Interesting Videoclips of the Week (March 12 – March 16, 2012)

Editor’s Note:  In this series of articles, we include important or interesting videoclips with our comments. 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.

1. Hail to the Chief

This week, it again become clear. The Boss of the markets is Ben Bernanke. He and he alone determines what happens and not technicians/gurus who charge high fees for their predictions. Thanks to the Chief Fed-man, the stock market had a glorious week, the Treasury market got shot and Gold cratered. And Bernanke didn’t even have to do anything. That is Power.

He is being thanked profusely not just by long investors but especially by Brian Moynihan of Bank of America. With BAC passing the stress test and hearing Meredith Whitney mention $10-$11, buyers poured into BAC. If you compare this week’s charts, you will see that BAC completely blew away Apple in terms of performance. And this was in a week Apple touched $600 amidst frenzied options trading.  Impressive, but to match BAC gains, Apple would have had to reach $700 this week. So the week belongs to BAC and our pole position goes to Meredith Whitney who mentioned the $10-$11 level.

2. Banks & Financials

Two weeks ago, Louise Yamada told us (via BTV*) that the Nasdaq was breaking out of its 10-year base (clip 4 of February 27 – March 2 Videoclips). This week, Richard Ross of Auerbach Grayson told us (via CNBC) that the Banks/Financials are on a 4.5 year breakout. He added succinctly (see clip 2 below):

  • “when my charts look like this, I know they are
    going higher…we like those banks, we like those brokers”.

A sour, and so far wrong, note was struck by Doug Kass on Tuesday after the monster rally inspired by the Fed that afternoon. He “doesn’t see a whole lot lore upside. In fact, he thinks the next catalyst for the sector could be negative.” What catalyst? He added:

  • “My main concern with banks over the next couple of months is economics, there’s increasing economic ambiguity both domestically and abroad.”


*BTV is our acronym for Bloomberg TV.

3. What’s the Parallel – 2009 Or 2008, 2010, 2011?

The rally has been so strong that it begs for a parallel. In one sense, it feels like the rally that began in March 2009. Last fall, many experts described last fall as Europe’s 2008. ECB began slowly but finally delivered a trillion dollar LTRO equivalent to France’s GDP as Sean Egan reminded us last week. So why shouldn’t stock markets behave as they did in 2009?

Recall that in 2009, the strongest economies in the world were the emerging economies. So emerging markets became the biggest beneficiaries of the stock rally. This year, the US economy seems to be the strongest. Europe is weak, the emerging economies are slowing down. So, in the parallel of 2009, shouldn’t the US Stock market be the biggest beneficiary of the stock rally? Just as EM currencies were strong in 2009, why shouldn’t the US Dollar be strong in 2012 with the US stock market?

On the other hand, 2012 seems to be tracing the pattern we saw in 2008, 2010 and 2011. These years began with a strong stock rally and a rally in Oil. The Treasury market sold off in March-April. During these years, the economy did not maintain its trajectory and the rally ended and then reversed. This was best articulated by Keith McCullough on CNBC Fast Money on Thursday on CNBC-FM:

  • “….this was the sucker move last year, Treasury yields spiked, every one said I gotta buy stocks and then growth slowed. That functionally is what we believe happens when oil is tracking anywhere above 96 on the WTI, never mind above 106,  growth slows as inflation accelerates, you can see that in ISM…we are seeing it in Asian numbers..we are starting to see it worldwide…”

Mr. McCullough was more direct on Tuesday on CNBC FM:

  •  “Between March and April of 2008, 2010, 2011 do you want to do this again? How many times do we have to take the VIX to 1415 and create a story telling exercise that the Banks are cheap, Europe is fine…the reality is the storytelling has been equally impressive every time the VIX has hit this level. Every time you should have been selling stocks.”
  • “..   if you go through the 2008, 2010, 2011 tops in the S&P 500 which are March to April, every time you’ve been burned chasing this concept of an economic recovery. Don’t forget growth completely came unglued last year. Now it’s unglued in the eastern side of the world.….I think U.S. GDP growth could get cut in half sequentially vs. the 3% Q4 2011 GDP number…first quarter GDP could be 1.5%….I like me for myself having not blown up in ’08, ’10, ’11, what I like to do is raise cash.

