Editor’s Note: In this 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. 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.
Thus spake Whitney! The S&P 500 was resting semi-precariously on its support at 870 merely 10 trading days ago on Monday, July 13. Then spoke Meredith Whitney on CNBC Squawk Box and the market took off. The damage in 2007 began in the financial sector and Ms. Whitney was prescient in calling that sell off in Bank stocks. So when she turned positive and said that Goldman was going to blow away numbers, that was the match that ignited the fire. The next day, Goldman blew away Whitney’s high numbers.
In the last 10 trading days, the S&P 500 went from 870 (pre-open Monday, July 13) to 978 on Friday July 24, a 12% plus increase, a proverbial steep acceleration wall. After last week, many people predicted a sell-off or at least a correction but the market confounded every cautious seer and destroyed the bears both mentally and materially. In a way, this past week was even more damaging to the bears than last week.
Steve Grasso, a floor trader and CNBC Fast Money participant said on Friday after the close “I have never seen a market like we have seen this week, unbelievable”. (see clip 3 below). We will not go that far, because this market still has a long way to go before it can be compared to the fourth quarter of 1999 – in that quarter, the Nasdaq 100 went up 50%, as we recall.
We were not surprised that CNBC decided to celebrate the crossing of Dow 9000 with a special program with Larry Kudlow and Maria Bartiromo. We were pleasantly surprised when we heard many participants voice notes of caution including Maria Bartiromo. In fact, Maria often played the feisty Bear to Larry Kudlow’s passionate Bull and questioned the fundamentals of the economy, bemoaned the lack of top-line revenue and worried about valuations. We wonder whether the fact that CNBC did not get giddy may prove to be actually bullish for stocks. This CNBC special report gets our pole position for the week.
As a housekeeping note, we said on June 6, that the CNBC Hall of Fame clip of Jim Rogers and Larry Kudlow trashing the US Dollar and the Fed Chairman, Ben Bernanke might end up signaling the bottom of the dollar. That has proved to be correct so far but, this week the dollar did go down and touch the Rogers-Kudlow lows. We shall see if these lows get broken next week.
This week, we feature the following clips:
- Dow 9000 Celebration on CNBC – Various clips from this one-hour special on Thursday, July 23
- Lakshman Achuthan of ECRI on The Kudlow Report on Monday, July 20
- Steve Grasso in the Fast Money opening segment on Friday, July 24
- Jim Bianco of Bianco Research on CNBC Closing Bell on Monday, July 20
1. Dow 9000 Celebration – CNBC Special Report with Larry Kudlow and Maria Bartiromo on Thursday, July 23 – 7-8 pm
We found this to be an interesting special with a couple of excellent guests, lively discussions and a real feisty debate between bulls and bears. Very different from the rah-rah 1999 CNBC specials. Below we highlight a few segments from this special.
- Dow 9,000 – The Summer Rally – 7:00 pm – Steve Grasso of Stuart Frankel is the first interview. Mr. Grasso, unlike many CNBC guests, has knowledge of trading orders and flows of large mutual funds and hedge funds. We always prefer facts to opinions. Mr. Grasso usually lays out the facts and then offers his views when asked. We try to listen whenever he speaks. Watch this clip.
- Dow 9,000: Bright Sides in the Economy – 7:26 pm – This clip features comments of Rick Santelli of CNBC, Mort Zuckerman, Chairman of Boston Properties and Joseph Lavorgna of Deutsche Bank. This was trader Rick Santelli offering his opinions on the economy, the corporate bond market and not the political-commentator Rick Santelli. We were delighted to listen to Mort Zuckerman. Mr. Zuckerman, a billionaire commercial real estate investor, is a down-to-earth speaker and an astute investor. He is an always must listen. Joe Lavorgna of Deutsche Bank, pretty bearish on the US Economy, explains why he has now turned bullish.
- Dow 9,000: Comparing Recessions – 7:38 pm – This clip features sharp debates on commodities and emerging markets. It is a must watch in our opinion. Larry Kudlow opens this segment saluting Dr. Copper’s role as the leading economic forecaster. Rick Santelli takes exception to Larry Kudlow’s optimism and explains his viewpoint that this recession is very different than other recessions. Then the real Maria Bartiromo stood up for commodities. She reminded us of her 2007 cheerleader’s passion for GLG2, Global Liquidity Global Growth. Maria repeated the basic bullish case by stating “I say you got to be owning these even if the economy does not come back – these are finite resources..”. Then Maria made the natural extension and plugged Emerging Markets by stating ” Go fishing where the fish are” and talked about the Chinese consumer. This got so bad that Mort Zuckerman had to intervene and tell Maria that China still remains an export-driven economy and there are 25 million people unemployed in China (isn’t that a small number?, we wonder).
- Dow 9,000: Investors on the Sidelines? Joe Moglia, TD Ameritrade Chairman & Ronald Kruszewski, Chairman of Stifel Nicholaus – 7:14 pm – Both CEOs expressed fairly cautious views about the market rally. So cautious that finally Larry Kudlow could not restrain himself and said ” I love that 2 leading financial CEOs are worry-warts; this is terrific stuff”. Then Larry went back to Ron and asked him about “the nice summer casserole of stocks”. Joe Moglia described the attitudes of Ameritrade clients and was cautious. Larry Kudlow then went back to to Ron Kruszewski and talked about optimism. Kruszewski replied “hey listen, I do run a financial services firm; optimism does drive our revenue. So I am all for it, but I also have a little bit caution is in the mix. I tell you why Larry..” Then he went on to tell Kudlow why. Again, this special was so different from the 1999 CNBC when allegedly CNBC did not tolerate bearish comments or guests on its shows.
2. Is the Recession Over? Lakshman Achuthan of ECRI with Larry Kudlow on Monday July 20 – 7:24 pm
As Larry Kudlow says in his introduction, the Economic Cycle Research Institute and Lakshman Achuthan have been among the most accurate of economic forecasters. We strongly encourage all readers to watch this clip. Mr. Achuthan reports that the ECRI weekly leading indicator index is “roaring”.
3. Steve Grasso on Fast Money Word on the Street on Friday July 24 – 5:00 pm
Steve Grasso makes his comments at minute 05:16 of this clip. He said:
- I have never seen a market like we have seen this week, unbelievable”
- for last week, we watched the hedge funds lay them out, lay them out. at the beginning of the week, they tried to break the market, they couldn’t.
- I was 5:1 sells to buys. I reversed that yesterday & today
Are funds chasing this market? Pete Najarian said so and remarked “they just don’t want to miss this market”. That may be the simplest explanation of this rally – funds that are sitting in cash or short are scrambling to get long and people who are long are too afraid to sell.
4. Big Gains, Big Opportunity? – Jim Bianco of Bianco Research and Michael Vogelzang of Boston Advisors with Maria Bartiromo on Monday July 20 – 4:07 pm
This is mainly a discussion about whether the momentum in the stock market will continue. Then Maria turns to Jim Bianco and asks his opinion about interest rates and the bond markets. Jim Bianco tells her that the Fed has a 100% track record of being wrong in getting out of easy money policies. That is why the “bond market is terrified of inflation”.
We have great respect for Jim Bianco and the insightful fixed income research produced by him & his team at Bianco Research. So we take his views very seriously. However, we were taught by a market guru that the consensus in the Bond Market always tends to be wrong. So we wonder, what would happen to long treasury rates if and when the Bond Market realizes It was wrong to worry about inflation?
The answer to this question and the 100% track record of the bond market of being wrong at consensus extremes should petrify speculators who are short long-maturity Treasuries and of course TV commentators who love trashing Treasuries.
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