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.
Words of the Wise!
- “You have the great problem of a potential disintegration of the euro” – Paul Volcker – Thursday, March 13
- “when you have a wave of banking crisis like we have just had, government debt explodes and like day follows night, you get these sovereign debt crisis.. I think it is going to play out for a long time…” – Kenneth Rogoff – Friday, May 14 (see clip 1 below)
- “growth is not going to be enough to pick up jobs, I don’t think housing is coming back, I bet it falls further, there are a lot of supports in the economy that eventually have to come off .” – Kenneth Rogoff – Friday, May 14 (see clip 1 below)
- “Gold is losing upside momentum, extreme upside momentum in 2006, less at the high in 08, less at the high last year in late 09 and even less now..you have got a background of slowing upside move against extreme positive sentiment” – Robert Prechter – Friday, March 14 (see clip 2 below)
- “for investors the worst time to buy something is when it is overbought and giving bearish momentum sell signals as Gold is currently doing” – Walter Zimmerman – Wednesday, March 12 (see clip 3 below)
- “Time to put the UK on the radar….The Chinese market is right on the edge” – Jordan Kotick – Thursday, March 13 (see clip 5 below)
- “real organic personal income is nearly $500 billion lower now than it was at the peak 16 months ago and this has never occurred before coming out of any technical recession” – David Rosenberg – Friday, March 14
- “The Emerging Markets story has been a credit story, people don’t realize it yet,…first it was US housing, then it was Iceland, then Greece, we will see more and more credit stories around the world….Emerging Markets stories are never based on equity, they are based on debt and leverage..” – Richard Bernstein – Thursday, May 13
Week that came in like a lion and went out like a lamb for slaughter
The Europeans found their manhood last weekend and approved the ginormous credit facility of Euro 750 billion or $ 1 trillion to ostensibly protect Greece et al from default and but really to protect banks of core Europe from crippling losses. The world’s equity markets exploded to the upside on Monday with the S&P rising 4.04% on that day. But the biggest indicator of them all, the Euro hit a high of 1.31 on Sunday evening and fell slowly but continuously on Monday. This foretold the fate of the equity rally. True enough, the week ended with two ugly trading days on Thursday and Friday.
What happens next week is anyone’s guess but we wonder whether we might see a reverse of this week, weak Monday-Tuesday leading to an expiration rally. This week might have emboldened the bears to put on shorts with impunity and expiration weeks have been known to create a bonfire of reckless shorts.
Rarely has a trade been as one-sided as shorting the Euro and deservedly so. Last fall, a few brave souls like Robert Prechter, Walter Zimmerman and Gary Shilling began speaking about the Euro reaching parity with the US Dollar. They were ignored or treated with derision. On this Friday, the talk of Euro parity with the US Dollar seemed to have become commonplace.
They did not just talk the talk but walked the walk and ran the run. The large speculator short position rose by 10% in the last week and by 27% in the last two weeks. The Euro is in free fall and it broke 1.24 on Friday. The momentum in this data is just awesome. We are not brave enough to predict what might cause a reversal.
Having pleaded cowardice, we wonder whether a default by Greece could be the trigger to cover the shorts in the Euro? All week, talk intensified that the eventual solution for Greece is a default.
An interesting comment came from Jordan Kotick of Barclays who said that UK should get on the radar screen of investors because of the action in the the UK-German bond spread (see clip 5 below).
Gold
Gold spiked earlier this week and went to a new 2010 high as the Euro kept falling. This may be the other overcrowded trade in the investment world. On Tuesday, CNBC Fast Money went parabolic in their rapture about the new high in Gold. Then a strange thing happened. As if on a dime, Gold stopped its vertical ascent and began a slow backtrack. On Friday, Gold opened up in New York and then reversed rather pointedly.
To its credit, the rest of CNBC did a good job of covering the action in Gold. They did bring in lovers of Gold but they also brought in a number of people who expressed their concern about the technical action in Gold. This included cautious bulls like trading strategist Scott Redler and true bears like Robert Prechter and Walter Zimmerman (see clips 2 & 3 below).
CNBC’s Erin Burnett & Maria Bartiromo did segments on Thursday about the new ATM in Abu Dhabi that dispenses small gold bars. It was Erin Burnett who said “if that doesn’t spell a bubble, what does?”
