Interesting Videoclips of the Week (August 9 – August 15)

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.

Equity Markets

This week, the U.S. equity market suffered its first weekly decline snapping a four week winning streak.  The Chinese market, the ultimate repository of the world’s hopes for global growth, fell 7% for the week and 12% for this month. What is the outlook for equity markets? Is there a short-term correction or a major sell-off lurking in the near future? We feature clips from experts like Laszlo Biryini. Tim Hayes of Ned David Research and others below.

For the past two weeks, we have wondered whether much of the rally in financial stocks and the market itself could be due, to a large extent, to the actions of Quantitative Managers. These managers buy in a very different manner than momentum investors and so when their buying is active, the VIX, or volatility index, tends to drop. Many of the Quant Managers use VIX Variance swaps in which Stocks are traded in a complex formula based not just on VIX but on square of VIX.

Is this why the VIX dropped 2% on Friday even when the stock market was down? We noticed a sustained, inexorable but quiet buying action in the Bank of America stock that began around 1:40 pm on Friday and ended just before 3 pm. It is during this time that the VIX dropped from being up to being down substantially. This BAC rally and the drop in VIX was dutifully followed by the rally in the S&P 500 that cut the day’s loss in half.

Predictably, CNBC had no substantive comments to make on this action. It is not surprising because all their trading correspondents and commentators are floor traders at the New York Stock Exchange.

Why is this a problem? Because a report revealed last week that an estimated 75% of all stocks that trade are from computer-generated orders and that NYSE trading accounts for about 20% of all trading volume.  So we ask how can NYSE based stock commentators of CNBC profess to know much about trading action?

Every expert that comes on CNBC tells us that the equity markets have been very overbought for a couple of weeks now. Yet, this market continues to disregard such experts. This is a mirror image of the January-March period when equity markets were being described as oversold and continued to go down.

According to reports we read a couple of months ago, Quantitative Managers were responsible for much of that decline. Apparently, they were establishing their short positions in that period and these positions were completed in early March 2009. This, the reports said, explains why the Quantitative Funds began severely underperforming the S& P 500 from the week of March 9. Apparently, the factor strategies of these funds called for going long high-quality stocks and shorting low-quality stocks.

Is a large part of this rally at least partly due to such huge Quantitative Funds covering their short positions? That might explain why this entire rally has been led by the lowest quality stocks. Have these funds finished covering their short financial positions?

We do not know and neither does CNBC. In fact, we are not sure whether CNBC is making any attempt to find out. It is much easier to make lofty statements about economic forecasts and macro opinions. 

U.S. Dollar

Despite the usual complaints about how the Federal Reserve was debasing the American currency, the U.S. Dollar continued to do well. According to Tim Seymour of CNBC Fast Money, DXY, the US Dollar index broke the 20-day moving average on Friday.  So what we have termed as the Rogers-Kudlow double bottom has held.

U.S. Treasuries

Last week, we opined 
“We have noticed that Treasuries sell off sharply before the week of upcoming Treasury Auctions. Then, as the Auctions prove successful, Treasuries rally after the auctions.” and asked “Will this happen again next week?”

Yes. The pattern repeated this week. The auctions went off very well and the 30-year Treasury Bond auction surprised the markets with investor demand. The entire Treasury market rallied strongly this week.

So, it seems more and more likely that the Treasury Market did turn on June 10, the day of the overwhelmingly negative coverage of the 10-Year Auction by the CNBC “Friends N Fun” Anchor gang. Treasuries turns are unique because they comprise both “top” and “bottom” – Treasury Yields make a top and Treasury Prices make a bottom. You would imagine that a top & bottom combo would seem more interesting to the CNBC Anchor crowd but you would be wrong. The so-termed “Haines bottom” remains alluring to CNBC anchors, not that there is anything wrong with that, as us Seinfeldians would acknowledge.

We were surprised to hear Bill Gross, the Bond King, describe himself as “bland” about Treasuries. Strange, because to us the 30-Year Treasury Bond looks like a hot “spice girl”. Just look at the sassy rally the bond showed on Thursday and Friday.     

Our CNBC “Friends N Fun” Anchors maintained their skepticism and chose to gang up on their own reporter Steve Liesman when he dared say something positive about Treasuries. Perhaps, we should not blame them. Two surveys released this week showed that investors dislike Treasuries intensely.

