Why didn’t Steve Liesman or Andrew Ross Sorkin ask these questions? Is there an implicit CNBC covenant that important guests like Mr. El-Erian are to be spared difficult questions. This seems to be the CNBC-equivalent of NBA’s Michael Jordan rule. But, the NBA viewers loved the Jordan rule because it was entertainment. CNBC’s individual viewers cannot love any potential CNBC “don’t touch Pimco rule” because it is their money and they are likely to lose it because of CNBC’s soft pitches to Pimco gurus. Kessler replied: Then anchor Brian Sullivan asked: Kessler replied: Then Dagen asked the money question – “On that note, how far out would you go into treasury?” Kessler replied: This is an excellent interview and the comments above are just excerpts. We think this clip must be required watching for every CNBC anchor. Perhaps then, we can see interviews on CNBC like this one. So we ask where is Jon Stewart? The Daily Show skewered Jim Cramer for his public comments, comments that were far less objectionable than Kudlow’s comments above. Speaking of Jim Cramer, we recall that on one “Kudlow & Cramer” show, Cramer had a guest who preached the same long term stuff that Matson preaches. No matter how Cramer asked his questions, this guest said “In the year 2100, Dow Jones would be at one million (or some such outlandish figure)”. We recall Cramer telling this guest that CNBC’s viewers are not endowments, that they are investing for their retirement or for their kids, but they do not invest for the year 2100. But this guest was not fazed in the least. He kept repeating his shtick about where Dow would be in 2100. This guest also refused to provide a single stock recommendation as we recall.
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.
Sovereign Debt
The Sovereign Debt crisis hit front page this week and even the European Union moved to announce “solidarity” with Greece. What this means, we do not know and neither does any one else. But we do know that EU will have to tell us what it will do in or before April 2009. That is when Greece will come to the markets to raise new debt. Perhaps, we should stop talking about the EU and begin speaking about Germany. The facade of the EU rests upon the financial pillar of Germany. It is an open question whether Germans will use their hard-saved money to rescue profligate peripheral Europeans whom they disrespect.
Did anyone notice that the Dubai CDS spreads widened on Friday? Why? We wait to be enlightened.
Stocks
Stocks meandered all week, up one day and down the next to close virtually flat. Were stocks correcting a short-term overbought condition or an intermediate term oversold condition? We don’t know. So we listened to experts on CNBC. As usual, the vast majority of equity “fee-collectors” on CNBC gave us the tired old spiel of stocks for the long term.
We are thankful to Maria Bartiromo for inviting the noted technician Rick Bensignor on her show this week. But Maria, when you invite a guest, shouldn’t you let him speak? And when you invite a technical analyst, why tell him to not talk about technicals and discuss long term fundamentals instead. Maria gave far more time to long term ramblings of Clark Winter about China & India. Is that because Maria is more comfortable discussing soft themes rather than focusing on what investors care most, what they should do with stocks in the current market turbulence? Come on Maria, you are better than that. You should remove the Davos fog that has built up in your mind. Fancy dinners, expensive wines and adulatory conversations with luminaries begging for visibility on your network, that’s the Davos fog. The stock market is pure blocking and tackling. It is middle America, not fancy Switzerland.
Strangely, the show we criticized the most in 2009 continues this year to be the most useful in providing diversity of opinion. CNBC Fast Money featured real debates between its traders. For us, the sanest commentary came from Gary Kaminsky, the veteran money manager from Neuberger Berman. He was succinct, simple and direct as only a real veteran can be. Fast Money invited Dennis Gartman, an old favorite of ours, to speak clearly about the currency and commodity markets.
Fast Money also invited a snarling bear on copper, a man who says that the price of copper will fall to $1 in 2010. We had never heard of David Threlkeld, the President of Resolved Inc. He is a noted commodity analyst and we are indebted to Fast Money for bringing his views to our attention. Mr. Threlkeld believes that “copper is being artificially propped up by China buying and simply being stored away in warehouses”. This copper inventory is about 2 million tons. Since this inventory is not being used, at some time, it will be delivered back to the commodities markets and that will cause the price of copper to fall to $1.
