Editor’s Note: In this new series of articles, we include important or interesting videoclips with brief 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. Please let us know whether such articles are useful to you.
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 that 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. Taking On Economy & Stocks – Richard Bernstein , former Merrill Lynch chief investment strategist with Joe Kernan – Tuesday May 26, 7:03 am
Thank you for this interview, Mr. Kernan. Mr. Bernstein is a balanced and astute thinker whose views have been prescient. If you had followed his thinking, you probably would have obtained positive returns in 2008. Need we say more except to suggest viewing this entire 05:48 minute clip at http://www.cnbc.com/id/15840232?video=1133070724&play=1. Below are some key quotes:
Bernstein – “People are really not thinking through what goes on. ..One example would be the rise in commodity prices, right; if the global economy is heating up and you get say rise in gasoline prices, what does that do to the consumer? If the global economy heats up and the dollar continues to weaken, what does that do the consumer? Over the past 3-5-10 years, we have made up for the lower standard of living by increasing leverage, by the household sector increasing leverage, well that is not feasible any more. So if the dollar weakens, our standard of living will go down dramatically without the possibility of levering up as we have been doing. Those are types of things I don’t think people are actually considering..”
Bernstein – “I think what people are misunderstanding is that bubbles create capacity and that is what they do in a economy. And we have just had a monstrous global credit bubble; what is happening now is that we are now seeing the consolidation phase, …..An economy with immense overcapacity does not function well.”
Bernstein – “…I am not particularly worried about inflation because of this huge excess capacity you have in the global economy right now..it is not just happening here, it is true all around the world; if you look at someplace like China, their solution to the problem is to build more capacity which to me is even more befuddling..I don’t know how you solve the problem by building more capacity..”
Bernstein – “..So I think the rise in commodities … I don’t think it is a lasting event and if you look at things like the valuation of commodities right now to Treasuries, commodities are pretty overvalued relative to the treasuries..”
Again, Thank you Joe Kernan for this interview. We were relieved to hear about Mr. Bernstein’s views about China and China’s solution of hoarding commodities to protect against inflation. We had expressed similar views in our May 9 article The Bubble Is Dead. Long Live The Bubble.
Joe Kernan is somewhat of a conspiracy theory buff. So we feel emboldened to ask why he ignored Bernstein’s comment about liking Treasuries. Readers who watch the video will notice that Joe Kernan engaged Bernstein on many points except on his views regarding Treasuries and China. Should we read some pro-China, anti-Treasury bias in this behavior, Mr. Kernan?
Joe Kernan has claimed on his show that he is not afraid to respond directly to viewers. We wonder whether he will respond to the doubt we have raised.
2. All About Bonds – Don Galante of MF Global and Michael Hasenstab of Templeton Global Fund – with Maria Bartiromo on Tuesday, May 26, 3:44pm
Maria Bartiromo asks both managers about their views about the US Dollar and the worries about America’s AAA rating. This is a good conversation and we recommend readers watch it at http://www.cnbc.com/id/15840232?video=1133564559&play=1
It was Don Galante that provided answers that were contrary to the current hysteria in financial markets. Thank you Maria Bartiromo for this interview.
Bartiromo – Would you as an investor be looking at alternative currencies to the dollar?
Galante – “I think, diversification-wise you want to be in a couple of different currencies, but if you are a dollar holder, you have to invest in dollar securities and I like dollar securities; I think this is a global problem in the economies, it has been and it is not going away tomorrow and I think the market is going to be a lot different going forward, I think the economy is going to be different, how we come out of it is going to be different and in general yields are getting to levels that are very comfortable”
Bartiromo – So how are you investing right now?
Galante – “I like Bonds; you know 4.5% on the long bond, these are levels we saw 18 months ago when the funds rate was upwards of 4.75-5% and same thing with ten year notes; the long end of the market is being whipped around, short end is pretty much anchored considering that the Fed’s not moving, I think right now the capacity of the long end to trade and to take the amount of paper that is coming in is being challenged and will continue to be challenged but I think these levels over the next couple of weeks are going to hold and they are OK as an own”
We featured Mr. Galante’s comments because they differ in direction, content and balance from those we read in Newspapers and hear on Financial TV like CNBC. The discussion with Michael Hasenstab about global economies is also interesting but more mainstream. We do recommend that readers view this entire 05:23 minute clip.
If you watch the clip, you will notice how Maria Bartiromo lets her guests like articulate their views without interrupting them. This to us is a sign of a self-assured veteran interviewer. We wish that the new CNBC anchors like Melissa Francis and Trish Regan learn from Maria Bartiromo’s example.
3. The Bond King Speaks – Bill Gross with Erin Burnett on CNBC – Thursday, May 28, 2:52pm
This is a good interview in which Bill Gross speaks about the “new normal” state of the US Economy. He also says that, in his view, you can get decent single digit returns in the stock market and in the bond market. Watch this clip at http://www.cnbc.com/id/15840232?video=1135507255&play=1
Gross – “because of delivering, because of re-regulation, because of de-globalization, because of United States consumer that is forced to save, that growth will be much less than what we are used to, that does not mean ice, that doesn’t mean depression & it doesn’t even mean negative growth in 2010 but it does suggest 1-2% growth & that will significantly affect corporate profits and stock prices.”
Burnett – whether there is any rate right now that would entice you into buying treasuries?
Gross – “I think at today’s level 3.7%, that yes it is much more attractive than what it was – that somewhere between 3.7% & 4% is an attractive entry point…”
This is what we want to get from an interview with an expert. A specific trade idea with a specific entry point level. Thank you Erin Burnett.
So, finally Erin Burnett and Maria Bartiromo are on the same side of Treasuries. Pimco and BlackRock are also now on the same side of Treasuries trade. If you do not know what we mean, read our April 18 article CNBC’s Bartiromo And Burnett – The Rivalry Continues And Evolves Into A Proxy War?
We had noticed that both Bill Gross of Pimco and Peter Fisher of BlackRock appeared together on Erin Burnett’s show a few weeks ago. The question remains whether we will ever see Erin and Maria on the same show or at least on the same segment. We sort hope not because that would deprive us of a topic that our readers seem to like.
4. Stocks vs. Bonds – Rob Arnott and Jeremy Siegel with Erin Burnett – Tuesday, May 26, 2:08 pm
This is an insightful interview in which two luminaries discuss whether stocks or bonds provide long term returns. Serious students of investing should watch this clip at http://www.cnbc.com/id/15840232?video=1133452968&play=1
5. Bernanke & the Bond Market – John Taylor, Jim Bianco and Rick Santelli with Larry Kudlow – Thursday May 28, 7:02pm.
- We like Larry Kudlow as an economist. But he often tends to mix his politics with economics.
- John Taylor is the economist who created the Taylor Rule we wrote about in our March 21 article What Is “Taylor Rule”?What Does It Say Now? Was It A Factor In Bernanke’s Decision?
- We were disappointed with Mr. Taylor’s comments. He can argue that his rule is no longer valid but he should not change a formula in an offhand manner without publishing a detailed rationale for it.
- We have been fans of Rick “REF” Santelli for his bond trading calls. But Rick also has his political viewpoints and those are what he expresses in this clip.
- Jim Bianco is as balanced and candid as ever.
Watch this clip at http://www.cnbc.com/id/15840232?video=1135850277&play=1 and then read Paul Krugman, another economist turned political pandit, discuss his views in The Big Inflation Scare on May 28.
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