4. U.S. Treasury Market

Ben Bernanke broke the Treasury market this week. The 30-Year Treasury Bond lost over 4% between Tuesday afternoon and Wednesday’s close. The yield on the 10-Year T-note climbed from 2.03% on Monday to 2.30% on Friday. The 10-year German and British yields also rose in a sort of confirmation of the US Treasury move.

Our friendly CNBC Anchors went semi-euphoric over this bond debacle and predicted that a Wall of Money that is “hiding” in Treasuries would move into stocks. We are not sure about a “Wall” but it would be entirely reasonable to expect investors to get out of their bond funds if yields keep rising. Before we quote from some “experts” about the direction of Treasury yields, allow us to point to a simple but critical point. 

On Friday, TLT, the 20-30 year Treasury ETF, closed just above its 200-day moving average. Look at the 5-year chart of TLT below and note the importance of holding the 200-day mv:

Whenever TLT has decisively broken down through its 200-day mv, it has fallen steeply and sharply. Whenever TLT has bounced off its 200-day or quickly recrossed above it after a small decline, it has rallied sharply or exploded as it did in 2008 and 2011. This pattern goes back to March 2007.

So next week could prove pivotal for the Treasury market.

Last week, we quoted John Ryding (ex Bear Stearns) tell BTV that 10-Year yields are headed to 3.75% later this year. George Goncalves of Nomura told CNBC-FM on Friday:

  • “I think there is a lot of down side…I think we will get to 2.50%. That will force more selling and push the rates above 2.50%.”

In contrast, Jeff Kilburg of Treasurycurve.com asked CNBC viewers to buy Treasuries and Silver for a rally next week.
 

5. Gold, Oil & FX

Gold and Silver fell hard on Wednesday and Thursday.  Jeff Kilburg, as we said before, suggested a long trade for next week. A longer term opinion came on Friday on CNBC Money in Motion from Carter Worth of Oppenheimer:

  • “This is an important development for a big asset. It has been going up for 12 years in a row. And the 150 day moving average is now downward sloping for the first time in a long time. This has all the hallmarks of a major topping out formation. It is a very crowded trade worldwide and there is a phenomenon when you have a multi, multi year move how they come to end dramatically.”

Oil also fell on Wednesday and Thursday. But unlike Gold, Oil has a someone looking out for it. So on Friday, Oil rallied sharply as worries about Iran intensified.

Mary Ann Bartels of BAC-Merrill Lynch sees higher oil ahead:

  • oil has had a bullish technical breakout. we call it a classic head-and-shoulders bottom. maybe we’ll get a neckline in there. we’ve broken above that. as long as crude oil stays above $104, it’s targeting $115, and maybe in later in the year we might see crude climb to $130.


6. The U.S. Stock Market – “Expert Opinions”

We thought we understood what “target for the S&P” meant. But after reading the comments made by Bob Doll on BTV’s Street Smart on Friday, we are not sure. And Bob Doll is the chief equity strategist at BlackRock, the world’s largest money management firm. Perhaps you can figure it out:

  •  Our target coming into the year was S&P 1350 plus because our prediction was a double-digit gain in stocks.  If Europe stays in the background and behaves itself, we could see a whole lot of the plus and this could be a great year for equities….We’re
    not changing our target. We could see 1550, and our target will still
    be accurate.

So 1550 is simply 1350 plus? With such a wide latitude, the forecast of every strategist would be “accurate“. See clip 3 below for a detailed summary of Mr. Doll’s comments.

Mary Ann Bartels is the Chief Technician at BAC-Merrill Lynch. She spent virtually the entire Q4 of 2011 predicting that the SPX will trade down to 1098 in the first quarter of 2012. That’s didn’t work out. Now Ms. Bartels has gone the other way:

  • I think this year we can see the S&P around 1400 to 1440.we have to be cognizant of the fact that we’re going into the end of the quarter. Many fund managers didn’t really have the exposure to the market that they wanted. So I think in the back end of march, we’re going to see the markets rally back up again.
  • I love tech. I believe that technology is entering a new secular bull market. From a technical perspective, it has been in a bear market for the past 11 years, it has been range bound since 2001. We have cleared that level. So we are on a path in the coming years to test the 2000 highs. We can see the Nasdaq composite back up near 4,000 again….tehc is theem based, cloud ia theme, internet is a theme, the tech mega caps that have been in a range for 10 years, we think they are trying to wake up and they can power the index.