Fast Money did a special segment on the prediction by Richard Russell that the market will return to March lows. Russell is renowned author of the Dow Theory Newsletter. According to Fast Money, the Russell opinion states “I see the Dow as the heavy side of the see-saw, and the heavy side of the see-saw, having tested the horizontal (Dow 10,725) and having failed to climb above it, is now heading down to the level from which the whole bear market rally began.” We must give kudos to Guy Adami of Fast Money who gave Mr. Russell due credit “listen, this guy has been writing Dow Theory letters since 1958, oldest service continuously written by one person in the industry and he has been right a number of times. Don’t discount him completely” Nicely done, Signor Adami.
Treasuries
This was a bad week for Treasuries. The 10-year auction was bad and the 30-year auction was awful. CNBC’s Rick Santelli rated these as “D” and “F” respectively. Readers might recall that the 30-Year auction in December was also rated as “F”. So this is the second consecutively awful 30-year auction. The conventional wisdom is that such auctions are buying opportunities like awfully priced large equity secondaries. We remind readers that Treasuries continued to sell off for the rest of December after December’s “F” rated 30-year auction, before rallying in January.
You can always count on Large Speculators to add shorts when Treasuries act badly. As of this week, Large Speculators were short 107,196 contracts (over $10 Billion notional) in the 30-Year Treasury and short 141, 303 (about $14 Billion notional) contracts in the 10-Year Treasury. Amazingly, these huge amounts are not the largest short positions for the past year. According to CFTC, max short positions in the 30-year were 129,933 (about $13 billion) and in the 10-year 190,708 contracts (about $19 billion). So short positions could indeed build in the next few weeks before some event lights a match and we see fireworks of shorts exploding. There is one bullish indicator though. Small Speculators have been covering their shorts in the 30-Year Treasury for the past 3 weeks.
In contrast, the Large Speculators have massed their long positions with 203,985 (about $20 billion) contracts in the 2-Year Treasury. A flattener trade anyone?
Our friends at CNBC were virtually unanimous this week in expressing their dislike of Treasuries, deriding them as mere safe haven plays. Our “most useful” CNBC anchor, Maria Bartiromo, kept asking her guests for an asset class in which investors could hide. Guess she forgot what Richard Bernstein told her on her own show on February 4 that the only asset class that provides true diversification is long maturity Treasuries. Did you forget that Maria or were you just carrying on your Anti-Treasury mission?
So again, if we want to find bullish opinion on US Treasuries, we need to leave CNBC. This time we go to Fo
x Business. Anchors Dagen McDowell & Brian Sullivan invited veteran Treasury investor Robert Kessler to discuss his views about Treasuries (see clip 4 below).
Speaking of Mr. Sullivan, we must give credit to his ex-colleague Erin Burnett. About 3-4 weeks ago, she invited a fixed income manager on her morning show. This manager fearlessly predicted that the yield of the 30-Year Treasury will fall to 2.75% and that this fall will result in a 30% gain in the price of the 30-Year Treasury Bond. The symmetry of the 30-Year Treasury providing a 30% return appealed to Erin Burnett, as we recall. Unfortunately, we cannot recall the name of this manager and so we could not search for this clip on cnbc.com. This was an interesting interview and Erin, if you can find it for us, we will discuss it next week.
Silence may amount to cruelty, says the Indian Supreme Court
In the above section, we asked CNBC’s Erin Burnett to help us find a clip of one of her interviews. As we wrote that request, we recalled seeing an article in the online edition of the Times of India. According to this article, the Supreme Court of India opined this week that “the silence of a partner could amount to cruelty”. This was during their hearing of a divorce case.
The case was first heard in a district court in which the Judge ruled for the husband. The State High Court reversed this ruling. The final appeal is being heard by the Supreme Court of India. We have always maintained that India is a more litigious society than America. We know of cases that have gone on for generations. We tried to say this Tyler Mathisen of CNBC some time ago. But he scoffed at us (so what else is new with our CNBC friends?). Unlike us, Tyler seems blessed with convictions that neither facts nor reason can budge. But he is a nice guy.
Getting back to silence as cruelty, we would really like to see this definition of cruelty extended to social and business relationships. If we could collect damages from every female relative, friend or associate that has subjected us to this form of cruelty, we would be rich, really rich. Just look at CNBC. We have tried to reach out patiently and respectfully to a few CNBC anchors. Male CNBC Anchors have on some occasions responded with short pleasantries or terse comments but Women CNBC Anchors have always treated us to “silent cruelty” even when we have simply tried to help with ideas.
