1. Bill Lockyer, California’s Treasurer on CNBC on Thursday, March 11
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.
CNBC Fast Money technical analyst “Flash” Gordon informed viewers on Friday that this week was the 8th lightest volume week in 6 years, since August 2003. The other 7 weeks were either Thanksgiving or Christmas weeks. Low volume translates into an upmarket according to the Quant action theory we have laid out in these articles. That is what happened last week.
The real action was in financials, low quality financials. AIG, FNM, FRE had a good week but the star was Citibank. Whether it was buying back of short calls at $4 strike or real buying, it was a sight to see. Before it sold off on Friday afternoon, Citibank had added almost 20billion to its market cap in this one week. If the worst large financial had a great week, so did the best, Goldman Sachs. Talk about technicals and overhead resistance. As soon as it crossed $160 a week and half ago, the stock added quick 15 points and now sits at $175.
The Bond market was no slouch either. Investors rushed to buy whatever was offered. Greek Bonds, Russian Bonds, California Bonds, Agency Bonds – these were all snapped up at low spreads over Treasuries. The hunger for yield seems to the driving factor leading people like CNBC’s Rick Santelli to wonder whether the glory days of 2006- 2007 were back. Even the 30-Year Treasury Auction was snapped up but that is a story for later sections.
Janet Yellen was named as the Vice-Chair of the Fed on Friday. Ms. Yellen is known as a “dove” and so promptly the dollar was sold and other currencies rallied. But curiously Gold did not.
Now we wait for the Fed statement next week.
Is Financial Journalism less “true journalism” than say News or Political Journalism?
Some time ago, we met a senior level individual at one of New York’s well respected Journalism schools. As we walked down to the subway, we began talking about journalism. We mentioned that we watch CNBC a lot and her lips sort of curled up a bit. It became quickly evident to us that she did not consider Financial TV on journalistic par with News or Political TV.
She was a nice lady and we behaved politely keeping our disagreement to ourselves. Our own belief has been that financial anchors are smarter than news anchors or political anchors. After all, financial anchors cannot let their opinions run wild because their opinions have to match the action in the markets. But by the same token, we have wondered whether financial anchors have the edge that political anchors seem to have.
Here is a case in point. On Thursday morning, CNBC’s Rick Santelli appeared on their Squawk on the Street show to talk about interest rates. In this short segment, Rick dropped the equivalent of a news scoop. He said that the spread between the 10-year Treasury yield & the 30-Year Treasury Yield had exceeded 1%. He said this is a big deal because he has only seen this 3 times in his 3 decades of watching the bond markets.
We stopped what we were doing and snapped to attention. But that was it. Rick did not elaborate and Erin Burnett, the anchor, virtually ignored Rick’s statement. We were stunned. When your best guy observes something that he has only seen 3 times in his 30 years, even the most novice of journalists would take notice and ask Rick two basic questions:
Unfortunately Erin Burnett did neither. We do wonder whether Nora O’Donnell of MSNBC or Campbell Brown of CNN would have asked these questions.
We should not be too harsh towards Ms. Burnett. We have little doubt that most CNBC anchors would have ignored Rick’s comment the same way she did. That is because we know that CNBC Anchors do not particularly care about what Rick says about the Bond market. They let Rick speak because he is popular but pay little attention to what he says. So Erin Burnett did what all her colleagues would have done.
If Erin Burnett made a mistake, we think her show’s producer made a much bigger mistake. When your network’s superstar makes such a terrific observation, the producer must throw up a chart of the yield spread and highlight the 3 occasions that Rick alluded to.
The Squawk on the Street producer did not do so and for that we need to throw a flag. Money managers and institutional traders have Bloomberg terminals and they can quickly display the chart of the 10-year-30-year yield spread. Individual investors cannot and they feel left out. That is not right, CNBC producer. You let your viewers down.
Let us be clear. Rick Santelli is NOT to be blamed. The man made a great call. That is what he does. He is to be congratulated. It is the Squawk on the Street team that failed both Santelli and us viewers.
Did Rick make an actionable call?
We remember Rick Santelli making a similar call in 2002 and that call proved to be a real winner. Such track record is one reason why we always listen to any trading point Rick makes. So we managed to get hold of the chart of this spread by using our contacts (us blogger journalists have contacts too, CNBC!).
