segments on geo-strategy and its long term implications on US Multinationals. Not every one invests just for tomorrow.


2. Bull Market or BS?  Doug Kass on CNBC Fast Money - Wednesday, July 21 

It was Doug Kass who made the bold prediction that the market has seen its lows for the year. He did so on Tuesday, July 6 on CNBC Fast Money (see clip 2 of our July 3-July 9 Videoclips article).

Doug Kass told CNBC on Wednesday, July 21, that he sees a trading range market between 1025 to 1150 on the S&P 500. Read a summary of his views at Market Range Bound With Defined Floor & Ceiling at cnbc.com.

We would like to give a shoutout to Tim Seymour of Fast Money. On Thursday's show, Tim suggested buying Nokia in the after-market ahead of its earnings on Friday morning. Then on Friday's show, he suggested holding the stock until it reaches about 10.24, if we recall correctly. What we like here is the completeness of the trade - Tim told us when to buy NOK and then after the trade worked, Tim told us when to sell it.

May we suggest that Fast Monay follow this practice with all recommendations. Tell viewers when or how to close the trades you recommend.


3. Bearish Case for Gold - Walter Zimmerman with CNBC's Maria Bartiromo - Thursday, July 22

This is a superb interview in our opinion. Both the guest Walter Zimmerman and the interviewer Maria Bartiromo are succinct and to the point. The interview tells the story with charts and pictures rather than just words. More Pictures & Less Lectures - that's what works. Strategy Session, take notice please.

Maria opened the interview with the comments that Nouriel Roubini, in his latest note to clients, said that there was now significant downside risk in Gold. Then she introduced Walter Zimmerman by saying his new technical work supports this view. 

Maria showed charts of Gold prices with Gold Momentum which show a clear decline in momentum as Gold prices rose, a clear divergence, similar to the move in 2008. Then she showed the sentiment chart which clearly shows flagging momentum. Then she asked Walter Zimmerman to state his case.

• Zimmerman - You never want to see a market make new all time highs at the same time that momentum is waning;...you see the same exact message from the sentiment indicator...in a momentum play like Gold, there are no fundamental indicators, you can't point to earnings, you can't point to PE ratio, ...the gold producers peaked way back in 2008...it is very very unusual to have new all time highs in Gold and the gold producers not participate ...
• Bartiromo - So the bottom line is you say sell your positions in Gold.
• Zimmerman - Take profits
• Bartiromo - what about gold mining stocks?
• Zimmerman - If Gold is gonna correct, then the mining stocks are going to get hit

4. Profits in Pipelines? - Richard Kinder with CNBC's Jim Cramer - Thursday, July 22


Kinder Morgan Energy Partners has been a great equity income play for investors. Those who don't know it should look up the 10 year chart on their favorite charting software (bigcharts, yahoo finance etc.). The security KMP has more than tripled in the last 10 years while providing a high dividend yield. Jim Cramer calls this a "money machine". No lost decade for KMP investors.

Richard Kinder, the Chairman-CEO of KMP, has been a highly respected figure in the energy industry. This is an excellent interview and a must watch. A good summary can be found at Kinder Morgan Is a Money Machine on cnbc.com

Jim does a superb job of asking Mr. Kinder about whether the expected IPO of Kinder Morgan, (the parent and the General Partner of Kinder Morgan Partners), would end up as competitive alternate to KMP for investors. Mr. Kinder said explicitly that if the IPO were to happen, it would be as a C-corporation. Very few CNBC anchors would have the savvy and the courage to ask such a direct and crucial question.

One statement of Mr. Kinder seems important to us from a macro perspective (at minute 03:40 of the clip):

• We are beginning to see a turnaround runaround in the economy at least through the lens of our business; I am not sure it is real and sustainable but at least it is positive in most respects.

Thanks Jim for this interview.

5. Parsing Bernanke's Comments on Monetary Policy  - David Lutz & Tony Crescenzi with CNBC's Erin Burnett & Steve Liesman - Wednesday, July 21

When Bernanke's testimony was released on Wednesday at about 2 pm, the stock market began selling off. The sell off accelerated as Bernanke testimony continued. Given the impact of this testimony, we thought it appropriate to include a good clip with expert guests parsing Bernanke's testimony. The experts are Tony Crescenzi of Pimco and David Lutz of Stifel Nicholaus. 

You can read the entire testimony at Bernanke's testimony to Senate banking panel on cnbc.com.

As an aside, we suggest readers, at least patient readers, should watch the views of Martin Feldstein on CNBC's Squawk on the Street  on Tuesday, July 20 at 10:33 am. We are not very patient and we could not stand Mark Haines imposing his views on Dr. Feldstein, who is highly respected. Erin Burnett was doing a good job until Mark Haines decided to force his agenda. 

This is not the first time Mark Haines has been less than cordial with Dr. Feldstein. We recall that Mark Haines was extraordinarily rude during Dr. Feldstein's previous interview on Wednesday August 19, 2009 on CNBC's Squawk on the Street. We discussed this rude behavior in clip 7 of our Videoclips Article for week of August 16- August 22, 2009 . We ended that discussion with "In our opinion, the behavior of Mark Haines towards Martin Feldstein was both ugly and anti-good, or simply put, repulsive." 

So we have a basic question. Given the antipathy Mark Haines has shown to Dr. Martin Feldstein, why does Squawk on the Street allow Mark Haines to participate in any interview with Dr. Feldstein. Erin Burnett is more than capable of conducting a thorough and professional interview, isn't she? 


6. Cities in Pain - by CNBC's Jane Wells - Friday, July 23

We have said before that Jane Wells is one of our favorite reporters and this segment shows why. This is not an investment clip and so we cover this at the end. But it really should be the top clip because of the subject matter is of national importance and the investigative reporting of Jane Wells is excellent.

• This is going to get your blood boiling; you knows Cities from coast to coast are closing parks, laying off police officers to make ends meet. So when the folks in Bell, California, a blue-collar immigrant community of 38,000 where the unemployment rate tops 16%, when they found out that the City's manager makes nearly $800,000 a year, they went nuts. There was a near riot at City Hall after the LA Times discovered how much city manager was making...turns out that Police Chief there is also making over $450,000; City council members are now facing recall for allowing this. The Manager and the Police chief and the Assistant Manager have all resigned but will still get life time pensions totalling tens of million of dollars. Attorney General Jerry Brown who is running for Governor and who makes a fifth of what the City manager made, has launched an investigation to see if any laws were broken. .....More Cities More Pain.

Then Jane Wells talked about Newark, NJ, where the Mayor is cutting everything including toilet paper, She shows the Mayor stating why a plan to raise taxes retroactively for the whole year would only make things worse:

• People will see tax bills into the thousands and it will ultimately mean massive foreclosure rates, massive delinquency rates, and other challenges that we might have

This is story of America's cities - massive cuts in citizen services and large increases on taxpayers to pay for rampantly high life long pensions. A graphic in this clip states the City Manager of the above California city would get an annual pension of $600,000 for life. 

Yes, Jane this clip did get our blood boiling. Soon the country will or at least should demand a retroactive law to cut down local government pensions paid to previous workers. An alternative solution might be to transfer all local government pension obligations to the same Govt agency that inherited private sector pensions. Then pensioners can be paid pro rata based on what agency's funding. The country, we are afraid, simply cannot afford life long pensions. 

But if pensions are restructured, can municipal bonds be far behind? 

       

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Vietnam has been described and analyzed in many ways and from many viewpoints. It was one of the longest running conflicts in US history. In the end, it turned out to be an enduring defeat of America's vision, approach and battle plans.

The reality is that the Vietnam War was a war for the unification and independence of Vietnam. Look at the results. In April 1975, Saigon fell and Vietnam was reunited. Since that day, Vietnam has never been a problem for America or for any other country in Asia. Today, Vietnam is a hot frontier market and increasingly a favorite destination for American companies as they reduce their operations in China. Today, Vietnam is on the verge of becoming an American ally in the American-Asean desire to contain China.

American society of the 1960s-1970s never grasped this central reality of the Vietnam war. How could it? America was obsessed in those days with the cold war against the Soviet Union. From this lens, any one who was not for America was automatically considered for Soviet Union. This is why America never accepted Ho Chi Minh as a Vietnamese patriot whose main aim was a free united Vietnam. America never wondered how a leader who fought against the full might of America could ever become a vassal of Soviet Union or China.

America was blinded to this reality for two reasons. First, its own global conflict against the Soviet Union made all local conflicts irrelevant except as a tool in America's global war. Second and perhaps just as important, America entered Vietnam as the successor of the French colonial empire. The history of the French and America's automatic acceptance of the French viewpoint blinded America from the beginning.

As a result, America fought the entire war on the wrong side of history, the history of Vietnam, the history of people who rise up to unite as one society and as one country.

Today, America is embroiled in another far away conflict, a conflict that is proving just as futile as the Vietnam conflict, a conflict that looks like a certain defeat for America. The entire world is watching this war just the way the world watched the Vietnam war. The parallels are eerie. American society is again split but no one seems to have a clue. So the dumb, futile effort goes on draining American money, lives and will. We think America has become trapped in another Vietnam War because America has made the same grievous mistake it did in the 1960s & 1970s.

America is once again on the wrong side of history and exactly for the same reasons. The theater is Afghanistan.

First, America is obsessed with a global war against Islamic Terror. Just as all politics is local, all wars are local. But with its global obsession, America finds itself unable to focus on the real reason for the Afghan conflict. Secondly, America has entered the Afghan conflict as the successor to the British colonial empire. So America find itself blinded to the central reality of the Afghan conflict.  How could it not? American society remains just as insular and european in its outlook as it was in 1960s & 1970s.

The central reason for the Afghan conflict is the reunification and independence of Afghanistan. In 1893, the British Indian regime partitioned Afghanistan into North Afghanistan, the area north of the Khyber Pass, and South Afghanistan, the Pashtun area south of the Khyber Pass. To pacify the warring Pashtun tribes, the British established the predominantly Pashtun Frontier Corps.

This partition of Afghanistan, the so called Durand Line, is considered to be the border between today's Afghanistan and Pakistan, the successor regime to British India. But the Afghan government and, more importantly, the Pashtun people refuse to accept this colonial line as the border. The Taleban travel across this artificial border with impunity and often under heavy fire from both American forces and the Pakistani Army. But it is their land and they are fighting for it. 

Pakistan understands this reality and it is doing everything it can to stop the march of history. Just look at the maps below. If South Afghanistan ever reunites with North Afghanistan, Pakistan would be a mere shell. No one in the world would ever care about Pakistan any more. The reunited Afghanistan would be again at the center of the Silk Road, at the center of the vibrant emerging region of Central Asia and at the crossroads of the trade routes between China and the Middle East. 

 
          (Green area is South Afghanistan - source wikipedia)          (Light blue area is South Afghanistan - source Wikipedia)


The real solution for the Afghan War is for America to get on the right side of history, to support the reunification of Afghanistan and to correct the awful colonial mistake of the British. This is the big idea that could unite all the Pashtuns and get the moderate Pashtuns to become engaged. The reality is that the majority of Pashtuns elected the non-religious parties in the last election. The moderate Pashtun majority rejects the Taleban. 

But today, the Taleban are the only game for the Pashtuns. They are the only group that is fighting the combined might of the American forces and the Pakistani military regime. And the Taleban are winning.  

Under today's American policy, the end result is a foregone conclusion. America will leave Afghanistan in disarray and ignominy; the Taleban will take over North Afghanistan. Then they will continue the war of attrition against the Pakistani Army to take de facto physical control of South Afghanistan. 

Unlike Vietnam, we do not see a Ho Chi Minh, a General Giap among the Taleban. We do not see the ability to govern in peacetime. But history suggests that a leader might emerge among the Pashtuns who could unite and govern. If such a leader does emerge, then the unification of Afghanistan could signal the eventual surrender of Pakistani Panjab to the new reunited Afghanistan.  Thats is also the lesson of history, at least the history of the past 1,000 years. 

It will take decades for America to get reengaged in Afghanistan or in Central Asia. The new Great Game will be left to China, Iran, Turkey and Russia. 



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Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.


The Week That Was

The End - That is usually the last frame of a motion picture. The Bond & Stock markets should have flashed The End sign at the close on Friday. Because, this week ended any doubt about the trajectory of the US Economy. The awful manufacturing data, the fresh low in the ECRI index and then the steep drop in consumer confidence revealed on Friday at 10:00 am - thus endeth the lesson that the US economy is at best stalled and at worst could fall into a double dip. 

This is not just the story in America. China is clearly slowing and on Thursday night, Japan revealed its own deflation sickness. Is this  why Arun Motianey, Director of Fixed Income at Roubini Global Economics, told CNBC that "the global economy is at risk of unfolding in on itself"? We would rather you hear him in clip 1 below rather than have us describe his theory of supercycles.

The fear of deflation has become the topic du jour in markets. No wonder long duration Treasuries are again trading below the small figures of 3% for the 10-Year and 4% for the 30-Year. The stock market was already down 100 points when the Consumer Confidence numbers hit at 10:00 am. That began the serious drop which ended at the lows, down 261 points. This was no swoosh drop; it was a slow steady sustained sell off on low volume that drew no bids or quick rallies. Frankly, this gives us greater worry than a sharp, fearful drop. 

Usually some seers sneer at macro data and insist on looking at company earnings. Well, these folks got Bank of America earnings on Friday morning.  No one could find anything remotely positive to say about the numbers revealed by the largest bank in America. Demand was practically non-existent; deposit-to-loan ratio exceeded 125%; credit lines to wealthy consumers and corporations remained unused. It was as if Bank of America drew a picture of a US Economy at a virtual standstill. 

No wonder the euphoria created by the SEC-Goldman settlement evaporated on Friday morning. May be, the selloff was just the old adage of Sell the News of the settlement, passing of FinReg and finally the relief of seeing oil stop gushing out of the BP oil well. Well, if the powers that be knew this would happen, they might phave postponed at least one of these news stories to late next week.  

Stocks & Treasuries

As we wrote the section above, we wondered ourselves whether our writing or the story reflected in our writing was just too pat. For some time, we have believed that that there is a choppy rally underway and that we shall see higher stock prices into August. As naive simpleton observers, we have neither the knowledge nor the organizational standing to justify this belief. All we have is the memory of prior years, especially of 1997 & 1998, the two years dominated by currency crisis.

So we felt relieved to hear Mary Ann Bartels, Chief Technical Analyst, at Merrill Lynch discuss her decennial theory on CNBC (see clip 2 below). Ms. Bartels has argued for some time that we would see a rally into fall and then see a sell off followed by a year end rally. But she warns, that this is a rally only for traders and not for investors.

Market forecaster Charles Nenner also expounded a part of this belief on Thursday as a part of his long term call for Dow 5,000 within the next two and half years (see clip 3 below). But before that, Nenner said he expects a climb for stocks for the next month. However, Mr. Nenner refuses to play this bounce and would rather hide in cash, even in zero-return cash. 

Too pat or otherwise, the signs are mounting for the Bernanke Fed to do something. Jim Cramer delivered his "They know Nothing" rant in August 2007, if our recollection is correct. If the Non Farm Payroll report in the first week of August is as much of a bummer as the previous two, then many observers might rant for Bernanke to do something. 

But, could he with the dissenters at the Fed getting bolder by the week? This week, Thomas Hoenig said that the Fed should raise rates to 1% and keep them there. May be Mr. Hoenig is right.

There is no doubt that lack of income is today's great American problem. Is Bernanke to blame for this? Savers today are in deep distress because nothing safe delivers decent returns. Unless savers, especially baby boomers, get some level of return on their safe investments, can they be persuaded to save? We doubt it. 

Safety as the Momentum Play

Just look at the CFTC figures. The net position of Large Speculators in the 30-Year Treasury Bond is now 100%, the highest it has been all year. Conversely, the position of the Hedgers/Commercials is 0%, the lowest of the year.

Anyone with doubts should look up the level of Dollar-Yen. Gold was struck down hard on Friday perhaps on deflation fears or perhaps on rumors of selling by a prominent hedge fund which has Gold as its largest position. 

The only animal spirit we see is the spirit of hibernation in a cave for the long winter. 


The Strange Saga of Steve Cortez & CNBC

You would think that a financial network, especially a First In Business WorldWide network, would bring on "experts" who have been proved right in their views and shun "experts" who have been proved wrong. But not CNBC.

We have written about Steve Cortez a few times in our articles. He is a quick, incisive macro analyst who has been proven right far more often than he has been wrong. He is articulate and carries himself well on TV. So we wonder again this week what is CNBC's problem with Steve Cortez? Why doesn't CNBC give him a fair deal? Why is he not invited to speak more often?

In contrast, an analyst like David Kelly, a salesman-strategist at JP Morgan, is invited regularly by CNBC on various shows. We have yet to hear one insightful idea from Mr. Kelly. Yet, CNBC keeps promoting him as the $450 Billion dollar man and last year CNBC used to promote him as the $500 Billion dollar man. Arithmetic was never our forte but even we can subtract. What we do find in David Kelly is a strategist who LOST $50 Billion in assets in the last year. 

So on what planet or network would you see David Kelly more often than Steve Cortez? On CNBC USA, of course. So we ask today what we have wondered privately for some time. Is David Kelly adored on CNBC because he is Irish and is Steve Cortez shunned because he is Hispanic? 

We do recall CNBC's vetran anchor Mark Haines expressing his ardent admiration for the lilting Irish accent of David Kelly (see clip 3 of our March 14-20 Videoclips  article). May be, this is the answer to the charm CNBC sees in Mr. Kelly. The fact that he is from a major advertiser doesn't hurt, we are sure. We do not wish to be personally unfair to Mr. Kelly. But, as far as we can recall as CNBC viewers, Mr. Kelly has been dreadfully wrong in his forecasts on CNBC and we find the adoring treatment showered on him by CNBC to be in stark contrast to CNBC's treatment of Steve Cortez.

There was a time (way back in 2007, for example) when almost every day show on CNBC had an Irish American anchor. That is less so today. But even now, there is clearly a demonstrated preference for Anglo Anchors at CNBC. This may be why CNBC has gone around the world to find anchor talent that is and looks Anglo, like for example, Amanda Drury from Australia. When compared to others on CNBC, Ms. Drury seems to us to be the weakest and the least insightful of CNBC anchors. Yet, not a day passes without Ms. Drury in the anchor seat of some CNBC show. 

CNBC is a global network but its thinking seems so parochial. They have yet to find any acceptable (to them) anchor talent anywhere in the non-Anglo world. In contrast, Citibank, Pepsi, IBM and other US corporations have no trouble bringing fine talent to America from all over the world. 

So Steve Cortez, don't take it personally. At least, CNBC has Michelle Caruso Cabrera and Carl Quintannia. Look, despite the success of Maria Bartiromo, CNBC cannot find another Italian-American anchor for its network. Hey CNBC, how about trying out Guy Adami as an anchor for a regular CNBC show?

Let us be clear. We have absolutely nothing against Irish Americans. In fact, for much of our career, we were suspected of Irish Envy. This was because the majority of our team was Irish American. We simply picked the best talent among what was available to us. We regret that CNBC does not do so.

Let us also be clear. We do not know Steve Cortez. We have never spoken with Steve Cortez and we do not get his research. Our entire relationship with Steve Cortez is that of a CNBC viewer who likes hearing Steve's macro views on CNBC.


The Third Musketeer?

We believe in offering a solution when we criticize. So here is our solution to CNBC's problem with Steve Cortez. CNBC has a tradition of successful, outspoken reporters who specialize in specific topics. These reporters come on any & every show when they have something to say. 

We are of course speaking of Rick Santelli and Steve Liesman. Our suggestion to CNBC is to make Cortez the "Macro Specialist" like the Bond Specialist Santelli and the Fed/Economy Specialist Liesman. Then Steve Cortez can be asked to appear on any show at any time when he has something worthwhile to add. 

Today's markets are dominated by macro events, events from China, Brazil, Europe. These macro events impact the US market in a much more dramatic way than ever before. Unfortunately, CNBC Anchors are singularly unequipped to understand or discuss these macro events or news items.

This is where Steve Cortez can come in with his Breaking Macro comments. So CNBC can keep its preferred Anglo Anchors and we can hear the views of one of the smartest tactical traders we have seen on CNBC.  A Happy Solution for all! 


Featured Videoclips 

1. Deputy Doom, Arun Motianey, on CNBC on Thursday, July 15
2. Mary Ann Bartels on CNBC Closing Bell on Tuesday, July 13
3. Charles Nenner on CNBC Closing Bell on Thursday, July 15
4. Gary Shilling on CNBC Fast Money on Monday July 12
5. CNBC's Herb Greenberg on CNBC Strategy Session on Friday, July 16

1. Global Economy at Risk: Deputy Doom - Arun Motianey of Roubini Global Economics on CNBC - Thursday, July 15

In a week dominated by deflation concerns and bearish sentiment, surely the pole position should go to Dr. Doom Roubini. Well, we could not find Signor Roubini himself. So we found Deputy Doom, the Director of Fixed Income Strategy at Roubini Global Economics. We owe thanks to Michelle Caruso Cabrera who drew attention to the CNBC.com article World at Risk of Folding in on Itself  featuring this interview. 

This is an interesting clip in which Mr. Motianey discusses his concept of SuperCycles. His main point is that the American & European Central Bankers will find it very difficult to create inflation because they simply don't know how. And without their ability to create inflation, the developed world will fall into a Japan-like problem. This will be exacerbated by the new intolerance of financial markets about governments acting as the source of final demand in developed markets.


2. Talking Numbers - Mary Ann Bartels with CNBC's Maria Bartiromo - Tuesday, July 13 

Mary Ann Bartels is the Head of Technical Market Analysis at BofA Securities-Merrill Lynch (what a way to butcher a great brand name, we ask?). Ms. Bartels discusses her decennial theory with Maria Bartiromo.

• Bartels - The summer rally, we are already in it. The midterm election year with the decennial pattern in "0', we are really surprised how well we are following it. January is generally a down month, we had a down month in January followed by a very strong spring rally which we got and followed by a correction with an important low around June which we also got. Now we are in the rally. So, we think it is important for investors to follow this pattern, July is normally up 2.8%, but with the exaggeration we might get a little bit more. But the important thing to note is that you get another correction which leads to a lower low in October and then you get a year-end rally. So we think the summer and the holiday season are going to be the best times for the markets this year.
• Bartiromo - So if I want to trade this move, I want to be a buyer and then I want to start peeling back as we approach October when we could see a low and then you are looking for a year-end rally. Why is there a difference between the years ending in "0"?
• Bartels - well, we just look at the "0" year without the midterm election year, and that is looking at all the years within the decade, the "0" year is actually the worst year. So we start off the decade actually down and when you look why that happens, it is because the back end generally is so strong and 09 was a very good year for the markets. In fact, from the March low of 09, we were up 80% without a 10% correction. 
• Bartiromo - You are still telling investors to maintain a defensive posture though right?
• Bartels - Yes we are because we are concerned about another low in October. But for traders, we would be long the market for the summer months, but looking to take profits looking for a deeper correction.
• Bartiromo - Alright. Got it

Maria, could we make a suggestion? When you get a guest like Mary Ann Bartels, please insist on obtaining a full copy of their published report to put on cnbc.com. That would really help us simple investors.


3. Get Ready for Dow 5,000: Market Forecaster - Charles Nenner with CNBC's Maria Bartiromo - Thursday, July 15

Maria announces market forecaster Charles Nenner by saying "he says stocks will peak in about a month and head south from there". This is why we like Maria Bartiromo as an anchor. She brings us interesting interviews from both bulls & bears.

• Nenner - well, as you may be know, most people know that I developed models many years ago and I did market timing for Goldman Sachs for 12 years, and these models use data of the last 100-150 years. Now based on this data, you know the future and whatever we do or the government does short term doesn't make much difference. So the cycle work I do comes up exactly with dates and with levels, for instance in 2006, I was on CNBC and I said that the Dow will go to 14,300, it will reach the end of December 2007. At the end of 2007, I was honest, everybody out, this is the target, now we are gonna crash, we are gonna go down, we go out. So I don't do so much with Why, I just want to know what is going to happen.
• Bartiromo - I see and what is your time frame on this? When do you expect the Dow to go to 5,000?
• Nenner - It is gonna take two - two & half years. I think this was all only bear market rally and the bear market will continue. We went out at S&P 1200 a couple of weeks ago and I don't think we will go in again. And I think we will see a bit of a Japan scenario which means it is a long, prolonged bear market with big upswings, rallies may be up to 40% and down again, and 40% up and down again, and so the opportunities, but in the end it will take a couple of years until we will go down to 5,000. 
• Bartiromo - And in about a month, you are expecting stocks to peak right? So, you think we have this short term rally that continues and things peak out in about a month? 
• Nenner - well, like I said we are on the same side when we reach upside target of 1200 on the S&P, we sold everything and I said may be we test it one more time but I am not counting on it. Just as more cycle pressure coming in August, so we standing aside, we don't have any stocks right now. 
• Bartiromo - and really quick, Charles, where do you think the money moves? If it comes out of stocks, where do you think it goes?
• Nenner - well, what we did is that when the 10-Year Note hit 4%, we moved all the money to 4% and I still think there is going to be a deflationary problem and deflationary problems, there is nowhere to hide, I know you don't get any return from cash but then it is still the safest place. 
• Bartiromo - Alright, we will leave it there.

4. Bull market or BS? - Gary Shilling on CNBC Fast Money - Monday, July 12

Remember last Monday? The Dow was up after a great rally during the prior week. The market was experiencing a Panglossian wave. Everything seemed to come up bullish. Remember that? Actually after this awful Friday, that bullish period seems aeons away. 

But you can see what a bullish period it was from the smile on Melissa Lee's face and the happy tone with which she greeted Gary Shilling. In fact, there was a note of "when are you going to cave in Gary and embrace the rally" in her first question. 

Well, Gary Shilling has seen just about everything and he was not ruffled. He made his case eloquently and withstood the attacks of Tim Seymour and Joe Terranova. We think listening to Gary Shilling is a very rewarding exercise and we leave it to readers to do so.

Suffice it to say that Gary is a bear and thinks that the first bear market is not over yet. He is sceptical of global growth and he sees China slowing down. He views the current rally as vicious short covering. 

As we said, listen to Gary Shilling speak. Watch this clip. 


5. The Fix Is In  - CNBC's Herb Greenberg on CNBC Strategy Session - Friday, July 16

In this so-called journalistic segment, Herb Greenberg looked at bond funds in today's low yield environment. The journalistic misconduct we discuss below was initiated by anchor David Faber who opened with: 

• Faber - for those investors looking to get into fixed income through bond funds, Herb Greenberg is here to tell you that there is a dirty little secret when it comes to these funds, there is one word, it is called fees.
• Greenberg - Bond funds have been sucking in money like a mop in recent months, I have to tell you something, in the past year, investors have been coming in, I say about a quarter of the money has been flowing into short term and intermediate term bond funds, you know you look at the prospectus, you see expenses are on these, ah less than a percent, no big deal, but that gets to the story. If you take the expenses you are paying on these funds and you taking them consider them relative to your performance, you basically have a situation where you are basically paying exorbitant fee.

Then Greenberg showed a slide of US Corporate funds (yielding 2.61% with 0.87% expense ratio), US Governments funds (yielding 2.02% with 0.67% expense ratio) and Short Term Bond Funds (yielding 2.21% with 0.74% expense ratio). He used this chart to make his utterly distorted case. 

Frankly, in our opinion, this is the worst example of Journalistic Misconduct we have seen on CNBC in a very long time. Let us tell you why we think so:

• Take stock funds. For the past 10 years, the performance of stock funds is NEGATIVE but investors have paid approx. 1.5% in expense ratio for 10 years. So, investors have been charged 15% of their money in fees over 10 years WHILE getting a NEGATIVE performance. Are these fees exorbitant? Does Greenberg think so?
• So why won't Greenberg tell you this? Is it because CNBC lives to push stock funds on their viewers? Or is it because Stock Funds are considered inherently performance oriented while Bond Funds are mistakenly considered stable?
• Greenberg NEVER tells his viewers that Bond Funds are pure equities. That investing in a Bond Fund is investing in the stock value of the portfolio of the Bond Fund. In other words, investing in Bond Funds is like investing in stocks.
• It is a deliberate false statement to say that investing in Bond Funds is the same as investing in Fixed Income. Investing in Fixed Income gives you principal protection. Investing in Bond Funds does not.
• But David Faber actively and deliberately engaged in this disinformation with his opening line by equating investing in fixed income with bond funds.
• Then, Greenberg made a factually false statement by terming the yield of a Bond Fund as its performance. This is as false as saying the performance of a stock fund is its dividend yield. 
• Greenberg knows, we think, that the performance of a Bond Fund is = its yield PLUS the return of its Net Asset Value or the principal value. This is exactly like the performance of a stock fund that is = its dividend yield PLUS the return of its Net Asset Value. 
• Therefore the performance of a Bond Fund may be much much higher than its yield OR it may be much much lower than its yield, even a negative performance.
• In other words, comparing the expense ratio of a bond fund with its yield is distorted and false in an investment sense. It is exactly as false as comparing the expense ratio of a stock fund with its dividend yield.