Will Erin Burnett help us find the clip of her interview? Or will she also be “silently cruel” like her colleagues?
Featured Videoclips:
1. Economic “PowerLunch”, Pt. 2 – Warren Buffet & Hank Paulson at the Omaha Chamber of Commerce – Tuesday, February 9
Warren Buffet hosted Former Treasury Secretary Hank Paulson to a televised conversation at the Omaha Chamber of Commerce. Two other clips titled Buffet on Bush & Economic “PowerLunch” can be found at cnbc.com. A summary of the conversation can be found at Paulson, Buffett say U.S. needed tough medicine and at Warren Buffett: I Have Greater Appreciation of Pres. Bush’s Handling of Credit Crisis on cnbc.com.
This entire conversation is a must watch, a unique opportunity. We wish to focus on a portion of the conversation that
has real significance to individual investors and to all anchors of financial news shows. This portion begins at minute 12:02 of the 31:10 minute clip.
Stop the Presses. This is a lesson for each and every anchor of financial network shows – Ask every expert guest this question. Every guest, whether a stock mutual fund manager, bond manager or whatever, is an individual with his or her own money. Ask that guest this exact question. In our opinion, this is the most important question and it must be asked.
We have seen too many managers give the party line about the funds or the products they pitch. But no one asks them how their monies are invested. Bravo Mr. Buffett. America should make you the chairman of the SEC & FCC to impose this discipline on financial networks. (see clip 5 below for a blatant example of anti-Buffett behavior, a guide to what not to do as an anchor).
Again stop the presses. Based on what see and based on what we read, a large number of Baby Boomers have reached the same conclusion. Having lost a big chunk in 2008, they are simply not willing to lose more. This is why so much money keeps going to fixed income. This is a secular trend in our opinion and a trend that is negative for ratings of networks like CNBC. Anchors at CNBC keep peddling the same tired drivel to investors who keep tuning them out. Yet, despite the drop in their ratings, CNBC cannot bring itself to diversify its 99.9% focus on stocks by helping investors with bond investments.
That settles it. Move over Maria Bartiromo. Warren Buffett just became the best interviewer we have ever seen on CNBC. See what a professional can do with an interview that a journalist anchor simply cannot. See what fun such an interview can be. This is what we were trying to say in our August 2009 article Financial Journalist Networks Or EMPNs?
Then Paulson made the most important remark of his conversation:
We concur totally. In fact, we simply do not understand how well known thinkers come on CNBC to tell us that America is in decline and that China, India, Brazil have it much better than us. That is just nuts. America has the best hand of all countries of this world and every other country in the world would rather have our cards than what they have. We are absolutely convinced of this.
But as Mr. Paulson says further, we have to get our focus and our fiscal act together.
2. Nouriel Roubini on CNBC Squawk Box – Friday, February 12
Nouriel Roubini, the Dr. Doom of 2008, now prefers the handle “Roubini the Realist”. His views are insightful and interesting as always. Listen to him speak at Greece Default Worries and at Sovereign Risks & Realities on cnbc.com. You could also read summaries of his comments at Low Global Growth Will Persist: Roubini and at Roubini: Greece Aid Is Step in Right Direction on cnbc.com.
Andrew Ross Sorkin of the New York Times & Steve Liesman of CNBC substituted as anchors for vacationing Joe Kernen & Carl Quintannia. Both Andrew and Steve added content, These are veteran journalists and it showed. Steve Liesman was especially good in asking real questions and providing detail about economic indicators.
But Becky Quick seemed put out by Steve Liesman’s knowledge and authority. She has always been treated with deference by Carl & Joe because of her fan appeal and she did not seem to get it from Steve or Andrew. So she interrupted Steve often and spoke right over him at times. Would it be ok for us to say Grow up, Becky?
3. Mohamed Measures Greece – Pimco’s Mohamed El-Erian on CNBC Squawk Box – Friday, February 12
Mohamed El-Erian is the CEO & Co-CIO of Pimco. With the great Bill Gross and Tony Crescenzi, Mohamed is the 3rd of the Pimco expert guest triumvirate. Bill Gross tries to play the reincarnation of Talleyrand while Tony Crescenzi is the simple, succinct speaker, sort of a man for all people. Mohamed El-Erian is the cerebral, erudite thinker and a measured speaker, your proverbial Harvard guy. Watching these three speak without tripping over each other could become the new version of watching the Brezhnev, Kosygin, Mikoyan politburo.
