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.
Same Old Same Old
The stock market grinds higher, rates back up some, VIX goes down, Investor Sentiment gets more one-sided – this was the story every day this week. Actually, that’s not a bad way to retire for a nice, merry holiday. Perhaps we shall take a page out of Mr. Art Cashin’s book and go on a more liquid diet. But unlike Mr. Cashin, we won’t worry about marinating ice cubes. Neat and Straight are two adjectives we believe in at least as far as Single Malts are concerned.
We wish to salute something Canadian in this article (see clip 2 below to understand why). It was hard. We prefer New York to Toronto, we prefer Football to Hockey and generally speaking we prefer American things to Canadian, no offense intended of course.
This week we found something glorious from Canada that made us switch loyalties. To paraphrase Ray Barone, ” we have always loved Dunkin’ Donuts and we have always tried to get as much of them as we could”. But, for some reason, this great chain does not serve Chocolate Cream Filled Donuts in Manhattan. So whenever we drive through the Holland Tunnel, we have to stop by the Dunkin’ Donuts that is located just after the exit in New Jersey to eat this delicacy.
This week, we found that our neighborhood Dunkin’ store had changed over to a Tim Hortons. We went in anyway and made a great find – a chocolate cream filled, non-powdered donut with a chocolate layer on top and sprinkled with 8-10 chocolate chips. In other words, a Dunkin’ Boston Creme like donut with chocolate cream inside and chocolate chips sprinkled on top. Folks, try these. You could eat half-dozen before you notice that you are eating.
- Meredith Whitney on CNBC Closing Bell on Tuesday, December 21
- David Rosenberg on CNBC Squawk Box on Tuesday, December 21
- Jim O’Neill on CNBC Squawk Box on Wednesday, December 22
- Dennis Gartman on CNBC Fast Money on Thursday, December 23
- Doug Kass and Peter Eliades on CNBC Fast Money & CNBC StreetSigns on Monday, December 20 and Wednesday, December 22
- CNBC’s Gary Kaminsky on CNBC Strategy Session on Thursday, December 23
1. Meredith Whitney Defends Muni Crisis Prediction (12:33 minute clip) – Tuesday, December 21
The comments by Meredith Whitney on 60 Minutes created a firestorm of protests. And why not? Ms. Whitney had made the astounding prediction that “50-100 cities or municipalities could face financial ruin in 2011; these possible defaults could result in losses of hundreds of billions of dollars “ in the opening words of Maria Bartiromo in this clip. Ms. Whitney made her mark by her predictions about American Banks way before the crisis hit in 2008. She proved to be right then. Whether she proves to be right or wrong could turn US Stocks and Bonds in 2011. The 60 Minutes interview was just a fragment. So we were glad to have the opportunity to listen to Ms. Whitney courtesy of Maria Bartiromo & CNBC.
- Whitney – ….If you really do the work, you can see how simple the Math works out which is States clearly have been funding the municipal governments for now up to 40% of their total expenditures, as the States become more compromised from the fiscal standpoint, that funding is gonna end, particularly as the Stimulus runs out in June, that funding ends. So the Federal Government supplies about 32% of the States funding which flows to about 40% of the municipal’s funding, if States get compromised they cut off that funding. And how it works is, you will so many states, so many states are in reorg anyway, you will see indiscriminate selling and prices for all municipals rise (she probably means yield rise & prices fall). But the reality is that you have municipals that can’t pay their debts, I am not the first person to say this and I certainly won’t be the last person to say this, I appreciate the reaction is so violent but I didn’t put this debt on the states, we are looking at the numbers; this is how it plays out. You have overlevered consumers that pay the consequences, now you have overlevered states, municipalities that will pay the consequences and there is so much at stake for Wall Street…I think a large portion of individual investors, a trillion dollars out of the 2.8 trillion dollar market, have been kept in the dark and pacified by saying nothing is going to happen, there hasn’t been a default in 30 years, you better hope there hasn’t been a default in last 30 years, it has been one of the biggest bull markets for the country that we have seen in generations.