We are not sure whether David Faber understands much of this but, based on watching Herb Greenberg over the years, we believe he certainly understands all of our above points. 

So why did Herb Greenberg make these misleading and false points? We do not know for sure because we have not spoken with him. We would love to speak with him but no one at CNBC ever responds to our requests.

But, based on our experience in watching him speak on TV, it is our opinion that Herb Greenberg said what he did to create a sensationalistic investigative journalism type segment. It is our opinion that Greenberg made the above erroneous points deliberately. He is too smart and too experienced to not know the above basic facts. 

This is why we believe that Greenberg's behavior can be termed as journalistic misconduct. This is our opinion and we leave it to our readers to form their own by watching the clip and reading our rebuttal of Greenberg's points. 

We are deeply disappointed with CNBC's Strategy Session. This is a show that began with a mission to educate CNBC viewers about Strategy. And look what it produced - the same journalistically sensationalist segment that pretends to be investigative but is full of false descriptions and erroneous interpretations. 

This is why we have tried to send a message to CNBC to hire professionals and not self-congratulatory journalists like Herb Greenberg. All professionals, including some Fast Money traders we have criticized in the past, have a basic core of ethics. Professionals respect markets. None of them would have stooped to the level Greenberg stooped to in this segment. 

Finally, we point out that we have been complimentary of Gary Kaminsky since he joined Fast Money earlier this year. So we feel we sort of have the right to say:

• "Shame on you, Gary Kaminsky! You are the co-anchor of this show. How could you allow such misleading and distorted statements on your show? You can tell a deliberate misconduct from a frank, factual journalistic report. You are probably better than us in tearing apart what Greenberg said on your show. Yet, you did not do so. Actually, you joined David Faber in the fun and in the process damaged the knowledge of viewers who trusted you to speak the truth and to educate them on strategy. As we said before, Shame on you, Gary Kaminsky".

As readers might be able to tell, we are absolutely livid at this segment. We apologize to readers who might have taken offense at our emotion. But when we see what we consider to be such journalistic misconduct, we find it hard to restrain our outrage.

We do not wish to be unfair to CNBC or to Herb Greenberg. So we offer to come on Strategy Session to debate Herb Greenberg on air about why we think his segment constituted journalistic misconduct. He knows our views because we have disclosed them publicly above. We do not know his defense. So Greenberg will have the advantage and he can tear us part on National TV. We would gladly give him that opportunity to make sure that CNBC viewers understand the truth.

CNBC Management, you have a track record of damaging your viewers at every major inflexion point in the markets - in 1999-2000, in 2007-2008. If you tolerate segments like this one, you will add another notch to your record. This year, you have made good strides by adding professionals to your team. Do not waste it away. Insist on absolute fealty to truth from your journalists.


Send your feedback to editor@macroviewpoints.com

        

Avatar, the film by James Cameron, is already the highest grossing film of all times. It is a beautiful film, a visual delight and a morally uplifting story about the triumph of good people. Every viewer could identify with how the Na'vi under the leadership of their Avatar protected the Tree of Souls and defeated the cruel, destructive invaders who only wanted the precious metals of Pandora. The final scene of the film shows the defeated invaders walking back in a line to their spacecraft for return to earth. 

But is that really the final scene? Unfortunately, History teaches us otherwise. In fact, the final scene of the Film shows us exactly why good, peaceful civilizations that coexisted with nature were eventually massacred and the precious treasures of their lands seized by invaders. 

Put yourselves in the shoes of the Parker Selfridge, the bad guy from RDA. Yes, he was defeated and his quest for Pandora's treasures proved futile. But, he gained incredible knowledge about the Na'vi, their Avatar and Pandora. If you were Parker, as you flew back to earth, you would analyze why you lost and think of countermeasures to foil the tactics of the Na'vi Avatar. After all, the battle had been a close one. With a small turn or two, RDA forces could have won.

So upon return to earth, Selfridge and RDA would begin planning for the next invasion of Pandora. This time, they would come armed with better weapons, more sophisticated tactics and with economic incentives to bring over a couple of tribes of Pandora to their side. The first time, they were guessing. This time, they would know everything there is to know about the Na'vi and Pandora.  

This second campaign would succeed and the Na'vi would be defeated and subjugated. This time, RDA & Selfridge would not give the Na'vi an hour to vacate the Tree of Souls. They would launch a preemptive carpet bombing without warning and  kill the Na'vi before they had a chance to unite and fight. The battle would be one-sided and totally destructive. The Na'vi would go the way of the many tribes that were destroyed in the past with their people massacred or enslaved and their civilizations extinguished. 
 
That is the lesson of History. This lesson is not restricted to any one continent, land or culture. This is how human history has evolved. The pattern is intrinsic to the dark side of human nature.

So what should the Na'vi have done?

• First, they should have prevented any news of the battle or the actions of the RDA from ever reaching earth. They should have killed every single human that set foot on their planet except the few good people that moved over to their side. They should converted these few good people to Na'vi bodies and souls and made them live permanently on Pandora. If the Na'vi  had done so, the mission to Pandora would have been a mission into never-never land for RDA HQ on earth, a futile lost quest into the vast unknown of the Universe.

But that might not have been enough. We know that discovery is one of the most enduring pursuits of the human mind. Sooner or later, another executive at RDA would have persuaded his bosses to send out a second mission to Pandora. After all, the riches of Pandora were too great to ignore.

• So the second necessary step for the Na'vi should have been to build defenses for Pandora. These should have included reconnaissance of space around Pandora to warn them of incoming spacecraft and weapons that could destroy any incoming spacecraft. They should have built defenses on all landing sites and capabilities to kill any invaders that succeed in landing on Pandora.

•  

The Na'vi had to convince RDA that the financial rewards of colonizing Pandora were simply not worth the economic and human cost. After all, there are many planets in the Universe and RDA could have been persuaded to conclude that easier prey were found elsewhere.

But, history teaches us that defensive tactics are not always enough.

• So the final and ultimate step for the Na'vi should have been to reengineer the RDA spacecraft that had flown humans to Pandora, build better weapons and then launch an invasion of RDA's home planet, the earth. Whether successful or not, this would have brought destruction to RDA's home just like RDA brought destruction to Pandora.

Without such capability and the mental strength to threaten damage on earth, the end of the Na'vi is a foregone conclusion. The first victory, however moral and uplifting, would end up merely as a happy interlude before the cruel final act.

The irony is that the Na'vi would not remain the good and noble Na'vi if they took the steps we describe above. Their great values are probably incompatible with the above steps and the mindset that is necessary to implement such steps. This is the moral dilemma that all good civilizations and people face. Those who solved this dilemma, those who developed the "bad" qualities necessary for the above steps without damaging their inner good core survived in history. Those who could not died.

The final step above is the true lesson of human history. Societies have tolerated wars that are fought on someone else's lands. Such wars send the aggressive young elements of society to win in foreign lands or to die in pursuit of wealth. But such wars do not damage the Societies themselves or their own homelands. But wars on one's own homeland are totally different events. This is why peace has been maintained through out history by assuring either mutual destruction or at least mutual damage on an intolerable scale. 

The Avatar of the Na'vi was a cinematic concept and not the real thing. When you study the real historical Avatars, you find out that the real Avatar always annihilated the Evil. Because, the Good cannot survive without the destruction of Evil. 

The concept of Avatar originated in Indian culture and every major Indian festival celebrates the destruction of Evil by an Avatar and the restoration of the Good. As Shri Krishna, the last Avatar on earth, said in the Bhagwat Geeta:

            For the Protection of the Good,
            For the Destruction of Evil,
            For the Restoration of Dharma,
            I Manifest Myself (as an Avatar) in every Yug (epoch).

 

 

Send your feedback to editor@macroviewpoints.com 

        

Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.

What A Week?

A spectacular week in the stock market, up 400+ points in 3 days. It was a bonfire of the shorts. The stock market went from deeply oversold to a bit overbought in 3-4 days. We are not entirely surprised. Over the past weekend, stubborn bulls like Barton Biggs had capitulated and sold stocks. Jordan Kotick of Barclays (clip 3 of last week's article) had predicted a very difficult week for the markets on CNBC. The entire CNBC network was full of negative comments about dark crosses and the possibility of impending doom in the stock market.

We noted last week that a bottom in stock prices was reached in July 2002. In fact, July has marked a local bottom for stocks on a few occasions this last decade. This may be why Doug Kass said on Tuesday that we have seen the stock market lows for the year (see clip 2 below).

Very few people are calling for a sustained rally. Just listen to CNBC Fast Money. Most of their traders are bearish. That sentiment is probably the best thing going for this rally. If the market believes that tax rates on dividends & capital gains are kept at 20% as Tim Geithner told Larry Kudlow (see clip 1 below), then the rally might even show better legs. 

The earnings parade begins next week. Much will depend on the outlook of leading companies. There may be signs that at least some of the bad news might have been priced in. For example, Meredith Whitney dramatically lowered her numbers for Goldman Sachs on Thursday morning. The stock went down in the morning, recovered in the afternoon and rallied hard on Friday.


Europe & China

The Euro has mounted a real rally from about 1.19 to over 1.26. Much of the optimism about the Euro and the stock markets may well be due to the great expectations for the release of the stress results due on July 23.

If past patterns hold, we could see a rally, perhaps choppy, in Euro and Risk Assets until sometime in August. Then may come the deluge, as it did in prior years of currency crisis with a bottom in October-November. For this to occur, Europe would need to be like Asia in 1998 and not like the US in 2008. The one difference is that Trichet/Bernanke do not have the powder Greenspan had in 1998. 

China is the real joker in the pack. We confess to be in the Austrian camp on China , the folks who believe that the deluge of credit and money flow into China has to result in at least a minor bust. But that may be a story for 2011 or for the fall of 2010 if Ken Rogoff proves to be correct (see clip 3 below).

 
US Treasuries

This week,Treasury yields crossed back above the big numbers (or small numbers) that were penetrated the week before. The 30-Year Treasury yield closed above the 4% level and the 10-Year yield closed above the 3% level. Auctions resume next week and the action of the Treasury market should provide some signals about the direction of risk assets.

We note that the position of Large Speculators in the 30-Year Treasury Bond is 90% of its peak while their position in the Australian Dollar is 0% of its peak. This tells us that the Large Speculators are on the wrong side of Risk. 

Like the wily General Yoshi Toranaga of Shogun, Treasury Investors may wish to wait patiently for the fast moving Large Speculators to vacate their Treasury positions and re-embrace risk. As usual, we shall watch for the ultimate media indicator of them all, CNBC Fast Money, to resignal the rapturous embrace of risk by the Mo-Money crowd. 

Recall that CNBC Fast Money invited Gary Shilling, the most fervent of 30-Year Treasury Bulls, to speak bullishly about Treasuries on Tuesday June 29, 2010. This, to us, seemed like capitulation by Fast Money. These folks have been anti-Treasuries since the inception of the their show in 2006. 

Was it a coincidence that the closing high in TLT was hit the next day on June 30? Or was it the classic media contrarian indicator ringing a bell at the top? We shall find out soon enough. 


Does CNBC Need Men? - II

We wrote a section titled Does CNBC Need Men? in our Videoclips Article for March 7- March 13 . That was the week when the contrast between the Mark Haines & Simon Hobbs anchor pair and the Erin Burnett & Melissa Lee anchor pair became obvious. Haines & Hobbs were a riot, they talked their heads off and enjoyed each other's company. In stark contrast, Burnett & Lee had very little to say to each other and their chemistry was flat. That is when it struck us that CNBC has a tradition of hit shows with just male anchors but the network has never ever had a hit show with two women anchors. So, as a spoof of the Maureen Dowd book, we titled our section Does CNBC Need Men? 

This week, we realized that we are more correct in our view than even we thought back in March. This hit us when we noticed that the Faberinsky odd couple (Faber & Kaminsky) had jelled and become a fun anchor pair to hear (sorry, looks are not their forte, but do they beat Haines & Hobbs?). The short jabs of Steve Cortez continue to be smart and actionable. See his comments about Gold on Friday, July 9 (at minute 00:47 of the clip). The point is that this is a show with 2 male anchors and one male trader. It does fine without a woman anchor.

Not to be outdone, Haines & Hobbs, or Stiff Upper Lip & Loose Lower Lip (as Louisa Bojesen of CNBC Europe named them), were reunited on Thursday after a long time when Erin Burnett went on assignment. They had been become a little estranged (with their massive egos, is anyone surprised?), but by the second hour they were back in form. We wish we could show you the video of the minute and half between 10:29 and 10:31 am on Thursday, July 8. You would have seen Simon Hobbs making an animated point to the camera with both arms extended and Mark Haines looking at Simon with adoring eyes. We have watched Mark Haines for years and this is the first time we have seen Mark Haines look at any co-anchor with such a look of pure adoration. CNBC Management, go watch this minute & half and see for yourselves.

But all this is really a preamble to our CNBC Moment of the Week. Melissa Francis returned to The Call this week and in just a couple of days, we saw the result - A beaming Larry Kudlow flanked by Melissa Francis & Trish Regan playing up to him. It was such a picture that a cult Bollywood song instantly flashed to our mind. The opening words of the immortal hit Huzur E Wala (from 1966) are a perfect description of the montage of Larry Kudlow in the middle with Melissa & Trish gazing at him from both sides (on Thursday July 8 morning at about 11:34 am, as we recall):

Oh Anchorman (or literally Big Guy), - "Huzur E Wala"
With Your Permission, - "Jo Ho Ijazaat"
We would reveal to the entire World that,  - "To Hum Yeh Sare Jahanse Kah De"
Your Style is such a Killer for us - "Tumhari Adaonpe Marte Hai Hum"
Who says we are ashamed to admit it? - "Yeh Kisane Kahan Hai Ki Darate Hum?"

Far from being ashamed, the admiring look in the eyes of Melissa & Trish told the story better than our pathetic translation of the classic Hindi. We do not provide a link to the YouTube video. We have no wish whatsoever to suggest that Larry Kudlow would look tolerable in tight fitting Spanish Flamenco pants. Sorry Larry, no offense intended!

As we wrote a long time ago, CNBC often reminds us of Bollywood and sometimes when we watch CNBC shows, classic Bollywood songs come to mind. How we wish CNBC would hire us to produce remixes of these classic Bollywood songs with CNBC anchors? 

Could you imagine Jim Cramer, Mark Haines and Erin Burnett in a remix of a Bollywood hit* from the sixties? Trust us, it is perfect fit. In this song, Mark Haines would not have to "hide behind Erin's skirts time and time again" as Gordon Charlop of Rosenblatt Securities accused him of doing on Wednesday morning . He could be perfectly Haines in a White Jacket and Black Tie. We are confident that Jim Cramer could reveal his inner Shammi Kapoor. The catch is Erin Burnett. We are not sure if she has the moxie. She did grow up with chickens, she maintains! 

Is this why CNBC Women Anchors cannot make a show fun without a CNBC Man as co-anchor?  


* Can any reader guess which hit song we refer to? A small gift will be sent to anyone who guesses correctly. 


Featured Videoclips:

1. Tim Geithner on CNBC's Kudlow Report on Wednesday, July 7
2. Doug Kass on CNBC's Fast Money on Tuesday, July 6
3. Ken Rogoff on Bloomberg Hong Kong on Tuesday, July 6
4. Scott Redler on CNBC's Squawk on the Street on Thursday, July 8
5. Steve Liesman on the Fed on CNBC's The Call on Friday, July 9

1. Secretary of Treasury Tim Geithner with CNBC's Larry Kudlow - Wednesday, July 7

This is an amazing interview, amazing for what Mr. Geithner said. He actually said:

• "We're going to make sure that we keep at 20 percent the existing rates on dividends and capital gains."

If he means it and if the Obama Administrations holds these tax rates at 20%, that would be very smart and bullish. We encourage readers to read the entire transcript of this interview at Larry Kudlow Speaks With Treasury Secretary Timothy Geithner  on cnbc.com.


2. Word on the Street - Doug Kass on CNBC Fast Money - Tuesday, July 6 

The market opened this week strong and rallied 170 odd points by mid-morning. But it sold off in the afternoon and closed down. That evening, Doug Kass appeared on Fast Money (minute 09:50 of the clip) and made a bold call that the Market Has Made Low for the Year.

• "...Now we have reached a yearly low for the market for the year. We have been traveling a path of fear and we have begun to dramatically disconnect from fundamentals and importantly the other risk assets, let me give you a very very quick example..the S&P was down 5.5% in June but High Yield Bonds were down, 2-Year Swap spreads were down, LIBOR was down, the Ted Spread was down and even the Spanish market was down 10%..."

Pete Najarian of Fast Money asked Doug which sector would perform the best. Doug answered "Always buy technology, it gives you beta."

Listen to Doug's words and read Doug's comments at Market Has Made Low For Year on cnbc.com. The next day Doug Kass came back and recommended Google, Apple & Amazon.


3. Ken Rogoff Interview on Global Financial Markets - Ken Rogoff with Susan Li of Bloomberg TV in Hong Kong - Tuesday, July 6

The definitive book of this market cycle could well prove to be the book This Time is Different by Carmen Reinhart and Ken Rogoff. The most interesting statement from Mr. Rogoff in this clip is that China Property Market Beginning Collapse That May Hit Banks .

This we think is the biggest macro development on the horizon. We have seen what happened to stock markets & Treasuries when US Banks had a problem; we saw what happened in Q2, 2010 with problems surfaced with Europe's banks. We shudder to think what would happen when global investors finally understand the precarious condition of China's banks. 

The only portfolio insurance against this menace? 30-Year US Treasuries? 


4. Red Dog Reversal  - Scott Redler of T3Live with CNBC's Simon Hobbs - Thursday, July 8

We have been impressed with the short term calls made by Scott Redler. We find him to be honest, smart and humble about trading the stock market, a relief from the usual "equity-fee collecting" stock managers who talk glibly about being invested for the long term. Yes, the same managers who tell us that "this is a stock-picker's market" but are always wrong in their own stock picks.

On Thursday morning, Scott Redler turned bullish from his bearish position quickly, perhaps too quickly for Simon's taste. So Mr. Stiff Upper Lip Hobbs questioned him: 

• Hobbs - "Call it the Red Dog reversal, after being very bearish, he has turned his attitude around and quickly...Scott, what happened?"
• Redler - "basically, everyone in the world started getting bearish, you heard the head & shoulders pattern from the mailman, from the milkman,... everyone was looking to get short and that we were going to break 1,000 (on the S&P 500); Dougie Kass came out and made the call saying that 1010 could be the low for the year.. So I started to look at similar patterns and if you remember back in 2009, when we had that head & shoulders pattern, we were below the neck line, everyone was bearish, Meredith Whitney came out and upgraded the banks, you had an hour to act..the market traded above 890, quick traders turned tail and did the red dog reversal, went from short to long and stubborn hedge funds wound up rolling up their shorts for months, they got put out of business because they thought that they were smarter than the market, they did not listen to the action...and yesterday when we we went above 1040-1043 and  took back that neck line, we had to cover, some did not believe and get long but some did act quick, got long and now we need to figure out as we move forward."
• Hobbs - "ah..hang on, hang on, hang on, are you saying that this is a bottom in the market or not?"
• Redler - "Right now, we have short term pivot point, we have a point of reference, 1010. You are now gonna look to see how we can hold up, is their commitment buying to this move? Right now, the go-to stocks look great, Apple had a big move yesterday, VMW had a big move, Netflix, Baidu, the Semis, some banks acted well. So right now there is reason to believe that we are back at glass half full..but we need to see this rally hold up, we need to see how we handle certain resistance levels, and we need to make a higher high in this market;  We are in a series of lower highs, 1217 to 1180, to 1131 and now we need to see if we can eclipse that lower high, and create a new trend"
• Hobbs - "Scott, thank you very much for the analysis."

Thank you Scott Redler. Thank you Squawk on the Street and Simon Hobbs.


5. The Fractured Fed - A Segment by CNBC's Steve Liesman - Friday, July 9

In this excellent clip, "Professor" Steve Liesman reveals the heated debates going on inside the Federal Reserve and the split in the usually united team Fed Governors & Presidents.

Steve began with the two opposing viewpoints:

• Dallas Fed President Richard Fisher - "I think we've done enough...It's not the cost of money that's the issue. It's not even the availability of credit."
• St. Louis Fed President James Bullard - "If the economic situation changes, policy should react...You shouldn't sit on your hands...I think there's plenty more we could do if we had to."

Then Steve discussed the views of Fed Governor Kevin Warsh, a top lieutenant of Chairman Ben Bernanke and outlined the things the Fed could do if it chose to:

• More Quantitative Easing ("Replace the Roll Off")
• Cut Rates on Excess Reserves
• Hyperextend "Exceptionally Low"

This was followed by a discussion between Larry Kudlow and Steve Liesman. We like discussions of monetary policy and a debate between Kudlow & Liesman is always interesting.


Send your feedback to editor@macroviewpoints.com

 

 

        

Editor's Note: We try to find a mood-enhancing topic for the Fourth of July Weekend. Thanks to a regular and clearly well-informed reader from Mumbai, our quest is fulfilled. Guess this article can be described as Mumbai's Fourth of July gift to our readers.


We love chocolate and we try to eat as much of it as we can. Our well-meaning friends have tried to correct this habit of ours for years. But our love is so enduring that their barbs and insults failed to touch our soul. Now, thanks to a scholarly reader from Mumbai, we can say to these friends, Hah!

The May 26, 2010 issue of the American Journal of Clinical Nutrition published a study by seven Chinese researchers. This team  comprised of researchers from:

• Key Laboratory for Clinical Cardiovascular Genetics of the Ministry of Education, 
• Sino-German Laboratory for Molecular Medicine,
• Hypertension Division Cardiovascular Institute, FuWai Hospital,
• Chinese Academy of Medical Sciences, Peking Union Medical College, Beijing. 

The title of this study is Short-term effect of cocoa product consumption on lipid profile . In other words, this study describes the effects of eating chocolate on cholesterol levels. What did the study find?

According to an article about this study from the health & fitness section of the Times of India , the researchers found:

• eating cocoa cut levels of LDL, or ‘bad’ cholesterol, by about 6 mg/dL and reduced total cholesterol by the same amount.
• healthy people didn't get any cholesterol-lowering benefits from cocoa, but
• people with risk factors for heart disease, such as diabetes, saw their LDL cholesterol and total cholesterol drop by around 8 mg/dL each.

The article quotes Dr. Rutai Hui: "Future research efforts should concentrate on higher-quality and more rigorous randomized trials with longer follow-ups toresolve the uncertainty regarding the clinical effectiveness. Then we can really eat chocolate without feeling guilty."

Way to go, Dr. Hui. Thanks for making our Fourth of July weekend guilt-free.


Send your feedback to editor@macroviewpoints.com

        

 

 

Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.



Declaration for the Fourth of July Weekend

Sometimes we tend to be critical or strongly critical of the TV shows and anchors we cover.  We do so because our first and foremost priority is our readers. Investing is a noble and serious pursuit. Clarity and candor are critical to fair coverage of investing. However, in our own personal celebration of this Fourth of July weekend, we resolve to be gentle in our comments today. We are writing this article in the very early hours of the morning after a couple of drinks of Scotland's gift to the world. So being pleasantly gentle should come easy. 


The Week That Was

We confess to being blindsided by the carnage of this week. We had been away on a business visit. Having returned on last Sunday in a cheerful mood, we saw on Monday morning that pre-market equity futures were up and relaxed. What a mistake!

The equity averages in the USA were down 5% this week and we saw a mini-capitulation on Thursday morning. On Wednesday afternoon, it seemed like large investors were getting rid of what they owned for the Quarter end. The selling seemed machine driven-to us. On Thursday morning, especially after the awful data at 10:00 am, there was a sudden and very fast swoosh in stocks. At that time, the 10-Year Treasury yield touched an intra-day low of 2.879% and the 30-year yield touched 3.825%.

Clearly, the 3% level on the 10-Year Yield and the 4% level on the 30-Yield have been decisively broken. We think it is important that these breaks hold for more than a day.

The interesting action of the week was in currencies, the Euro in particular. On Thursday, after the horrific data at 10:00 am, the Euro actually rose. That day, the Euro rallied 2.4%, an astonishing one-day move. It seems that investors have suddenly woken up to the fact that the US economy is still very weak. So there seems to be a realization that Europe, while bad, may not be all that awful compared to the USA. From this angle, the Euro seems attractive relative to the US Dollar, at least for a trade.

Of course, it could be just be as Robert Prechter argued to Maria Bartiromo on June 10. Prechter said that he can see the Euro rallying to 1.30 (see clip #2 in our Videoclips article for week of June 6- June 10,).


Income Rules!

So said David Rosenberg on Friday, July 2. Kudos to him, Gary Shilling, Robert Kessler and other investors who remained steadfast in their bullish outlook for long maturity Treasuries. (Hear Gary Shilling in clip 1 below and hear Robert Kessler in clip 5 below).

We believe that the need for income is probably the least understood problem of the American middle class. What we wrote on May 30, 2009 in our article America's Income Problem remains true today and the problem may actually have worsened. As a result, we believe that long maturity Treasuries are and remain in the secular bull market that began in 1981.

There have been many smart thinkers who have called for a bear market in Treasuries like Jim Grant did in 2004. Jeremy Grantham reportedly termed Treasuries are wildly overvalued in April. Of course, US Treasuries answered by an explosive rally in June. Thankfully, we are neither intelligent analysts nor smart thinkers. Our simple view is that until we see sustained income growth in America, long maturity Treasuries will remain in a secular bull market. 

However, secular bull markets feature regular pullbacks. We sense that the action in Treasuries is getting fatigued and jaded. They seemed to rally when stocks collapse. But the rallies in Treasuries seem less and less capable of hedging the down move in S&P 500. We saw a similar lack of oomph in Gold a month or two ago. So, should we expect a sell-off in long maturity Treasuries in the relatively near future? 

Frankly, that depends on whether we are in a period similar to July 2002 or September 2008.


Parallels to 2008 

Awful or really awful seem to be the right adjectives to describe the recent US economic data. The data seems to suggest that the economy sort of halted in May 2010. The last time we saw this was in September 2008 after the shock of Lehman bankruptcy. Perhaps, the debacle in Europe had a chilling effect on the US Economy.

The action in Sovereign Government bonds also seems similar. Witness the yield of the 10-Year German Bund at 2.58%. So if May 2010 is indeed September 2008, then we have lower yields ahead both in Europe and in the USA. Even after Friday's bad payroll report, it seemed as if the Bund was leading the Bond. So we watch the Bunds to get a clue about the near term direction of US Treasury yields. But Jordan Kotick seems to think that the main market to watch is the Japanese JGB market and especially the 10-Year JGB (see clip 3 below). 

We believe that the next substantial downward move in 30-Year & 10-Year Treasury yields will come when investors realize the true condition of China's Banks and the extent of the Chinese slowdown. Once that happens, we are convinced that the 30-Year Treasury yield will head lower, perhaps even lower than Gary Shilling target of 3%. 

Why? David Rosenberg did argue once that the 10-Year Treasury could trade at 1.5%. We notice that the spread between the 10-Year yield and the 30-Year yield can touch a historic low of about 50 basis points at major deflationary inflexion points. This is how we can measure to a 2% yield for the 30-year Treasury Bond. Of course, for this to occur, investors need to be fear that China or the US in this decade will be like Japan. 

In that case, the US stock market will break the March 2009 lows decisively.  