Read a summary of Mr. El-Erian’s comments at Foreign Debt Troubles Causing Pain For US Investors: El-Erian on cnbc.com. Unfortunately, the CNBC summary makes no mention of the big trade of Pimco buying German Bunds over US Treasuries.
A quick summary for new readers – In the first week of January 2009, Bill Gross told CNBC that he recommended buying German Government Bonds rather than US Treasuries. There is an immediate currency risk when Americans buy International Bonds. Mr. Gross did not disclose whether he had hedged his Euro currency risk when he bought German Bonds and CNBC’s Erin Burnett, Joe Kernen, Carl Quintannia did not ask him. We discussed this in clip 1 of our January 9 videoclips article. Last week, Bill Gross appeared on CNBC and again spoke about German & French Bonds. Again, he did not disclose whether he had hedged the Euro currency or not. The CNBC Anchor, Maria Bartiromo did not ask him despite the fact the Euro was virtually in free fall that day. We discussed this in clip 6 of our February 6 videoclips article.
Would Steve Liesman walk in where his colleagues refused to tread? At minute 03:10 of this clip, Steve begins:
Mr El-Erian is cerebral, we are not. So we were confused by his remarks:
At least, Andrew and Steve went a wee bit farther than other CNBC anchors. Steve did ask whether Pimco was short US Mortgages to which El-Erian said they were underweight US Mortgages. Then the discussion shifted to quantitative easing between Roubini and El-Erian. At the end, Becky Quick performed her role by saying sweetly that she is glad Mohamed is back from Australia.
Our final question is why didn’t the CNBC summary of the El-Erian comments include these issues?
4. Are Treasurys a Safe haven? Robert Kessler on Fox Business – Friday, February 12
Robert Kessler is a veteran investor and is usually bullish on US Treasuries. This is a good clip in which the Fox Business anchors ask good succinct questions. The Fox Business website provides automatically generated transcripts of their videos. Read the transcript of this interview and watch the clip. You will read and hear views that, for some reason, cannot be found on CNBC.
The interview began with a discussion of how the Greece events are bullish for Treasuries. Then anchor Dagen McDowell asked:
5. Bull vs. Bear – Mark Matson and Dean Barber with CNBC’s Larry Kudlow – Friday, February 12
Larry Kudlow begins this segment by asking his guests “how are the overseas developments affecting your stock investments here at home and what should you do about them?”
Dean Barber of Barber Financial Group offered sensible viewpoints about the European contagion and told viewers that these issues are a long term situation. He said they are positioned conservatively and he said “caution is the word of the day here”.
Melissa Francis, in her cutish, optimistic roleplay, asked Mark Matson “Is any of this new and is that why we are seeing a sell off today?”
We wrote about our disdain for the glib views of Mark Matson in clip 5 of our January 16 videoclips article. Every man is entitled to his views and so is Matson. But Matson’s blase stocks-are-the-best for the long term garbage was thoroughly discredited in 2008 and early 2009. His concept of diversifying stock portfolios with other types of stock portfolios was conclusively shot down in the parallel crash in all risk-categories in that awful bear market. This is why really intelligent investors like Richard Bernstein tell viewers that only long term Treasuries offer a true diversification from risk assets like stocks & commodities.
Matson’s comments, we felt, gave Larry Kudlow the perfect opportunity to play Warren Buffett and ask Mark Matson about his own personal assets. Are Matson’s personal monies invested forever in stocks as he preaches to CNBC viewers?
He did not. He let Matson go on blithely about forget the short term and invest for the long term spiel. Then he actually praised him “By the way, Mark, I just wanted to say how much I admire your spirit on that statement and I love that wealth creation through equities in the long run. I get attacked by these left wing bloggers saying exactly the same thing but I feel good this morning, I feel like you are giving me comfort. I like that a lot….That is a very brave statement and I love it. You are the spirit of America. of optimism, Let us never lose that despite the fact that there is a lot of bad stuff out there”
Unlike Kudlow, we feel awful. Especially for CNBC’s individual investor viewers. Many of these viewers saw their portfolios go down 20%, 30% in 2008. The markets have again turned turbulent. So these trusting, honest investors tune in to day-time CNBC to get information, insight and guidance of how to invest in turbulent markets. Instead they are subjected to this nonsense, the same nonsense that caused them to lose large portions of their savings two years ago.