Jason Trennert from Strategas is more cautious for the second half of 2012:

  • And that’s mainly because of a big secular trend we are seeing in Government spending, there is a big fiscal cliff next year, probably going to have $425 billion of a drag from government spending alone…

In response to Mr. Trennert’s comments, Ms. Bartels concurred and said “we might have a bump in the road in May, a sort of sell in May and go away.”

And then we have the ever-bearish Walter Zimmermann of United ICap. He thinks the S&P will touch 1,000 by the end of 2012 as he told CNBC’s Carl Quintannia and David Faber on Thursday, March 15:

  • when you look at the percent bullish on this stock market, it just hit 68% two days ago. now, actual all-time high in October 2007, it was only 69%.
    This is much higher than it was at the peak of the internet double. This has all the froth and ebullience of a bubble market, when you look at both sentiment and momentum. momentum divergence, indicating yeah, it’s still going higher, but it’s running on empty.…..
  • we see three main risks ahead.
    • Iran,
    • Portugal is in depression, and the core countries like Germany, very export dependent. They’re going to start to suffer from this severe weakness in the periphery, the real problem in Europe is what we call a deflationary debt trap, as the economy shrinks, they can’t carry existing debt. 
    • we think they’re overlooking the problems in the U.S. economy.

Mr. Zimmerman is supposed to be a technician but he hardly ever makes a cogent technical case. He has been so wrong in his past appearances with Maria Bartiromo that we had to create our Bartiromo-Zimmermann indicator. This indicator says you should buy S&P calls when Mr. Zimmermann speaks Ms. Bartiromo’s on her show. How has our Bartiromo-Zimmermann performed?:

  • On Tuesday, January 24, Mr. Zimmermann made comments about a bullishness extreme in the stock market, similar to his comments quoted above. That day, the SPY closed at 131.46. This week, it closed at 140.72, an increase of 7%.
  • On Friday, October 28, 2011, Mr. Zimmermann made some precise comments about how long that rally would last and advised put buying strategies. He argued “if this rally fails to break the may peak, then that in our book targets to 800. the double dip targets to 580. so there’s significant downside risk.“. That day, the SPY closed at 125.26. So the S&P has rallied by 12.3% since Mr. Zimmermann’s appearance with Ms. Bartiromo in October 2011.

The above are just two recent examples. This indicator has worked for over 2 years. But, a caveat for those itching to buy calls on Monday. All previous Zimmermann appearances have been on Ms. Bartiromo’s show. Hence our Bartiromo-Zimmermann indicator.  But this time, Mr. Zimmermann appeared on the Quinatannia-Faber show. So technically, the Bartiromo-Zimmermann indicator does not apply.

Speaking of someone who has not been right for some time, Tom DeMark communicated his views to BTV’s Adam Johnson on Friday. A succinct summary was tweeted by Mr. Johnson:

  • DeMark to me: $SPX top at 1419-1426 is imminent, likely next week. Awaiting a final Day 13 count and then ‘price flip’ confirmation. 

We have a simple question for both Tom DeMark and Adam Johnson. Why not wait to get the Day 13 count and to get the ‘price flip’ confirmation and then make a definitive prediction?  Mr. DeMark has made a habit of coming on air to discuss imminent tops or declines before. For example, on February 21, Tom  DeMark said to Adam Johnson “So if we follow up with an up close tomorrow, we think the market is about ready to decline.” We have seen how this conditional prediction turned out. This seems like having it both ways – if the prediction comes true, then take the credit. If it doesn’t, then point to the condition to avoid blame.

Lawrence McMillan of Option Strategist wrote on Friday:

  • In summary, the price chart of $SPX is bullish and that’s all that seems to matter right now. There are overbought conditions, though, and the market is starting to get farther from support (1370 and below) and thus any correction to the support levels could be rather painful, even though it wouldn’t necessarily be a change of trend.


7. Apple

We began this article with a reference to Apple and so we end our stock market discussion with a couple of calls about Apple. The first is from  Carter Worth, of Oppenheimer:

  • “Apple is now 40% above its 150 day moving average, just reached t
    hat level. That
    has happened 6 or 8 times since the IPO. Every time, 1, 3, 6, 12 months out, it’s higher. … Here’s a two-year chart, it is well defined channel and it shows how excessive and extreme this move is. Put this same picture on the long-term and you’ll see again how far above trend — that’s the same channel but a five-year basis. it is a frequency that’s only happened about seven or eight times since the IPO – extreme strength.”