Parallels to 2002

The market action in 2010 resembles the action in 2002 in some ways. Recall that the stock market made a major bottom in July 2002 and then rallied into fall of 2002. October 2002 was the next significant bottom. Then the real rally began in March 2003 with a real but job-less recovery.

Is this possible in 2010? Well, we shall find out soon enough whether the stock market makes a bottom in July 2010.


A Media Signal about US Treasuries?

We have written extensively about how CNBC Anchors have been contemptuous of US Treasuries and people who invest in US Treasuries. Their usual refrain has been why would any one lend their money to the Government for 10 years for 5.5% or 4.5% or 4% or at 3.5%?  We wrote our first article on this topic in August 2008 titled Are CNBC Anchors on a Mission Against US Treasuries? The CNBC Anti-Treasury mission has been the most steadfast of all missions we have seen in American Television. We even wondered in an article whether CNBC Fast Money, CNBC's most aggressive show, had a censorship against speaking bullishly about US Treasuries.

Then came last week. It was as if CNBC had seen the light. We could not believe our eyes and ears. Every single CNBC show sang praises of US Treasuries and lauded investors who had invested in Treasuries. Yes, even CNBC Fast Money. Actually CNBC Fast Money went to the other extreme by inviting Dr. Gary Shilling, one of the most passionate bulls on Treasuries, and allowed him to state that his target was 3% for the 30-Year Treasury yield, a return of 20% from today.  

If you landed on earth from another planet lasy sunday and watched CNBC USA all this week, you would think that CNBC considers US Treasuries as the elixir for all investment portfolios, a sort of earthly investment Amrut or Ambrosia.

Let us be clear. We love it. We welcome CNBC into our light from their self-imposed darkness. It is one of the things that makes us happy, pleasant and gentle this week. We consider this as CNBC's Fourth of July present to American viewers.

But then we recall the contrarian nature of major media turns and we wonder whether CNBC's new found love for US Treasuries might prove to be a contrarian signal. We sincerely hope not.  


Strategy Session

In our last Videoclips article on June 12 , we were fairly blunt in our criticism of CNBC Strategy Session, the new show that was launched that week.  We also offered our suggestions to make the show better.

When we returned this week, we were rather happy to see that the changes in the show match our suggestions. The show has gone to a two anchor format. Kate Kelly is now being used to deliver focused reports. The show does try to focus on strategy and tries to deliver an actionable idea that has the life span of a couple of months. We like the show now. We know this because we no longer wait for the Fast Money HalfTime report to begin as we did in the week of June 6.

The Faber-Kaminsky couple is odd but seems to work. Gary Kaminsky likes to talk, but he does talk strategy. Our suggestion to David Faber is to not compete with Gary Kaminsky in volume of words uttered. When Gary talks about strategy, he often leaves himself vulnerable to a zing. So, in our opinion, David should use the rapier than the broadsword. Wait for Gary to give you an opportunity and then zing him with a verbal taser or wound him with a verbal rapier thrust. Gary tends to get more animated and somewhat upset when zinged like this but then he gets even more decisive in his strategy. 

David, you can't be the new odd couple unless you can get to Gary Kaminsky. Trust us, it is easy. Finally about Kate Kelly, watch her short but succinct report about the Euro on Friday, July 2: 

• David, speaking about the possibility of a double-dip in the US, I am told by a sell-side trader I know this morning that sentiment towards the US is getting so relatively bearish that people are actually beginning to feel good about Europe, imagine that! This is a guy that I talk to on a regular basis and for months he has been relatively bearish on the Euro and he says that the position that he has had for months is now flat, so they are no longer bearish on the Euro and I am hearing the same from the hedge fund community; sentiment is starting to shift and if you take a look at Euro's performance Tuesday night; it hit a certain inflexion point, I believe it was like 1.2150, something like that and since then it has been moving slowly upward. People feel like FinReg, I am told, is really going to drag down bank earnings, we talked about this week about the taxes on the banks and the other costs of doing business in different way, the reorganization etc., so there are concerns globally about what this is going to do to bank earnings as well as the macro picture in the US and all told there are stress tests going on in Europe, there seems to be some feeling that stress tests will improve confidence, may be they will raise more capital, who knows those are underway right now, but in general you know there is a lot of uncertainty out there and Europe may actually be a better place to play, I am hearing that some people think the Euro will go to 1.30 by the end of the summer, if not sooner

Well done, Kate. We like such a clear, actionable report. But as we pointed out above, Robert Prechter made this forecast to Maria  Bartiromo on June 10. A case of technicals leading the fundamentals?

A gentle message to Strategy Session Head Honchos and CNBC Management, please do not feel shy. Feel free to send us a gift for our contributions to Strategy Session. US Dollar cash works best (we are not like Gisele in any way). For alternatives to cash, read the next section.


Luxury Life

We saw promos on CNBC Europe for a show called CNBC Luxury Life. This particular show was about horse racing on ice in St. Moritz. Nice idea, but sort of passive we think!

In our experience, people who watch CNBC are investors. In other words, they are do-ers and not passive watchers. So we think Luxury Life segments should cover luxuries that viewers can try. This is where we can add real value to CNBC. We could offer various ideas for such segments and even offer to do some segments. Here is an example: 

• The Dorchester is a nice hotel in London, an elegant place in a picturesque setting across from Hyde Park. The Piano Bar at the Dorchester was made famous by author Jack Higgins in his novels about Sean Dillon, "the man of thousand faces", the feared enforcer of the IRA who turned and joined a covert section of British Intelligence. Sean Dillon loved to visit the Piano Bar at the Dorchester. 
• When we did so a couple of weeks ago, we made an interesting discovery. We saw on the menu a vintage Macallan priced at 650 pounds per shot (approx. $1,000 per drink). We like such luxury but when paid for by some one else. So we stuck to our own preferred Macallan brand, a much more recent and affordable age. 

CNBC Management, allow us to make an offer to you. We hereby offer to do a review of this rare and luxurious Macallan vintage for a very nominal fee, extremely nominal relative to our vast experience of drinking single malts, subject to receiving  a bottle of this vintage as raw material provided by you for this review. We shall keep detailed notes about the novelty of first few tastes, the real taste when our pallet gets accustomed to this vintage and the longing sadness we would feel with the final tastes. Then we would write a review that would be factual and poetic. 

Wait! For your double pleasure, let us make a double offer. The London Duty Free has a Glenfiddich Private Label single malt that is priced at 7,500 pounds for a bottle. We hereby offer to do a review similar to the above Macallan vintage review on similar terms as well as a comparison of the two. We could even review good cigars, to be selected by us and provided by you, that go nicely with these single malts. 

For those who do not wish to fly to London for such luxurious pleasures, we could do a segment in the American heartland:

• A hour's drive from Milwaukee airport brings you to the divine Whistling Straits . We set great store by inner peace. One way to achieve inner peace is to sit in the elegantly rustic Irish clubhouse with a nice single malt, a good cigar and gaze at the pristine solitude of Lake Michigan. You will see why Pete Dye said of his own masterpiece  "I should say this with some degree of modesty. But in my lifetime, I've never seen anything like this. Anyplace. Period."

Readers may have realized that we tend to view things differently from most folks, at least sometimes and in some cases. For example, most people visit the Louvre in Paris to see what is inside the gorgeous museum. But to us, the visual experience of a beautiful exterior is sometimes much more pleasing than any inner beauty or treasures.

• When we visited the Louvre last fall, we did not see the Mona Lisa or the other treasures within. As do-ers, we wanted to experience the setting where Ticket to Hollywood was filmed. Why view the painting of a woman when you can view a Miss Universe moving to the music of Shanker-Ehasan-Loi? Would you not choose to view a beautiful creation of God over a lovely creation of man?
• But what does this have to do with CNBC? Well, Insurance of global treasures is a business topic worthy of the network that advertises itself as First in Business Worldwide. Along the lines of our Louvre thoughts, we could do a segment about how physical treasures of beautiful actresses are insured and the costs of such insurance. After all, trophy assets do need trophy protection insurance! How many CNBC viewers can tell us which companies specialize in such insurance? Very few, we suspect. How many male CNBC viewers might be interested in such a segment? Most, we believe!

So, here we are CNBC. We have come up with 3 different segments about Luxury Life quickly, instinctively and without any effort. Can your on-air talent come up with such ideas? We doubt it. 

CNBC Management, would you like to retain us for such Luxury Life segments? We could offer our services for a nominal fee if and especially if we get the standard 20% performance fee of ratings-based revenues.

So call us, CNBC. You would not regret it.  


Editor's PS: When we began writing this article, we had no idea we would veer towards the path of the last section above. Our articles are written in the time honored discipline of fire, aim and ready. We do not think and then write. We begin writing and the act of writing summons our own personal muse and ideas flow into our article. Sort of weirdly different. But that's what we are. That is why we use the nom de plume Cinema Rasik.

 

 

Featured Videoclips

This week we feature the following videoclips: 

 

1. Gary Shilling on CNBC Fast Money on Tuesday, June 29
2. Bill Gross on Bloomberg Radio & TV on Friday, July 2
3. Jordan Kotick on CNBC Closing Bell on Wednesday, June 30
4. Jing Ulrich on CNBC PowerLunch on Friday, July 2
5. Robert Kessler on CNBC StreetSigns on Tuesday, June 29
6. Alan Greenspan on CNBC Squawk Box on Thursday, July 1

 

 

 

 

 

 

 

1. Bull Market or BS?  Gary Shilling on CNBC Fast Money - Tuesday, June 29

We are amazed that Fast Money invited Dr. A. Gary Shilling to talk bullishly about US Treasuries. 

And they actually let him speak! They let him say that his target for the 30-Year yield is 3%. They let him say that a fall from 4% to 3% yield would generate a 20% return for the 30-Year Treasury Bond and 32% return for the 30-Year Zero Coupon Treasury strip.

Watch this clip and see for yourself. Dr. Shilling added that the odds of a double dip in the economy are 50% in his opinion. He was explicit about his positions - long 30-Year Treasuries, long US Dollar and Short stocks, China & Commodities.

This was the first time since the show's inception that we heard an expert on US Treasuries be allowed to be bullish on CNBC Fast Money. Our faith in redemption is restored!

But, we shudder about this seminal media event becoming a contrary indicator.


2. Gross Says 10-Year Treasuries Are Decently Valued - Bill Gross on Bloomberg Radio & TV - Friday, July 2

Some time ago, we wrote an opinion suggesting that all Financial TV shows should use the ESPN format of a journalist anchor and a professional anchor-analyst. This has worked wonders for ESPN. After all, we would rather hear comments about quarterbacks from Phil Simms or Troy Aikman rather than from a journalist.

If you want to see how a professional can add value to a financial interview, listen to this interview of Bill Gross on Bloomberg. David Malpass, ex-economist in chief from Bear Stearns, acted as a guest host. Just as we expected, David Malpass asked the best and the most pointed question to Bill Gross.

David said "I will try to put Bill on the spot. Bill, would you still be buying US Treasuries at these low yields?" The Bloomberg Radio anchor gleefully said "that's putting him on the spot; very good David. What are you doing this morning, Bill?" What did the Bond King say? 

 

 

• "well, nothing yet, talking to you. But here is the conundrum, it is a new conundrum, I suppose in terms of interest rates as opposed to the old one. The new one is simply with the 10-Year Treasury at less than 3%, that represents something almost historically low, but certainly better than the 0.25% you can make with the money markets. If inflation continues down and if nominal gnp, this is the key, if the nominal gnp in the United States is around 3%, which is our new normal forecast, then the 10-year Treasury is decently valued, it is not cheap but it is decently valued, certainly a better alternative to money markets."

Then followed a discussion of Stocks vs. Bonds similar to the one Bill Gross had with CNBC's Erin Burnett on Thursday. We are determined to be gentle today and so we mildly wonder why the Squawk Box team did not ask the above direct question of Pimco's Tony Crescenzi on Friday morning and why Erin Burnett did not ask the direct question of her friend Bill Gross .

May be, CNBC does need to listen to us and go to the journalist-professional duo format we put forth in our article Financial Networks or EMPNs?


3. Rising Risk, Big Concern - Jordan Kotick with CNBC's Maria Bartiromo - Wednesday, June 30

We tend to feature clips of Jordan Kotick because he tends to be more right than wrong, though we hope he proves to be dead wrong about his concerns in this clip.

Jordan said that he sees clear signs that the market is moving from stability to vulnerability and added we are seeing some pretty dangerous signs heading into the month of July. He discussed a couple of charts:

• Italian 10 Year Breakevens - "The inflation expectations were lofty but now these are going down hard". Kotick pointed out that "these have moved with the stock market and so a breakdown here suggests that the market is pricing in a lot less optimism on the European side."
• Japan 10 year yields - This is the most important chart as far as Kotick is concerned. "Japanese 10 years have been in a range for 7 years; Japanese investors are among the most risk-averse in the world. Yet, Japanese 10yr JGBs have broken the range. When you have broken a 7 year range, the market is now bulled up and the Japanese bonds are getting a bid. The fact that they have not gone anywhere in 7 years, the market is saying something is wrong. The bigger the range, the bigger the break" Kotick explained.
• Euro-Swiss Franc - "Last time, there was an aggressive outperformance by the Swiss Franc was in the 1970s; For 25 years you have done nothing in Euro-Swiss until just a few weeks ago; now Euro-Swiss is starting to go to the downside very very aggressively. That is a huge move into the Swiss Franc..."
• Palladium/Gold - "This is not about direction; this is about sector rotation. What we are seeing is Gold is outperforming Platinum, Palladium and Silver". Then Kotick showed the chart that clearly showed a major topping formation.

Then he added "all of these are clear signs that the market is rotating to a more negative sector. This is not the end of the world. All we are saying is that the correction of the rally from 2009 is not over. Once you get past the fourth of July, just be careful in July. There is still some vulnerability here."

Kotick's conclusion - Timing is everything and it will be everything this summer.


4. China Growing or Slowing? - Jing Ulrich of J.P. Morgan on CNBC PowerLunch - Friday, July 2

Jing Ulrich, China Equities & Commodities Chairman at J.P.Morgan, has been a frequent guest on CNBC. Until now, she has always been bullish on China, its economy and its markets. She remained bullish even as other well-known investors like Donald Straszeim were turning cautious. But in this interview, Ms. Ulrich was more cautious and in fact bearish. She said:

• ...at this point there is further downside to some of the China stocks because momentum is slowing, we are seeing across the board demand for commodities, for housing, for cars coming off a very high level from 2009

To her credit, Sue Herera did ask her to comment on views of Mark Chandler of Brown Brothers and Don Straszeim who see value in China right now. Ms. Ulrich basically said there is no catalyst yet. 

So it seems that Ms. Ulrich, like her colleague David Kelly of J.P.Morgan Funds, is essentially a momentum investor. As long as Chinese stocks are going up, she articulates the bullish case on China (as she did on April 1 in the clip China's Global Growth ) and when Chinese stocks are down in bear market territory, she talks bearishly.  

This is very similar to the on-air behavior of David Kelly, the man with 500* Billion Dollars Worth of Advice as CNBC PowerLunch called him once. When the stock market was strong, Mr. Kelly was a committed bull on stocks and contemptuous of people who were investing in Treasuries. In fact, Mr. Kelly repeatedly asked CNBC viewers to sell US Treasuries and invest in stocks. In particular, on March 16, the day of the Fed meeting, David Kelly got into an argument with Ken Volpert, the bond pro at Vanguard. Given what the Treasury market has done, the investor Volpert won and the strategist Kelly lost (see clip #3 from our Videoclips article for March 14-March20 ).

In our resolve of gentleness, we can only sigh about the pressures on Wall Street Strategists to be perennially bullish. That is why we have such respect for people like Charles Clough, David Rosenberg, Richard Bernstein who wrote with candor in spite of such pressure and protected investors through the past two bubbles.

• * PS: We noticed that CNBC PowerLunch called the advice of David Kelly worth $500 Billion on July 8, 2009 and worth $450 Billion worth on May 13, 2010. How did Mr. Kelly's group lose $50 billion, literally 10% of their assets from July 8, 2009 to May 13, 2010? Did their clients take their money away or did Mr. Kelly's group lose money for their clients? Ours is an inquiring mind and it would gently like to know. It would also like to ask gently why Michelle, Sue & Tyler of Powerlunch did not ask this question of Mr. Kelly. Finally did they wonder about the true value of Mr. Kelly's advice when his group can lose $50 billion or 10% of their capital in less than a year? Is it because J.P. Morgan is an advertiser? We could have asked so many hard questions but the constraints of gentleness restrain us today.

5. Is the Treasury Bull Market Over?  - Robert Kessler with CNBC's Erin Burnett - Tuesday, June 29

Talk about a strange week at CNBC. You know a heading like this would almost always feature a stock manager telling viewers why US Treasuries are about to go into a horrible bear market and how yields are going to skyrocket.

But not this week. Erin Burnett invited a long standing Bull on Treasuries who told viewers that the average bull market in Treasuries lasts 37-40 years and so this current 30 year old Treasury Bull market has another 8 years to go.

Read the summary of this conversation in Bonds Bull Market Has Another 8 Years on cnbc.com.

The Burnett-Kessler pair likes to delve into strange concepts. For example, a couple of years ago, Robert Kessler told Erin Burnett his idea that individual investors should put on a matched volatility trade of going  long 2-Year Treasuries with volatility = that of S&P 500 and short the S&P 500 against it. Erin Burnett liked the novelty or the strangeness of this idea and we recall that Burnett-Kessler duo had a good time with it.

They did not disappoint us this time either. First Kessler told Erin Burnett that Treasuries should be made tax-free (Mr. Kessler, have you heard of Pre-Refunded Munis?). His argument is that foreign central banks like China and Japan don't pay tax on their US Treasury holdings and so why should US investors? He says USA should follow the example of Taiwan where consumers pay 1% interest on their mortgages. Ever hear about the Housing Bubble, Mr. Kessler?

Then Mr. Kessler said government should enlist celebrities to sell bonds to build a nationwide bullet-train system. "I think you need a big spending project," he said, "We should have the greatest bullet train....in the world."

We have a better idea, we think! How about selling bonds to make college education far less expensive than it is now. One of the reasons India has become a center for technology jobs is that college education is very inexpensive in India. In our own case, we estimate that our education from kindergarten to college cost less than $500 in total. If we could educate more young people via inexpensive education, perhaps we could fill more technology job needs from within America.

But the final point of Robert Kessler is a little more sensible. He pointed out that if Americans used 5% of their $45 trillion in household balance sheets to buy Treasuries, then that would raise $2 trillion "which would cover the whole deficit of the United States and we wouldn't need China or Japan to do it".

We concur because we think Treasuries are a far better investments vehicle than CDs. But, we wonder if Americans take $2 trillion out of their CDs to buy Treasuries, what would happen to Banks? If their assets walk out of the door, what would Banks lend or perhaps how would Banks buy 10-year Treasuries at 3% while paying us virtually nothing? So would a good idea for US Treasuries end up being an awful idea for Banks and the economy?

We wonder! Ms. Burnett, could you ask Robert Kessler to help us with our quandary?

 

  
6. Alan Greenspan with CNBC's Steve Liesman & Squawk Box - Thursday, July 1

Read the unedited transcript of the interview Alan Greenspan, Former Federal Reserve Chairman, on CNBC's Squawk Box on cnbc.com. The various videoclips can be found by searching for Alan Greenspan on cnbc.com or simply go to http://search.cnbc.com/main.do?keywords=alan%20Greenspan&sort=date&minimumrelevance=0.2&type=video&pubtime=0&pubfreq=h

We said before that we intend to be gentle and pleasant in our comments in celebration of the Fourth of July. So we will withhold our comments.

Dr. Greenspan did make an interesting point, though. He said at one point that essentially stock market is a cause of economic activity. He probably would have added, if asked, that he watched the stock market to the point of targeting his monetary policy to the message of the stock market. Of course, Dr. Greenspan never admitted this when he ran the Fed and Dr. Bernanke would not admit it now.

We recall that James Bianco made this point in 2006 & in 2007. In fact, we recall an article by Mr. Bianco in which he showed case by case how Chairman Bernanke's monetary actions in 2007 matched the inflexion points of the stock market. This is why we generally refer to him as the astute James Bianco.


Send your feedback to editor@macroviewpoints.com

        

The violent reaction around the world against Israel's intervention in the Turkish Flotilla has cooled down but the ramifications of this incident will continue to spread. We may well look back at this incident as the beginning of a new unstable period in the Middle East.  

The old American posture in the Middle East was based on two major tenets:

• Israel as America's first and foremost ally in the Middle East and 
• Reliance on Saudi Arabia as the geo-strategic center of the Middle East surrounded by allied Egypt, Iraq & Jordan

America's military venture into Iraq made this geo-strategic center virtually impregnable. With a strong center, the Gulf emirates of Bahrain, Kuwait, Abu Dhabi, Dubai and Qatar were able to develop their own business friendly economies and societies.

In to this stable situation stepped the Obama Administration with its own initiatives and plans. President Obama believed that the anger of Muslims against America was a grave danger and his number one priority was to become friendly to Muslims. But he did not propose to do so by becoming more friendly with Saudi Arabia, the religious center of Sunni Islam. Instead, he chose a three-pronged strategy:

1. President Obama announced his plan to withdraw from Iraq.
2. He anointed Turkey as his main ally in the Middle East. 
3. President Obama made it his mandate to create peace between Palestinians & Israel. Apparently, his belief was that solving this crisis will win America friends all over the Muslim world.

The Middle East, America and the World have now begun to realize the long term ramifications of this Obama strategy. 


The Middle East

The Middle East can be thought of as four distinct areas:

1. Turkey to the north-west, a strong non-Arab emerging power with dreams of being the successor to the Ottoman Empire which ruled the Middle East;
2. Iran, another strong non-Arab emerging power with its own history of ruling the Middle East. The Middle East has been subject to the military and cultural struggle for dominance between Iran & Turkey for centuries; 
3. Core Arab Middle East of Egypt, Saudi Arabia, Iraq, Syria, Jordan; 
4. Gulf Emirates of Kuwait, Bahrain, Qatar, Abu Dhabi & Dubai with their history of negotiating their survival by becoming suzerains of the dominant military power in the region.

Before, the only danger to Middle Eastern stability came from the ambitions of Iran. But as long as American forces remained in Iraq, there was little Iran could do to the Core Middle East. In fact, the ambitions of Iran made the American role in the Core Middle East even more secure and necessary. Under American military umbrella, the Gulf Emirates became economically advanced and rich.

President Obama's anointment of Turkey as America's core ally changed the Middle East situation. The new Turkey wishes to become the successor to the Ottoman Empire, the empire that occupied and ruled the Core Middle East for centuries. This new Turkey signalled its ambitions in the Core Middle East by its support of the Turkish Flotilla into Gaza and its vituperative condemnation of Israel's military intervention. 

In doing so, Turkey has changed the geopolitical calculus of the Middle East. It has awakened Iran to a new & formidable challenge to Iranian ambitions from a historical enemy. In addition, the Core Middle East has been awakened to a renewed sense of danger from an old empire that ruled them with an iron hand.

This disquiet can be seen by the statement by Hamas that Turkey should get involved in Gaza in cooperation with Egypt. This is from Hamas, the major beneficiary of the Turkish flotilla. Turkey is fine but Hamas cannot survive without Egypt, the giant neighbor of Gaza. This Hamas statement demonstrates the deep concern that Turkey has aroused in Egypt. 

Look at the map below. If Turkey can create such concern in far away Egypt, how deep must be the concern of Iraq, Syria, Jordan & Saudi Arabia?
 

                 (source - wikipedia)


Iraq as America's Tibet

Look at the map above. America's military presence in Iraq provides America with a controlling position in the Middle East. From Iraq, America can neutralize the expansionist intentions of both Iran & Turkey. America can protect the oil fields of the entire region and it can dominate the Persian Gulf from the land as well as from the sea.  

The last military venture that yielded so many benefits was China's occupation and annexation of Tibet. Without Tibet, China had no presence and no hope of a presence in Afghanistan, Pakistan or Iran. With Tibet, China instantly became a power that influences Iran, Afghanistan & Pakistan. Today, America has to plead with China to support the sanctions against Iran. Israel has to seek China's support against Iran. All this is due to China's occupation of Tibet.

We think America's military venture into Iraq is as important to America as China's venture into Tibet has proved to be for China.  But there is a huge difference between the two.

America's venture into Iraq has brought stability, democracy and hope for economic growth to Iraq. In contrast, the annexation of Tibet by China has been a disaster for the Tibetan people, a disaster that has been described by the Dalai Lama as cultural genocide. 

How important is American presence in Iraq? The best way to answer the question is to visualize a post-American Iraq and Middle East.


The Middle East after America leaves Iraq
 
The World remains focused on Iran as the main post-America problem for the Middle East. We think that the real instability in the Middle East is likely to come from Turkey. This was the topic of a Washington Post article which quoted Henri Barkley of the Carnegie Endowment for International Peace about Turkey's leaders "They want to be the big kid on the block. They have essentially a very inflated sense of their own importance."

We think the next few years will see an increased level of competition between Turkey and Iran for influence in the Core Middle East. As long as American forces remain in Iraq, this struggle will remain muted. But once American forces leave Iraq, the gloves will be off. Iraq will become the theater of a real struggle for supremacy in the Middle East. It is likely that Iraq might end be split between a Shia Iraq dominated by Iran and a Sunni Iraq dominated by Turkey.

The combination of Iran & Shia Iraq will put enormous pressure on neighboring Bahrain (with 60% Shia Population) and on Kuwait. The next step would be pressure from the south on the southern Shia regions of Saudi Arabia. 

The combination of Turkey and Sunni Iraq will put enormous pressure on Syria to toe the Turkish line. The next step would be to pressure Saudi Arabia from the north.

Saudi Arabia, the center & the jewel of the Middle East, will be subject to this pincer movement from both the north and the south.  Who will Saudi Arabia turn to? Egypt is behind Saudi Arabia and remains underdeveloped with a weak military. Jordan is too small and weak to count.

Ironically, Israel is the only country that can act as the military protector of the Core Middle East once America is gone. Is this why Saudi Arabia, Jordan & Egypt have refrained from criticizing Israel in harsh terms about its intervention in the Turkish flotilla?


The Islam Issue & the Palestinian Problem

We believe that President Obama has made two major blunders in his formulation of Middle East policy. First blunder was to assume that Islam, as a religion, is the crux of America's problem. We believe that Islam the religion is the medium through which anti-American struggle is waged but Islam the religion is not the main problem.

Just look at the Middle East. Every country we have discussed is Muslim. Turkey and the Core Middle East are all Sunni Muslims. But these are different ethnicities. The Core Middle East is Arab but Turkey is not. Arabic & Turkish are completely different languages with different cultural and ethnic roots. Iran is ethnically Persian and not Arab. Its language is Indo-European and totally different from Arabic ethnically and culturally. 

Getting closer to Islam the religion would not help America navigate the ethnic, cultural and historical quagmires of the Middle East. In fact, we think America is trusted because America is a foreign country with a foreign religion. We think every Middle Eastern country wants and would want America to stay in the Middle East as long as America itself does not want to stay for ever. 

The second blunder has been President Obama's focus on the Palestinian issue. Frankly, no leader in the Core Middle East cares much about the Palestinians. They simply don't want the Palestinian problem to become visible in the news media. This is because this issue resonates in the so-called Arab street even though no portion of the Arab-street has any desire to make any sacrifices to the Palestinian cause. 

Frankly, the Palestinian issue seems to be more alive in the hearts and minds of the Obama Adminstration than any leader in the Middle East. Any one of the rich Oil countries in the Middle East can solve the poverty and economic hardships of the Palestinian people. They don't want to because they do not care and because they think the issue remains a millstone around Israel's neck and a real impediment to a potentially expansionist Israel. 

As far as Gaza is concerned, Egypt can solve it by offering to take over Gaza. We believe Israel would be happy to hand over Gaza to Egypt. Egypt has no such intentions because Egypt already has a terrorism and extremism problem inside Egypt. They have no wish to assimilate Hamas into Egypt and create a domestic monster. 

There was no reason whatsoever for President Obama to step into the Palestinian issue. But he did and he did it in the dumbest way possible by making Israel the public enemy of the Peace Process.


The Reality of Israel

Israel remains the most publicly hated country in the Middle East. But it remains the most necessary country in the Middle East. Ironically, the military dominance of Israel may be one of the stabilizing constants of the Middle East. 