Treasuries
David Rosenberg of Gluskin Sheff wrote on Friday “It is rather unbelievable but the asset class that has delivered the best risk-adjusted returns for a decade now is still so completely maligned.” Needless to say, he was talking about Treasury Bonds.
Not that we needed a reminder. Watching CNBC Fast Money is enough to see the malignant contempt towards Treasuries (see next section). CFTC data showed that the large speculator short position in Treasuries actually increased this week. And what an increase? The short position in 30-Year Bond Futures increased week-over-week by 19.6% (82,113 to 99,116 contracts) and the short position in 10-Year Bond Futures increased by 9.8% (218,249 to 239,797 contracts).
Would it be a Bonfire of the Global Macro Vanities or more like an Inferno of Speculator Arrogance when these shorts are forced to cover? This is a consummation devoutly to be wished.
You got to concede that our CNBC Anchor friends are nothing if not consistent. Readers might recall that CNBC’s Mary Thompson gave glowing coverage to Morgan Stanley’s prediction that 10-Year Treasury yields would go up to 4.5% by June 2010 and to 5.5% by year-end 2010. Every CNBC Anchor trumpeted this prediction (they seem to like nothing better than to malign investing in Treasuries) and the most vociferous was CNBC Fast Money. This entire network ignored the opposite prediction by Goldman that 10-year Treasury yields would fall to 3%. (see sections Treasuries & Morgan vs. Goldman in our December 13 – December 19, 2009 videoclips article ).
Last Monday, Morgan Stanley withdrew their 5.5% yield prediction and extended the 4.5% yield prediction to year-end 2010. Did CNBC Anchors inform their viewers of this volte face by Morgan Stanley? Did any one expect they would? No is the short answer to both questions.
But the CNBC Anti-Treasuries Anchor Phalanx showed a small crack this week. Erin Burnett actually did a bullish segment on the 30-Year Treasury auction and made positive comments about investor appetite for duration on Thursday (see clip 4 below). Will others follow her lead or will Erin Burnett fall back in line with her colleagues?
GLT on GLD – CNBC Fast Money bares its soul
CNBC shows have a way of ringing a bell. We wrote last year that CNBC’s disdain of Treasuries on June 10, 2009 could end up marking the bottom in Treasury prices and top in Treasury yields. That guess proved to be accurate.
Today, we wonder whether the Fast Money opening segment on Tuesday, May 11 might end up ringing the bell for at least a short term top in Gold prices. The wild abandon, the sheer rapture of the show’s GLT team of Steve Grasso, Melissa Lee and Joe Terranova about Gold and GLD, the Gold ETF, needs to be seen to be believed. “Solid Gold” Melissa Lee exulted. “Gold is the one trade you have to have” exhorted Joe Terranova. “You don’t want the Dollar, you don’t want the Euro, what do you want as Joe said, Gold“, said Steve Grasso.
This sounded strange to us because the US Dollar is in the midst of a bull run. Perhaps the Dollar trades differently on the NYSE where Grasso acts as Fast Money’s “Governor“. Grasso added “all these banks have to get out of the Euro, they don’t want to get back into the Dollar and so they are buying Gold” We did not realize that Gold is now traded on the NYSE and Steve Grasso acts as the floor trader for European Banks. Does Duncan Niederauer know of this development?
Being Fast Money, it wasn’t enough to run up Gold as the ultimate cure-all for their viewers, they had to trash US Treasuries at the same time. As soon as Steve Grasso finished said the banks are buying Gold, Fast Money Anchor Melissa Lee asked sarcastically (at minute 01:50 of the clip) “and they are not going to buy our Treasuries? ” Steve Grasso looked into the camera and laughed derisively and someone else on the desk joined him in loud laughter.
Let us look at the facts. According to Trim Tabs, approx. $2.3 billion flowed into GLD in the past week and GLD jumped up 3% on Tuesday. Surely, European Banks have more than $2,3 billion in euros. If they are getting out of the Euro and buying Gold as Steve Grasso said, where is that buying? Gold is a small market and Gold would rally much much more than mere 3% if European Banks were flooding into Gold.
In contrast, investors stepped up to buy $80 billion of new Treasury auctions this week in addition to normal secondary trading. If this buying had gone into Gold, then Gold would have been up more than 120% this week alone.