- Whitney – (in response to a question about comparison to Europe)…Yes, we have a Federal Government that can bail out but the idea is the Federal Government then is comprised of a lot of constituents from a lot of different states and who in Nebraska is gonna want to bail out someone in Florida? So you are going to have so many issues, the severity is not the issue, it is the frequency, you have so many different municipalities; when I say default, I also mean technical definition of default, their debt is going to get reorganized, that’s still a default for the bondholder, you are going to have special contract defaults, you are going to have so many different issues of laying off employees, this is going to be such a wider spread issue. Its going to look like Europe, when programs are cut, you are going to see a lot of social unrest with those programs being cut., unemployment, job cuts from the state & local governments that employ over 19 million people, social unrest to that point. Obviously the most important thing for the markets, but the most important thing for the economy, what happens with the given states that will underperform so much because of the fiscal gap..(emphasis ours)
- Bartiromo – So how do you come up with the figures of 50-100 defaults and you said 100 hundred billion dollars in losses? They were saying yesterday that we have seen about 64 defaults in the last 30 years. You are saying of course we are not going to see defaults in the last 30 years because we have been in a bull market for the country…
- Whitney – We saw thousands of defaults during the Great Depression and you could argue that states were in better shape during the Great Depression than they are now. It was a matter of speech, I said 50-100 or more right? We already know obvious municipalities that are compromised, but imagine the area. The Municipal Debt market doubled since 2000 and so you had massive issuance in the Municipal Debt market that compares only with in fact greater than the almost doubling of debt at the consumer level, at the mortgage level. So the idea that is not all of this debt was triple rated, not all of this debt has the revenues to support it, we are not talking about GO, the State issued Debt, we are talking about the more local municipal debt..the revenues will not support the debt payments, I mean, (Meredith stutters)
- Bartiromo – Do you assume the Federal Government will not lend money to for example, Illinois, as needed as a bridge?…Assuming that it gets repaid, gets repaid sooner than say AIG would repay them?
- Whitney – I think the problem comes when you have California which is the first to really beg for support, the BAB program could arguably be a reaction to that..then you have Illinois, then you have Georgia, then you have problems in Florida..its just..the numbers line up, it becomes such an issue of how many states are going to be inline and how big does this bailout have to be? If the Federal Government decides, OK we need to do another formal bailout, thats another trillion dollar number in terms of a bailout, I don’t know thats politically viable in this new Congress.
- Bartiromo – Is this priced into the market? You have got, certainly equities rallying, real strong performance at year-end here..we saw an upset in the Muni bond market..but as far as real implications of this prediction, services being cut, jobs being cut, 100 hundred billion in losses..is that factored into the market or do you think we see a market reaction if in fact this materializes…
- Whitney – There is no way that this is priced into the markets because just imagine how this pans out from a sequencing basis…States as I said employ, States & local governments are the largest employer in the United States, we estimate they are going to cut between 1 & 2 million employees over the next 18 months..so that keeps (un?)employment at very high levels, so if large corporates come back and hire they are working off a very strong head wind of state & local government hiring (firing?), so you have a persistently high near 10% unemployment rate; GDP cannot add up to +2% on the basis of the fact that you imagine that the states that are the coastal states, CA, FL, IL (coastal state?), states that are so depressed from weakened housing prices, AZ, NV to a smaller extent, that they are going to underperform the stronger parts of this economy..so the coastal states represent about 22% of GDP, the states that are doing so well, this center region, the agricultural rich region, they are only 7-8% of total GDP and the Government stimulus programs are running off in this June; I don’t know how you get the numbers to work to get excited about stronger than already factored in GDP..
- Bartiromo – From an actionable investments standpoint, obviously your clients are looking at making money from this situation, whatever that may be…Gary Kaminsky today said that Muni Bond Market presents a fantastic buying opportunity..You would be on the other side of that trade?
- Whitney – I am on the other side of that trade, today; I think what will happen is when you start to see the first several major defaults in this area, you have had stealth defaults, everyone knows about Vallejo, everyone knows about Harrisburg, you start to see more material defaults, you start to see indiscriminate selling; if you do your research now and figure out who is protected where, which revenues are safe where, there will be great buying opportunities, but its way too soon because look the fact that people are surprised by this, and more importantly the fact that people won’t talk about this because there is so much at stake..the fact that there is so much complacency out there..tells you that the news isn’t out yet. When the news is out, and only when the news is out will there be a buying opportunity.
- Bartiromo – What about buying in terms of equities? You have been bearish on the financial sector, obviously thats going to be a sector that is going to get impacted when we see defaults from some major cities.. last 12 months, a number of financials have actually outperformed the broader market..are you still bearish on financials?
- Whitney – …certainly the big banks have not outperformed..but think about why? Their business was coastal oriented, right? So 23% of the mortgage market is in California, another 7% of the mortgage market is in Florida, that’s where they did all their business..So the financials that are outperforming are the regionals, probably based on the fact that there is some hope and prayer that there will be consolidation. There are so many great opportunities in the equity market to play but you want to play where there is growth, the ag-rich section of the country is what I would call the BRIC of the US, ..