Think of post-American Middle East. If Turkey invades neighboring Syria, which is the only country Syria can look to for help and protection? Saudi Arabia & Jordan are too weak. The only possible answer is Israel. Frankly, Israel would have no choice but to intervene militarily to protect Syria from Turkey. Because Turkish occupation of Syria would bring the Turkish army to Israel's doorstep, something Israel cannot accept.

If Iran invades Kuwait or Bahrain after America leaves Iraq, which country has the military power to intervene before Iran occupies these emirates. Saudi Arabia, Iraq, Jordan? No. Again the only answer is Israel. Is this why the Gulf Emirates maintain friendly relations with Israel?

A smart Israel could end up playing the role England played in continental Europe. With its dominant navy and strong military, England could intervene into any continental European conflict when needed. Israel with its dominant air force and strong military can do the same in the Middle East. England was always the outsider the way Israel is in the Middle East. England never had any intention to stay in continental Europe as an occupier. This is why England was trusted by the smaller European countries. Israel has no intention to stay in any other part of the Middle East as an occupier. This is why Israel may end up being trusted by the smaller Middle Eastern countries. 

England made sure that none of the main continental powers of Germany, France and Russia ever became strong enough to dominate continental Europe. England did so by diplomatically and occasionally militarily. Israel needs to make sure that neither Iran nor Turkey become strong enough to dominate the Core Middle East.

The question is whether Israel is crafty enough or diplomatically skilled enough to play this role. To fulfill this role, Israel needs to grow into a more mature society and shed its almost craven emotional dependence on publicly visible American goodwill.  

The Obama Administration for its part has to recognize that Israel is fundamentally its most important ally in the Middle East and the only ally that can always be counted upon. Once he recognizes it, President Obama needs to make this known clearly, unambiguously and publicly. 

This is the only way for the Obama Administration to extricate itself from its current Middle East policy. If it does not, we fear the Middle East will become chronically unstable and possibly find itself in a region wide ethnic and military conflict within a decade of America's departure from Iraq. 



Send your feedback to editor@macroviewpoints.com

        

Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.


Words of the Wise!

• ...I am actually very bullish on the equity market;..we have done a lot of charts, looked over history where it is vs. the S&P, of yields of the S&P vs. 10 year Treasuries, it looks to us like stocks are cheap here - Robert Kapito -  Friday, June 11 (see clip 1 below)
• The collapse of the financial system as we know it is real, and the crisis is far from over; Indeed, we have just entered Act II of the drama. - George Soros - Thursday, June 10 (see clip 3 below)
• .  I think we have completed also a pretty clear 5-wave structure in our Elliot Wave Model..it (Euro) went from 1.50 down to 1.20, it could bounce to 1.30 without much trouble. Certainly it needs some kind of relief. There are too many people piled on the other side - Robert Prechter - Thursday, June 10 (see clip 2 below)
• ...I am a little concerned about Gold this afternoon, the manner in which Gold traded yesterday was really quite disturbing; we got to 1250, one of those philosophically difficult points, magical number as it were,...I don't preclude the fact that you could take Gold under 1200 without too much difficulty may be even 1175 - Dennis Gartman - Wednesday, June 9
• ...We are huge bulls of bullion but we are concerned over the near-term outlook since this now looks like an overcrowded trade... - David Rosenberg - Tuesday, June 8
• ...economic expansions don't die of old age, they are killed, when you get volatility like we have seen now, that's a red flag that could kill it, we haven't done it yet, but unfortunately we are moving down that path - James Bianco - Thursday, June 10 (see clip 5 below).

Week that was

For the first time in many weeks, the US stock market closed up because of a big rally on Thursday. On Friday, the stock market opened down sharply thanks to an awful Retail Sales report, but stocks recovered quickly. A final hour rally drove the averages to the positive territory. We don't know much but it sure seems that investors are either underweight stocks or positioned to the short side. The fact that 1040 on the S&P 500 held again this week might have contributed to the rally at the end of the week. 

Treasuries behaved like they did last week, a selloff midweek and a rally on Friday after a surprisingly bad economic report. The May retail sales report was worse than the one in April and the April report was worse than the one in March. The deceleration in the US economy is becoming more obvious by the week. Yet, Treasuries seem unable to make new lows in yield or new highs in price. This Thursday's 30-Year auction was very strong with a bid-to-cover ratio of 2.87, the second highest in recent memory. Yet, the bond sold off materially after the auction, falling by over 2 points. Does this mean that the buyers are increasingly ones with weak hands or does it suggest covering of short positions in the auction? We would love to know.

Just when CNBC Anchors had become believers in the continued fall in the Euro, Robert Prechter turned bullish on the Euro and called for the Euro to rally to 1.30 (See clip 2 below).  Jim Rogers is reported to have said that now may be a time to buy the Euro. Coincidentally, both Dennis Gartman  and David Rosenberg  made cautionary comments on Gold in the short term. These people are doers. We have a high degree of respect for doers in general and very high respect for these particular doers.

In stark contrast to doers are the talkers, especially academic talkers like Niall Ferguson who wrote the Newsweek cover story titled End of the Euro . We recall that the same Prof. Ferguson had written the obituary of the US Dollar during the week of October 21, 2009.  That was also the week CNBC devoted a full day to its Sense of the Dollar special (see our videoclips article for the week of October 18 - October 24 ). Frankly, the article by Niall Ferguson persuades us that Prechter, Rogers & company might be correct in their call to buy the Euro.

Is this a sign that risk asset classes may be ready for a rally after the carnage of May? The steep fall in Treasury yields has to be a short term positive. If patterns of previous years hold, then we could see a nice rally lasting a couple of months.

Think back to 2007. We had a snap-back rally after Bear Stearns was taken over by JP Morgan and we had an explosive rally in risk assets from late August to end of October 2007. Then reality intruded on the October euphoria and the downtrend resumed.

We do agree with George Soros (see clip 3 below) and Jim Bianco (see clip 5 below) that we have begun the second act of the Credit Crisis. But we wonder whether an intermission of a couple of months may be due after the emotionally exhausting selloff in late April and May.  

When does the European crisis resume? Carl Weinberg of High Frequency Economics told CNBC on Friday that a Greek Debt Default could come as early as August 2010 .  Veterans of 1997-1998 might recall that the month of August has featured the start of a new leg of currency related selloffs. 


Emerging Markets

China export figures rose sharply providing a sigh of relief to bulls who are worried an immediate downturn in China. But there are worrying signs about labor unrest in China that could lead to higher inflation in China and loss of manufacturing to neighboring Vietnam. For more details on this topic, read the Bloomberg article China Reaches Lewis Turning Point as Labor Costs Rise  or articles about labor unrest in the New York Times & Washington Post. 

The drop in the Euro is creating serious problems for Asian countries both by making their exports expensive and from the fears of hot money pouring into strong Asian currencies. A good overview can be found in the Bloomberg article Currency Controls Mount in Asia as Euro Hurts Exports .

Will these issues lead to continued outperformance by US market over Emerging Markets? How we wish such issues were discussed in Strategy Session, the new CNBC show launched this week? 


Strategy Session - CNBC's new show

In these articles, we have asked CNBC to focus on Bonds, on Credit markets and their interplay with stock markets. For years, we have wished for more strategy segments on CNBC, segments which tell individual investors how to think about their future strategy and how to allocate their investment money into various assets for optimal returns balanced with safety.

Recently, CNBC began advertising their new show Strategy Session, a show with two smart investors Steve Cortez & Gary Kaminsky and two reporters David Faber, a CNBC veteran and Kate Kelly, a journalist from the Wall Street Journal.  Each show was to have a guest host, a personality of stature. This would be a must watch show, we thought. We could hardly wait for the show to launch. 

Then it did, with a thud. The first couple of days were so bad that we had to force ourselves to stay awake. The shows were utterly boring and useless. Below we lay out our thoughts about Strategy Session. We take pains to do so because we still believe in the premise of the show. 

• The show is hopelessly cluttered, three anchors and a guest host - all standing around. Only two people add any value, Gary Kaminsky and Steve Cortez, even though Steve Cortez is shunted into a corner and allowed to speak only a couple of sentences in the half hour show. But in these couple of sentences, Cortez added value. Gary Kaminsky is a proven manager of other people's money. He proves his value whenever he is allowed to.

• The two journalists, Faber & Kelly, have very little to contribute except banalities. With 3 main talking heads all tripping over each other, the show cannot breathe. Unlike Squawk Box, which this show tries to mimic, there is no camaraderie between the anchors. That removes the principal ingredient of the Squawk Box magic recipe. 

• Strategy Session also tries to mimic CNBC Fast Money with its 4 talking traders format. But Strategy Session forgot that the 4 Fast Money traders are the show, the content. Fast Money adds investment value and Fast Money is great fun. Strategy Session is neither. Melissa Lee, anchor of Fast Money, understands her role and plays it perfectly. She does not have to opine or give her views. Her job is to elicit content from her team and keep the show moving fast with fun. This is what the earlier anchor Dylan Ratigan did well and Melissa Lee does it even better (smaller ego makes for a better anchor, perhaps?)

In our opinion, the design of Strategy Session is based on David Faber's vision. This is its core problem. The show often becomes a lecture and sometimes a servile pandering of Wall Street Investment Bankers. David Faber is a deal junkie and he cannot stop talking about investment bankers. It got so obvious that guest Robert Kapito of BlackRock called Faber both a "deal jockey" and a "deal junkie" in one show. Faber was talking endlessly about which investment bank was going to get which deal. As Mr. Kapito said to him, "who cares?"

We were also turned off by Faber's behavior on the show. He seemed obsessed with controlling the show. He talked too much and he shut  off his colleagues, especially Kate Kelly, in an abrupt and sometimes insulting manner. We were also disappointed with Kate Kelly. Occasionally we saw flashes of a personality & a touch of mean but mainly Kelly was boring and obsequious to Faber.  

Fast Money provides investment ideas and is fast paced. Strategy Session provides a lecture and is Boring. Squawk Box is fun and lets their hosts speak. Strategy Session is dull and competes with its own guest hosts for talking time. Squawk Box has Joe Kernen and Becky Quick while Strategy Session has David Faber and Kate Kelly. Enough said. 

But we really like the concept of a strategy session. So below are our suggestions to improve the show:

• Stick to two anchors, investment pros who can actually add value. Gary Kaminsky and Steve Cortez could do it well. If the show needs a woman, get someone like Karen Finerman. Make David Faber and Kate Kelly segment reporters who come in for short stories when they have something to add.

• Get some fun into the show. The magic recipe of CNBC is making financial news fun to watch. This is the key to the longevity of Mark Haines and Joe Kernen. It is the key to the appeal of Fast Money.

• Get real strategy content. Rather than focus on getting guests hosts and then fitting the show to that guest, select a strategy theme for some shows - Asset Allocation or how to break up investment capital between stocks, bonds and commodities; US stocks vs. International stocks, Investing in Bond funds vs Bonds - real topics that can add value to both individual investors and professionals. Remember every professional investor is also an individual investor for herself, himself and their families. We find most stock traders have little idea how to buy bonds for their family portfolios.

• Use Strategy Session to focus on such basic strategy disciplines and get real investing pros in each area to discuss these tactics.

Above all, lose the journalist egos. Fast Money works because egos are kept in check by the traders themselves and by funny takedowns of a trader by others on the team. Today, the best part of Strategy Session is the anticipation of the Fast Money Halftime Report that follows it.

We do not mean to be unduly tough on David Faber. We are told daily that he is an intelligent man. But intelligence is of different kinds. We tend to distinguish between Analytical Intelligence vs. Instinctive Intelligence . David Faber seems analytically intelligent to us. Most reporters are. Faber is very good at looking back and explaining why events happened. This is why he does a good job with documentaries and writing books. These require look back analytical thinking. 

Strategy is about looking forward often with little data or facts. It requires instinctive intelligence based on experience and pattern recognition. This is the intelligence that divides great investors from ordinary investors. Successful TV Anchors have this intelligence. It is what separates anchors from reporters.

This is why Strategy Session should use David Faber where he can be most effective, in doing special reporting segments.

We have always liked David Faber but as we say to Maria Bartiromo at the end of this article, our comments are not personal, just business.


Featured Videoclips

This week we feature the following videoclips:

1. Robert Kapito on CNBC Strategy Session on Friday, June 11
2. Robert Prechter on CNBC Closing Bell on Thursday, June 10
3. George Soros Speech telecast by Bloomberg on Thursday, June 10
4. Matt Simmons & Whitney Tilson on CNBC Fast Money on Tuesday, June 8 and on Wednesday, June 9
5. James Bianco & Larry Kantor on CNBC Closing Bell on Thursday, June 10

1. Are Buybacks New M&A? Japan Next Debt Crisis?  GM IPO Underwriters Revealed  - Robert Kapito, President of BlackRock with CNBC's Steve Cortez, David Faber, Gary Kaminsky and Kate Kelly (lnac* order) - Friday, June 11

We have very high respect for BlackRock as we do for Pimco. We have said before that the 2007 interviews of Larry Fink with Maria Bartiromo were almost prophetic and would have saved a good deal of capital for investors had they heeded Mr. Fink's warnings.  BlackRock's Peter Fisher had impressed us a great deal by his interviews with Maria Bartiromo as had Curtis Arledge in his interview with Fast Money. 

So we were very interested in listening to Robert Kapito, who we were told built BlackRock with Larry Fink. This is one case when the reality outperformed the hype. Mr. Kapito was frank to the point of being blunt at times but he was always insightful. We think his clips should be viewed by readers. Simply ignore the blarney from David Faber & Kate Kelly of CNBC and just listen to Robert Kapito. 

We feature some of his quotes below:

• This (cash on corporate balance sheets) is one of the reasons  I am actually very bullish on the equity market; companies have been the beneficiary of very low rates, so they have refinanced all their issues, and now they are sitting there with lots of capital; they are not investing in capital equipment, they are not sure where the economy is going, they are worried about liquidity, they want to know what the maturity of their debt is, they have learned now in the last couple of years that when you need it you may not be able to get it, so they are keeping their cash, when you think about that, two things come to mind - 1)when you have that cash, you are either going to invest it, you are going to buy back your stock or you are going to pay it out as a dividend and so we see a lot of power behind the dividends, we see a lot of buybacks, one other point about cash that I want to make  which is not only for corporations but it is also for individuals is that very low short term rates are really a tax on all of us, so think about that, where is all that cash being attracted right now, it is attracted to bank deposits, and banks are taking that money and putting on the largest spread trade in the history of mankind, so we are in essence by very low short term rates, we are bailing out the banks...so a corporation today has all of its cash and of course they are gonna look at transactions but I am afraid about those who are just looking at transactions just for earnings...what they should be doing here is really streamlining themselves, getting their production in place; their inventories are low; if there is any bounce in the economy, these companies are going to do very very well and also they are trading at the lowest PEs they have traded too, keep in mind.. 

In the clip Japan Next debt Crisis , Mr. Kapito said about his opinion of the US equity market:

• two reasons, you look at earnings, most of them have been earnings surprises; when you look at that and you look at where the PEs are today,  I think there is an opportunity; we have done a lot of charts, looked over history where it is vs. the S&P, of yields of the S&P vs. 10 year Treasuries, it looks to us like stocks are cheap here..
• the other side you haven't talked about today is interest rates, if I ask you today, where interest rates are gonna be 5 years from now, higher or lower, (answer higher), OK we all agree that rates are going to be higher..In the bond market, it is really important, asset allocation is really important to all people that are watching today, you got to get it right, I mentioned that you should be invested in the equity market, but the bond market is really interesting, people are not looking at Municipals, what people don't know that 46 states have to have a balanced budget, taxes are going to go up and interest rates are going to go up, and the second area is to look at credit, I want to make one point, you have to do the analysis, because you said rates are going to go up in the next 5 years, so you are going to buy companies that you are going to get back PAR because during that period of time you are not going to able to sell it at a profit.

Now James Chanos might disagree with Robert Kapito about Municipals and David Rosenberg might disagree with him about rates going up (remember rates remained low in Japan for last 20 years). But we like an asset manager who speaks plainly. 

In the clip about  titled GM Underwriters Revealed , Mr. Kapito interrupted the discussion about who the underwriters are and asked:

• Why is that the story here? Who cares who is underwriting this deal? Some one has to buy the deal, we are a fiduciary; we are going to make the determination of whether we are going to own a company, that we are going to own for the future that it is going to return a good yield or a good upside for our investors;everybody is a deal junkie here; I don't care who is underwriting this deal.

How we wish all CNBC guests are this blunt with CNBC Anchors?

Gary Kaminsky introduced Robert Kapito as the true Bond King and said "he doesn't flip flop". What a dig at the man known as the Bond King in the Bond world, Bill Gross? Were you listening, Erin Burnett? Aren't you going to defend your favorite guest?  

* lnac = last name alphabetically correct


2. Market Pro: Long Bear Market Looming - Robert Prechter with CNBC's Maria Bartiromo - Thursday, June 10

Maria Bartiromo introduced the topic by stating that the US Dollar has risen nearly 20% since last December. Then she welcomed Bob Prechter. Mr. Prechter's comments are below:

• Prechter - The dollar move was just fantastic and we were bullish for the whole thing back when people thought inflation was going to rage. The Euro has been killed, Now you remember the story back late last year when everyone said inflation was going to take over, the Dollar was going to collapse, the Euro was the thing to own. Well, now everybody knows that why the Euro is not the thing to own. These market turns always have a terrific story, fundamental story behind them and they fool people into doing the wrong thing. But the reason that we think the Dollar is ready for a correction and Euro is ready for a bounce is that not only do we have quite a few bullish people among traders for the first time through out this whole period but I think we have completed also a pretty clear 5-wave structure in our Elliot Wave Model; those two things tell us that it is time for a respite in the Dollar, possibly a recovery in the Euro, but if I were going to pick a currency to speculate on, I would rather be in the Swiss Franc rather than the Euro.
• Bartiromo - Swiss Franc rather than the Euro; let me ask you this, will the Euro's rally perhaps or this bounce you are looking for, will that get diverted if we see a leg down in the European Debt Crisis?
• Prechter - Well, I think what this is suggesting is that there is going to be a respite or at least Europe wouldn't look as bad as somewhere else for awhile; so it went from 1.50 down to 1.20, it could bounce to 1.30 without much trouble. Certainly it needs some kind of relief. There are too many people piled on the other side

Then Maria Bartiromo moved to stocks.

• Bartiromo - Let me move on here, Bob. A 20% loss in the major indexes is also the number that signifies a bear market. Is a bear market inevitable at this point?  We are 10% down from the peak in the S&P 500. Are you looking for equities to continue lower or higher?
• Prechter - I think the bear market that began in or resumed, I should say, in April is still in force. I spent quite a bit of time between December & April doing media, I think you and I talked in New York back then, I spent time saying look it is a great opportunity to get out of the stock market, if you are still in it; Since then, only in the month of May the S&P retraced all of that action from last December; the market can certainly bounce for awhile. I don't think it is really prudent right now to get into short term stuff, as long as people got out of the market and are in cash; I think my job is to look for the next bottom; I certainly don't see any indication of a major low yet and so we are waiting for that one
• Bartiromo - Real quick, what would be the indication of a low and a bottom?
• Prechter - We need to see some pessimism, we need to see market wave further oversold, and may be we need to get the point where there are only 20% of incumbents left in office
• Bartiromo - All right, real capitulation. Bob, thanks so much.

 
During the clip, you will see a slide of takeaways from Bob Prechter. CNBC titled the bullets below as Prechter's Insight:

• Dollar run may be over in the short term
• Stocks are still overpriced; long bear market ahead
• Still bullish on the dollar long term; Best place to be is cash and cash equivalents

Our sincere thanks to Maria Bartiromo for this interview. We gave Maria the Macro Viewpoints Most Useful CNBC Anchor of 2009 Award because of value added interviews like this one.


3. George Soros speech at the International Institute of Finance spring meeting in Vienna - Bloomberg Videoclip - Thursday June 10  

We consider George Soros to be among the greatest investors of this time. His words are always to be listened to.  A short summary of his speech can be found on Bloomberg.com at Soros Says 'We Have Just Entered Act II' of Crisis  . A couple of excerpts are below:

• “The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”
• the current situation in the world economy is “eerily” reminiscent of the 1930s with governments under pressure to narrow their budget deficits at a time when the economic recovery is weak
• When the financial markets started losing confidence in the credibility of sovereign debt, Greece and the euro have taken center stage, but the effects are liable to be felt worldwide

Frankly, the excerpts above and the Bloomberg summary almost trivialize the speech by Soros.  In our opinion, the entire speech is a must read by all investors. The full text of the speech can be found in the Dealbook section of the New York Times at The Full Soros Speech on Act II of the Crisis  .


4. Two Opposing Views about BP - Matt Simmons  and Whitney Tilson  on CNBC Fast Money - Tuesday June 8 & Wednesday June 9

Matt Simmons is a widely regarded authority in energy markets. He appeared on CNBC Fast Money on June 8 in the videoclip titled What's Next for Energy Infrastructure?  Mr. Simmons made an emphatic and extreme prediction in his appearance:

• I don't think BP is  going to last - at least not for more than a matter of months
• President Obama got in writing from Tony Hayward that he would clean up the Gulf of Mexico. And right now the spread is larger than the State of Washington

Mr. Simmons said that the cost of clean-up would just be too massive for BP to bear. But he thinks that the service companies will be exonerated because "this was all BP's fault".

Whitney Tilson, Managing Partner of Hedge Fund T2 Partners, first appeared on the Halftime edition of CNBC Fast Money to state that his fund was buying BP as a value stock. This clip is worth a serious listen. The next day, BP stock fell over 15%. Mr. Tilson appeared again on CNBC Fast Money on Wednesday, June 9  to state that his fund had taken advantage of the stock decline to buy additional shares of BP and that the position had been increased from a 4% position to a 5% position. Mr Tilson did a good job of explaining his investment rationale. This clip is a must watch in our opinion. Mr. Tilson begins speaking at minute 14:00 of the clip.


5. Market Breakdown  - James Bianco & Larry Kantor with CNBC's Maria Bartiromo - Thursday, June 10

Mr. James Bianco is the President of Bianco Research and a recognized authority on markets. Maria began with Jim Bianco:

• Bartiromo - Why does Europe matter so much to US investors?
• Bianco -  It is the second half of the credit crisis; we borrowed, we printed, we guaranteed a lot of money to stop the deleveraging in late 2008, it worked; now that borrowed, printed and guaranteed money is the problem and it is showing up at its weakest point; the weakest point is 16 countries using the same currency; some of the weaker currencies like Greece and Portugal are having a hard time repaying that debt; and the solutions we have had so far don't seem to really calm investors; and that's why over the last few months the markets have been struggling;
• Bartiromo - Jim let me ask you this; do you think anybody drops out of the Euro?
• Bianco - Don't think anybody will drop out of the Euro; there is no reason for Greece to or Portugal, that's what we really need, because they get a better deal in the Euro, the Euro has no mechanism to kick anybody out any more than we have a mechanism to kick any state out of the United States; you can't go that way;
• Bartiromo - what about if Greece can't keep up the austerity promises, what if they can't actually deliver on some of this;
• Bianco - Then they are going to wind up defaulting if that was to be the case; I am not so sure that they can be booted out; that's very murky area I will admit because this was not really contemplated; if they don't keep up with the austerity if they don't do what they say they will do, they are not going to get the loans, then they wind up defaulting; that's how the mechanism I think would work;

Then Bartiromo turned to her favorite guest, Larry Kantor, Head of Research at Barclays Capital:

• Bartiromo - Larry, we got a market that was up more than 273 points on the Dow Jones Industrial Average; not a lot has changed on the economic developments, so why are you so bullish?
• Kantor - You remember Maria, I was on the show Friday and I said to you this was a buying opportunity (emphasis ours)
• Bartiromo interrupts - yes you did; nice call Larry thanks (emphasis ours)
• Kantor - A couple of months ago, we weren't so sure there was a lot of value in the US stock market, now its down about 11%; it looks more value; a couple of months ago when things were calmer people seemed to be accepting that the US economy was rebounding, now there is a doubt; we have raised our forecast of our US GDP growth to about 4% for the next 2 quarters, that would now be a positive surprise; and US corporate profits look great; margins are fantastic; ....this is the kind of thing that will reaffirm confidence in the US economy; we don't think this problem in Europe really hits the US in a very big way; in fact, if anything interest rates have gotten down and gasoline prices are coming down as a result of this, this is a Europe problem, not a US problem. 
• Bartiromo - It is a Europe problem, not a US problem. So how do I make money on this situation? How come the markets trade down any development coming out of Europe?
• Kantor - I think we are due for a correction; the market was up from the bottom almost 80%; we have now had a correction; at worst it was down about 13%; this is giving you a buying opportunity; Maria, when the market goes up that much, after what we have been through the last few years, you are going to take some money of the table; everybody took some money off the table; we think the US economy is still going to be healthy ; this is a good buying opportunity;

Bartiromo - Very quickly, Jim Bianco, what do I sell in your view?

• Bianco - well, I think what has happened is correlations of a lot of markets have moved closer together, I don't want to say 1, they are not right that way but stocks go down, treasuries go up, gold goes up; so its kind of what you have been calling here "Risk on Risk off", I would say bigger picture Risk is Off. When you get financial market volatility that tends to kill economic expansions; economic expansions don't die of old age, they are killed, when you get volatility like we have seen now, that's a red flag that could kill it, we haven't done it yet, but unfortunately we are moving down that path;

We noticed Larry Kantor take credit for his bullish call on the stock market one week ago on Friday. To us, this seemed like a low-class or a tacky thing to do. It was even tackier for Maria Bartiromo to congratulate Larry Kantor for this one week call. Why? Read on.

In our experience, really good investors or managers rarely praise themselves. In the old West, amateur gunfighters often put notches on their guns, but the real pros never did. This is true of today's managers as well. We were particularly troubled by Kantor's self-praise because we have heard Larry Kantor a few times before.  We recall that Mr. Kantor told Maria in early May that he was Short Treasuries. Now that was a disastrous investment position because Treasuries had a ferocious rally in May. Did Mr. Kantor mention that? No. Did Maria Bartiromo remind him of that mistake? No.  

We are willing to overlook this because Maria has never cared about US Treasuries. Her first and last investment love is the stock market. So how accurate has Mr. Kantor been in the past on the stock market? Read his comments above and see how Larry Kantor glibly says that "when market goes up so much, you are going to take some money off the table". We wondered did Mr. Kantor take any money off the table at the stock market highs in April, or more importantly did Mr. Kantor tell CNBC Viewers to take some money off the table?

We went to cnbc.com and looked for Mr. Kantor's videoclips. Below is an an excerpt from a conversation between Larry Kantor and Maria Bartiromo on Tuesday, April 20 at 4:09 pm.

That day the Dow Jones industrial Average closed at 11,117.06. In response to Maria's question whether he would buy into this market given the uncertainties out there, Mr. Kantor replied on April 20:

• Kantor - yeah, I mean it has got a lot of momentum; you know this is a very nice sweet spot, accelerating economic growth, we are revising our forecasts everywhere for the first quarter and inflation is moving down, that means that even as the labor market starts to improve, its going to be awhile before the Fed stands in your way; so you have got the very low short term interest rates, strong economic growth, its a great combination.....the macro environment is great for the stock market overall...

Watch this Bartiromo-Kantor clip at Checking Market Pulse at cnbc.com or read a summary of Kantor's comments on April 20 at Economic Growth Has Market in Sweet Spot: Kantor on cnbc.com. In the videoclip, you will see a CNBC slide titled LARRY's VIEW which has two bullets:

• Concerns about a double dip in the US are unwarranted
• Biggest risk to our strong global recovery scenario in inflation but we fail to see global inflationary pressures yet

So here is Larry Kantor on April 20 saying he would buy the stock market at Dow 11,117.06 and that the macro environment is great for the stock market overall. After that day of Kantor's great macro environment, the Dow fell 1,217 points to close at 9899.25 on June 9, the day before the Bartiromo-Kantor conversation on June 10.

Mr. Kantor did not apologize to CNBC viewers for his wrong bullish call on the stock market on April 20. He expressed no regrets. And Maria Bartiromo did not question him or chide him about his awful judgement on April 20.