This conversation between Melissa Lee and Steve Grasso smacks of sheer intellectual dishonesty and this, we think, may be a true revelation of CNBC Fast Money’s soul. Facts do not matter, honesty is irrelevant. What matters is their personal bias and their goal is to mimic the trading jock rooms of old wall street. This show practically tells its viewers that the Anchor & her Trader Team don’t give a heck about their viewer’s investments.
But to be fair, the 2010 edition of Fast Money is better than the 2009 edition. Why? Better and more honest trader talent! Listen to what new Fast Money member Anthony Scaramacci said to the Grasso-Lee-Terranova team “gold has gone up a little bit, it went up a lot today, Ok. But you really think this is the answer?…I just want to take the contrarian side for our viewers, I am thinking that Gold is probably full to the top right now, everyone in the market is long gold, gold may trade higher in the last gasp, I just want to take the other side for the people tonight.. ”
Last year, no one on the Fast Money Trader Team had the courage to take a stand like this. Kudos to Mr. Scaramacci. Traders like Gary Kaminsky, Brian Kelly and Anthony Scaramacci are the reason Fast Money 2010 is much better than its 2009 edition. If CNBC could find a more intellectually honest anchor, then this show could actually achieve its promise.
But, we confess to be worried about Mr. Scaramacci getting ex-communicated from CNBC Fast Money. Because he used words that could be interpreted as sacrilege by the show. After all, the show’s central faith is Global Growth & Inflation. So we worry about Mr. Scaramacci when he asks “Why isn’t Gold trading at $2,000 then?..We are awash in liquidity. Answer – we have Deflation. We have global overcapacity….Just tell me the reason why Gold is going higher?”
To be absolutely clear, our objection is not to the recommendation of Gold as a trade or investment. David Rosenberg of Gluskin Sheff is much more bullish of Gold than the GLT team of Fast Money. Mr. Rosenberg believes that Gold is in a secular bull market and Gold could eventually trade as high as $3,000. But he is concerned that Gold is overbought in the near term and it could be ripe for a setback.
We object to the utterly flippant, rah-rah yelling about Gold by the Fast Money GLT team in this segment and the “who cares a hoot about the viewers” attitude that we sense from this team.
Dennis Gartman & Fast Money Show – Man & Mice?
Dennis Gartman, the founder of The Gartman Letter (“TGL“), is a highly regarded investor. Mr. Gartman, we understand, put on the long Gold – Short Euro, Long Gold – Short Pound and other such trades some time ago. These have been great, great trades. In the same clip discussed above , Dennis Gartman explains his reasons for the trades and does so in a characteristically thoughtful, insightful manner.
In full disclosure, we do not receive TGL and we have no business relationship with TGL or Mr. Gartman. We do not always concur with Mr. Gartman’s public views. To the best of our recollection and knowledge, Dennis has not been bullish of long duration Treasuries since 2005. He tends to short Treasury futures when the opportunity presents itself.
Dennis Gartman is distinguished by his trading acumen and by his intellectual honesty. He discloses his trades in his newletter and he discloses when he closes these trades. We understand that he publishes his performance monthly and annually. He is a real man.
Unlike Dennis Gartman, the Fast Money Trader team does not disclose the results of their trade recommendations. They make random trade recommendations on the fly every day. But they do NOT publicly close these trade recommendations. They do NOT disclose the performance of their trades recommended on Fast Money and they do NOT disclose the performance of their own trading accounts or funds.
This difference is why we consider Dennis Gartman to be a Man and the Fast Money traders to be, well, the nicest word that comes to mind is Mice.
Featured Videoclips:
- Kenneth Rogoff on CNBC on Friday, May 14
- Robert Prechter on CNBC on Friday, May 14
- Walter Zimmerman on CNBC on Wednesday, March 12
- Rick Volpe on CNBC on Thursday, March 13
- Jordan Kotick on CNBC on Thursday, March 13
- Jim Cramer on Mad Money on Tuesday, March 11
- Ken Langone and Dick Grasso on CNBC on Thursday, March 13
1. Kenneth Rogoff on CNBC Squawk Box – Friday, May 14
Professor Kenneth Rogoff, a former IMF Director, is the Thomas D. Cabot Professor of Economics & Public Policy at Harvard University. He is the co-author with Professor Carmen Reinhart of the widely acclaimed book “This Time is Different “.