The histogram at the bottom of the chart shows the yield spread between the 30-Year Treasury and the 10-Year Treasury. A cursory glance at this chart suggests that when the yield spread exceeds 100 basis points or 1%, that proves to be the local maximum. In other words, the 30-Year Treasury has proved to be good buy at these spread levels.
So it seemed to us that Rick Santelli had made a terrific call. But did that call pan out in the 30-Year Treasury Auction that was to take place about two & half hours after his call?
Guess what? The 30-Year Treasury Auction was a strong auction. Listen to Rick describe the auction to Erin Burnett at 2:38 pm on Thursday. The 30-Year Treasury rallied after the auction and rallied again on Friday. So Rick was right. Kudos to you, Mr. Santelli.
Rosenberg & Santelli (& Cramer) on the same side?
This week we read that David Rosenberg of Gluskin Sheff had expressed worries about the mad rush by investors to buy yield without concern about the underlying credit. He also expressed the view that current conditions remind him of the post July 2007 period.
We also saw Rick Santelli express similar sentiments, albeit in more colorful form on Thursday & Friday. In response to a question from Dennis Kneale, Rick said ( at minute 06:00 of the clip) ” the credit markets are moving along just terrific, just like they did in 03,04,05, & 06. I actually think it is a sentiment indicator”. At this point Michelle Caruso Cabrera laughed leading Rick to admonish “I wouldn’t laugh”. Then he added, “a sentiment indicator that things are going to get ugly again, I think you can hedge and wedge for so long and you can interpret Green shoots for so long…………what did smart people do before the mortgages melted down, they moved into long term fixed….they don’t want to be hostage to short term funding, they don’t want to be held hostage to another commercial paper seizing up…….”
Rick made a similar point on Friday afternoon in response to a question by Trish Regan about investor appetite for risk or even crazed risk “yeah, it might be March but the demand for Turkeys is higher now than it was in November…you throw something out there, …they issued some paper today that was the tightest to Treasuries in the history of their issuance, Russian Bonds that expire in 2030 trading very close to US rates, pretty much you could look at it as a great sign or flashing red, we are doing it all over again…”.
What if Rosenberg and Santelli are right? Those 30-Year US Treasuries could prove to be just what the Doctor ordered.
Jim Cramer also expressed caution about both the credit markets and the stock markets this week. On Thursday, he told Erin Burnett that he would not be a buyer of California Munis at this time (see clip 3 below) and then, on Friday, he called this market overextended, the most he has ever seen. He added that if the market gets hammered because of the Fed then it would be a buying opportunity.
The Resurrection of Steve Cortez on CNBC Fast Money
Steve Cortez of Veracruz LLC is a smart, contrarian investor. Recently he recommended financial stocks and especially Goldman Sachs to Fast Money Viewers. This trade worked very well. This week, on Wednesday, he told viewers that he had closed these trades in Goldman and a financial ETF. Good trade, Mr. Cortez.
We like Mr. Cortez because he is a self-described contrarian investor. In September 2009, he was bullish on the U.S. Dollar, bullish on U.S. Treasuries and disliked Commodities. He was early or wrong. Then in December 2009, he reiterated these trades. This time he was right.
Mr. Cortez was absent from CNBC Fast Money between these two appearances in September & December 2009. Anchor Melissa Lee was on vacation when Mr. Cortez was invited in September & December 2009. So we assumed Ms. Lee did not like Mr. Cortez for some reason. So we asked in our December 24-31 videoclips article, Will Steve Cortez be banned again until Melissa Lee goes on her next vacation?
Then a few weeks ago, Melissa Lee invited Steve Cortez and now he seems to be a regular guest on Fast Money. We wondered what had changed to put Mr. Cortez in Ms. Lee’s good graces?
This week we think we got the answer. On Wednesday, March 10, Steve Cortez told Fast Money Viewers to “Sell Treasuries until your fingers hurts from pressing the mouse to sell more”. Then we recalled that the first time Steve Cortez was invited by Melissa Lee in 2010 was when he changed his stance on Treasuries from bullish to bearish. Mr. Cortez was not invited in January when he was bullish on US Treasuries and now that he is strongly bearish on US Treasuries, he has been resurrected.