But Mr. Worth adds that if you are long Apple, it is not a bad idea to trim some. A stronger version of “trim” came from Steve Cortes (a contrarian trader on CNBC-FM), who announced on Thursday that he had shorted Apple at $595.  Why?

  • “The main reason: When I look at charts, I look at Google from late 2007, in late November 2007, and overlay Apple, present tense, over that chart it looks incredibly similar…..I do have tremendous qualms with the technical picture of Apple right now”

But Pete Najarian, his Fast Money colleague, took the opposite view:

  • “What I don’t think anybody seems to understand is, this is not a comparable to Google”


8. Fund Flows

Our favorite fund flows analyst, Michael Hartnett of BAC-Merrill Lynch,  commented on the Great Rotation this week:

  • potential for a “Great Rotation” from bonds to equities is significant (since 2008 bonds inflows = $480bn versus equity outflows of $48bn); but while equities saw biggest inflows ($9.6bn) since Apr’11, inflows into bonds ($7.6bn) continued this week, with majority into IG bonds & EM debt.
  • flows show shift from EM to US domestic demand theme. US equity inflows were $9.1bn… while EM equities saw a meager $0.5bn.
  • The three B’s (Bricks, Banks, Bonds) are causing investors to short treasuries to the benefit of global equitiesTrough in real estate = trough in bank stocks = trough in Bond yields.
  • Question now is magnitude & duration of move….Our recent call to take profits is wrong if The Great
    Rotation has started, forcing a dramatic change in asset allocation
    and a major equity breakout, which would be driven by either the banks or a bubble in “Best of Breed” large-cap multinationals.



Featured Videoclips:

  1. Meredith Whitney on CNBC Closing Bell on Wednesday, March 12
  2. Richard Ross on CNBC Closing Bell on Wednesday, March 12
  3. Bob Doll on BTV Street Smart on Friday, March 16


1. BAC to 10-11 & A New Brain needed for Citi – Meredith Whitney with CNBC’s Maria Bartiromo – Wednesday, March 12

There was a time when an interview with Meredith Whitney was automatically the most important of the week. But recently, we haven’t been able to find anything interesting or relevant in Ms. Whitney’s interviews. This week, thanks to Maria Bartiromo, we found the acerbic Meredith Whitney we used to witness. For example, she answered “a new brain” when asked “what would it take for you to invest in Citi?”