Instead, Kantor praised himself on June 10 for his week ago call to buy stocks and Maria Bartiromo congratulated him on his one week bullish call. Talk about adding insult to viewers' injuries. What a combination of Wall Street Strategy and CNBC Journalism? Caveat Viewer just about covers it.

With another anchor, we would have assumed that the anchor simply forgot what Mr. Kantor had said before. But this is Maria Bartiromo, CNBC's franchise interviewer. Maria is an exceedingly sharp lady. She takes her anchor role very seriously and, in our opinion, does not forget much. And then, Larry Kantor is her favorite guest. When we searched for Larry Kantor on cnbc.com, we found that Mr. Kantor was Maria's guest on April 6, April 20, April 29, May 4, May 25, June 4 and on June 10. Heck, Mr. Kantor would probably win Maria's most favored guest award. 

Let us be clear. Mr. Larry Kantor is free to express any opinions he wishes. His investment record is for him and for his employer. We are not clients of Barclays. We are merely viewers of CNBC and so, Mr. Kantor owes us nothing. But Maria Bartiromo does, we think. At least we think she should because we are her loyal viewers. So we have a right,  in our opinion, to ask questions about Maria's on-air anchor practices.  

So we ask - Why does Maria Bartiromo like Mr. Kantor so much? Perhaps, we might get a clue from Maria's closing comment on April  20 - "good news all around, Larry; good to have you on the program". Is it as simple as this?

Maria Bartiromo likes to hear good news from her expert guests. May be this is why great strategists like David Rosenberg, who have saved the investment bacon of many CNBC Viewers, are rarely invited by Maria. And when they are, they are always accompanied by Larry Kantor or other perma-bull favorites of Maria. 

We have watched Maria Bartiromo for years.  We have seen that Maria just loves to be bullish. In fact, we called her Global Liquidity Global Growth Champion in 2007 because of her giddily bullish opinion of global growth (we don't like to use the more commonly used term cheerleader - also Maria champions from the front in our experience rather than cheerleading from the back).

The horrific bear market of 2008 taught Maria Bartiromo a lesson about being overly bullish. So she changed her demeanor and her on-air declarations. But we guess Maria still loves to talk bullishly and spread the good cheer around. So we think Maria now prefers to have her guests talk perma-bull langauge and spread the "good news all around" message on her show. If we are right, this is a tactic worthy of Maria's smarts - she can ask bearish sounding questions to keep up her journalistic credentials but still have her chosen guests spread the good cheer around. At least, that is what we think.

With other anchors, we would publicly urge them to mend their ways. But over the years, we have developed our own Maria indicators based on levels of her bullish or giddy behavior on air. These indicators have proved quite reliable and we would be loath to lose their predictive value. However, in the interests of CNBC viewers and their financial health, we do publicly urge Maria to consider the needs of investment safety of her viewers rather than remain selfish about her own ratings.

We do not wish to be unfair to either Maria Bartiromo or Larry Kantor. All our opinions are based on what we observe on CNBC and what we find on the CNBC website. We would be happy to discuss this with Maria Bartiromo. We would even be willing to go into the lioness' den and appear on Maria's show to discuss this topic, if she invites us. We would also be happy to discuss this in person with her or over the phone and off the record, if she so wishes.

We gave Maria Bartiromo the Macro Viewpoints Most Useful CNBC Anchor of 2009 Award . We feel we have the right to keep up our journalistic vigil to ensure that Maria's on-air practices remain consistent with the standards of The Macro Viewpoints Award.

So Maria, don't be offended by our comments. It is not personal, just business!


Send your feedback to editor@macroviewpoints.com

        

The Middle East seemed to explode last week in angry protests against the Israeli action of boarding the Turkish ship and the tragic death of several activists on board the ship. This was considered to be another extremely rash, dangerous act by Israel in open defiance of international law and procedures. The other tragic error attributed to Israel was the damage to its only Muslim ally, Turkey. 

Below we lay out our views about the incident and its long term. 

We begin with the last statement in our first paragraph above. Turkey has been the best friend of Israel in the Middle East. Turkey has also been the most non-religious regime in the Middle East under the traditions of modern Turkey's founder Mustafa Kemal Ataturk. The first step in our thinking is to distinguish today's Turkey from the Turkey of the Mr. Ataturk. 


The New Turkey

Today's Turkey is ruled by an Islamist party and its leader Erdogan is a man of vision. His vision is make today's Turkey into the successor of the Ottoman Empire of the past. He has taken steps to shed the secular and non-religious framework established by Mr. Ataturk and to openly adapt an Islamist framework.  

Prime Minister Erdogan's greatest hurdle is the Turkish Military which has been a staunchly non-religious organization. In this struggle, Mr. Erdogan used corruption charges to arrest several high-ranking officers of the military and used the popular support for such charges to extract acquiescence from the Military to his expansionist plans. 

Prime Minister Erdogan has taken up Islamic causes all over the world. This is his key to enable Turkey to break out of its regional base and to be recognized as a world power. When riots broke out in China's Xinjiang province, Turkey was the only country to condemn China. Turkey called it genocide and took up the issue in the United Nations Security Council. Their claim was that the Uighurs of Xianjiang were of Turkish descent. This venture failed  because no other country wanted to offend China or get involved in a diplomatic dispute with China. 

Prime Minister Erdogan then inserted Turkey in the Af-Pak situation by claiming a rightful role for itself because of the historical involvement of Turkey in Afghanistan. Turkey organized and held meetings between Afghan and Pakistani officials, perhaps with the blessing of the Obama Administration. This venture did not go anywhere either. 

But now the Turkish Government seems to have found a cause, a cause that they think is perfect for their long term vision. That cause is Israel's occupation and control of Gaza & the West Bank. For many in the world, this is today's golden standard of a cause for morality, peace and humanitarian justice. There is no contest between the benefits to Erdogan's Turkey in taking up the Palestinian cause vs. its old alliance with Israel.

Today's Turkey has virtually nothing to gain and its future vision to lose by remaining friendly with Israel. The events of 2010 have removed the two major roadblocks against Turkey's new anti-Israeli posture. 

• The concept of Turkey joining the European Union is virtually dead. The EU voted against admitting Turkey and now the EU itself seems on the verge of breaking up. Even if it stays intact, there is no question of admitting Turkey into that union and Turkey probably has no interest in joining this hobbled union.
• The election of Barack Obama changed the calculus in Turkey's favor. President Obama has anointed Turkey as his most favorite Middle Eastern country and begun relying on Turkey to play a much bigger role in the Middle East. At the same time, President Obama has essentially declared Israel as the enemy of Middle East peace by publicly calling Israel to task for Jewish settlements in the West Bank. This was partly political and short term. President Obama concluded that participation of Turkey would be invaluable to the US in its attempts to get out of Iraq and Afghanistan. In addition, Turkey could offer a large military, political and historical counterweight to Iran. If that were not enough, a resurgent Turkey could stem the tide of increasing Russian influence. This seemed to be an all-win and no-lose strategy for the Obama Administration.

So forget roadblocks. Turkey was virtually given a green light by the Obama Administration to exercise its ambitions. Unfortunately for the Obama Administration, this strategy has backfired and the core Obama policy in the Muslim world is now in trouble thanks to its new best friend, Turkey.

The Turkish Flotilla 

The facts as reported by various newspapers seem clear. This so-called humanitarian flotilla was a Turkish idea, plan and implementation. The New York Times reports that this flotilla became a big affair because of the money of a Turkish organization. It is reported that Israel tried to work with Turkey to move this flotilla to a different path to avoid confrontation. But their attempts were unsuccessful. 

We are not surprised. In our opinion, this flotilla had one and only one purpose, to break the Israeli blockade of Gaza in a highly public way. Frankly, this was a beautiful setup. If Israel let the flotilla go unchallenged into Gaza, the Israeli blockade would be over. This flotilla would be followed by many many more flotillas into Gaza. If Israel chose to stop the flotilla militarily as it did, the fallout would be global and Israel would be condemned by the world as it has been this week. 

Israel was put in a no-win situation by Turkey. Israel chose to stop the flotilla militarily. This was and should have been the lesser of the two evils for Israel. But Israel botched the intervention. This is not the Israel of old with flawless implementation of brilliant plans. This is a bumbling Israel that seems to botch even small operations.


Is Turkey's Victory Real or Pyrrhic? 

In the past, protests against Israel were led by Syria, Jordan, Egypt, and Saudi Arabia. This time it seems as if these countries were relatively subdued while the protests by Turkey were extraordinarily loud and vociferous. 

Judging from the outrage in the world, Turkey won this round. Turkey is now the country that stands up to Israel in the Middle East. In one stroke, it seems to have displaced even Iran & its fiery anti-Israel leader Ahmadinejad. Saudi Arabia and the Arab neighbors of Israel are now further sidelined as far as the Palestinians are concerned. 

This was a masterstroke for Turkey because, let's face it, the world simply does not care about Israel. England, France and rest of Western Europe are usually too happy to attack Israel verbally to solidify their pro-Arab credentials and to provide cover for their own internal repression of Muslim expression. Much of the developing world does not care either. Israel is a tiny country and trade with Israel does not benefit Africa, Asia or Latin America. So attacking the inhumanity of Israel is a no-risk proposition for much of the world.

So far so good. But if Israel continues to defend its blockade of Gaza and if Turkey is unable to translate its media gains into a concrete result, where does that leave Turkey? The aspirations of the people of Turkey have been raised. What if these aspirations go unmet? Will their frustration backfire on the Erdogan government?

In a couple of years, Turkey has managed to awaken Russia's geo-strategic concerns and old animosity; it has managed to upset China; it has managed to provoke India by its needless and ham-handed intervention in the Af-Pak problem. 

Above all, Turkey might have alienated the core Middle Eastern countries of Saudi Arabia, Egypt, Jordan, Syria and even Iraq. These countries, Saudi Arabia in particular, desire stability. These countries are already uneasy about the dangers from Iran. Now they might have to worry about the entry into their neighborhood of another ethnically non-Arab country that has dominated the Middle East in the past. (Those who need a quick primer should watch the DVD of the Lawrence of Arabia). 

Instead of being an ally and helping the Obama Administration in the Middle East, Turkey might have created a deep sense of worry and instability in the Middle East. If Turkey is successful in its vision of being a successor to the Ottoman Empire, it might end up being America's biggest problem in the Middle East. If Turkey is unsuccessful, then Erdogan might have sowed a whirlwind. 

Turkey has its own restive minority problems. Countries like Israel, Saudi Arabia, Syria & Russia can covertly turn the anti-Turkish Kurds into a well-funded, well-armed rebelion inside Turkey. In that case, Turkey might find itself on the verge of breaking up rather than expanding into a new empire. 


Israel at its Most Vulnerable Stage?  

Turkey would not have dared to make its flotilla play two years ago. And Israel would not have cared if Turkey had done so. Because, two years ago was like a lifetime ago for Israel. At that time, America had a President who was Israel's most  passionate supporter. Today, America has a President who is Israel's least passionate supporter. In fact, President Obama might actually be an opponent of the role Israel has played since its inception.

Every President until Barack Obama has viewed Israel as its most important ally in the Middle East. Not President Obama. Actually, under President Obama's policies Israel might be viewed as a problem rather than as an asset. President Obama's major preoccupation is to improve America's standing among the world's Muslims. Israel is an impediment in this pursuit. This is why President Obama opened his Middle East policy by publicly rebuking Israel and instructing Israel to stop its settlements in the occupied territories. In addition, Turkey, President Obama's anointed ally in the Middle East, has now become Israel's new enemy.

Today, Israel finds itself in the unprecedented position of competing with Turkey for America's support. This is why we think Israel today might be at its most vulnerable stage in its history. How will Israel react? Will Israel turn passive due to American pressure? Or will Israel stand alone if needed and defend its interests even in the face of President Obama's opposition? If it does, it risks becoming an international outcast. If it does not, Israel might not remain Israel for long. 


Future Scenarios - A long term nightmare for the USA? 

This incident could prove to be the beginning of a new alignment in the Middle East. President Obama's Middle Eastern policy was based on using Turkey as its core ally and forcing Israel to make concessions to Palestinians. This policy is in tatters. The dreams of Palestinians have been awakened again and Hamas has been strengthened. Israel with a new enemy in Turkey would be less willing to make any concessions. 

As we said earlier, the core Middle Eastern countries of Saudi Arabia, Egypt, Jordan and Syria have been antagonized. The Middle East is now a much more unstable place with Turkey & Iran, two non-Arab ex-empires, competing for influence in the Middle East. 

What does this mean for Post-America Iraq? President Obama had to contend with the possible domination of Shia Iraq by Iran? Now President Obama might have to contend with the possible domination of Sunni Iraq by Turkey. Saudi Arabia cannot tolerate the incursion of Turkey into Iraq and Israel cannot tolerate the incursion by Turkey into Syria. Syria itself has horrific memories of Turkish occupation of Syria.

So do Saudi Arabia, Egypt & Jordan covertly team up with Israel and form an alliance against both Turkey & Iran? Do they begin playing one against the other? Does this allow Russia to regain its foothold in the Middle East as a power broker or as an covert ally of Israel, Saudi Arabia, Egypt & Syria?  

If any of these post-America scenarios prove feasible let alone realistic, President Obama might have to reconsider his plans to withdraw from Iraq. Otherwise, he may find post-America Middle East to be a much more unstable region than post-America Af-Pak. 



Send your feedback to editor@macroviewpoints.com.

        

Editor's Note: This article is an exercise in journalism and journalism only.  It is intended to describe history and to raise questions about the future. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investment decisions or consider any investment decisions based on any fact, opinion or analysis in this article or inferred from this article. All Investment decisions should be discussed with your investment advisors and should only be based on your investment needs, objectives, suitability and risk tolerances. 

Chuck Daly was the Championship Coach of the Detroit Pistons basketball team and the Coach of the World Champion American Dream Team at the 1992 Summer Olympics. As fans of the Kareem-Magic Lakers, we usually rooted against the Pistons. But we respected Mr. Daly for his smarts, his knowledge and for his professionalism. His favorite dictum was "keep running a winning play until they figure out how to stop it".

We thought of the late Coach Daly on Friday afternoon, the day the Dow tumbled by over 300 points and the 30-Year Treasury rallied by over 2%. This is after all the month of June, the pivotal month of the year for US Treasuries.

Look at the track record for June. From 2003 to 2009, the month of June reversed the price trend for long maturity Treasuries. Look at the chart below of TLT, the 20-Year Treasury ETF:

 

• In 2004 and from 2006 to 2009, the price of Treasuries fell from April to June and the month of June presented a significant opportunity to buy long maturity Treasuries (see the green annotations in the above map).
• But in 2003 & in 2005, Treasuries rallied from April to June and the highs in June proved to be a significant opportunity to sell long maturity Treasuries (see the red annotations in the above map).

This simple play has been a winner for the past 7 consecutive years. If Treasuries rally strongly into June, sell'em in June and if the Treasuries sell off ferociously into June, buy'em in June.

This year, perhaps due to the problems in Europe, long maturity Treasuries have enjoyed a substantial rally into the first week of June. Will the pattern of the last 7 years continue this year? Will this Treasury rally also prove to be a selling opportunity? No one knows. Should investors follow the Chuck Daly dictum? That depends on each individual. After all, every Chuck Daly play eventually was figured out and stopped by the opposition. Perhaps 2010 is the year the above simple strategy stops working.

We do not mean to trivialize investment decisions. In our opinion, pattern recognition is one way to think about investment tactics.
 
But what about fundamentals? This year seems to be driven by serious problems in the world. Europe seems to have become a basket case of governments loaded up to the gills in Debt. The Euro currency is hitting new lows vs. the US Dollar virtually every week. It appears that the European economies will suffer an extended slowdown from austerity measures imposed to curtail their debt spending. 

This week the US economy delivered a very unpleasant surprise in the May jobs report. With a tepid US economy and Europe facing a serious economic downturn, forget any concerns about inflation. The specter of deflation is now upon us or so say the experts on Financial Television.

These conditions seem ideal for long maturity US Treasuries and that may be the reason for the ferocious Treasury rally we have seen. The 10-Year Treasury yield has collapsed from almost 4% in April to almost 3% in late May. That is a huge drop in rates and a massive rally in Treasury prices. 

But how much of this deflation scare, how much of the weak fundamentals of Europe are already priced into the current levels of Treasuries? No one really knows. But in the past two weeks, we have seen a seachange in the coverage of US Treasuries at our favorite CNBC. On Monday May 24, CNBC Closing Bell did a bullish segment on Zero-Coupon Treasuries, the most aggressive Treasury Bond vehicle there is. Then on Thursday June 4, CNBC Fast Money highlighted an aggressive bullish options trade on TLT, the 20-Year Treasury ETF. As we said, this is a seachange in attitude. Is this also an indication that the positives about Treasuries are now in the markets?

Then you have the interesting one-year chart below of TLT:



Notice how the May rally in TLT went up to the previous price high reached in October 2009 and reversed back. The big rally on Friday, June 4 stopped well short of the horizontal red line (our annotation). Despite all the bad news from Europe, America and China, TLT has not broken thru this red line so far. 

We recall that the 30-Year Treasury Bond touched a low yield of 3.90%-3.95% in October 2009. This is the level to which  the yield of the 30-Year Treasury Bond traded in the panicky pre-market period on Tuesday, May 25. But it could not pierce thru this 3.90%-3.95% level to the downside. Is this what technicians call a Double Top? The next few weeks might tell the tale.  

So here we are. The Chuck Daly dictum and a potential double top seem to suggest one alternative while the fundamentals of the American & European Economies, the perilous condition of the Euro, the fear of Deflation & the prospect of continued Contagion in Financial Markets seem to suggest the other alternative. 

This may be why some call investing the Greatest Game in the World.



Editor's PS: We wrote a similar article on April 25, 2009 titled US Treasuries - Will 2009 Be Like 2006-2008 Or Like 2003?


Send your feedback to editor@macroviewpoints.com

 

 

        

Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.


A Day greater than all others this Week

What happened from Monday to Thursday? Do we care? Not really after the horrid Friday. That Non Farm Payroll report stunk up the joint. Rather than read our amateurish words, hear and read what David Rosenberg had to say about this report in clip 1 below. His take on Gold is equally interesting. 

What about the stock market? Just look at the statistics. Stocks got taken to the cleaners. After the 100 point drop in the final hour, it felt as if all hope was snuffed out of the optimists on the economy and stock markets. Every one, except of course the "equity fee collectors" (or otherwise known as long only stock managers and stock mutual fund managers), seemed to have given up on the economy. The words "double dip" are now coming readily to the lips of our friendly CNBC Anchors and CNBC Fast Money, that champion of global growth, actually featured a segment about global depression titled The Nightmare Scenario. 

If the US employment was not depressing enough, we heard talk of default from the new Hungarian Government. Perhaps the European governments could learn a lesson from the land of Borat. According to the Financial Times, the Land of the Kazakhs (literal meaning of Kazakh-Stan) completed the restructuring of BTA by imposing severe haircuts on investors holding BTA bonds and loans. The creditors of this large Kazakh bank included ABN Amro, Commerzbank, Standard Chartered, ING, DE Shaw and Fortis Investment Management. Can SocGen or Sarkozy spell Kazakh-Stan?


Geo-Events

The week began with Israel's military intervention to stop the Turkish flotilla. By the end of the week, nobody seemed to remember this incident. We think this event could prove to be long term game changer in the Middle East. For our rather long term and perhaps fanciful thoughts on this topic, see our article Israel & Turkey - Our Views about the Flotilla & Its Ramifications.

Mr. Robert Gates, US Secretary of Defense, was disinvited by China this week. Mr. Gates attributed this to the Chinese Military or the People's Liberation Army ("PLA") as it is called. Unlike many China enthusiasts, we believe that China's Civilian Government can only pursue globalization policies with the consent of the PLA. As long as the money keeps coming in and domestic stability is maintained, the Civilian Government will be allowed to keep its power. But we believe that at the first sign of trouble, the PLA will show all of us who is the Boss in China. This will be a very harsh awakening for emerging market investors. Another reason to support Richard Bernstein's theme about Developing Markets outperforming Emerging Markets for the next few years. See clip 4 below for the views of a Pentagon Strategist about the PLA.  


US Treasuries

After treading water for most of the week, US Treasuries mounted a big rally on Friday with the 30-Year Bond up more than 2 points. This rally fit in perfectly with the fundamentals.  

But we were surprised to notice that, according to the CFTC data released on Friday, the net position of Large Speculators in the 30-Year Treasury has now reached a 90% ranking while the net position of the Hedgers/Commercials is now 0%, yes zippo. How quickly does a ferocious rally change positions and views?

For a more simplistic description of our views on Treasuries, see our accompanying article Would Chuck Daly Ask Us To Sell Long Maturity Treasuries? 


Currencies

The currency data from CFTC is also interesting. The net position of Large Speculators in the Australian Dollar is 0%, it is 8% in the British Pound and 12% in the Euro. The Australian dollar position is perhaps the best signal of risk aversion by Large Speculators. And this was on Tuesday, two days before the Freeport CEO described China as a "risk" for commodity markets (see clip 3 below). 


Featured Videoclips

This week we feature the following viedoclips:

1. David Rosenberg on CNBC on Friday, June 4
2. Jordan Kotick on CNBC on Thursday, June 3
3. Richard Adkerson of Freeport McMoran on Bloomberg on Thursday, June 3
4. Bob McGinnis of the Pentagon on CNBC on Thursday, June 3

 

1. Today's Market Action - David Rosenberg & Others with CNBC's Maria Bartiromo - Friday, June 4

David Rosenberg, the Guru at Gluskin Sheff, has been the prescient economist for the past few years. He was proved right again on Friday. His words about the May Non-Farm Payroll report suffice for us:

• Well, what I got out of it (the payroll report) was that the strongest sector of the economy right now is manufacturing, and the best we could do was 29,000 jobs and with the ISM at 60; And that's the best performing sector of the economy right now; You take a look at state and local governments, they are retrenching, the other sectors, construction and financial services, both negative and those jobs are not coming back. I didn't know what all the hoopla was about the census hiring related number going into today's action when you know that employment is a coincident indicator; Jobless Claims are one of the 10 leading indicators in the economy for the Conference Board and we are struck right now on around 460,000 on a 4-week moving average; I mean that is the sort of jobless claims number you had after 9/11 when we were 8 months into a recession and if we sustain these levels on jobless claims, I got news for ya, the second half of the year we are going back into a fraction in terms of those monthly employment numbers....

In a follow up clip titled Markets Fall More Than 3%  on Friday, he had more comments. 

• Rosenberg - European continent is roughly 20% of Global GDP, it is about as big as the US and we know from the last cycle that we are very interconnected, global economy and capital markets; it is not much say direct impact but indirect impact and the rest of financial contagion, so on and so forth... Basically at Gluskin Sheff we have been anticipating this correction, we have actually been getting our clients in capital preservation themes and long short strategies and into income orientation, and I think we are in a period right now in which we are back to return of capital as opposed to strictly return on capital. Something very interesting that happened today Maria is that copper broke down and gold rallied and that's something very important here as far as Gold prices are concerned, Gold is increasingly trading less as a commodity and more as a monetary metal and that's something we are looking at very closely....
• Bartiromo - It is really the mining area that has been among the best performers overall when you look at the last 3 years or so because of the demand coming out of China and SouthEast Asia....
• Rosenberg - right but that's yesterday's story; When the Shanghai Index is down almost 30% from the peaks, as we saw a couple of years ago, you don't want to stand in front of that commodity train; I am a long term commodity bull but I say for the next 6 or 12 months step aside; Gold though is the only interesting variable here because it is not going down to new lows and hanging in extremely well. It is rallying in every other currency except the Dollar. Today it was actually up with the commodity complex down - this is a very powerful story and what it is telling you is Gold is trading higher because it is increasingly behaving as if it is its own currency....it is really consistent with these intensifying investor concerns over the stability of the global monetary system and I got news for you, those concerns are not going to be going away on Monday..no matter how the equity market trades

2. More Trouble Ahead for Europe? - Jordan Kotick with CNBC's Maria Bartiromo - Thursday, June 3

Jordan Kotick, Global Head of Technical Strategy at Barclays, has been featured in these articles on several occasions. He usually looks at links between different markets and then draws conclusions. In this clip, he began by comparing the graphs of Hungary (did he know Hungary was to going to be newsworthy the very next morning?) during its financial crisis a couple of years ago and the Asian crisis via Dollar-Korea. He then concluded that the European markets are following the Hungarian template. 

In response to a question from Guest Host Joe Moglia, Jordan warned that the problems in Europe are not over and investors should be ready for high volatility in the summer. Then Maria Bartiromo asked him "what should the investors do now?" 

Rather than answering the question, Jordan Kotick made a statement that sort of chilled us. 

• Spain and Italy look like Greece did one month before the blowout; we have Spain taking out not only its ECB highs but its previous highs last week and Spain is now accelerating higher....Two days ago, Maria, we have taken out the highs in Italy, just like Greece before it started to implode. like Portugal before it tried to implode, Spain and Italy despite the package from the ECB, the market is saying we are not finished. That's instability, that's a problem

At this point, both Joe Moglia & Maria Bartiromo asked Jordan about the possibility of a Greece-like problem eventually occurring in the US. Jordan replied:

• The market turned its focus on each country, one at a time; it is not a United States problem, we are actually concerned about United Kingdom because if you look at the spreads between Germany and UK, very quietly those have been widening aggressively for the next (?) 12 months.. so next on the horizon has got to be the UK...at this point the market is not worried about the United States

Then Maria Bartiromo asked a key question, "You said this is a correction, not a collapse, what do you mean by that?". Jordan replied:

• Yes Maria, we think this is a correction of a 15 month move to the topside, what we rather look at finally is US Treasury yields. We are in the strange month of June. 7 of last 7 years Treasury yields have turned the trend in the month of June..you are not going to have yields bottom and prices top out in terms of the Futures markets if stocks haven't somewhat stabilized; so we think we could go lower in stocks for a month or two, but given how treasury yields tend to turn trend in June, you are not gonna have that without the stock market eventually stabilizing, so keep your finger on the trigger, its going to be dangerous for a month, may be 6-8 weeks but then we think it will be a buying opportunity

3. Freeport's Adkerson Sees China Risk to Copper Markets - Richard Adkerson with Bloomberg's Sara Eisen - Thursday, June 3

This is one of the interviews that torpedoed the mining stocks on Thursday. Mr. Adkerson, the CEO of Freeport McMoran, was bullish on the long term outlook for his company for most of the interview. But he dropped a key line in the middle of a rambling answer:

• The confidence (in China) is in the longer term view, China because of its big population and the economic, social, political forces that have been unleashed at least in recent years gives us great confidence about the long term outlook for China. In the near term, it is a risk to the world's marketplace depending on the events that transpire. (emphasis ours) So from our business standpoint, we are not involved in trading activities, we don't hedge our production, we make our investments with a long term view and right now we are positive and we are moving forward with our expansion plans aggressively.. 

This was a tactic that John Chambers of Cisco developed in the technology bear market, to give a long answer about the long term bullish prospects for his company and to slip in a note or two about near term risks. The markets figured it out a few years ago. This is why you often see the markets turn in the middle of the Cisco conference call and begin selling CSCO. 

On Thursday, the market ignored all the bullish long term comments by Mr. Adkerson and focused on this key line about China being a near term risk to the world's metals marketplace. The result was a steep decline in all base metal stocks.

As an editorial aside, this was a poorly conducted interview. It seemed as if the interviewer was reciting a prepared list of questions. There was hardly any give & take that makes an interview interesting.


4. The China Threat & Your Portfolio - Bob McGinnis, a Pentagon Strategist with CNBC's Erin Burnett - Thursday, June 3

This is another first of its kind interview by Erin Burnett. The trigger for this topic was China's disinvite to Robert Gates, the US Secretary of Defense. Erin correctly described this disinvitation as a snub to America and opened the question of alarm expressed by Pentagon Strategists about China's military buildup. 

The first portion of this clip is from Erin's interview last week with the US Ambassador to China, John Huntsman. His comments were revealing:

• " on the military issue generally, there is a lack of transparency and a lack of dialogue & interaction is a huge problem for the United States and we need more interaction at the junior officer level and we need interaction at the senior officer level and we are getting very little of it right now and when you have no dialogue and when you have no interaction, cultures sort of build up on both sides and they are cultures built upon suspicion and lack of trust"

Pretty straight talk from America's top China diplomat. Then Erin spoke with Bob McGinnis, retd. Lieutenant-Colonel with the US Army and currently a strategist for the Army at the Pentagon.