A summary of his views can be found at EU Bailout Package Just a ‘Fig Leaf” at cnbc.com. A few excerpts are below:
- It’s a fig leaf for the ECB to go across Europe and bailout countries. The Germans know that they’re going to end up paying more than the other countries,
- There’s a little flavor of California bailing out Arizona, here,
- It was nuts to let Greece and Portugal in (to the EU) as quickly as they did,….They just looked the other way and decided to let them in. Greece had high inflation, default risks. Portugal had an IMF program early as 1984.
- I think they should have let Portugal and Greece go before doing the bailout — not overnight — but in an orderly fashion
Prof. Rogoff was a guest host and his comments are spread over a few clips:
2. Gold Bull vs. Bear – Robert Prechter & Jerry Castellini on with CNBC’s Simon Hobbs – Friday, May 14
Mr. Castellini of CastleArk Management is the Gold Bull and Robert Prechter of Elliott Wave International is the Gold Bear.
Mr. Castellini made the standard arguments for a bull market in Gold and said it is getting pretty late in the argument against Gold. He added that the case is overwhelming for Gold.
Mr. Prechter viewed Gold as a technician and looked at two aspects of technical analysis. He said:
- In 1999-2001, ..showed only 5% bulls ..we have had a nice beautiful nine year rally in Gold and now we have been bumping up against these highs, we are seeing readings of 97%-98% bulls..to realize how extreme that number is – 98% is the kind of reading we saw at the stock market low in March 2009 that has led to a 80% move, the same kind of reading we saw in silver in March 2008 and silver has not met that price since..so that is a very extreme number ..it tends to happen days or weeks before the highs, …so I think there is some risk here…
- we can also see that gold is losing upside momentum, extreme upside momentum in 2006, less at the high in 08, less at the high last year in late 09 and even less now…you have got a background of slowing upside momentum against extreme positive sentiment and many many reasons to own it which were completely absent in early 2001 when it was a buy..
3. Gold Rush – Walter Zimmerman & Robert Cohen with CNBC’s Maria Bartiromo – Wednesday, March 12
Walter Zimmerman is the Chief Technical Analyst at United-ICAP and Robert Cohen, Portfolio Manager for the top-rated Dynamic Gold & Precious Metals Fund.
This interview begins at minute 03:31 of the 08:07 minute clip. Mr. Cohen gives several fundamental reasons to own gold and than asks “what are the alternatives now?” His answer:
- The Euro is not looking as good, I think we see a long term viewpoint for Gold for that reason and in G8 countries you have an ageing population. So as more people move into their retirement age, you have a shrinking percentage of working class with a debt burden for future pension costs and health care cost liabilities. Ultimately governments print their way out of these problems and gold is the only monetary asset out there that central banks around the world use to back their foreign exchange reserves.
Mr. Zimmerman is bullish in the short term but sees technical headwinds out there. He said:
- In the last few years, there have been two big technical signals in gold and we focus on the price action…Back from 1034 ..the rally that preceded the decline to 681. That high at 1034 was marked by bearish momentum divergence on the weekly charts..Gold was making new high but the momentum was not confirming. That gave us a sell signal. From there Gold tumbled to 681 late 2008 when you had the reverse bearish momentum buy signals on the weekly charts.
- Here now as gold is making new highs breaking above the 1226 from December of last year, we are also getting bearish momentum sell signals. It is clearly a short term momentum in play for traders but for investors the worst time to buy something is when it is overbought and giving bearish momentum sell signals as Gold is currently doing ..
- Debt default is deflationary and there is still a risk that this whole thing is going to end in a deflationary debacle and while Gold will probably hold its wealth better than any other commodity, it will still be subject to the ravages of deflation…
4. Tepid Treasury Sale – Richard Volpe with CNBC’s Erin Burnett – Thursday, March 13
Folks, this is a path-breaking segment, the first ever entire segment on CNBC about a Treasury auction. Wow! We should have given this clip the pole position this week because of its sheer rarity. We thank Erin Burnett for her courage and hope that covering Treasuries becomes a regular event on CNBC.