  • A Reuters survey pointed out that the number of investors bullish on Treasuries is at its lowest point since January.
  • A Merrill Lynch Global FX and Duration survey showed that global investors are Underweight Duration exposure in US Treasuries and this exposure was cut by 6 points to 47 last month (50 is neutral). According to this survey, a net 32% of investors expect to see higher global 10-year rates.

Now, we are know what you are thinking – such pessimism usually turns out to be bullish. Yes, CNBC Anchors would have been the first to point that out had these bearish surveys been about US Stocks. But, you really cannot expect CNBC Anchors to ever get bullish about US Treasuries. After are they or are they not on a Mission Against US Treasuries? If you doubt us, check out the clips below.

This week we feature the following videoclips:

1. Hedge Fund Roundtable with Leon Cooperman, Michael Steinhardt and David Gerstenhaber on Squawk Box on Monday, August 10
2. George Friedman of Stratfor on Squawk Box on Tuesday, August 11
3. Laszlo Biryini on The Kudlow Report on Wednesday, August 12
4. Tim Hayes of Ned Davis Research on StreetSigns on Friday, August 14
5. Mohamed El- Erian of Pimco on Squawk Box on Friday, August 14
6. Jordan Kotick of Barclays on Closing Bell on Wednesday, August 12
7. Lakshman Achuthan of ECRI on Closing Bell on Friday, August 14
8. Peter Schiff of Euro Pacific Capital on Fast Money on Wednesday, August 12
9. Joe Kernen, Becky Quick & Rick Santelli ganging up on Steve Liesman on Squawk Box on Friday, August 14
10. Treasuries Love’em or Leave’em on Closing Bell on Wednesday, August 12
11. Jane Wells on California’s Prop 2 or luxury for chickens on Squawk on the Street on Friday, August 12
12. Kindle Killer? – A Wall Street Journal View on StreetSigns on Monday, August 10


1. Hedge Fund Roundtable on CNBC Squawk Box – Monday, August 10

A roundtable with Leon Cooperman, Michael Steinhardt and David Gerstenhaber is a rare opportunity indeed. Their joint interview with anchors of CNBC Squawk Box is worth watching. The conversation is divided in to two clips:

We looked forward to hearing what these great investors thought about today’s markets. We were eager to learn what their investments are – what they are buying and what they are shorting. We wanted to hear about their positions in which they have the highest conviction.

But, as we realized later, our expectations assumed Louis Rukeyser was the anchor of the show. We began watching Financial TV with Lou Rukeyser and his show on PBS every Friday night. It was so obvious to us that Lou was always on our side, that he was running the show for our benefit. Lou made it clear to every guest that his viewers came first. Lou never allowed a guest to speak aimlessly, to ramble on. When a guest did, Lou would ask the guest “what would you buy?” or “what would you sell?”.

As we watched the Squawk Box Hedge Fund Summit, we missed Lou Rukeyser terribly. Because, we saw CNBC anchors that were wonderstruck to speak with great investors. The anchors chatted with the hedge fund stars, they exchanged pleasantries and they allowed these guests to share history.

There was a good deal of camaraderie between these guests and CNBC anchors, but precious little of real value to us viewers. This is one of our long-standing issues with CNBC Anchors, especially the anchors on Squawk Box. They have three hours and they think can show off themselves to viewers, show off how they can chat on an equal footing with the investing celebrities.

They are wrong. We are simple, ordinary viewers but our time is valuable. If we wanted idle chatter, we would watch the Today Show or the View. We may like the “Friends N Fun” ambiance of CNBC, but above all, we want value, investment value.

If you disagree with us or if you think we are being too harsh, watch these two clips. You then decide for yourself whether the 30 minutes you spent doing so was worth it. You would get upset when you think how an anchor like Lou Rukeyser would have obtained good investing ideas from these great investors. You will sigh like us and rue the waste of it all.

2. The Fate of Bernanke on Squawk Box
– Tuesday, August 11 – 8:45 am
We direct you to minute 1:38 of this clip to listen to what George Friedman of Stratfor had to say. Stratfor is one of the leading resources for geopolitical intelligence. When George Friedman, Founder of Stratfor, speaks, we listen carefully.