• Burnett - What explains the fact that China just won't tell us the truth and literally it is an issue of not telling the truth - they put out numbers on what they are spending on their military; what $40-50 billion and what I have seen of any real estimates are 4-5 times that
• McGinnis - well, it is 3-4 times that Erin because the People's Liberation Army has all sorts of side businesses and of course the pay to the average soldier over there is very low. But by and large, for the last 20 years, we have seen double digit increases in their defense budgets and we have seen very tangible evidence of that; they have a new strategic force, they have submarine launched ballistic missiles and they have anti -access weapon systems, in other words, they can stop our carriers and oh by the way, they are making their own carriers, their navy has been described by our Admiral in the Pacific as pretty dramatic increase in capabilities
• Burnett - Is China in any way ready to be a threat to America? They do have the second highest military spending in the world after ours but even if you inflate what they are spending, it is still far shy of the USA.
• McGinnis - Erin, when translate to tangible evidence on the ground, things just don't make sense; 260 ships. We have 280 and they are ramping up their production of submarines..they have 4 aircraft carriers,... they even intend to build their own aircraft carriers and right now they are training their pilots for those aircraft carriers. This is not a defensive navy; this is an aggressive overseas navy, in fact they recently changed their strategy to what is called the Far Seas Strategy; it is a global strategy.
• Burnett - You think this is an imperialist, an ambitious, externally focused Chinese military, not to defend but to go on the offense?
• McGinnis - certainly very aggressive in the marketplace and because they are very aggressive in the marketplace they have the capability to defend their interests across the globe. So how else do you come to the conclusion that they are somewhat imperialistic?

Good interview but incomplete in our opinion. The second part of this interview should have focused on the following. Gates.   

According to the Washington Post, Mr. Gates told reporters there was a clear split between China's political leaders, whom he said want stronger military ties with Washington, and the People's Liberation Army, which he said does not - "I think they are reluctant to engage with us on a broad level," he said. "The PLA is significantly less interested in this relationship than the political leadership of China."

This is an extremely significant point in our opinion and one of serious relevance to the China investment story. In general, investors believe that the Chinese leadership is a relatively cohesive unit and that the civilian leaders, Hu Jin Tao & Wen Jia Bao are in charge of China. These are leaders that investors have seen and understand. 

But what if these civilian leaders are NOT the real power in China? In our opinion, the civilian leadership in China governs at the sufferance of the PLA or China's People's Liberation Army. There is absolutely no doubt in our mind that the PLA retains at least a veto power on all major foreign policy decisions and no civilian regime can survive in power if they challenge the PLA on issues that the PLA considers paramount.

The PLA is far more insular and cares much more about China's Power Projection than the Civilian Government. The PLA does not understand America or other countries the way the Civilian leaders do. The Civilian leaders have been very successful in bringing huge amounts of capital into China, capital that has been used by the PLA to build an globally ambitious military machine. The Civilian leaders have also been successful in maintaining domestic stability. As long as these two trends continue and the PLA is left alone to modernize and expand its machine, the Civilian Authority can continue to govern.  

But when these trends reverse and when the PLA feels it needs to exercise its muscle, we think it will and there is nothing China's civilian leaders can do to prevent it. The fact is that the PLA realized long ago that its ambitions will one day bring it into potential conflict with the American military. They have been planning for such an eventuality for years. This is what Mr. McGinnis meant by anti-access weapons, the weapon systems that can prevent American aircraft carriers or land based aircraft in the Pacific from entering China's domain. 

This scenario chillingly reminds us of the 1930s. The Imperial Japanese Army spent that decade in expanding its military machine to wage war against America if necessary. Once they became confident, Japan decided to expand its reach in the Pacific to seize commodity producing regions and to dominate access to the oceans critical to Japan. They did so by attacking Pearl Harbor and sidelining America for a few months. With that respite, Japan invaded their neighbors in SouthEast Asia.

Next time you read about market conditions today being similar to those in the 1930s, the next time technicians draw chart patterns that resemble the chart patterns of the 1930s, remember that decade long deflation and the Japanese expansion at the end of that decade.

When you hear analysts talk today about the Chinese real estate bubble crashing or deflation spreading through China due to its overcapacity, think of the PLA deciding to invade other countries to seize their markets and resources. This is not our base case of course, but we assign a 25% probability to this event occurring by the end of this decade.

This should have been the topic of the second portion of Erin Burnett's interview rather than a China stock buyer talking about how US-China are destined to remain friends and how all of us should buy Chinese stocks. Buying Chinese stocks is fine but investors should keep a wary eye on what might lie ahead. US-China relations should not be viewed with complacency or equanimity but with a sense of vigil for the long term problems.


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Editor's  Note:  Today, there is a widespread belief that Samskrut is a has-been language of very little consequence for modern India.  A few readers responded to our article of last week in that fashion.  So we thought it might help to inform readers about a similar period in Indian history when use of Samskrut essentially disappeared until it reemerged around 4-5 centuries later and went on to become the cosmopolitan language of South & South East Asia for nearly 1,000 years. Serious discussion of this topic is beyond the scope of this Blog. Below is a summary of this extraordinary supranational development Almost all the historic material in this article comes from the staggering scholarly work The Language of the Gods in the World of Men by Professor Sheldon Pollack. This is a must-read book for every serious student of Indian history. 


Introduction

The origins of Samskrut go back to the beginning of known history as the oldest living Indo-European language in the world.  Originally, Samskrut was a sacred langauge used mainly for Vedic studies, Vedic practices and other knowledge systems such as Grammar, Phonetics & metrics.

Around the beginning of the common era, Samskrut was transformed into a language for new and unprecedented capabilities for literary and poetic expression. This development marked the start of an amazing career of quasi-universal Samskrut and a a creation of a culture-power formation. This Samskrut and its culture-power formation sped from Afghanistan in the North West to Cambodia. Vietnam, Indonesia and Java. This cosmopolitan world language retained its dominance for 10-15 centuries depending on the country.

Few people know this. We did not know of this astonishing history of Samskrut as a world language until we began studying this development some time ago.


The Post-Buddha Period & the Disappearance of Samskrut

The emergence of Buddha was an event of enormous significance to India and the world. It is now reasonably well established that Buddhists systematically discouraged use of Samskrut and for centuries refused to transmit Buddhist doctrine by redacting it to Samskrut, Until then, Samskrut had been the authoritative medium for religious and philosophical discourse. This was similar to the earlier rejection of Samskrut by Jains who used a Northeastern Indian language called Ardha-Magadhi for their scriptures. The Buddhists used the vernacular Prakrut for their texts. The Buddhists to the south invented a new and parallel sacred language called Pali.

Emperor Ashok of the Maurya Dynasty was probably the greatest emperor of that period. He converted to Buddhism and spread Buddhism across all regions of the known world. This is why Emperor Ashok is considered to be the second in Buddhist hierarchy next only to Buddha himself. The importance of Ashok to India can be recognized by the simple fact that his symbol, the Chakra of Ashok, adorns the center of the modern Indian flag.

Perhaps due to the deep and abiding influence of Ashok with the dictates of the Buddhist hierarchy, use of Samskrut disappeared from the royal courts of India, including those of dynasties like the Sat-Vahan Dynasty who considered themselves to be of Vedic heritage rather than Buddhist heritage.

This disappearance of Samskrut lasted about 4-5 centuries until a new form of Samskrut was inaugurated in Junagadh on the Kathiawad peninsula in today's Gujarat.

 
          (Buddhist Proselytism during Ashok's reign )                         (Chakra of Ashok)


The inscription of Rudra-Raman in Junagadh around 150 CE

King Rudra-Raman, a ruler of Saka (silent "a") lineage, composed a massive inscription (11 by 5 feet) on a huge granite boulder in Junagadh in approx. 150CE. Unlike the prevalent custom of that period, the inscription was not in Prakrut but in Samskrut. In this inscription, Rudra-Raman actually mentioned the events of prior four-five centuries including activities of "Maurya King Chandra-Gupt" and of "Asoka Maurya". The Gupt King Skanda-Gupt added his own Samskrut inscription to this rock around 457 CE, some three hundred years later. 

This inscription by Rudra-Raman was in Samskrut unlike anything the world had seen before. The research done since its discovery in 1838 has settled the certainty that Rudra-Raman's inscription blazed a new trail in cultural history by creating a self-consciously expressive Samskrut. This Samskrut, with all the authority of power and cultural value, was used in a public space in bold for all to see.

The new Samskrut created two new literary forms, Kavya (poetry) and Prashasti (praise). This was a new version of the old language, the Samskrut called The Langauge of the Gods. 


The World Conquest of Cosmopolitan Samskrut

With its new form, the Language of the Gods entered the World of Men as Professor Sheldon Pollack writes in his book.  According to him, the new political culture or cultural politics spread across Southern Asia with remarkable speed. Look how vast this cosmopolis was - from Kashmir and Purus-Pura (today's Peshawar) in the north west to Champa (central Vietnam) in the North East, to Prambanam in central Java and even beyond to islands of today's Indonesia, from Nepal across peninsular India to Sri Lanka. Professor Pollack writes:

• "All across this vast geography, there arose a shared, Samskrut way of speaking about and conceiving of the nature of political power.  At the same time, Prakrut essentially disappeared from royal or public ceremonial usage from India. No Prakrut whatever is to be found in royal inscriptions after the early fourth century when Samskrut entered history with extraordinary, sudden eclat. All across India, a linguistically homogeneous and conceptually standardized form of Samskrut political poetry came into usage and this transformed itself into Power."

In a strange globalization or Samskrutization process, "this power spread to all corners of the eastern world. Suddenly, from the 4th century on, Samskrut inscriptions began to appear with increasing frequency in places now known as Myanmar, Thailand Cambodia, Laos, Vietnam, Malaysia & Indonesia". 

In Cambodia, Samskrut political poetry continued until the late 13th century and the crowning achievement of the Khymer Samskrut period is the Angkor Wat temple complex. In Java, it continued until mid-15th century.  Look at the map below of Champa or Chiam Thanh or today's Vietnam in 1832 , (yes 1832, a period when India itself was annexed by the British East India Company). In the map, you see a local capital named as Indra-pura (Da Nang), and other cities named as Vijaya, Amravati, Pandurang, all celebrated Indian names.

     
   (Main Entrance to the Temple - Angkor Wat )                               (Aerial view of Angkor Wat )



The How & Why of the Globalization of Samskrut

It is astonishing to scholars how quickly the new Samskrut cultural-political form spread across Asia. No one has a good explanation of why and how this globalization occurred.

• There was no conquest. No "Samskrut" political entity had conquered the entire Indian subcontinent let alone all of Southern Asia. So this was no Romanisation process that followed invasion by Roman legions or a Westernization that followed conquests by England, France or Spain.  
• The Chola Dynasty of South India had extensive forays in to South East Asia but for the most part the kingdoms of Thailand, Cambodia & Vietnam were local.
• Samskrut was never a language of commerce. So this globalization was not driven by the vibrant trade that was prevalent in those days. There is strong evidence that India and the Roman Empire traded extensively with each other but this trade did not lead to any cultural influence on either India or Rome.
• Unlike Islam, there was no religious revolution that created acceptance of a new langauge form.

Yet, the ascendancy of the Samskrut cultural-political power continued for well over 1,000 years. During this period, Samskrut names were adapted by Kings across Asia and Samskrut was used almost exclusively in recording exploits of Kings. In fact, Samskrut became not just a shared language but a means of "aesthetization of power", as Professor Pollack puts it. In this period, Samskrut names were used extensively for Kings, their cities and monuments.  For example, a king of central Vietnam or Champa named a new reservoir as the New Kurushektra (shades of New York?) and the names of Vietnam's cities were Indra-Pura, Vijaya and Amravati. 

Why? This is still the realm of conjecture and study.

    
(Chola Empire of India & Its Subordinates in Purple in 1050)   (Champa  = CampaDesa = Chiem Tanh = Vietnam in 1832 ; Blue area is Khymer)


Relevancy for today's India

This brings us to today's India,  a land which has forsaken Samskrut to a large extent. The langauge is hardly taught in schools & colleges. Fewer and fewer students bother to learn even the rudiments of it. What is the relevance of Samskrut in the modern world? This is deemed to be a rhetorical question. The ancient Guru-Shishya tradition that preserved Samskrut is slowly dying because of newer opportunities for progress. We can attest to this personally because ours is the first generation in our family history that is not proficient in Samskrut.

We used to be depressed about this state of affairs. But reading the history of Samskrut from the days of Buddha to 150CE has encouraged us. If Samskrut could come back after nearly 500 years of rejection in those days, surely it can do so again and perhaps with global impact. 

Today the study of Samskrut is gaining adherents in America, Europe, Australia, Israel and Eastern Europe. One great venture of this kind is the Clay Sanskrit Library and its grand effort to translate 100 Samskrut texts into English.

It took a Saka ruler (foreign immigrant into India) to launch Samskrut on its 1,000 year trajectory of transnational dominance. Perhaps, the next successful global drive of Samskrut might come from America!


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Editor's Note: The FT article discussed in our article below was sent to us by a reader of the Blog. We thank him for it.


We have written critical articles about many newspapers and editorial boards on this Blog, including the New York Times, Washington Post and the Wall Street Journal. In our opinion, these newspapers suffer from a general lack of non-Western knowledge as well occasional cases of cultural supremacitis. 

But in our opinion, the Financial Times of London seems to stand alone in the ability of its writers to display historical ignorance and cultural-religious prejudice. 

In May 2009, we drew our reader's attention to a virulently biased article in the Financial Times and wrote our rebuttal titled Flagrant Foul on FTs Joe Leahy and on Editors of Financial Times for Journalistic Misconduct and Religious Prejudice . We also compared the British Financial Times with American Wall Street Journal in our article Wall Street Journal vs. Financial Times.

This time, we see the same attitude at work in a travel article about the central Indian city of Gwalior. We appreciate the efforts of FT writers to write about the charms of India's cities. But we do expect them to do the barest amount of research about their subject matter and to shelve their deep-seated prejudices about patriotic Indian regions that opposed British annexation.

What bare amount of research do we mean? Simply a search of Wikipedia! How difficult can that be? Very tiresome actually, if the intention is to distort Indian history.

We refer here to a tourism related article titled Gwalior's historic splendour. In this article, Jan Dalley writes about attacks on Gwalior "Then came the usual – 10th-century Rajput clans, burned out by12th-century Muslim invaders, then more Rajputs, then Mughals, some Afghans, plenty of marauding Marathas".

The article goes on to imply that Daulat Rao Scindia rescued Gwalior from these "marauding Marathas". Dalley notes that Muslims attacked Gwalior from 12th to 15th century (Mughuls) but that does not qualify as "plenty" to Dalley. Only the "marauding Marathas" were "plenty" for Dalley.  From Dalley's article, a reader might imagine these "Marathas" to be bandits, thugs, barbarians or something equivalent. 

Now look at what a simple search of "Scindia" on Wikipedia reveals:

• "Scindia (Marathi: शिंदे), anglicized from Shinde, and also spelled as Sindhia, Sindia, is a Maratha family in India which included rulers of the Gwalior State in the 18th and 19th centuries, collaborators of the colonial British government during the 19th and the 20th centuries until India became independent, and politicians in independent India."

Whoa! So Dalley's savior of Gwalior from "marauding Marathas" was himself a Maratha? Does Dalley know this and more importantly does Dalley care? How distorted is this writing?

The FT article by Jan Dalley makes no mention of the Maratha lineage of the Shindes and omits the entire glorious history of the Shinde family. Dalley does not tell you that Daulat Rao Scindia was the son of the great Maratha general Mahadaji Shinde. Such utterly distorted writing seems to us be a characteristic of the British Financial Times, especially when British annexation of India is concerned. The Financial Times seems to go out of its way to distort Indian history, especially Maratha history. Witness our article about FT's Joe Leahy's comments  in May 2009.   

Let us tell you why we think so. First take a look at the map of India in 1760 from wikipedia. The areas in Yellow represent the territories of Maratha Empire. Gwalior is near the top of the central yellow region. So it was a part of the Maratha Empire. Actually the Gwalior region was given to the Shinde family as their fief by Baji Rao, the Prime Minister of the Maratha Empire.  


(Maratha Empire territory in yellow - Gwalior is the northeast part of the yellow region)
(India in 1760 - Source Wikipedia)


Let us be clear. The Shinde or Scindia family served India in the most heroic and selfless manner. Just look at the basic history of the Shinde family: 

• Peshwa (Prime Minister) Baji Rao was a young man of 20 years when Emperor Shahu of the Maratha Empire named him Peshwa. Baji Rao became the greatest general of his era. He won every single of his 40 battles and the Maratha reign spread all over North India. His supremacy was accepted by the then Mughul Badshah of Delhi.
• The Maratha Empire delivered upward social mobility to young men of all castes. Baji Rao chose a few young men as his plenipotentiaries. The two most famous of these were Ranoji Shinde , a young man from a peasant family, and Malharrao Holkar,  a young man from a shepherd's family.  These two young men proved to be great warriors and empire builders.
• The Shinde family had a glorious role in the history & conquests of the Maratha Empire. Very few families have given so many of their men to their country. Jankoji Shinde, Dattaji Shinde died in the great battle of Panipat. Only Mahadaji Shinde survived that destructive battle. He proved to be a great general and a diplomat. He supported the young Peshwa Madhav Rao. Under Madhav Rao's direction and under Mahadaji Shinde's generalship, the Maratha Empire reached its zenith with its reach all over North India.
• The early death of Peshwa Madhav Rao weakened the central authority of the Maratha Empire. But Mahadaji Shinde labored alone in "solitary grandeur, a ruler of (North) India, without an ally, without a party, without even able and reliable civil and administrative service", in the words of a British historian.
• The vision of Mahadaji Shinde was to build a confederacy of North Indian states. To achieve this plan, Mahadaji Shinde modernized his army and hired a a noted French general Benoit De Boigne to build divisions for specialized artillery warfare.
• This was deeply troubling to the far reaching aims of the new emerging coastal power, the British. The last few years of Mahadaji's tenure saw battles with the Indian forces commandeered by the British.
• Unfortunately for India, Mahadaji died during a state visit to Maharashtra after an attempted assassination. His son Daulat Rao Shinde was a far cry from his father. He was defeated by the scion Yeshwant Rao of the other great Maratha clan, the Holkar. After a bad defeat by Yeshwant Rao Holkar, Daulat Rao Schindia allied with the British and essentially became a British suzerain. This was the beginning of the end of the Maratha Empire.
• The British led Indian forces then met each of the Maratha Generals in single battles and defeated them. The weak Peshwa surrendered. Yeshwant Rao Holkar won a few battles but was defeated in the end.

Jan Dalley writes about the rewards showered on Daulat Rao Schindia & his descendants by the British:

• The Scindia family, the Maharajas of Gwalior, were good friends to the British, supporting them in 1857, and so were accorded the highest ranking in the strange hierarchy that was imposed – Gwalior was named one of only five “21-gun salute” states. And the rulers lived up to it,building in the 1870s the immense Jai Vilas Palace – quasi-Italianate,though designed by a Lt-Col Sir Michael Filose – made of white-painted sandstone, with a huge courtyard, Tuscan loggias and Corinthian columns, and filled with furniture commissioned from factories in Birmingham, Paris, Berlin or Calcutta.

The British never acknowledged the greatness of Mahadaji Shinde, the valor and heroism of Mahadaji's cousins, uncles and father. No. The British made a hero of Daulat Rao Scindia, the man who surrendered to them and made their defeat of the Maratha Empire possible. Is this why Jan Dalley and the Financial Times only write about Daulat Rao Scindia and not about his glorious family?

This was deliberate British strategy. All over India, you find families who surrendered to the British living high life as Maharajas and Nawabs in huge palaces. The great and victorious Indians who could remind the Indian people of their military heritage were systematically ignored and their palaces destroyed in a campaign of anglicization.

     
(Shaniwar Wada - Wikipedia picture)                                       (Gwalior Palace - FT Picture)


Look at the above pictures of the Scindia palace at Gwalior and compare it with the state of Shaniwar Wada, the seat of the Peshwa Dynasty in Pune. Shaniwar Wada was burnt in a mysterious fire shortly after the British annexed the Maratha Empire.

The gorgeous palace at Gwalior represents the success of those who collaborated with the British and the pitiful state of Shaniwar Wada shows the plight of those who fought for India. We could not even find a picture of the seat of the Holkars in Indore.

Today, a descendant of Daulat Rao Scindia is a minister in Indian Government and no can find the descendants of either the Peshwa or Holkar families. We have no quarrel with any descendants of Daulat Rao Scindia nor do we resent their success in the slightest. But we do wonder whether their palace in Gwalior makes any mention of the Maratha Empire or of any of the great Shindes, Ranoji, Jankoji, Dattaji, who gave their lives for Maratha Empire. We also wonder whether the Scindia palace at Gwalior has any portraits of Peshwa Baji Rao, the man who gave a common young man named Ranoji Shinde his chance at greatness. Does the Scindia Palace even have portraits of the great Shivaji Maharaj, the man who launched the Maratha Empire and without whom no Maratha would have been successful? We don't know but somehow, we doubt it.


Jan Dalley's article in the Financial Times

We find it disturbing that Jan Dalley would make such a disparaging comment about Marathas, a defamation of the entire state of Maharashtra and its glorious history. To call them "marauding Marathas" is not just defamatory but seems almost racist to us.  

How did Jan Dalley miss the basic fact that Daulat Rao Scindia was a Maratha? It seems evident to us that Jan Dalley did not even bother to find the facts, facts that Dalley could have found by a quick search on Wikipedia. To us this seems to us a clear case of Journalistic Negligence.  
 
In our opinion, the above facts show that Jan Dally and her newspaper the British Financial Times are engaging in the same perversion of Indian history that the British began two hundred years ago. To call this sheer prejudice seems fair, we think.



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Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.



Another Exhausting Week

A week long Rip Van Winkle would probably wake up on Saturday morning and think it was a ho-hum week. How wrong would he be? Yes, the Dow closed down 65 points on the week and the 30-Year Bond closed up about 11 basis points. But what a ride it was?

The Dow showed a 500 point intra-week move from the lows to the highs of the week.  The real question is whether the panic low of 1044 on the S&P will hold in the next few months and whether the 3.95% level of the 30-Year Bond would mark the bottom of the yields for the summer. 

We don't know much but it does appear that investors have gone from an overinvested posture in stocks to an underinvested position.  At the same time, even passionate bulls like Larry Kudlow have begun contemplating a slowdown in the second half of 2010.  

As we said last week, all eyes will be on the May NonFarm Payroll report next Friday. 


Featured Videoclips

This week we feature the following videoclips:

1. Steve Wynn on CNBC on Friday, May 28
2. Jim Cramer on Mad Money on Thursday, May 27
3. Doug Kass on CNBC Fast Money on Thursday, May 27
4. Kirby Daley on CNBC Squawk on the Street on Wednesday, May 26
5. Jordan Kotick on CNBC Closing Bell on Wednesday, May 26
6. Jeff DeGraff on CNBC Fast Money on Tuesday, May 25

1. Steve Wynn Takes on Washington - Steve Wynn with CNBC's Jane Wells - Friday, May 28

Rarely have seen a CEO so passionately outspoken about what he sees happening in America. This video of Mr. Steve Wynn is an absolute must-watch in our opinion, regardless of your political beliefs. Just a few quotes to pique your interest:

• It's common sense that has disappeared in Washington DC, it is common sense that has disappeared in years of 7 & 8 in America, and we are inheriting the awful results...of wild, uncontrolled spending.unbelievable, unsustainable debt..and yet here we are doing it again....
• 20 Billion a month to the FHA on top of what happened to Fannie Mae & Freddie Mac, (in a passionate voice, hitting his finger on his palm), we are doing it again today for 20 billion a month, we are destroying the housing market again, under the name of a stimulus, phony misrepresented names....
• Macau has been steady, the shocking unexpected Government is the one in Washington, that's where we get surprises everyday, that's where taxes are changed every 5 minutes, that's where you don't know what to expect tomorrow, to compare political stability and predictability in China and Washington is like comparing Mt. Everest to an ant-hill. 
• So when you ask me to compare the unpredictability and uncertainty politically in China compared to Washington, I take China; Washington is unpredictable these days; No one in the Business community from one coast to the other has any idea what's next?...the uncertainty of the business climate in America is frightening, frightening to everybody and it is delaying the recovery... 
• We are on our way to Greece in the hands of a confused and foolish Government that is living up to the predictions of Alexis de Toqueville who in 1909 said "The American system of democracy will prevail until that moment when the politicians discover that they can bribe the electorate with their own money" and boy, it is in full bloom today, so extreme that it will probably have an end onto itself, the public is frightened, this Tea Party business is all about fear, there is a sense in the land of discomfort, there is a sense of fear that the politicians are ruining us and the people are right, its got to stop,  its got to stop...

Pure, honest stuff whether you concur or not. Kudos to Jane Wells for conducting a beautiful interview. The other 2 clips of the Wynn interview are:

• Steve Wynn on EBITDA
• Steve Wynn on Surviving Vegas Downturn

Jane Wells is a fabulous talent at CNBC. We have always loved her clips. Today, we find out that she can write lovely too. Her summary of the Wynn interviews can be found at Steve Wynn Takes on Washington, Vegas at cnbc.com.

Jane is a master of the CNBC recipe of making business news fun. Watch her get Steve Wynn talk about stuff (in the Vegas downturn clip above) we can relate to:

• "This generation of people that are between 22 & 40 have a different attitude, it may be this whole notion of interactivity, that instead of sitting and watching something, you want to be part of it...their idea is not sitting & watching, their idea is being in it, doing it, being immersed, they are very very hedonistic and sensual..."

Jane Wells could not show what perhaps she would have liked to show on TV as a backdrop to these comments. So she writes in her summary:

• As we spoke, scantily clad waitresses in barely-there orange bikinis prepared for one last practice run-through. “They’ll make north of a hundred grand apiece,” annually he says. The jobs pay well, and the tips are great. But wearing those bikinis isn’t easy.

Mr. Toure may call himself that, but Ms. Wells is the real Fab. 


2. Tug of War - Jim Cramer on Mad Money - Thursday, May 27

Jim Cramer gets a lot of blame but he rarely gets credit. On Thursday, May 27. the Dow Jones soared by 285 points. Most of the commentators on CNBC became giddy. CNBC Fast Money's China & Commodities Ultra Bull, Joe Terranova went euphoric:

• Last Fast Money move? I think you are opening the books right here. I think what the market is telling you to do and what money managers are gonna have to be doing over the next couple of days is going out and putting back on positions. When I look at what I have got long in the last couple of days, I kinda feel like I am not long enough and I think right now, if you are a money manager...you have to invest, I would imagine over the next couple of days they chase the tape higher.

Then about 58 minutes later, Jim Cramer began his show at 6:00 pm. Here is Jim's opening message:

• A glorious day at long last.Everything seems well let's say hunky dory. With the Dow rising 285 points and the S&P up about 3%, totally different from the usual bloodbath scenarios that we have gotten used to lately, it's my job to remind you that this is NOT the time to become bullish it is NOT the time to buy whenever everything looks up even though fundamentals haven't actually changed you should turn seller
• ..that is why tonight I want to talk about the concept of ammunition; stock we bought when the market was getting hammered when I told you to buy on the way down like those accidental high yielders you buy these on weakness so that you can unload them on strength, like the strength we had today..
• we don't buy up 285 dow points, that be nuts and believe me I know crazy when I see it..No. we lighten up. When the market gets euphoric, we get grimfaced and think about what we can offer on the way up, just like we get more positive on the way down and look for bargains. It is incredible, it is called Buying Low & Selling High.
• Having ammo is integral to our strategy of not having too much stock when the market turns down..that way you have enough room and cash to add to positions that you trimmed or, in the parlance of Mad Money, schnitzled on the way up 

When will Jon Stewart show such a clip of Jim Cramer?

PS: The Dow Jones was down 122 points the next day on Friday, May 28. Cramer's viewers have a reason to say "Thanks, Jim". Terranova's viewers, not so much!