Erin’s guest is Richard Volpe, Co-Head of US & Global Rates for RBS, one of the biggest primary dealers in the country.
- Volpe – …The demand for the 30-Year Bonds comes mostly from domestic accounts (are you listening Sue and Michelle?) than the shorter paper where we have a lot of foreign interest. So I think overall there has been a pickup of demand in the back end of the market and the trend is going to be towards lower yields.
- Burnett – So what do you make of that trend? Because everyone kept saying it is one thing to see strength on the short end of the curve where you are taking a lot less risk and it is another to see strength at the longer term, longer term bet on America and its ability to deal with the entitlement problem and everything else if you are looking at 30 years ..is it fair to read that into this?
- Volpe – you know I think there is just a comfort in moving out on the curve right now I think there is an expectation that yields are going to be low for a long time, as our analyst likes to say “it seems to be the only game in town right now”..so what you have is total domestic borrowing as a percentage of GDP has gone way down and but that percentage in terms of Treasuries has gone way up..it is a bigger slice of a smaller pie,,and investors need to move into that territory..
- Burnett – So many people out there say that no one is going to want to buy American debt any more and to make that case we go the way of Greece..it just doesn’t seem to happen; it seems that when things get really terrible the United States is usually the best of the worst..in your view, is that the way it is going to continue to be?
- Volpe – I think it will continue that way .. you know a year ago we were hearing 1.7 trillion in issuance in US Treasuries and a lot of people thought ,..many investors were expecting much higher yields in the market. Year-over-year I think we look great,. bid to cover ratios – it shows how much oversubscribed the auction is in the Treasury process – they have steadily gone up..so I think the folks at Treasury and the taxpayer have to be very happy with the results in the Treasury market and we are actually moving into a period now where some less public spending and some less outlays on TARP, higher tax receipts, we are going to be looking at less Treasury issuance and I think they are in vogue right now and the back end will be as well..
- Burnett – I like it. It is nice to hear that US Debt is in vogue.
Wow! Was this segment on CNBC? Thanks, Erin Burnett.
5. Potential Summer Storms – Jordan Kotick with CNBC’s Bob Pisani – Thursday, March 13
We have featured clips of Jordan Kotick, a technical analyst with Barclays, in these articles. Mr. Kotick does point out interesting situations and tends to do it early. His first comments in this clip were about the UK:
- The first thing in Europe is the UK….the spread in UK vs. Germany has been in a range for 10 years. As we approach the range highs, we saw in Europe what happens when you take out the range highs, so we have to keep a very close watch on this 110-120 area. If you start to push through here, that’s going to be a bad sign for the UK.. Time to put the UK on the radar.
Then Bob Pisani asked about China and the Chinese stock market. Kotick said:
- we think these two could be the two most important charts to watch ..First take a look at the Shanghai Property market. We are down 45%, we are down 25% this year alone.. the trend in the real estate market has been the worst performing subgroup of the Shanghai stock market – the real estate stocks in China are a problem…
- That matters because if we flip to the Shanghai composite, what you will see here is that we are at some very crucial levels – we start to get below these levels here, below 2600 you are going to see the Chinese stock market in trouble, You got to keep an eye on China and this one is right on the edge..
Time to put the UK on the radar and the Chinese market is right on the edge? Is this 30-Year Treasury Bond time?
6. Off the Charts – Jim Cramer on Mad Money – Tuesday, May 11
Jim Cramer devotes an entire segment of his show to discuss the technical condition of SPY, the S&P 500 index ETF. We think all individual investors should watch this clip.
We also think that other CNBC Anchors should watch this clip and follow Cramer’s lead in explaining technical charts to their viewers. Many CNBC Anchors invite technicians on their shows. But they do not give enough time to the technicians to explain their methodology or to explain graphically how technicians make the arguments.
We wish they would. If they did, they might find more individuals would watch their shows and benefit.
7. Ken Langone & Dick Grasso with CNBC’s Larry Kudlow – Thursday, May 13
Ken Langone, the co-founder of Home Depot, is a billionaire and a straight speaker. Dick Grasso is the former Head of the New York Stock Exchange. This is a long discussion of financial issues, government policy and political issues. It is better heard than described.
The discussion takes place in 4 clips:
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