  • Bartiromo – I want to get your take on where people are where people are allocating money. What’s your reaction to the bank stress tests?
  • Whitney – The assumptions were draconian. The severe scenarios that were imposed upon the banks. I don’t know that it’s surprising, other than it came two days earlier than expected. We had a buy on JPMorgan for a long time. We’ve had a sell on SunTrust, which failed and we had an underperform on Citi which failed. I think Citi failed because it asked for too much and maybe didn’t have an appropriate sense of what the Fed was expecting. It seems like a communication blunder. They can resubmit and pass.
  • Bartiromo – So you think Citi has enough capital?
  • Whitney – I don’t know that – Citi is not creating a lot of capital. They still have that sizeable deferred tax asset. So the quality of their capital is not terrific. And they have risky assets, which is clearly demonstrated in the stress test. I found the stress test illuminating to read. But the group is oversold. In March of ’08 when I first started coming on your show, I said the Banks should trade at best tangible book because they were taking huge hits to capital. I don’t expect any huge hits to capital, so the Banks should trade at tangible or a little bit better. But that doesn’t mean they’re off to the races….So they still have to hold more capital, the leverage is lower, which is a huge challenge to higher returns on capital. You’ll get long in the tooth these large cap banks, if you get, you know, 20%, 30% returns…then people are really going to pay attention to what are these guys earnings. The earnings outlooks are not that strong.
  • Bartiromoyou say the banks are oversold.
  • Whitney – They were oversold. They’ve come a long way in the last two days. Bank America still oversold, you know, I think $10, $11, people are going to start paying attention to what Bank of America earns, but with a 8-handle on it, it still has upside. JPMorgan has still upside. 
  • Whitney — I’m a fundamental investor, so I want to know that there are legs to these stories. And I don’t see huge legs — you’re getting a value trade and that’s just about it. Now, the smaller banks are overvalued in my opinion and they’re not going to be able to demonstrate real earnings. And people don’t want to buy them in terms of they’re not a consolidation story. you’ve got the large cap banks that are oversold. and the mid-cap banks, small-cap banks that are overbought.
  • Bartiromo – Let’s talk about sort of the fundamentals here. Because of t
    he earnings power.
    we’re not sure if and when the Volcker rule is going to be implemented. that, of course, changes the revenue stream. You have a buy on JPMorgan, tell me about the earnings potential there.
  • Whitney – JPMorgan we upgraded, it was a value call. And I usually hate value calls because you get stuck too long in value calls. But the stock was just too cheap. They’ll have a great quarter in capital markets. Fixed income has benefited enormously from the Europe LTRO program. So it’s like the equivalent of the Fed’s purchase program. So they’ll have a good capital markets quarter. And their are other businesses, maybe okay with asset writeups. For the last two years, anyway, you’ve had a strong first half and terrible second half. I expect you’ll have a strong first — you know, decently okay first half, and a far weaker send half.
  • Bartiromo – Would you still sell Citi and Suntrust right here at these levels after the sell-off?
  • Whitney – I think Sun Trust is at — you know, it’s richly valued. So what’s the trade here? You’re just not going to make any money in my estimation on that name. And Citi, they don’t have any earnings power. It’s difficult to move that ship. They’re investing in a lot of regulatory processes, but it’s like the old broken-down Victorian house, you have to put so much money in to get to a modern equivalent of a new house. it’s just — their investment span is prohibitive. It’s not that exciting in terms from an investment scenario. People were way too optimistic about Citi being able to earn a lot. 
  • Bartiromo – Are they going to be able to come back and get out of this this year?
  • Whitney – Oh, yeah. but that doesn’t mean it’s a fantastic home run investment, because they’re still not going to grow. this was just a — Citi failing is not a huge deal. It’s reflective of the fact that someone gave them really bad advice in terms of what to go to the Fed with under the stress test. but I don’t think it doesn’t change the game. Citi hasn’t been investable in four years.
  • Bartiromowhat would it take for you to invest in Citi?
  • Whitney A new brain. They’re stuck with what they have. It’s just not going to happen.
  • Bartiromo – Let me move on to the Muni Bond market. It was a huge call you made on this program, and then you reiterated on 60 minutes, you talked about the possibility of defaults. Are you writing a book about it?
  • Whitney – I am writing a book about it. Look, you have Stockton that is on the brink of bankruptcy. You have five cities, including Detroit, which is on the brink of insolvency. It’s fascinating, because there’s been so much back room political maneuvering to keep these cities from going bust. California is trying to pass legislation to prevent municipalities from declaring bankruptcy. So there’s been every effort on the part of the states to prevent this tidal wave of default, which will happen sooner or later. But look, it’s happening at an accelerated pace. What’s clear what’s happened, social services are being cut dramatically. taxes are going up. You’re going to get into multi-billion-dollar fiscal gaps. and so you’ll have to keep cutting programs. You see the migration of the country shift. That’s what I’m most interested in.
  • Bartiromo – Where is it happening on an accelerated basis. This is $3.7 trillion market and we’ve only seen $2.6 billion in default and it’s not happening as you predicted it.
  • WhitneyI would argue that the number is a lot higher than that and they’re not called technical defaults. It took how long for Greece to become a technical default. So they’re insolvent. They’re not paying their bills. And they’re not called defaults, a lot of understated defaults. And I think that this is prolific. You’re either willing to see it or you’ll shut your eyes. If people want to tell me, oh, I was wrong, because this hasn’t weighed out, stay tuned.
  • Bartiromo – What is your take on Europe right now? I mean, Greece obviously officially in default. Do you worry that Europe is going to spill onto the U.S. markets and the economy here, or do you think that things have been stabilized enough in the Eurozone to be contained?
  • Whitney – I think Europe has already
    spilled on into the United States to the extent that economically the slow growth in Europe has impacted companies. It has also benefited many US companies in terms of very low rates because no where else to go. So you have capital inflows into the US because of the duress of Europe. So ultimately things will normalize out and you start looking behind the kimono of US, the US doesn’t look terrific. The US Corporations look fantastic.The US Banks look so much better than European Banks.
  • Bartiromo – Would you put money to work in US stocks here?
  • Whitney – There are some US stocks that I think are terrific… look there is a whole group of names that have outperformed and will continue to outperform. Look at Discover, the stock has been up 30% every year for the past 3 years. There is real fundamental growth. American Express – a terrific company.  Agriculture, freight companies there is a huge opportunity for investing in US equities and I am very bullish on some. I just haven’t been interested in the financials for awhile.