In our opinion, the reappointment of Ben Bernanke is a matter of extreme importance to financial markets – currencies, bonds, stocks and commodities. The Wall Street Journal published a survey that showed that Economists are nearly unanimous that Bernanke should be reappointed. That survey also said that there is 71% chance that President Obama will reappoint Ben Bernanke.

George Friedman disagreed and we think you should hear his views directly by watching from minute 1:38 of this clip. Essentially, Dr. Friedman said that the financial community and Wall Street have very little standing with the Obama Administration and with the American people. So it might be politically beneficial for President Obama to choose some one else as the new Fed Chairman and start afresh.

Rarely have we been as depressed as we became after listening to George Friedman.

3. Making Money Now – Laszlo Biryini of Biryini Associates with Larry Kudlow – Wednesday, August 12 – 7:36 pm

It has been a long time since we heard the views of Laszlo Biryini and we thank Larry Kudlow for the opportunity. Every investor should watch this clip. The chart produced by Biryini is important to get the story. This chart called Bull Market Strength is a composite of the last 6 bull markets.

Biryini says that the strength of the current bull market has already passed the strength of the 1980s bull market, which was the strongest thus far. He also points out that in 1982, the market did not have its first correction for over a year. The other guest was Ed Yardeni of Yardeni Research. His views were similar to Biryini’s.

Laszlo did bring up Biryini’s Law No. 2 – that the negative case is always more compelling and more rational. We could not agree more. We have seen the negative case against US Treasuries discussed with great passion and lucidity on CNBC. Yet, the market keeps taking Treasury prices higher. It is indeed hard to be an optimist but the rewards can make it worthwhile.

In keeping with Larry Kudlow’s fervor, this clip is very bullish. The next couple of clips present different points of view. 
4. Trading the End of the Recession – Tim Hayes of Ned Davis Research with Erin Burnett – Friday, August 14 – 2:04 pm

Ned Davis Research (“NDR”) is a highly respected organization. A few months ago, Ned Davis called for a monster rally in equity markets based on his indicators.  Tim Hayes, we understand, is in charge of long term strategy for NDR  This is a must watch clip.

Tim Hayes says that he would not be surprised to get a short term correction and that he sees this cyclical bull market continuing into early next year.

A request to Erin Burnett. Could she invite Ned Davis himself to discuss the short term trading outlook that Mr. Davis manages at NDR?

5. El-Erian on the Markets – Mohamed El-Erian of Pimco with Joe Kernen – Friday, August 14 – 8:40 am

Mohamed El-Erian, CEO and co-CIO of Pimco, shares his outlook on the markets and the economy. His views are quite different than those expressed by Laszlo Biryini and by Tim Hayes (see clips 3 & 4 above).

Mr. El-Erian called the July-August rally as a sugar high for equity markets. He reiterated his view that markets have come far ahead of the economy. Watch this clip.

6. Market Tick by Tick – Jordan Kotick of Barclays Capital with Melissa Francis – Wednesday, August 12 – 3:15 pm

Jordan Kotick has a real hot hand going these days. So we listen to what he has to say. In this clip, he says he is worried about September and that the market is likely to see a market top of some kind this September.

7.  Return to Spending? – Lakshman Achuthan of ECRI with Melissa Francis – Friday, August 14 – 3:40 pm

ECRI is noted for the accuracy of its indicators. So we tend to listen when Lakshman Achuthan, Managing Director & TV face of ECRI, speaks. In this clip, he speaks plenty. In summary:

  • Our weekly leading indicators are literally on fire
  • Growth rate of the (ECRI) weekly leading index has gone to a 26 year high, levels that we have not seen since the early 1980s
  • This recovery is going to be stronger than the last 2 recoveries
So it would appear that Mr. Achuthan’s economic indicators are aligned with the market indicators of Mr. Biryini (see clip 2 above). 

8. Bull Market or BS? – Peter Schiff on Fast Money
– Wednesday, August 12 – 5:12 pm

We had described the behavior of Fast Money trader Guy Adami as sucking up to Peter Schiff during Mr. Schiff’s appearance on Fast Money on July 30 (see clip 10 of our article about July 26 – August 1 videoclips).