- Bartiromo – because we are seeing real demand
- Whitney – massive demand for agriculture, massive demand for transportation which transport the agriculture, the services that support that, the financial services that support that…that region is booming….That region of the US is going to massively outperform, the problem with the US is that that region is too small to matter. For example, a perfect reflection of this is in 2008 the top 15 states comprised 70% of the GDP, by 2009 that figure dropped already to 68%, thats a huge move. Whats that telling you is the smaller states are really powering the growth and the larger states are going to be underperforming. So an investment thesis that plays on all of this is, it doesn’t have to be financially related at all, you can play so many themes, thats how you will make money. But if you are gonna be dependant on what was in the economy, you are going to underperform..
- Bartiromo – If we were to see these kinds of defaults, I would suspect the equity market goes down. Do you want to be selling the equity market at year-end or buying into this rally that we have been seeing?
- Whitney – I don’t think the equity market is all created equal, there are parts of the equity market that do well and there are parts of the equity market that do not do well. I don’t think financials, the large cap financials stand a chance to do well because their loan books are still shrinking, from a capital markets standpoint so may of the large banks are so US-focused. The US debt market is shrinking and the European Debt market is shrinking and so if you have great emerging markets exposure you can grow but sadly a lot of US financials are US-centric.
We think this is an interview we will review several times next year. So we wanted to give a detailed overview to readers.
Our first and foremost reaction is disappointment with Maria Bartiromo. She relies on us individual viewers for her success but it seems she doesn’t care two hoots about us. Why didn’t she ask Meredith Whitney:
- whether Ms. Whitney owns any Municipal Bonds in her personal portfolio? Frankly, this would have the most relevant question for us. If Ms. Whitney does not own any Munis, that would tell us far more than her long interview. On the other hand, if Ms. Whitney owns State GOs and is comfortable owning them, that would also tell us far more than this interview did;
- whether Ms. Whitney owns Treasuries?
- whether Ms. Whitney owns commodities, emerging market stocks or agricultural stocks?
This, Ms. Bartiromo, is what we individual investors want to know. And you just don’t care enough about our financial well being to ask these questions. Or do you ask Ms. Whitney in private and then take her advise for your own personal portfolio? Ms. Whitney and you, Ms. Bartiromo, are individuals above all and your personal monies are more important to you than anything else in the financial world That’s why you work, don’t you? Is it possible some day the FCC & SEC would impose this disclosure liability on Financial Television? How we await that day?
Having said that, we confess we are getting sold on Ms. Whitney’s math. But there is always another side. That has been ably articulated by CNBC’s Gary Kaminsky, his show CNBC Strategy Session and by his guest Ben Thompson of Samson Capital who oversees about $7 billion in tax-exempt bonds. Their viewpoints can be heard on the clip Default Risk for U.S. Muni Bonds or by reading the summary Muni Bond Default Prediction Overblown:Samson Capital Exec on CNBC.com. A few excerpts of Mr. Thompson’s views are below:
- The hundreds of billions of dollars is really the issue,….I can’t say nothing’s impossible, but the reality is you need major urban areas to collapse in the next twelve months for this to be true.
- Interestingly, over the summer the volatility was related to credit. The volatility of the last six weeks is really related to Build America Bonds, heavy supply, mutual funds outflow,
- When you have the unrated sector, which is things like nursing homes and housing projects and speculative development, you are going to see an increasing default rate, and you have
- Also, comparing sovereign debt to muni debt, Greece is 130 percent of GDP in debt, going to 150 percent. Even the U.S. government is over 50 percent, – When you look at the states as a percentage of growth, state products, they’re basically 7 percent,….Illinois is fully loaded obligations, debt and pensions, 16 percent of the growth state product.
Notice that Mr. Thompson did not address the “sequencing issue” that Ms. Whitney spoke about. That is what we are most concerned about. Markets can take one problem at a time, Dubai in November 2009, Greece in Summer 2010, Ireland in December 2010. But if markets face a fast sequence of Greece, Ireland, Portugal, Italy and Spain then you might see “indiscriminate selling” that Ms. Whitney talks about.
We hope Ms. Whitney turns out to be very wrong and we hope her statement about GDP for 2011 remaining around 2% is also wrong. It is certainly non-consensus. Most others including Goldman & Pimco are at 3.5%+.