2. We love financials and banks – Richard Ross of Auerbach Grayson on CNBC Closing Bell – Wednesday, March 12

Richard Ross is the Global Technical Strategist at Auerbach Grayson. His comments below need no discussion. A man in love with his charts and what they say to him.The specific chart he discusses is the 5-year, 200-week moving average chart of BKX, the KBW Bank Index:

  • We
    don’t like financials and bank, We love them. That wasn’t a head fake
    last night, just a sign of things to come…
  • [the chart] gives you very
    few signals, but when you get those signals, you have to respect them. We see the
    first breakout of the 200-week average in 4.5 years. In 2007, when we
    moved down from the 200-week moving average, you literally called the top in the S&P in 5 days. That is a very compelling sell signal, of course in
    hindsight.
  • I am giving you foresight right now. We have an equally
    compelling buying opportunity in the financials based upon this breakout
    above the 200-week…..There are a lot of stocks that make up this
    index that we like.
  • One stock in particular US Bankcorp. For on, the
    stock had very nice relative strength against its peers. It held up very
    well in 2010, one again in 2011 – created a very nice double bottom .
    you will see a very well defined trading range, 21 on the low end, 29 on
    the high end. Now, a decisive breakout with a technical break which suggests
    we go significantly higher ..a measured upside to 37, that’s almost 20%
    from current levels.
  • When my charts look like this, I know they are
    going higher.
    ..we like those banks, we like those brokers.


3. 1550 is do-able – Bob Doll on BTV’s Street Smarts
– Friday, March 16

Bob Doll is the chief equity strategist at BlackRock, the world’s largest money management firm. The excellent summary below is courtesy of Bloomberg PR.

Bob Doll’s predictions for the stock market:

  • This isn’t a year about economic growth or earnings, it’s all about the probability of the left tail risk. How afraid are people? When the stock market yields the same as a ten-year Treasury, people are invested in a very afraid manner. My view is that this year is when fear dissipates some, the crisis premium comes out, the risk premium comes out and that means interest rates move up, spreads narrow and equity valuations move up.” 

  • “Our target coming into the year was S&P 1350 plus because our prediction was a double-digit gain in stocks.  If Europe stays in the background and behaves itself, we could see a whole lot of the plus and this could be a great year for equities.” 

  • “We’re not changing our target. We could see 1550, and our target will still be accurate. It’s all about Europe, if that left tail risk dissipates. At S&P 1550 stocks would still not be expensive…If Europe continues to heal and the Middle East doesn’t blow up, 1550 is do-able.”

On why market volume is so low: 

  • There’s still a lot of cash on the sidelines waiting to come in….I’m being a bit extreme, but I think stocks are the place to be. At some point we’ll get a pullback, we’ll get a sloppy period as things will go sideways, you’ve seen the mini-corrections and they last about one day and half because there’s some many people are waiting for a pullback.”


On what equities to invest in:

  • “I still think having a cyclical orientation – meaning yo
    u want to own technology, some energy, but I’m not afraid to buy some healthcare either to get some defense in the portfolio. What you really want is companies with good free cash flow.”

On bank stocks:

  • We have more [bank] banks than we did six months ago, but still not a big weighting there. While they’ve done well, I’m still concerned about where the revenue growth is coming from, what’s the regulatory environment means. [The stress tests] were certainly a positive step in the right direction, but stress tests are all about credit…For earnings to grow, it’s not going to be about less bad news, but where’s the revenue growth?

On interest rates impact on stocks:

  • For me, it’s about the pace of increase rather than the level. If we go up 10 basis points per day, as we did early this week, I’m going to get scared fast, but if it’s slow but steady as I’m expecting, not a problem at all. Stocks are still cheap relative to bonds.” 
  • “In a zero interest rate environment, at the short-end, 2 percent for a 10-year Treasury and very little inflation, 14 times growth for the S&P is cheap.” 
  • “We’re up 30% since the low of October 1st – for six months, that seems pretty quick for me. I think some people are just praying for a pull-back so they can put some money in.”

On QE3:

  • “I don’t think we’re going to get QE3 if the U.S. economy is growing anywhere close to 3% and unemployment is falling. That’s hardly the condition for an emergency, and QE3 is for emergencies. We don’t have one, so I think it’s on the back burner… The Fed’s been a little bit more forward about that and markets have hung in there. For the bears among you, we’re appreciating at a slower rate. We’re a little overbought. We’ll get a correction, but a correction could just be time without much change in price.”

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