If simple viewers like us can see this pattern, can’t every smart strategist or guru see it? Is this a lesson they learn if they desire an invitation from Fast Money? Is this how a de facto “censorship” of bullish com
ments about US Treasuries works on Fast Money? We wonder.
Does CNBC Need Men?
We have always believed that the visual fields like Television are ruled by women. CNBC’s Joe Kernen has often complained that his viewers like Becky Quick more than they like him. Mark Haines has voiced the same feeling by saying that viewers would rather look at Erin Burnett than him.
In this context, the pair of Erin Burnett & Melissa Lee should be a much higher draw than Mark Haines & Simon Hobbs. But that is why they put on a show, to crudely paraphrase Boomer Berman (Swami of ESPN) .
When Erin Burnett was on vacation, CNBC asked Simon Hobbs (ex-CNBC London) to co-anchor the Squawk on the Street show with Mark Haines. This pair of middle aged men showed instant chemistry. They joked about each other’s way of speaking English, made other insulting comments about each other and laughed at each other’s jokes. Yes, these two really hit it off. They did not miss Erin Burnett at all. Mark Haines hardly mentioned Erin Burnett in her absence besides the required “Erin is on vacation” disclaimer.
On this Friday, when Mark Haines was off, Melissa Lee joined Erin Burnett as the guest co-anchor. These are two terrific anchors, pleasant, witty, lively and they claim to be friends. But the chemistry was just not there. They seem to have nothing vibrant or interesting to discuss with each other. So Erin kept speaking about Mark Haines, about how he likes small donuts and how he does not drink Orange Juice. And Melissa asked how Mark gets his Vitamin C?
We could not believe our ears. Even when he was not there, Mark was there in spirit because these two women anchors needed him as a foil.
So it struck us. CNBC’s women anchors need men anchors to shine. Before we get pelted, look at the evidence. Erin Burnett plays off Mark Haines in the morning and Jim Cramer in the afternoon. Melissa Lee plays off 3-4 men in every show, even though, as Erin Burnett observed, Guy Adami is the special foil for Melissa.
The other Melissa on CNBC plays a similar role with Larry Kudlow. Her colleague Trish Regan has also begun to play this role. What would Melissa Francis & Trish Regan do on the show without Larry Kudlow? On Friday, Melissa Francis played the same game with Dennis Kneale by playfully saying she cannot imagine Dennis clipping coupons. Michelle Caruso Cabrera, the other anchor, could not stop laughing.
So here it is. We cannot think of a CNBC women anchor pair that can put on a show like the Mark & Simon show. But Haines & Hobbs are not unique. Carl Quintannia & Joe Kernen can carry a show themselves. The Faber-Kernen pair used to be a big draw. In its old days, the CNBC franchise show had three men in a squawk box.
In contrast, we cannot think of single pair of CNBC women anchors who can liven up a show without the presence of a male anchor. We can think of a combination that could play like ABC’s View. But that can’t happen because CNBC does not like disagreements or arguments between their anchors, especially women anchors.
Perhaps, Maureen Dowd does not need Men. But CNBC certainly seems to.
The California Bond Issue was a major story of the week. So the pole position goes to videoclips about California Muni Bonds. CNBC devoted Thursday to the topic of Municipal Bonds. This is rare and much needed for individual investors.
2. Frank Troise of Soho Asset Management on CNBC on Thursday, March 11
3. Jim Cramer with Erin Burnett on Thursday, March 11
4. Robert Doll of BlackRock & David Rosenberg of Gluskin Sheff on Bloomberg on Wednesday, March 10
5. John Roque of WJB Capital on CNBC Thursday, March 11
6. Ajay Kapur of Mirae Asset Securities on CNBC on Tuesday, March 9
1. California’s Cash Crunch – Bill Lockyer, California State Treasurer with CNBC’s Melissa Francis & Jane Wells – Thursday, March 11
This is an excellent interview. Mr. Lockyer does a very good job of answering critics who compare California’s finances with the finances of Greece.