This interview reminded us of the comments of James Chanos on May 6, 2010 on muni bonds. We reproduce part of his comments below. For details and for a link to his interview, see Clip 2 of our Videoclips Article for May 1- May 7 , 2010.
- your viewers need to be careful about their Municipal Bond Holdings…and don’t count on the Federal Government to bail you out as your backstop…if anybody gets into a problem at the state and local level, there are going to be 3 people at the bargaining table in effect – the taxpayers of that state, the state employees and the bondholders..and there are going to be a set of negotiations..guess which group is probably the least politically connected of those three..and what kinds of people own those bonds, Becky..wealthy people…you may lose you tax advantage..there are all kinds of ways for you to …lose value.and still the State saves face..
- I am concerned that the political dynamics of the municipal bond market.do not bode well for the people who own the bonds..who tend to be the wealthiest people and we are going to get some financial populism in order to restructure the states. it is a simpler way to increase the taxes on the people..this is one way the debt crisis on the state and local level might play out..before you get a federal guarantee…
Would CNBC Squawk Box bring him back for his current views about Municipal Bonds? We hope they do.
On his show, CNBC’s Gary Kaminsky went a bit too far, in our judgement, is attributing motives to Meredith Whitney. He spoke about analysts the way portfolio managers speak derogatively about analysts. That is his choice as an ex-portfolio manager and as the Anchor of his show. But we think it was tacky and took away some from his comments about the Muni crisis. His writing is cleaner and more succinct. Read his call titled Muni Market May Be Great Buy Opportunity at CNBC.com. The key paragraph is his call reads:
- “To be clear, I’m not saying the muni market today offers the same opportunity as it did in 2008,…. But it now presents a fantastic opportunity for those looking to generate tax-free income, and here’s why.”
We may concur with Mr. Kaminsky as a trade at this juncture, but we do not concur with his reasoning. He like many others fall back on the old cliche that:
- “Moreover, state and local issuers can do something corporations can’t: raise your taxes and cut your services, something that is happening right now across the country.”
That’s where we part ways with Mr. Kaminsky. We think the November election was a shot across the bow of all governments – No New Taxes. If true, this would rob the States & Municipalities of their most potent weapon against debt restructuring. There is also a limit to the extent services can be cut. So that only leaves a Federal Bailout. This is what James Chanos argued on May 6, 2010. We are deeply concerned that his doubts may prove to be prescient – in other words, many Muni Bond Owners may find themselves GMized – suffer a fate similar to that of GM bondholders.
For another view that compares the US Muni crisis to the Euro Zone debt crisis, read the views of Steven Major, global head of Fixed Income Policy at HSBC at Muni Bond Crisis May Be Similar to Euro Zone on CNBC.com. The two scary sentences in this article are:
- “This idea that the debt must be repaid is fallacious“,
- “Phil Bredesen, governor of the state of Tennessee, told CNBC that the first quarter will be the hardest time for states”
The first quote above is what we mean by GMization of Muni Bond Holders.
2. The QE2 Quandary – David Rosenberg on CNBC Squawk Box (09:17 minute clip) – Tuesday, December 21
We have never seen David Rosenberg attacked as he was in his appearance as guest host on CNBC Squawk Box on Tuesday, December 21. You gotta watch this clip to see the persistent attack. Becky Quick began with
- “Jim O’Neill of Goldman Sachs is calling 2011 the Year of the USA. He says things are going to getting back to normal and that means you could see stock market increases of up to 20%; US Bond Yields will rise further and he thinks that the Dollar could rally quite a bit as well.”
Through out this clip, when David Rosenberg answered or tried to make a point, either Becky Quick or Andrew Ross Sorkin, a guest host from the New York Times, jumped on Mr. Rosenberg. Mr. Sorkin’s questions were direct to the point of being sort of hostile. This was unusual because Mr. Sorkin is polite to most other guests. May be because the other guests are bullish. This treatment of Mr. Rosenberg really suggests that the bullish forecasts are so deeply engrained in the psychology of CNBC Anchors and NYT Journalists. Will this prove to be a signal?
Of course this hostile questioning was nothing compared to the angry, derogatory tone used by Joe Kernen in the earlier segment titled Testing the Bull’s Endurance . This segment featured Jason Trennert of Strategas Research Partners and David Rosenberg. If you have the patience to watch this 15:39 minute clip, you will see the substantial difference in how these 3 anchors treat the bullish Jason Trennert and the usually un-rosy David Rosenberg.