Peter Schiff is not a Perma-Bear as Melissa Lee keeps calling him. He stated clearly in this appearance that he is not short the US market. He also asked Melissa to stop calling him a perma-bear.

Peter Schiff believes that Foreign markets are far more attractive than the US market, especially the Asian markets. He believes that the policies of the Fed are damaging the U.S. Dollar and its purchasing power, Therefore, he is short the Dollar. Frankly, this is the consensus position in today’s markets. It is just that Peter Schiff takes his views to an extreme on air by predicting the crash of the US Dollar.

We were astonished that no Fast Money Trader pointed out to Peter Schiff that he has been dreadfully wrong so far. It is abundantly evident to any market watcher that the Foreign Markets are behaving as leveraged plays on the US market. When the US market goes down, the foreign markets go down more. When the US market goes up, the foreign markets go up more. It is this simple fact that made Peter Schiff have a very bad year in 2008, as he admitted on July 30, and it is this simple fact that is helping Schiff’s performance in this explosive stock rally.

We were surprised to see the entire Fast Money trader team join Guy Adami in sucking up to Peter Schiff even though it was evident they disagreed with him. Karen Finerman said “He is a smart guy” and Joe Terranova piped in “He is brilliant”.

This is not a negative comment about Peter Schiff but about the Fast Money Traders. Now had Jim Cramer been on Fast Money, we would have seen some investment horsesense and some spine.

9. Econ Analysis: CPI Data – Steve Liesman & Rick Santelli on CNBC Squawk Box – Friday, August 14 – 8:30 am

Before this number, Joe Kernen tried to bait Steve Liesman by asking “who would want to buy a 30-Year Treasury Bond”? Joe Kernen is not dumb. He probably knew fully well that the 30-Year Treasury Bond has been rallying strongly for the past several weeks. But, as we see it, Joe Kernen has to make everything about himself. So often he takes crazy-sounding positions just to make himself the center of the conversation. As Robert De Niro says to his traitor cousin in the movie Analyse This may be you weren’t hugged as a child or something?” Or more likely, Joe has a complex about his popular co-anchors, Becky and Carl.

The CPI number released at 8:30 am on Friday, August 14 was a negative number, -2.1% year-over-year. This raised the specter of mild deflation. So Steve Liesman thought to educate Joe Kernen:

  • Let us do a quick calculation after the numbers Rick just gave us…the year-over-year number inflation  rate is -2.1%. Now Joe, what is the Real Rate (after inflation) of the 30-Year Bond? 4.5% – (-2.1%) = 6.6% real yield. Why would you buy that???
Bravo, Steve Liesman. This is the first time we have seen you or anyone at CNBC tell the real story of the 30-Year Treasury Bond, our “Spice Girl” as it were (And Bill Gross calls her “bland”?)

Before Joe Kernen could answer, Becky Quick jumped again to rescue Joe. She said to Steve “Rick said this is probably the end of these inflation drops”. But then, Becky is a charter member of the Hate-Treasuries Club of CNBC Anchors.

Becky also seems to have a very short memory. Did she forget that just last week, Tony Crescenzi of Pimco told her that inflation was likely to bottom in 2011? Or is this another case of Becky trying to save her co-anchor Joe? When will she learn that Joe Kernen usually manages to land on his feet and his rescuers are the ones who get in trouble? Learn from Carl, Becky!

This clip was really not about economic data but about Rick Santelli and the Joe-Becky combo ganging up on Steve Liesman, a man they should listen to. This clip also shows the progressive transformation of old Trader Santelli into new Politico Santelli.

As fas as inflation is concerned, neither Rick nor any one else at CNBC mentioned the report from Goldman Sachs that said that “next market surprise is likely to be falling inflation”. Wouldn’t that make the performance of the 30-Year Treasury even more spicy? Is that why CNBC Anchors ignored this report? We have seen how they hype any Goldman report that is bullish on Oil & commodities.

Two weeks ago, on his show, Joe Kernen admired the stance taken by his colleague Dennis Kneale about bloggers. Following Kneale’s more explicit term, Kernen used the less courageous term “Richardweed” to describe bloggers. We may be wrong but as we recall, Dennis Kneale invited his critics to appear on CNBC and only when these critics refused to show up, did he call them names. Dennis Kneale showed courage. Joe Kernen, not so much!