3. Kill the Trading Machines - Doug Kass of CNBC Fast Money - Thursday, May 27

Doug Kass of Seebreeze Partners is an astute investor. He has made excellent trading calls in the past. This time, he came on the Fast Money to spin his theory that High Frequency Trading ("HFT") is responsible for the spike in volatility. We respect the investment views of Mr. Kass. But frankly, his new theory seems dubious to us. As far as we know, HFT models fail when volatility spikes and they tend to withdraw from the markets under high volatility conditions. 

You can hear real experts on HFT talk about their tradecraft at Calming the Market Storm - an interview by Maria Bartiromo with Irene Albridge of Able Alpha Trading & Manoj Narang of Tradeworx.

Perhaps, Mr. Kass was speaking about other types of Quant Managers who amplify market moves by their trading. What interested us most in his interview was his forecast that the "S&P 500 would trade between 1080-1180 for the rest of the summer". 

Read a summary of his views at Market Storm Clouds Bring Rays Of Opportunity at cnbc.com

 

4. Is Asia an Investment Bubble?  - Kirby Daley with CNBC's Erin Burnett - Wednesday, March 26


Kirby Daley is the Strategist of the Newedge Group. We confess we do not much about either Mr. Daley or the Newedge Group. But after listening to Mr. Daley, we feel we should know more about them. We judge an expert by what they say and not by the banner they speak under. By that standard, we think Mr. Daley is worth a serious listen. 

• You can't look at the property market, you can't look at the numbers and say there isn't some sort of bubble forming,  we are not in some bubble territory. But it is not the same type of bubble we are used to in the US, there is not the same type of mortgage activity withdrawal and the consumers leveraging themselves up,
• ...but the problem is, what is damaging in my view, China is not making the transition yet to a domestic demand-driven economy and they need to do it.. and I have said, it is going to be a 5-10 year process.
• When I was on your show in NY in September, I talked about the fact they are investing in overcapacity, they are driving this economic growth through investment infrastructure, that sound s great, they can use it in future, the problem is that the world is not going to be there to buy the products to make it a good investment,
• that leads to NPLs (non-performing loans) and to get out of NPLs, they can't magically use their reserves to pay that off and the laughing gas breathing China optimists say there was not a NPL problem, the last time there was a NPL problem, they got out of it with no damage, this time they are going to get out of it through financial repression, which is what they did the last time as well, that means keeping interest rates low for consumers, keeping the spreads low for the Banks, and the consumer will not be able to pick up..
• that is what Japan went through, that is what is going to happen to China and that is what is probably going to happen to the US. That is what worries me more than a housing bubble.

In response to a question by Erin Burnett, Mr. Dale said:

• there is domestic consumption because we have a wealth effect from the housing bubble, it is different from the wealth effect in the US, people are making money here and they are spending it, but in general, we need the entire economy, how the economy is structured and driven, to change, and that is not happening...

Then Erin asked an excellent closing question:

• Burnett - How do you trade China right now given those concerns which are serious and macro and given the immediate concern about the situation in Europe, 20% of China's exports go to Europe, single biggest market for them, how do you trade China?
• Daley - It is very difficult, it is a great question, because the stock market is not overvalued, however, the chances for the stock market to really rally substantially from here are fairly low because of the worries about the real estate bubble. So many corporations are invested in real estate, that if real estate does start to come off because of the tightening on the real estate sector thats going to affect corporate bottom lines....It is a tough play right now

Words to ponder, we think!


5. Red Flags for Markets?  - Jordan Kotick with CNBC's Trish Regan - Wednesday, May 26

As the title suggests, Jordan Kotick, Barclays' technical analyst, sees red flags everywhere. The worrying signs he sees are:

• Germany-Italy 10 Year Spreads - This market is getting back to the wides. This is a story about Italy and Spain, of contagion concerns that are back in the markets.
• US 5Yr5Yr forwards - 5yr5yr forwards* are rolling to the downside. When the markets are doing well, investors buy inflation protection. What you are seeing now is that they are not buying inflation protection but yet again it is actually starting to break to the downside. That is a troubling sign. It shows that the market is still concerned about risk.
• Indian 5-Year Swaps - Not the most liquid market but for American investors it matters. India 5-year swaps look like the Nasdaq, look like the FTSE. What you are starting to see here is a market that is topping out. That means money is starting to go into the Bond Market. What that suggests to us is that money is going into the Bond market and out of the stock market, on the verge of breaking down. Again, a sign of risk aversion.
• USD-Israel Shekel - That, the USD-Shekel is based out and starting to roll to the top is, to us, a very troubling sign. It does suggest that the EM currencies are still in trouble. The Dollar is gonna continue to do well.

His basic message "Risk is still at Risk here. That is what we are seeing through out all these asset classes."

Risk is still at Risk! Nice line, Jordan.

PS: David Faber of CNBC did a rah-rah segment earlier in 2010 about inflation and how large hedge funds were putting on 5Yr5Yr forward based trades to take advantage of inflation. David, are you listening to Jordan Kotick and do you have any plans to update your segment? 


6. Chartology  - Jeff DeGraff on CNBC Fast Money - Tuesday, May 25


Jeff DeGraff of the ISI Group is rated as the #1 technician by Institutional Investors.  He came on CNBC after a tumultuous day in which the Dow was down 290 points (& S&P touched 1044) in the morning and closed down only 22 points, a day when 30-Year Treasuries traded in the early morning at 3.95% and closed at 4.06%, only 2 basis points down on the day.
 
This is a good clip. Mr. DeGraff points out that the 10-day TRIN is very high and the last 13 times the TRIN has been so high since 1965, the S&P 500, on a 65-day forward basis, produced a return 3 times what the S&P normally produces. The one caveat DeGraff had was Credit. He also said he would like to see the 2-year & 10-year rates go up. On this topic, he said he would short the TLT, Treasury 20-year ETF, because the reversal in the TLT on Tuesday was more striking than the reversal in the S&P 500.


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There are three changes to the Top 10 list since our last update on April 30, 2010:

• A new article  New York Times vs. Washington Post - IV - Pakistan-Afghanistan has entered the Top 10 list in the 9th place.
• The article Flagrant Foul on Mark Haines and Erin Burnett - Their Conversation about India's regard for "sacred cows" has dropped to the 10th place from 9th place.
• The article The Greatest Publishing Project of Recent Years - Conceived & Implemented in America has dropped out of the Top 10 list. 

Below is the complete list of this Blog's 10 Most Popular Articles (in terms of viewer hits) as of Friday, May 28, 2010.


1. "The Karna-Arjun Battle in The Maha-Bharat - Beyond Adjectives" - September 20, 2008

2. "Jeffrey Sonnenfeld Of Yale & Erin Burnett Of CNBC - Read The China-India Article in Foreign Affairs"- February 28, 2009
 
3. "Mo Force is On Board the Deflation Wagon - Time for Mr. Bernanke to Cut Interest Rates" - October 4, 2008

4. "India & Greece - A long, deep and ancient relationship" - May 31, 2008

5. "CNBC's Fast Money - Practice What Your Anchor Dylan Ratigan Preaches" - February 21, 2009
 

6. "Will The Obama Administration Occupy Pashtunistan Or All Of Pakistan?"- April 25, 2009


7. "First Snoop Dogg, Now Sylvestor Stallone - Everyone Is Getting Aboard The Bolly-Holly Train" - February 7, 2009

8. "Iraq & Tibet - Strategic Will of The American and Chinese People" - July 26, 2008
  

9.  "New York Times vs. Washington Post - IV - Pakistan-Afghanistan" -  December 26, 2009


10. "Flagrant Foul on Mark Haines and Erin Burnett - Their Conversation about India's regard for "sacred cows" - May 16, 2008


A breakdown of the Top 10 list by topic is as below: 

• India Related - 3 articles
• Geo-Strategy - 4 Articles
• CNBC Related - 3 Articles

Send your feedback to editor@macroviewpoints.com

 

 

        

Last week we wrote an article about the Case of Two Financial Journalists and how they pronounce their first names. This article created a level of response that was as varied as it was voluminous. It seems that we struck a nerve among people who are frustrated with the way Indian names are pronounced and spelled. It also generated responses that focused on regional variations of how names are spelled and pronounced within India.

Today, we describe why the case of Mr. Krishna Guha seems important to us.

Facts

The MahaBharat, in our opinion, is the greatest story ever told in the Indo-European literary world. Unlike other stories that bear this label, the MahaBharat is not a religious tale. It is described by scholars as Iti-Haas or "the way it happened" - in other words History. It is a story that is as vibrantly alive today as it has been through centuries and millennia.  Go to any remote village in India and you will find people who will discuss the epic at a level of scholarly insight.

Krishna (with long "a" sound suffix like Carla) the woman or  कृष्णा is one of central characters. She was celestially beautiful. In fact, she was considered to be the most sensual and desirable woman in the world. Notice the second vertical bar on the right in the phonetic Devnagari script. This is the bar that tells you to pronounce the "a" sound like Carla or कार्ला.

Krishna (silent "a" like Carl) the man or  कृष्ण ("a" silent - notice the absence of the second bar on the right from कृष्णा ) is a major character in this story. He is one of two greatest figures in Indian history. Krishna is regarded as God or an Avatar of God on earth. Any one with the most rudimentary acquaintance of Indian culture knows about Bhagwan Krishna.

The story of how कृष्ण or Bhagwan Krishna came to the rescue of  कृष्णा  or Queen Krishna in the moment of her greatest personal crisis is a story that is known, recited and sung in every part of in India.

These two names have the same grammatical structure as nouns with "a-stems" in the Indo-European family of languages. We demonstrated this in our first article by comparing the names Carl & Carla with Krishna (silent "a") and Krishna (pronounced "a" sound).  The pronunciation of the "a" sound in Krishna, Carla, Roberta, Sharpova, Medvedeva distinguishes the feminine name from the Krishna (silent "a"), Carl, Robert, Sharpov, Medvedev male names. Yes, we do know of a Ms. Medvedeva and Ms. Sharpova is the name of a famous tennis player.

Even Wikipdia knows this basic grammatical fact. We quote: 

• A-stems (/ə/ or /aː/) comprise the largest class of nouns. As a rule, nouns belonging to this class, with the uninflected stem ending in short-a (/ə/), are either masculine or neuter. Nouns ending in long-A (/aː/) are almost always feminine. A-stem adjectives take the masculine and neuter in short-a (/ə/), and feminine in long-A (/aː/) in their stems. This class is so big because it also comprises the Proto-Indo-European o-stems.

Feminization of Masculine Names

It should be evident now that calling a man as Carla, Roberta, Medvedeva or Krishna (with "a" sound suffix) should be described as changing the man's name to its feminine version. We termed this feminization of a masculine name. We think this is valid terminology.

Imagine an official of the US State Department calling the President of Russia as Medvedeva? Do you think it might make the Russian people angry? Do you think it might cause an international incident? We do.

We also think that feminizing the male name Krishna (silent "a" like Carl) is far worse than feminizing the male name of the Russian President.


Names with deep emotive and religious significance

Krishna is the name of God, the name of the Avatar who recited the Bhagvat Geeta or the Words of God to his disciple Arjun in the MahaBharat. The Bhagvat Geeta is the most widely read scripture in Indian Culture and Religion. 

In our opinion, feminization of this deeply emotive and religious name, the name of God, is an insult of paramount proportions. Feminization of names of the Russian President and a CNBC Anchor pale into significance compared to this insult, we feel. 


Speech Matters, American National Television Matters & United States Federal Reserve Matters

Language and its usage are far more influenced by speech or pronunciation than by written syntax. People tend to remember what they heard and tend to repeat what they heard.  This is especially true of Sanskrut which was developed long before writing was invented as technology. Even today, Sanskrut is more easily learned by listening and speaking than by reading. As children, we learned Sanskrut verses by listening to our parents and reciting with them. 

American Television is broadcast and heard all around the world. Wherever we have traveled for business or pleasure, we have found CNBC. So if a sacred Indian name of enormous emotive and religious significance is feminized on a nationally and internationally televised CNBC Show, that feminized pronunciation is likely to stick and spread around the world. 

The United States Federal Reserve is the greatest and most powerful monetary institution in the world. We are great admirers of Ben Bernanke, Chairman of the US Federal Reserve. We believe that Chairman Bernanke singlehandedly saved the world's financial system by his dramatic, unprecedented and effective steps in late 2008. The New York Fed is the single most important component of the US Federal Reserve. Mr. Tim Geithner, the current US Treasury Secretary, served as the President of the New York Fed prior to his current appointment.

Mr. Krishna Guha is today the Executive Vice President of the New York Fed and its Head of Communications. In our opinion, his words and, in particular, his pronunciations of sacred Indian names will carry ginormous weight around the world and his pronunciations are very likely to be copied with conviction. 

This is why we think the feminized pronunciation of his first name, the sacred masculine name Krishna, is an important, material and dangerous issue for Indians worldwide. 


The case of Mr. Guha

Let us point out that we did not comment on his pronunciation Guha (with long "a" sound suffix) of his last name. This is considered to be an anglicized version of the Sanskrut name Guh or Guha (with silent "a").  This practice is somewhat common in North India, witness the usage Gupta for the well-known Sanskrut Gupt or Mishra (with "a" sound suffix) for Mishra (with silent "a").  We don't like the fact that, even 63 years after independence, some Indians prefer the anglicized versions of their last names to the original Sanskrut ones. But we think that is their personal choice. 

But then should it not be Mr. Krishna Guha's personal choice to pronounce his first name the way he sees fit? Yes and No in our opinion.

Yes, he has every right to use any pronunciation of his own name in private. As one of our readers asked, what is wrong if a man wishes to feminize his name? Nothing. We believe in the Seinfeldian "not that there is anything wrong in it" approach. 

But when a man bears a name of great emotive and religious appeal, we feel he should be extremely careful in the way he exhibits his personal choice of pronunciation in public. In our opinion, he should, when speaking in public, point out the religiously correct pronunciation and then explain how or why he chooses a different one. The tone of this explanation should be deferential to the religious sentiments of millions of people around the world. 

Think of a man with a deeply emotive & religious Christian, Jewish or Muslim name (listed in alphabetical order), say for example, Jesus, Moses or Mohammed. Imagine such a man feminizing his name in public or even using a slightly insulting version of his sacred name! Does any one doubt the explosion of criticism that would result? Depending on the religion involved, the entire Middle East, Catholic Church, the Anti-Defamation League would protest in the strongest possible terms.

Any man who causes any disparagement to a name like Jesus, Mohammed or Moses (listed in alphabetical order) would be told in a firm manner that bearing such a great name creates a huge responsibility to be respectful of what that name means to the followers of that name. He would be told that this responsibility transcends his personal preference, at least in public.

But the name Krishna (silent "a") is a sacred Indian name. It may be sacred to millions to Indians around the world. But in the world of American Television or the US Federal Reserve, it counts for very little. This is because Indians around the world have forgotten how to protest. They have become inured to religious insults and defamation suffered over decades. They are reduced to expressing their anger in the privacy of their homes, at Saturday evening dinners with friends and to saying "why to bother...let it go" like a reader said to us.

A struggle for respect for Indian religion has to start somewhere. In our opinion, the case of Mr. Guha seems a good place to start.


Behavior of Mr. Guha 

We do not know much about the professional achievements of Mr. Guha. The fact that the NY Fed chose him to be their Head of Communications is sort of enough for us. 

We did not wish to be unfair to Mr. Guha. So we called his office and requested to speak with him. We also sent his office an email with the request to speak with him about the pronunciation of his first name. We received no answer. After we published our first article, we sent his office an email with a link to the article and another request to speak with him. We called his office on Monday evening and we were told that he had declined to speak with us. At that time, we offered to speak with him off the record to give him comfort. We have not heard back from him or his office.

As a result of Mr. Guha's refusal to speak with us on or off the record, we are reduced to make our appeal to Mr. Guha in this article.


Our Appeal to Mr. Guha

We would like to appeal to Mr. Guha's sense of responsibility as a public official of the United States Government, an employee of the US Federal Reserve, an institution that operates under the purview of the United States Congress, a legislative body and the agent of the American electorate. 

We would like to make an appeal to Mr. Guha, both humbly and with respect, that he should not ignore the religious feelings of the small Indian community in the United States. however lowly and backward he may think of us. By doing so, he would do injustice to and possibly besmirch the name of that great institution called the United States Federal Reserve. 

We notice from his profile on the Fed website that Mr. Guha received his undergraduate degree from England. We would like to ask Mr. Guha whether he is of British origin. If he is, then we would like to ask him whether he shares the opinion of some British elite (the sort of people who use the adjective "paki" in private) that people of Indian origin are of a lower level than  the native British. We would ask this question of Mr. Guha because we sense a degree of cultural contempt from Mr. Guha towards our religion. 

We would like to ask Mr. Guha whether he realizes that disclosure and transparency are the best way for a public official to address concerns about himself. American history demonstrates that closeting oneself behind closed doors and pulling down the governmental shutter of silence has never been a successful practice. It tends to generate more questions. 

So Mr. Guha, we make this public appeal to you. Speak with us. Answer our questions.  

If Mr. Guha refuses to speak with us, should we then ask, as American citizens, taxpayers & journalists, whether Mr. Guha is indeed the best person to serve as Head of Communications of the New York Fed, an institution supported by the American Taxpayer? 

Of course that would be a question for President William Dudley of the New York Fed and Chairman Bernanke of the United States Federal Reserve! 




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In this article we discuss the varied responses from our readers to our article last week about the Case of Two Financial Journalists . We were really surprised with the volume and variety of responses. We thank the readers for both reading the article and taking the time to respond to it.

Sanskrut Grammar and Literature

We are very happy to see the love and respect shown by readers to Sanskrut. Many readers showed proficiency in Sanskrut Grammar as well as Sanskrut literature. Sanskrut is the one unifying bond for all of India today as it has been over the centuries and millenia.

We believe that English will end up being de facto business language of India within the next decade or so and that Sanskrut will have to be the spiritual, historical and literary soul of India. The regional Indian languages will become richer and stronger as well. This has been so through out Indian history. The land records, the business transactions were done and recorded in local languages. But the language binding India remained Sanskrut. 

It will become incumbent on  India to modify English to suit the needs of Indians. That is how it should be and we think that is how it will be. This is why we take pains to make sure that Sanskrut and regional Indian words are pronounced and spelled correctly in English.

This is not an easy task given the diversity of Indian languages and scripts. But it needs to be undertaken. It also requires that basic Sanskrut be taught to each Indian child in early school. This does not have to be complicated grammar but simple verses that enable each child to speak at least some part of the child's heritage.

Our opinion is that ability to speak Sanskrut will remove some of the ingrained differences between castes in India.  One of the old proverbs says"Janmata Jayate Shudra: Samskarat Dwij Uchyate" Or "everyone is born Shudra, it is with Samskar that one becomes twice-born (Brahman)".  When everyone learns to speak basic Sanskrut, a huge barrier will be removed from Indian society.


Regional & Language Differences within India
 
Many responses we received suggested a tension or animosity between South Indians and North Indians.  This is natural to a degree.  No one will or should allow any one part or any one Indian language to dominate others. Each language in India has its own great history. Indian history shows that each region of India became dominant at some time and contributed to India's greatness. 

But the drive to differentiate one's region can get too extended at times. We saw some of this tendency in many responses. These responses accused us of taking the Hindi perspective. That would be difficult because Hindi is not our primary language. We actually learned it after coming to the United States. One of our friends in America was a British-educated Muslim who could speak in perfectly clipped Oxford English and in perfectly nawabi style of Lucknow Urdu. He did more to teach us Hindi than any of our school and college teachers. 

Today's Indian society shows an increasing propensity for internal strife. You see people of one Indian state hurl invectives at people of another state; you see insults hurled at each other by people from different castes. Yet, the same people get soft, silent and submissive towards people from other countries, especially Americans and Europeans. This is how every foreign  entity was able to annex and rule over India. The last one to do that was a private English company that annexed India by encouraging each small ruler to fight against his neighbour in a step-by-step, state-by-state fashion.

Today, the politicians of India are practicing the same divide and rule approach to build their own private and party empires.


Sprawl in Modern India

You see urban sprawl in virtually every city in India. In south Mumbai, you still see sensible planned neighborhoods with wide roads. But the Mumbai suburbs have been built in a random, haphazard manner. The result is urban sprawl. This is also true of many other cities across India.

This sprawl is now spreading to well established Indian Institutions. You see formerly strong institutions breaking down under the relentless pressure of regional, language and caste differences.  This pressure leads to the "anything goes" approach to avoid any row.

We see the same sprawl emerging in Indian English. Sixty three years have elapsed after Indian independence but there is no national institutional effort to standardize the Indian version of English. Instead, a language sprawl is growing in Indian English and pretty soon, one group of Indians might not be able to understand the English of another group. 


Our Goal

We saw a part of all this in responses to us. Our goal is and was simple. It was to explain to Americans, especially to American media, how to pronounce Indian names, at least names of great emotional and religious significance to all Indians. For this purpose, we chose the original Sanskrut or Indo-European pronunciation. 

To those who complain that European-Americans cannot pronounce your names, we suggest patience. Break up your name into phonetic components and explain the syntax to them. Americans have a horror of mispronouncing names of others. It is up to you to show them how to pronounce yours. patiently, skillfully and firmly. 

Every name in America can be mispronounced because English does not have a phonetic script.  Take for example a name like Scarborough, a national anchor with MSNBC. How would we pronounce it if we had never heard it before? Since we know the word "rough", our initial guess would be to pronounce "Scarbo" phonetically and then add the word "rough" or Scarbo-rough.  The MSNBC Anchor would not be pleased to hear this pronunciation and he would be quick to correct us. Once we were taught that his name is phonetically spelled as "Scar-ba-ro", we were able to pronounce it. It is the same with your name. 

The spelling of French words is often very different from the pronunciation. Yet, Americans have learned to pronounce French names. Today, Americans tend to feel uneducated or rude when they mispronounce French names.  Why? Because the French correct people when they mispronounce French names and they have created a image of haute culture around the French language.

In our humble opinion, Sanskrut poetry, literature, and philosophy is India's greatest gift to the world. It is up to every Indian to take pride in it and to teach it to any one who wishes to learn. 

Today, Americans are engaged in the greatest literary publishing project in modern history - translation of over 100 Sanskrut literary books into English.  The last time such a major project was undertaken was in the 5th century by China's Tang Dynasty . Learn about this great American project and tell your European-American friends about it. 

Our appeal to readers is to drop the Micro or regional issues and focus on the Macro, the introduction of Sanskrut to the average American.  If we do that, respect for us, our traditions and our names will be the natural result.    


Send your feedback to editor@macroviewpoints.com

        

Indian Americans are generally not seen on American Prime Time Television. And when they are, they are parodied as nerds or tech geeks. This is of course better than the earlier portraits of India as the land of snake charmers and elephants. Frankly, we would rather not see people of Indian origin on American Prime Time than watch them in stereotypical roles.

Then we saw last week's episode of Rules of Engagement  on CBS.

After watching a heavy day of European crisis and stock market sell off on CNBC, we were hungry for some light entertainment in the evening. The show Rules of Engagement is tailor made for that. When the show began, it was about two Manhattan couples and their friend, Russell Dunbar, played by David Spade. Russell is a single guy on the prowl, sort of an older and sleazier version of his earlier role of Dennis Finch in Just Shoot Me.  

A few episodes ago, the show added a new character Timmy, a South African MBA (clearly of Indian origin) who becomes the assistant to Russell.  Timmy is your classic Indian type, a bright MBA who comes across as bookish, a perfect foil for his boss, the older single guy always looking to score.

  
            (Russell & Timmy in the diner)                       (Jeff watching TV - our own favorite activity)


But unlike other shows, Rules Of Engagement has always treated the role of Timmy with respect. This week (Monday, May 17), the show took this respect to a totally different level.  The character of Jeff, a husband in the show, is played by Patrick Warburton of Seinfeld's "David Puddy" fame. Jeff like David Puddy is a huge sports fan and plays a TV-style All-American guy. 

This episode features a mano-a-mano confrontation between Jeff & Timmy.

The Challenge
 
At minute 01:57 of the show, Jeff walks in to the show's diner and finds Timmy sitting alone. Jeff is in visible discomfort because he has never spoken with Timmy alone.  

• Jeff - What's your deal?
• Timmy - How do you mean?
• Jeff - I don't know, you talk one way but you look another. So I don't know what's going on?

At this point, Timmy spots Russell and says "Mr. Dunbar, over here, please hurry".  Russell sits down. Timmy opens his package and tells Russell that it is a Cricket video game sent to him from South Africa.

• Russell - Why is it not legal in the US? You got to get on the geek market?
• Timmy - Nothing geeky about it. Cricket is a tremendously exciting sport

Jeff gets involved and insults cricket.  Jeff & Timmy trade a couple of insults. Then:

• Jeff sneers in an English accent - The guy on the box is wearing a sweater; it is ever so chilly. 
• Timmy - Well, I see the Ugly American has weighed in at about 20 lbs more than most Doctors would recommend
• Jeff - Sorry we all can't have that ropey underfed look....
• Jeff - Now look there is a warning - not suitable for anyone who wants to get laid

The gauntlet is about to be thrown:

• Timmy - So typical, you can't do it, so you mock it
• Jeff - Oh, I could do it
• Timmy - So why don't you come on over and we will play 
• Jeff - All right. We will call it America vs whatever other crappy countries play cricket 
• Timmy - The rest of them
• Jeff - Are you sure you want to invite the wrath of God to your home?
• Timmy - Two words, Bring It

The Video Game encounter

Timmy destroys Jeff in the video game and struts:

• Timmy - That was a wicker googly, if I say so myself
• Jeff yells - Don't say so yourself, say real things
• Timmy wins and struts - You are out for a duck

The Heat Is On 

Jeff then makes excuses about this being a video game.

• Jeff - Playing this video game proves nothing. It is not like we are playing the actual game.
• Timmy - Wait, wait, wait, wait wait! You are saying you would beat me if we play the real game of cricket.
• Jeff - If it involves a bat and a ball and even a hint of testosterone! I win, you lose.
• Timmy - I will have you know that back home in South Africa, I was such a fast bowler that I was known as the Cape Town Express.
• Russell jumps in - Sounds like a stomach virus! ....Here is a thought Timmy. You are a dork who actually owns cricket equipment. Jeff, you are a stubborn blockhead who would actually play him. 
• Jeff - I would play
• Timmy - As would I. 
• Jeff - Then it is decided
• Timmy - Yes it is
• Jeff - We will take the south side and battle it like men
• Russell - Where are we gonna get the men?

 
The Real Game 

• Jeff - What is taking him so long?
• Russell - Ironing a wrinkle out of his sweater 

Then walks in Timmy in full cricket battle regalia with helmet, gloves and pads. 

• Timmy growls - Lets do this 
• Jeff smiles and say in English accent - Shall we then?
• Timmy - I am going to give you three chances to get a hit of me so lets play
• Timmy with his game face - You ready? 
• Jeff  sneers - Hit a ball with a stick, I think so 
• Russell to Jeff - Dude, you are gonna get struck out by a scooter from the muppets

Three balls from Timmy; three swings from Jeff and three misses in a sort of remake of the scene from the movie "The Natural". 

• Jeff to Timmy - You were right, Cricket is a great game. 

Jeff smiles and shakes Timmy's hand.

This may be a corny episode to some. But after writing about other people of Indian origin who timidly allow their names to be feminized on national television, this show came across as a trail blazing episode. Frankly, we have never seen the likes of this on American Television. Watch this episode to see what we mean.

Kudos to Rules of Engagement and CBS.  Above all, congratulations and thanks to Mr. Adhir Kalyan for showing the fighting side of the typical Indian MBA nerdish guy. 

You are the man, Adhir!


Send your feedback to

editor@macroviewpoints.com

        

Editor's Note: In this series of articles, we include important or interesting videoclips with our comments. Our Web Software does not permit embedding of the clips into our articles. So we shall have to be content to include the links to the actual videoclips. We are very happy with the tremendous response from readers to this series of articles. We thank them sincerely and profusely. 

This is an article that expresses our personal opinions about comments made on Television and in Print. It is NOT intended to provide any investment advice of any type whatsoever.  No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.

Words of the Wise! 