Now fast forward to minute 15:01 and hear Joe Kernen say
- “why is the only thing I can hear with a Canadian accent is “hose” (our phonetic attempt to show Mr. Kernen’s pronunciation) and all you talk about is “hose”, “housing, housing, housing”
Look at Mr. Kernen’s face and see the anger, the derision as he deliberately overdoes the Canadian accent and look at Mr. Rosenberg’s face to see the derision hit home. Mr. Rosenberg replied:
- “I am from Toronto, not Labrador, OK?”
to which Mr. Kernen responded with sarcastic laughter. Then Mr. Kernen again ridiculed David Rosenberg about how housing is the only word Rosenberg uses. Finally Mr. Kernen asked (at minute 15:31)
- “You know it is so cold and dreary up there? Is that why you are always so cold and dreary? Does it have anything to do with being from there?”
Mr. Rosenberg seemed offended but said “you know the Igloo does not melt in July?”
We have resolved to not condemn any one this weekend and to think charitably about all people. Suffice it to say that Mr. Joseph Kernen made it very very difficult to keep this vow. May we request all readers to watch 36 seconds of this clip from minute 15:01 to minute 15:37 and judge for yourselves. If you concur with us, let CNBC know. If you disagree with us, let us know frankly and candidly.
Shall we finally and gently point out that David Rosenberg discloses and accepts his national origin proudly while Mr. Kernen does not!
Since Becky Quick began interrogating David Rosenberg with the views of Jim O’Neill, we thought it would appropriate to feature Mr. O’Neill’s views in the next clip. Do notice how respectful and friendly are the 2 CNBC Anchors to the bullish Mr. O’Neill.
3. 2011: Year of the USA? – Jim O’Neill on CNBC Squawk Box – Wednesday, December 22
Mr. O’Neill is a colorful speaker and this is an interesting clip. A summary of his prediction can be read at Exports, Jobs to Drive US Growth; Goldman’s O’Neill . A few excerpts are below:
- Rising exports and falling unemployment will drive US growth in 2011 and allow the country to avoid comparisons to Japan’s lost decade, Goldman Sachs Asset Management economist Jim O’Neill told CNBC.
- Too many investors are still stuck in a crisis mindset and need to see the “big picture” that shows the US is poised for strong growth ahead, O’Neill said,
- With exports driving higher and weekly jobless claims edging lower toward 400,000, that could provide the catalyst for sustained growth, he suggested.
- O’Neill said that would most readily show up in consumer cyclical stocks as well as strong multinational companies. He is projecting GDP that could eclipse 4 percent and stock market gains of 20 percent for the year ahead.
- A modest recovery of the dollar on the back of rising real yields and circumstances of a stronger US economy almost definitely will lead to some breaking down of those correlations,” he said. “We’ll get back in some ways to a normal that we knew of yesteryear.”
4. The Rules of Trading – Dennis Gartman on CNBC Fast Money Halftime (03:37 minute clip) – Thursday, December 23
We have said before that we would like to trade Interest Rates like Bill Gross and Macro like Dennis Gartman. Neither is within our ken but at least Dennis Gartman gives us some key rules of trading. Watch the clip and read the summary Dennis Gartman’s 3 Rules to Trade By in 2011 on cnbc.com.
- There’s Never Just 1 Cockroach: …….When a problem occurs, it’s generally followed by another. Debt concerns in Greece, for example, were followed by similar problems in Spain, Portugal, Italy and so on. Gartman’s trade – Short the Euro against any other currency, against the Aussie & Canadian Dollars in his case.
- Buy High and Sell Higher: “The one thing you learn in this business is things go higher than we ever anticipate and things fall lower than we ever anticipate,” Our comment – This does not mean Buy High and forget about it. It means when you buy high, you are buying a winning stock, a stock the market likes. But this also imposes a responsibility to watch whether the stock keeps making new highs or begins to falter. If the latter, get out.
- Never Add to a Losing Trade: This is the most important rule of all, Gartman said.”What ever you do, never average down into a long position and never, ever, ever, ever average up into a short position,” he said. “Averaging down is the suicide move in the business of trading and investing.” Our comment – This is a variation of our Blessed Are the Meek… adaptation. Hedge Funds have gone out of business because they thought they knew better than the markets; they kept adding to loosing positions until their capital ran out. This is also the reason many traders ended up destroying their firms by betting against the market, i.e., on losing trades. The statistical name for this game is Gambler’s Ruin and it guarantees bankruptcy unless the player’s capital is limitless. This is only plausible if the trader is Ben Bernanke. Look at the history of global macro hedge funds that went out of business. A common trade for these funds – Shorting long maturity Treasuries. These funds thought the market just didn’t understand that inflation was inevitable. This is also the game CNBC Anchors play with their viewers. Of course, they only bet their verbal capital which appears to be limitless.