10. Treasuries: Love’em or Leave’em – Ira Jersey of RBS Capital Markets & Tom Sowanick of Clearbrook Partners with Rebecca Jarvis & Rick Santelli – Wednesday, August 12 – 3:36 pm

We were eager to listen to this interview because to see a CNBC guest who professes love for Treasuries is a rare sight indeed. We should not have worried. The bull turned out to be a chicken. Ira Jersey himself asked “who would want to buy a 30-year Treasury Bond”? This is a Treasury Bull?

Mr. Jersey is bullish on 10-year Treasuries and expects the 10-year yield to drop to 3%. When has the 30-year Treasury Bond ever done badly when the 10-year yield drops by 60 basis points?

Ira Jersey is new to CNBC and he, perhaps, was unnerved by the presence of Rick Santelli, the new CNBC bear on Treasuries.  Rick Santelli grilled Ira Jersey pretty hard and Mr. Jersey folded. A bull does not fold or flip flop. A bull lowers its head and charges ahead.

How much do we miss the old Trader Santelli? But we have to admit that the new Politico Santelli has already mastered the tricks of his new vocation. Last week, he jeered the stock rally as a “Prozac rally” in a Fast Money segment. In this clip, Rick embraces the rally and uses it as an excuse to rattle Ira Jersey. A flip-flop worthy of a veteran Chicago politician. Bravo, Politico Santelli.

The Treasury Bear, Tom Sowanick, growled like a true bear “it is hard to be not bearish on Treasuries”.  Is there a problem with Mr. Sowanick’s memory or with ours? As we seem to recall, Mr. Sowanick was a bear on Treasuries a few years ago and he got badly gored by the Treasuries Bull.

During the recovery of 2003-2007, several large hedge funds and several Bond ex-traders shorted Treasuries as a High Conviction Trade. The results were not pretty. Treasuries stampede like wild elephants. As we recall, one multi-billion dollar hedge fund ended up shutting its doors and many others lost ungodly amounts of money by shorting Treasuries. If our recollection is correct, Mr. Sowanick was one of those hurt badly.

11. Cali Chicken – All Clucked Up – Jane Wells with Erin Burnett & Mark Haines – Friday, August 14 – 10:40 am

This is a hilarious clip that demonstrates that Truth, especially in California, can be stranger than Fiction. Apparently, California voters overwhelmingly approved Prop 2 that forces egg ranchers to give chickens enough room to spread their wings without touching another chicken. It is not clear that this law applies to egg ranchers located in other states that supply eggs to California.

Eggs are a $300 million dollar industry in California. Jane Wells reports that unless this law also is made applicable to non-Californian egg ranchers, the California egg industry will disappear in six years.

What can we say except recall the words of that famed TV philosopher, Archie Bunker, who once noted “California is the land of fruits and nuts, where the fruits are too nutty and the nuts are too fruity”.

12. Kindle Killer? – Brett Arends of The Wall Street Journal with Erin Burnett – Monday, August 10 – 2:52 pm

This is a very interesting clip that should be a must watch for any one who is thinking of buying the Kindle from Amazon or is a shareholder in Amazon.

A bit of history. Sony was the first company to build a videorecorder. Sony made its technology, called Betamax,  proprietary. The other manufacturers like Panasonic, Sharp, Toshiba etc. were not going to allow Sony to capture this entire market. So they got together and created a different format called VHS.  This meant a tape recorded on any non-Sony video recorder could be played back on any other non-Sony video recorder. In contrast, a tape recorded in  Sony Betamax format could only be played back on Sony recorders.

So, VHS ended up dominating the market even though Betamax was the better technology.

Brett Arends wonders whether Amazon’s sexy Kindle might share the fate of Betamax. Like Sony, Amazon has chosen to make its Kindle software proprietary. So a book purchased on Amazon can only be read on Kindle and cannot be read on any other e-reader. Similarly, any book purchased from Barnes & Noble, Borders or any other book store cannot be read on Kindle.

Watch this clip. It persuaded us to not get a Kindle. Thanks, Erin Burnett.

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