So we imitate Warren Buffet (see clip1 above) and ask whether the personal assets of Larry Kudlow are invested in stocks for the long term as he preaches. We also ask the same question about Mr.Matson’s personal assets. Here is the point:
And here is the crux of this lesson. Jim Cramer actually apologized to his viewers for this guest and admitted that the conversation with this guest had been of no value whatsoever. This is one of the reasons why we believe that, despite the zany format and the occasional rants, Jim Cramer has a core of honesty, ethics and care for the safety of the monies of his viewers. This is why we think Cramer went on TV in October 2008 to tell viewers to take money out of the stock market. He saved his viewers the steep drop from 11,000 in the Dow to 6,500.
Here we wish to apologize to Jim Cramer for including Kudlow with him in our article Financial Journalist Networks Or EMPNs? In our opinion, the ethical bent of Jim Cramer is very different than Kudlow’s, based on Kudlow’s own public comments on CNBC.
Let us be clear. We do not know Larry Kudlow personally. Our comments are not about his personal beliefs whatever they might be but about what he articulates publicly on CNBC. In other words, we criticize the behavior of the man, behavior that we can see and from which we can draw inferences. For example, Larry Kudlow has spoken on TV about his house which has tennis courts. He has also said that he owns a Manhattan apartment. So we assume he has a substantial amount of money.
Therefore it is reasonable and in the public interest to ask how Mr. Kudlow invests his own money. It is incumbent on every journalist to ask about how Kudlow invests his own money when Mr. Kudlow himself chooses to broadcast his recommendations to all viewers of CNBC, regardless of their personal requirements, age, financial risk tolerances or needs. In other words, Larry Kudlow, in our opinion, violated the principle of suitability when he gave his blessings to Matson’s generic comments about long term investing.
Larry Kudlow could have followed the excellent example of Former Treasury Secretary Hank Paulson. In clip 1 above, we see Mr. Paulson describing his own personal needs of keeping what he has rather than growing it; we see Mr. Paulson first disclose his own investments. Then and then alone, does Mr. Paulson speak about what a young person should do with his or her long term investments.
Larry Kudlow could have made Mr. Matson modify his recommendations by distinguishing between needs of investors of different ages, incomes, assets and risk tolerances. Mr. Kudlow did not. Instead he heaped verbal honors on Mark Matson for expressing the same spiel that has ruined the finances of so many CNBC viewers.
Mr. Kudlow, please let us know if we have misjudged you or been unfair to you. Write to us, call us or invite us on your show. Allow us to ask you questions and you can criticize us for any mistakes you think we have made about you.
We have criticized other CNBC Anchors like Mark Haines, Sue Herrera and Tyler Mathisen in the past about how they interview glib stock managers and about their own comments. We think the criticism was justified and based on their own behavior on CNBC. We have watched these anchors for years and we believe these anchors to be ethically honest people. We may question their knowledge, their views and their lack of investment expertise but we have never questioned their intentions.
Larry Kudlow is different from these journalist anchors. Mr. Kudlow is a trained economist. He has worked at the Federal Reserve and held professional positions of high stature on Wall Street. He is in a different league than Haines, Mathisen & Herrera in terms of investment knowledge and experience.
This is why, in our opinion, the public behavior of Larry Kudlow on CNBC is far more objectionable than the behavior of his journalist colleagues. When he rants, he seems to not care a whit about the impact of his comments on the trusting, honest individual investors viewers of CNBC. Perhaps, Mr. Kudlow is already behaving like a US Senator, a position that some reports say he covets. Whether he does or not we do not know. But we do feel that his public comments are beginning to exhibit standards often ascribed to that august body called the United States Congress.
Again, if you feel we are being unfair. call us on your show, Mr. Kudlow. You can tell us where we are wrong and we will try to defend our opinion. Let CNBC’s viewers decide the debate. We will accept their verdict and publicly apologize to you if the viewers agree with you. Otherwise, you apologize to CNBC viewers and promise to be rational, sensible & suitable in your investing opinions on CNBC.
Send your feedback to [email protected]
Interesting Videoclips of the Week (February 7 – February 13)