Besides this nugget, Dennis Gartman did Trade School on Wednesday, December 22 (at minute 14:15) about Contango & Backwardation:
- “When you see a market going to Contango, in the Futures market when the Spot price is below the next Future, the next Future is higher than that…that is a commodity that is bidding for storage, usually a commodity that is abundant, demand is low and the commodity has to go into storage. Backwardation is the opposite of that. When the spot rate is above the nearest future, the next future is lower…the market is saying to that commodity, come out of storage, we need you, demand is high and watch how markets move from wide contango to narrower contango to backwardation, it often tells you where the next great move is going to come from. For example, last year you had the front month to the second month futures contract in WTI Crude at almost a $4 contango, that was an enormous supply of crude in the world, crude was in a bear market, and contango began to narrow, the crude prices began to strengthen. Now you are starting to see the market go to a backwardation which tells you that market still wants to go higher and you are probably only getting started in a bull market.”
What Mr. Gartman says has been evident in the climb of Oil to above $90.
5. Bear & Bull on Gold – Doug Kass on CNBC Fast Money & Peter Eliades on CNBC StreetSigns – Monday, December 20 & Wednesday, December 22
Doug Kass, a widely followed investor, is the President of Seebreeze Partners. At this time of the year, he comes out with a list of Surprises for the next year. He unveils a couple of surprises on a weekly basis on CNBC Fast Money. Next year, Mr. Kass expects “the price of gold to plunge $250 an ounce in a 4 week period” and gold to be the “among the worse performing asset classes in the new year”. His main reason – Too Many Bulls & Not Enough Bears. Read a summary of his call at Gold Among Worst Asset Classes of New Year on CNBC.com.
The second clip features Peter Eliades of Stockmarket Cycles and Dave Rovelli of Canaccord Genuity with CNBC’s Erin Burnett. Peter Eliades is a well known forecaster and generally regarded, as he admits it in this clip, as a perma-bear. Mr. Eliades is a long term bull on Gold until 2022. In his view, Gold suffered one of the longest bear markets in the history of commodities and so can expect a long term bull market. But, he is short term cautious on Gold.
This clip begins with a discussion of an interesting forecast by the technical FX group of Citi. They predict that Gold will go to $1,700 and then to $2,000 and interest rates to go up. Their outlier forecast is a 13-17% drop in the stock market in 2011.
Why? They compare the current 2007-2011 market with their favorite 1929-1939 market, their second choice, the 1966-1976 period and the distant 3rd choice, the 1906-1909 period. When CitiFx compares these 3 chart patterns to the 2007-2011 market charts, they see and predict the following:
- All three previous markets peaked on 3rd January 1910, 3rd January 1940 & 3rd January 1977. So, they expect the current stock rally to peak on 3rd January 2011.
- The last three chart patterns delivered on average a 5% down January and so the CitiFX folks expect a 5% down January 2011.
- Finally, the market fell by an average of 16% in the past three chart patterns. So CitiFX expects a down double digit 2011 for the stock market.
This might sound whimsical to many, but CitiFX is a well followed group. Erin Burnett asked both Peter Eliades and Dave Rovelli for their reactions to the above CitiFX forecast. They both thought that the stock market is likely to correct in the January-February period and then rally to a mid-year high. Mr. Eliades was the more bullish of the two. He thinks there is a chance that the stock market will test the 2007 highs by mid-year. That makes him among the most bullish on the street.
6. K-Call for the Next Decade – CNBC’s Gary Kaminsky – Thursday, December 23
This is an unusual call. Rather than issuing a call for 2011, Gary Kaminsky, CNBC Anchor and ex-money manager, issued a 10-year call. His 3 main points are:
- Organic Growth ALWAYS Wins Over Volatility.
- U.S. Equity Market Will Appreciate 6-7% Annually – 2/3rds of that will come from dividends and distributions.
- The Secular Shift To Fixed Income Remains Intact – Gary dismisses the notion of a “bond bubble”. He believes that as a result of the last 10 years, so many people are in Bonds because they believe for their own asset allocation, that’s where they want to stay.They are not interested in the risk reward of the other asset classes.
This is an interesting clip.
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