• I think the exposures of our banks to Europe are pretty well understood and contained - Neal Kashkari - Friday, May 19 (see clip 1 below)
• Investors should "avoid financials at all costs, particularly in the banking sector"  - Meredith Whitney - Monday, May 17 (see clip 2 below)
• European banks are in even worse shape than their US counterparts,....would not invest in them "in a million years." - Meredith Whitney - Monday, May 17 (see clip 2 below)
• Decline that has happened in Euro will add 8/10th of one per cent to Europe's growth - Barton Biggs - Thursday, May 20 (see clip 3 below)
• If you don't get an event, a Lehman Brothers II in Europe in 48 hours, those stocks are gonna go up - Jim Cramer - Wednesday, March 19 (see clip 5 below)
• There is another wave to go, individual investors became very worried about their 401(K)s...as they were just coming up for air and now they are very worried they are going right back down again ....the dollar and I think dollar-denominated assets are slowly becoming the assets of choice ... this the beginning of something that is much longer term - Richard Bernstein - Friday, May 21
• The lesson of 2002 is that market priced for perfection does not even need a classic double-dip to falter - a simple growth relapse will do the trick - David Rosenberg - Friday, May 21

Exhausted Sellers?

Kudos to CNBC's Sue Herera for her simple remark on Friday that "there was an exhaustion of selling last night". We are fans of simplicity and as far as we are concerned, Ms. Herera called it true. The selloff on Thursday had all the signs of another liquidation and the S&P opened on Friday morning with a swoosh down move. This swoosh only lasted for a couple of minutes. As soon as Friday's expiration at the open was concluded, stocks bounced back.  We do not know whether it was shorts covering ahead of the weekend, or a bounce from the end of the relentless selling pressure.

Not sure it matters. Stocks went down to retest the flash crash low of about 1065 on S&P. The successful retest was the story of the rest of the day. We wonder, like many people we heard including Doug Kass of Seebreeze Partners or Mark Haines of CNBC, whether this will prove to a low at least for the short to intermediate term.  The history of local bottoms made on option expiration mornings is pretty solid.


Euro & Gold

Euro bottomed a day and two before stocks bottomed. Thursday saw a liquidation of global growth currencies and metal stocks. These bounced reasonably well on Friday.  The words from last week of Robert Prechter, Walter Zimmerman and CNBC Fast Money's Anthony Scaramacci proved true. Gold sold off all week.  The selloff in Gold preceded the bottom in the Euro by about 3-4 days. 

The large speculator short positions in the Euro remain almost as extreme as in the past week.  But small speculators seem to have covered most of their shorts in the Euro.


Treasuries

The hands down winner of the week were long maturity Treasuries. The 2-10 yr yield curve flattened by about 22 basis points this week. The yield on the 30-Year Treasury touched 4.002% early Friday morning as stock futures went down.  The bond market backed off from this big number and closed down 4-6 ticks across all maturities. Frankly, that is impressive. In prior weeks, the bond fell by much more on Friday afternoons ahead of looming auction supply.

We did not expect the 30-yield to break through 4% on its first try especially with the supply of $113 billion looming ahead of next week.  We recall that 4% proved to be serious resistance in October-November 2009. At that time, the 30-Year yield broke through 4% for a short time to trade around 3.95%. Then it reversed as if on a dime and went back to 4.70% by December 2009. 

This was similar to the behavior in November 2007. But in November 2008, the 30-Year tested 4% once and then decisively went through 4% the second time. In 2008, it kept going until the yield hit 2.50% in December 2008.

The 10-year German Bund did hit an all time low in yield this week and closed at 2.67%. Bill Gross told CNBC's Erin Burnett that US Treasuries and German Bunds were the two best assets to own in these turbulent times (see clip 6 below). It is nice to have you on our side, Mr. Gross.

In contrast, Steve Cortez of CNBC Fast Money told viewers to sell and short Treasuries. He said he sold and sold Treasuries on  Friday until his fingers hurt.  But never does Mr. Cortez tell us nor is he ever asked by others which Treasuries he sells. After all, selling 5-year Treasuries is very different than selling 30-Year or 10-year Treasuries. This is because today large speculators are long 5-Year Treasury futures while they are extremely short 10-Year Treasury futures. 

How short? We were stunned to see that the huge speculative short position in the 10-Year Treasury actually increased this week to 267,229 short contracts from 239,797 short contracts the week before, an increase of 11% on the week. Amazing given this week's ferocious rally in the 10-Year Treasury. 

All eyes should be on this asset class next week, actually until the all-important Payroll number number on Friday, June 4.


Featured videoclips: 

1. Neal Kashkari on CNBC on Friday, May 21
2. Meredith Whitney on CNBC on Monday, May 17
3. Barton Biggs on Bloomberg on Thursday, May 20
4. David Faber with Hedge Fund Heavyweights on Wednesday, May 19
5. Jim Cramer on Mad Money on Wednesday, May 19
6. Bill Gross and Mohamed El-Erian on CNBC on Friday, May 21
7. Secretary Tim Geithner on CNBC on Wednesday, May 19

1. Pimco's Take on Financial Reform - Neal Kashkari, Father of the Mother of all Bailouts - TARP, with Erin Burnett - Friday, May 21
 
We respect do-ers far more than talkers. As far as TARP is concerned, there has been no greater do-er than Neal Kashkari. This young man was thrust into the utterly thankless job of implementing the TARP program, the biggest and most unpopular bailout in American history. History will look back at his work with deep respect, we think. 

These days, many TV pandits have called the trillion dollar Euro fund as Le TARP II.  We were very interested in hearing Mr. Kashkari's views on this subject. He did not disappoint us:

• Burnett - people are now talking about the big bailout in Europe, that is the equivalent of the US TARP in terms of its size and hopefully its efficacy .... do you think that's fair?
• Kashkari - I don't. TARP was focused on solving a capital problem which was the financial system did not have enough capital. Europe is now so far focused on liquidity helping them get over their funding problems, but it has not yet dealt with solvency or actually being able to pay back their debt. So we are not near end of the Europe (problem), not by a long shot..
• Burnett - ....when you put it that way, I guess it is a pretty stark way to put it..the real issue is in front of us and they have already put in a trillion..
• Kashkari - I agree. I think that they really need to get their political leaders together to address the long term solvency issue - can the peripherals afford their level of debt? not just continuing their funding.Can they fundamentally afford the level of debt they have accumulated?And we don't yet know the answer to that.
• Burnett - so everyone is trying make these analogies, it is interesting when you don't think that's fair - another one is Ok Greece is, let us just say, the Bear Stearns, Greece is gonna get sort of saved although it is gonna take some pain like Bear Stearns was when JPMorgan bought it. But if that analogy holds, then you still do have Lehman and Fannie and Freddie and AIG..all in the distance.
• Kashkari - Extreme financial crisis take many years to work out, What's happening in Europe is a continuation of, it is an extension of what we experienced in the US.. it is going take probably years rather than months to ultimately resolve and Greece is a big issue, Spain is a big issue, the sequence isn't very important, the solution for one can affect the others. Policy makers in Europe are scared right now - they want to defend the Euro, but they also want to preserve the ECB's credibility, there is a tension there, and they ultimately want to deal with this long term solvency issue but in a way it does not terrify creditors to other countries.
• Burnett - during the whole TARP in the US, you dealt with European leaders, bankers all the time..do you think that they are going to be able to get organized, get this together, implement it and then stick by the promises they make?
• Kashkari - I think its tough..because you are dealing with many different individual countries, their own political processes, we all exist in a political reality we just can't wave those away..the politics in Europe are magnified by the fact that you have many different country legislatures that have to act...it is going to be a hard coordination problem.
• Burnett - another thing you knew from the inside that there is a big difference during the crisis between how the American banks dealt with it and how the US government dealt with them via the TARP and how European banks dealt with it.and did not deal with all the problems and bad loans etc. that they had. So now here they are in jeopardy again with very close to links to our banks. Is there a real risk that this contagion does directly affect our financial system yet again?
• Kashkari - I think it is limited. I think the exposures of our banks to Europe are pretty well understood and contained. That's a dangerous word to use but it seems to be moderate. I think whether they can get their act together is still an open question.
• Burnett - and what about the TARP here in the US, I know that it may take years before there can be a verdict and obviously you are someone who set it up and wanted it to succeed. What would be your verdict about where we are now if you were to grade it? Where has it been successful and where has it failed?
• Kashkari - I think it has been a resounding success far exceeding my own expectations. I saw that the latest estimates are that the cost is going to be around a 100 billion dollars. That's way lower than anything I predicted at the depth of the crisis. Frankly at the worst moments, I didn't know we would get any money back and the fact that we are getting most of it back is a resounding success. Where it has been more challenging is increasing lending, getting lending out to small businesses, we went to Congress to ask for TARP to prevent a financial collapse. I think it succeeded in doing that but it has not yet reached its full potential in terms of getting credit flowing again to our communities.
• Burnett - What about GM? there is a lot of frustration around this because GM has been putting out ads that they have been paying taxpayers back,  perhaps it did using another pool of governmenet money but clearly the US taxpayer is very very underwater in GM especially because of the equity investment.  Do you think GM and GMAC will ever be able to pay it back or is that money taxpayers may just want to say we are not gonna see that again?
• Kashkari - I think it is going to be hard for GM, Chrysler, AIG to fully pay back the taxpayers. Again I am pleasantly surprised that we have seen any money back from the auto companies. I think every dollar we get back is a good thing and I hope that GM is on the path to long term viability.
  Burnett - So does the financial reform bill .... in that bill do you think that it will avert the need for more giant bailouts or another TARP down the line?
• Kashkari - It is hard to know ..in a normal crisis when an individual institution runs into trouble, some of these ideas like resolution authority can work. We still don't know what to do if we have another extreme crisis where the entire system is put at risk. My fear is that we are going to declare victory when we pass this bill and think that we have solved all of our problems. We need to study this for the next 3-5 years and then come back when we know a lot more than we know today.
• Burnett - do you think, do you have any issue, big picture with the things everyone raises. Hey rating agencies are not dealt with, Fannie & Freddie are not dealt with..the derivatives part of it appears to be too draconian in some ways and may be too light in other ways - do you share these concerns?
• Kashkari - I do. I think we absolutely have to deal with Fannie & Freddie. That is a huge issue that needs to be addressed. I think that this bill is so complex. In a few years we are going to know a bunch of things that they got wrong and we are going to have come back and fix some the things that may have been too extreme. I think net net it is a good step in the the right direction but we are not done yet.

This is one of the best interviews we have heard for awhile. First we have to feel blessed that we live in a country that has the emotional strength and sound intelligence to create, structure and successfully implement a program like TARP. We do not have the confidence that Europe has it. This is why we do believe that the Euro will, after a period, resume its downtrend perhaps toward parity.

We remember that after the creation of TARP, the bottom of the equity market took about 4-6 months to form. So we are not sanguine that any local bottom reached in the near term will hold for long. We do think investors have been exhausted after the past few weeks and that markets will stabilize. Then some time later, we will all wake up again and the next step in this crisis will begin. 

The only thing missing in this interview is the acknowledgement of the enormous role played by Chairman Ben Bernanke. Without his innovative and dedicated support, TARP might have failed. 

So we thank Erin Burnett for this superb interview and we join Jim Cramer in saying "booyah" to Neel Kashkari . 

While we are relieved that US Banks do not have a substantial exposure to Europe's crisis, we cannot let our guard down. Why? Listen to Meredith Whitney talk about US Banks next.


2. Whitney Talks Small Biz - Meredith Whitney with Maria Bartiromo - Monday, March 17

Another clear-cut and succinct interview by Meredith Whitney. A summary of her comments can be found at Investors Should Avoid Banks At All Costs  on cnbc.com. A few excerpts are below:

• "Politicians have proven far worse than our worst expectations,....It could be very bad for banks."
• Some of these regulatory proposals are going to make it so difficult for everyone involved that you'll see, I think, at least another $1.3 trillion (of credit) sucked out of the system.
• Investors should "avoid financials at all costs, particularly in the banking sector"
• "European banks are in even worse shape than their US counterparts," and she "would not invest in them "in a million years."

Her general outlook for the second half of 2010 "..more consumers to lose their jobs and have even more limited access to credit. The housing market will likely see a double dip, while the stock market will be "bleak."

This is where our favorite bottle of single malt comes in handy.


3. Barton Biggs with Bloomberg's Matt Miller & Carol Massar - Thursday, May 20

Barton Biggs, the Managing Partner of Traxis Partners is an interesting speaker.  A few of his comments are below:

• everybody is... because they are nervous and because we & everybody else are apprehensive about the mistake we made in 2008 about not taking one of these things seriously enough and know that it would very bad for our businesses to have another bad year like 2008, that is not to protect capital in a bear market..and so everybody has said Oh my God, this could be terrible and Europe might blow up and so we got to head to shore..(emphasis ours)
• I think the chances of Europe blowing up are very very small. and meanwhile the recovery both in US and emerging markets is still probably strong and healthy
• I think it is ridiculous I think it is a buying opportunity ..
• But are we buying? No. Because we probably own too many stocks already..
• Decline that has happened in euro will add 8/10th of one per cent to Europe's growth

Want to see real apprehensiveness on part of Hedge Fund managers? See the next clip.


4. Hedge Fund Managers Discuss Their Views with CNBC's David Faber - Wednesday, May 19

David Faber spoke to the a number of experiences hedge fund managers. We present two clips below:

• Hedge Fund Titans Meet - Michael Novogratz of Fortress

Mr. Novogratz is the apprehensive Hedge Fund manager described by Barton Biggs in clip 3 above. His key point "Usually when markets crack as severely as they're cracking today, it's the start of a new regime." Read a summary of his comments at Time to Play US Anti-Growth Trade at cnbc.com.

• Hedge Fund Heavy Hitter Weighs In - Marc Lasry of Avenue Capital

Mr. Lasry is an experienced investor in distressed assets. In this clip, he describes his style. 

A good summary of all Faber interviews can be found at Hedge Fund Chiefs: De-Risking For Survival at cnbc.com 

5.  Stop Trading. Listen to Cramer - Wednesday, March 19  

Jim Cramer makes an interesting and bold statement in this short segment:

• He (Geithner) is an adult. I don't like what I hear out of Germany, a lot of yakking but if Geithner is right and there is really no huge crisis and we don't get some Lehman Brothers in the next 48 hours out of Europe, I am beginning to think that we are going to become a little more inured to how bad Europe is...
• If you don't get an event, a Lehman Brothers II in Europe in 48 hours, those stocks are gonna go up....

6. Bill Gross and Mohamed El-Erian with CNBC's Erin Burnett - Friday, May 21


First we need to congratulate Erin Burnett for asking the question dearest to our heart. This is an all-time first for a CNBC Anchor. Erin Burnett actually asked Bill Gross & Mohamed El-Erian how they are personally invested (clip 2 below). They did not really answer the question. Instead they said they are mostly on the sidelines. We realize Erin Burnett did not push them but baby steps are fine when a trail is being blazed. Will other CNBC Anchors follow and will Erin Burnett keep it up? We fervently hope so.

The interview is in two clips:

• Pimcos Bet on the Market - 2:06 pm
• Pimco on the Housing Recovery - 2:52 pm

In the second clip, Bill Gross says that Green is Bonds and Red is for Stocks meaning that Bonds are better than Stocks. Erin Burnett deftly defended Bill Gross from any criticism by saying his earlier prediction that stocks would do better than bonds was for the long term. This is why we have said that her show is Pimco's Home Court on Financial TV. Frankly, we don't mind because Erin can get Bill Gross to speak more openly than anyone else.

That is important because Bill Gross is the Michael Jordan of interest rates trading.  But in these clips, we saw a tired Bill Gross. He did not seem to have his usual energy and his opinions had a defensive edge to them. 

At minute 05:21 of the first clip, Bill Gross said about Treasury Bonds "..the 10-Year Treasury at 3.2% and the 30-year Treasury at 4.4%..". We nearly fell off our chair. The 10-Year Treasury was trading exactly at 3.2% but the 30-Year Treasury was trading at 4.09% and not 4.40%. 

Folks, this is a difference of about 6% in price. Friday was no average day. That morning the 30-Year Treasury yield nearly broke below the big number of 4%. How could the Bond King have made a mistake of such proportions? This is like Jim Cramer saying that Dow Jones was at 10,600 on a day when the Dow nearly broke 10,000 on the downside.

We have never heard him make a misstatement about yields of such proportions. What is going on with Bill Gross? Is he more of a CEO now? Is he no longer involved in trading on an active basis? Ours is an inquiring mind and it sure wants to know why & how Mr. Gross lost track of the Bond's yield. Actually, as far as we can tell, the 30-year Treasury last closed with a 4.4 handle more than a week ago on May 13. Does that mean Mr. Gross had not observed the bond's yield for over a week? As we said, very strange! 



7. Secretary Tim Geithner with Erin Burnett - Wednesday, May 19

This is a long interview. The exclusive transcript can be read at cnbc.com. 
 


Send your feedback to editor@macroviewpoints.com

 

 

 

 

        

Mr. Carla Quintannia is a veteran journalist with CNBC. Carla anchors Squawk Box, a daily three hour show that is often described as CNBC's franchise show. The buzz is that Carla is being groomed to become a future anchor of NBC's Evening News.

Mr. Krishna Guha has been a veteran journalist with the Financial Times. Krishna's last position with FT was US Chief Economics Editor. Today, Krishna serves as the Executive Vice President  & Head of Communications for the NY Federal Reserve.

This is the story of how these two veteran journalists tell others to pronounce their first names.

Mr. Quintannia pronounces his name as Carl and not Carla. If people were to pronounce his first name as "Carla", we suppose Mr. Quintannia would correct them and ask them to pronounce his first name as Carl. He might even explain that Carla is a woman's name and Carl is a man's name. Our guess is that Mr. Quintannia would get testy if people continue addressing him as Carla rather than Carl.

Mr. Quintannia would be right. First names ending in the "a" sound are generally female. Look at the names of his own female colleagues, Rebecca, Maria, Melissa, Diana, Bertha, Amanda. No shortage of female names ending in the phonetic "aa" sound.

He would also be correct in pointing out that adding the "a" sound suffix to a masculine name turns it into a feminine name, like Carl to Carla. This is a characteristic of many European languages. In fact, in Russian, the convention applies to last names as well. Sharpov, Pavlov  are masculine names. Add the "aa" sound suffix and you get the feminine Sharpova, Pavlova names.

Mr. Quintannia would be correct in admonishing us for spelling his name as Carla. We mean no disrespect to him. We did so here to make the next point. 

That point is about the other man, Krishna Guha.The name Krishna pronounced with the "a" sound (like Carla) is a feminine name. Not just any feminine name, but the name of the most sensual woman in the universe during her time, a name that every Indian kid learns. Draupadi, the daughter of King Drupad, was a celestial gift to her father and she was called Krishna (pronounced like Carla).

The masculine name Krishn or Krishna (pronounced like Carl without the "a" sound suffix) is one of the two most revered names in India (the other being Ram). Some people think of Krishna as God, some as the Avatar of God on earth and some as a great human being. He is the one who composed and recited the "Bhagvat Geeta" (the words of God) in the Mahabharat. There is no one in India who does not know how to pronounce the masculine name Krishna (like Carl without the "a'" sound suffix).

In India, the addition of the "a" suffix also converts a masculine name to a feminine name - Neel to Neela, Veer to Veera, Lalit to Lalita, Megh to Megha, Arun to Aruna, Deep to Deepa, Susheel to Susheela, Sunand to Sunanda, Subhadra (the a is silent) to Subhadra (a pronounced like Carla) and so on. Names ending in the "a" sound are almost always feminine names, Anita, Anuya, Geeta, Manisha, Meena, Meera, Padma, Pratibha, Sheela, Surekha, the list goes on and on.

This is not surprising. All Indian & European languages are derived from the Indo-European language family and Sanskrut is the oldest living Indo-European language.

This brings us back to Mr. Guha. He is an erudite man and an accomplished journalist. He is no stranger to basics of Indian culture or the phonetic structure of Indo-European languages.

Yet, Mr. Guha allows people to call him by the feminine pronunciation, the phonetic "Krishnaa", rather than the masculine pronunciation. We checked CNBC videos for confirmation. We found a videoclip in which CNBC Anchors Sue Herera & Michelle Caruso-Cabrera call him by the feminine name Krishna (like Carla). To our recollection, neither has ever called Mr. Quintannia as Carla, though Michelle sometimes calls him by the diminutive Carlito. We also recall that Hank Paulson, the US Secretary of Treasury, once addressed Mr. Guha with the feminine "Krishnaa" pronunciation in a public press conference.

We decided to check how Mr. Guha prefers to be called himself. So we contacted his office at the NY Fed and spoke with a wonderful lady who answered the phone. When asked how he prefers his first name to be pronounced, she instantly answered Krishna with the "a" sound suffix like Carla.

So we have a case of two veteran successful men in the same field, Mr. Quintannia who probably demands to be called by his given masculine name Carl and Mr. Guha who prefers to be called by the feminine equivalent of his name as Krishna with the "a" sound suffix. 

Inquiring minds usually want to know why. And ours is a highly inquisitive mind. We requested to speak with Mr. Guha and followed up with an email request for a conversation with him about the pronunciation of his first name. We have not heard  from Mr. Guha or his office.

Mr. Guha is by now means alone. Many successful Indians allow their names to be feminized by Europeans and Americans. In fact, this feminization by Westerners has now become a phonetic ritual in Indian English. Even revered Indian names are now routinely pronounced in the feminized manner - Ganesh is pronounced as Ganesha, Shiv is pronounced as Shiva, Ram is pronounced as Rama.  Addition of the feminine "a" sound suffix is also common for names of epics, witness Mahabharata, Ramayana, Purana.

If this were not enough, English speaking Indians in India now add the "a" suffix to almost any Indian word when speaking in English. For example, the Sanskrut word Rasik is pronounced in Indian English as the feminine Rasika and the plural is pronounced as Rasikas. We heard this horrible distortion on Bloomberg-UTV channel in Mumbai. The Mahabharat is the story of the Pandav and Kaurav brothers. In this newly degraded Indian-English, the plural becomes Pandavas & Kauravas.

This is not true of all Indians. If you call an Indian taxi driver by the feminine "Krishnaa" sound, you would get beaten up. Never call any Indian laborer, farmer, soldier or a "real" Indian by the feminine version of their first names. You would not be pleased with the response.

Today's India has a new category of people, people who call themselves "Educated" Indians. These self-described "Educated" Indians perceive themselves to be different than the ordinary Indian. They think of themselves as new Indians who can mix and socialize with Europeans & Americans.This has virtually become a new "caste" in India.

Membership in this caste requires their acceptance by the Europeans & Americans they know. So fit in with the western crowd, they mould themselves. Dress is the first change. The next step is language. This is why you see "Educated" Indians pronounce Indian names the way the British did and the way Europeans & Americans do today. If that means feminizing their own masculine names, so be it. 

Some people who resent this feminization privately accept it publicly to fit into the new caste. As one such "educated" man said to us "What does it matter? I am not going to become a woman if they call me by a woman's name. So let it go. What to do if they are stupid?"

There is another factor at play here. "Educated" Indians don't like to be embarrassed, especially in public. They would just die if their English is publicly deemed to be of lower calibre than that of the British. This is why "educated" Indians strive to speak exactly the way the British speak. When you speak with call centers in India, you still hear old English phrases like " we will do the needful".

The practice of feminizing their names is getting so ingrained that many "educated" Indians don't even realize it. Now these "educated" Indians have begun using these feminized versions even when speaking Hindi. Some time ago, we attended a concert by an Indian Singer at the American Academy of Indian Classical Music in Manhattan. The Indian Singer said the words in Hindi and his Irish-American assistant translated into English. The Indian-American male singer used the anglicized feminine term Ganesha when speaking in Hindi. In stark contrast, his assistant, a lovely young Irish-American woman, spoke with perfect Sanskrut diction in English and pronounced the real name Ganesh.  We guess an Irish-American woman did not feel the need to appear "educated" as the Indian-American man did.

The above is our attempt to come up with some answers, some analysis of why "educated" men of Indian origin willingly allow themselves to be addressed by feminine versions of their masculine names. If our readers can think of better answers, we would love to listen.

We began this article with the example of two veteran successful men, a Western man who insists being called by his given masculine name Carl and a man of Indian heritage who himself tells others to call him by the feminine version of his masculine name Krishna.

The sad reality is that this example is symptomatic of the difference between Western men and today's "educated" Indian men.



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"Our nation has to be strong fiscally at home in order for us to be strong abroad," said Secretary Hillary Clinton in her interview on Sixty Minutes. Prior to this statement, Mrs. Clinton said "All of a sudden you've got countries who are explicitly saying to me, in private, 'Well, look, you know, we always looked to you because you had this great economy and now, look, you're in the ditch. And you've dragged other people into the ditch,"

These are strong words and interesting words. We interpreted these words as distaste for the results of President Obama's economic policy.  But as we scanned the newspapers on Monday morning, we could not find any serious discussion of these comments. We were relieved to see Bill O'Reilly cover this topic in a segment on his show. Mr. O'Reilly invited Dick Morris, a confirmed Hillary disliker, to discuss whether Secretary Clinton's comments signalled her desire to challenge President Obama for the 2012 Democratic nomination.

We think this discussion is highly premature and Dick Morris seemed to agree. A great deal depends on the 2010 Congressional elections and on whether President Obama pulls a Bill Clinton type makeover to become a centrist President. 

Bill O'Reilly had a point about the tension between Secretary Clinton & President Obama but we think he made it in the wrong context.  He should have focused on her comments about Pakistan on Sixty Minutes:

• "I'm not saying that they're at the highest levels but I believe that somewhere in this (Pakistan) government are people who know where Osama bin Laden and al Qaeda is, where Mullah Omar and the leadership of the Afghan Taliban is and we expect more cooperation to help us bring to justice, capture or kill, those who attacked us on 9/11"
• "We've made it very clear that, if, heaven forbid, that an attack like this, if we can trace back to Pakistan, were to have been successful, there would be very severe consequences"

These words are extraordinarily undiplomatic, harsh and confrontational. Every syllable uttered by Secretary Clinton is 100% true. But, we do not recall such words ever expressed by a senior diplomat against Pakistan. The regime in Pakistan reacted angrily to these words as one would expect. In response, the Obama Administration went into high gear, reports the New York Times, to pacify General Kiyani of the Pakistani Army. Admiral Mullen, the man who claims to have a trusting relationship with General Kiyani, called Kiyani to water down the Clinton message. 

President Obama has staked his entire Af-Pak policy on winning cooperation from the  Pakistani Army. His approach is to have long talks with the Pakistani Army and ISI, the Pakistani Intelligence service. He hopes to persuade them to come around to his way of thinking and he has offered many carrots to them.

Clearly, Secretary Clinton thinks poorly of this approach. She should know. This approach has been tried by virtually every President except George W. Bush and it has failed miserably. Secretary Clinton understands that Pakistan is the greatest threat to Afghanistan. She now seems extremely concerned that the Taleban, well protected and nurtured by the Pakistani Army & ISI for many years, are serious about attacking the American homeland.

The attack on Times Square nearly succeeded. The only reason it failed was the incompetence of the alleged bomber. The next bomber will probably learn from this failure. Secretary Clinton is an uncommonly intelligent lady and we have no doubt she understands this better than just about any body else in the Obama Administration. 

This is why we believe Secretary Clinton was so undiplomatically unequivocal in delivering a harsh warning to the Pakistani Army.  We wonder whether the strong message was as directed towards President Obama as it was against the Pakistani regime. We sincerely hope it was. 

Apparently we are not alone. Bruce Riedel, who chaired President Obama's special interagency committee last year to develop the administration's Af-Pak policy, agreed with Secretary Clinton in his recent interview with the Council of Foreign Relations. Mr. Riedel said:

• "The secretary is right, that there is a very serious possibility that the next mass casualty terrorist attack on the United States will be postmarked "Pakistan." We narrowly averted that in Times Square just a week ago. A stiff diplomatic demarche is not going to satisfy anyone should that happen."

Secretary Clinton is saying publicly to Pakistan and America that the situation is moving towards a serious confrontation and that the time is now for President Obama to get tough, really tough against the Pakistani Army.

Will President Obama listen? And will TV hosts like Bill O'Reilly join this debate? At stake is America's security at home.



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