2. California Budget Crisis: Helping & Profiting – Frank Troise of Soho Asset Management with CNBC’s David Faber – Thursday, March 11
We had not heard of Mr. Troise or of Soho Asset Management. But now we have and we are impressed. This was a candid and smart analysis of California and its bonds. Mr. Troise says that the bond issue was a great hit with individual investors because of the 10% pre-tax yield. Then he adds that the same bond will probably yield 12-13% during an “emotional default” this fall. What does he mean? Watch the clip.
3. Stop Trading! Listen to Cramer – CNBC’s Jim Cramer with CNBC’s Erin Burnett – Thursday, Mar 11
Jim Cramer speaks his mind on the California Bond issue. He thinks California Bonds face a big headline risk around June 30, the end of the fiscal year :
4. Doll, Rosenberg Interview on U.S. Economy – Robert Doll of BlackRock & David Rosenberg with Bloomberg’s Margaret Brennan – Wednesday, March 10
This is a terrific interview. Bob Doll & David Rosenberg share and debate their opposing views. Watch this clip.
5. Beware of a Double Dip – John Roque of WJB Capital on CNBC Fast Money – Thursday, May 11
John Roque is a well-known technical analyst. In this clip, Mr. Roque argues that a double dip is unlikely and he sees a rise to 1200-1225 on the S&P 500. One of his indicators is the slope of the moving averages. Right now, the moving averages are upward sloping and Mr. Roque remains bullish. Watch this clip.
Then watch Mr. Roque’s clip Chartology; Is the Party Over? on March 29, 2009, the day the S&P fell 3.5% and broke below 800. At that time, Mr. Roque described the rally from the lows of 666 on S&P as a “failing rally” because the moving averages were still sloping downwards and said that all rallies within the context of downward sloping moving averages are suspect.
This indicates how one indicator can provide a wrong signal at times. This also suggests that Fast Money anchor Melissa Lee should do her homework before speaking with an expert guest. She could have done what we did, simply searched for “Roque” on the CNBC videos page. Then she could have heard the comments of Mr. Roque on March 29, 2009. That would have enabled her to ask more penetrating questions to John Roque about his indicators and methodology.
Are we making a fair point, Ms. Lee?
6. One Year Later – Ajay Kapur of Mirae Asset Management with CNBC’s Erin Burnett – Tuesday, March 9
Mirae Asset Management is one of the largest emerging market managers in the world, according to the CNBC promo. Mr. Kapur has been a consistent bull on emerging markets for the past few years. In this interview, he strikes a different tone. His comments begin at minute 03:37 of this clip.
Erin Burnett asks whether Americans now have a bit too much money in emerging markets. Mr. Kapur concurs and says that “Americans have about 8% of their own domestic market value in emerging markets and that is actually enough. You probably want to have 30% of your money overseas, probably 1/3rd in Europe, 1/3rd in Japan and 1/3rd in Emerging and you are already there. Whereas emerging market investors have very little money invested in Europe and the US and that’s the new trend. Emerging Market investors, the Korean housewives, the Indian housewives, the Brazilian dentists will put money in US & Europe.”.
He goes on to add that the Dollar is undervalued and “some of the world’s best brands, which happen to be US & Western Europe, are now trading at pretty compelling valuations vs. their emerging market counterparts”. As an example, Mr. Kapur compares the valuations of Mahindra & Mahindra and Toyota. He points out that Mahindra & Mahindra is trading at 3-4 times price-to-book while Toyota is now trading at price-to-book of 1. He adds “normally, when such a great global brand gets into trouble, like say Johnson & Johnson with Tylenol, those are buying opportunities and not selling opportunities.” Mr. Kapur also says that “global brands have a free cash flow margin of about 6%, twice that of emerging markets.”
This is a good interview. Erin Burnett lets Ajay Kapur speak and asks good questions. As Indian-Americans, we also wish to thank Erin Burnett for correctly pronouncing Ajay. Very few CNBC Anchors take the effort to do so.
Finally, Mr. Kapur, what about your “Korean Wives, Indian Wives & Brazilian Dentists” characterization? Don’t Korean and Indian women work? Or is dentistry a Brazilian monopoly? Just kidding!
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1. Bill Lockyer, California’s Treasurer on CNBC on Thursday, March 11