Interesing Videoclips of the Week (June 4 – June 10)

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. 

Tepper Giveth & Tepper Taketh Away?

The last four months of 2010 featured a terrific rally that was based on the simple dictum of David Tepper about QE2. He expressed it in his interview on CNBC Squawk Box on Friday, September 24, 2010 (see clip 1 of our September 19 – September 25, 2010 Videoclips article.) The Stock market rallied and the Dow added 200 points that day.

The biggest question before US markets is whether the Fed will launch QE3 after QE2 ends in 3 weeks. We have wondered what Mr. Tepper thinks about the prospects of QE3. On Friday, June 10, Mr. Tepper sent an email to CNBC’s Becky Quick in the morning. What is Tepper’s take on QE3?

  • Basically Bernanke said no QE3. If SPX is down a couple of hundred points and financial conditions tightened, may be they would reconsider. There is no logic to QE3 now and the only result might be more food and energy inflation. We’re in a difficult investing environment. Short and Sweet.
What did the US stock market do after it digested Tepper’s take on Friday? The Dow fell by 172 points and the SPX put in a 9% down payment on Tepper’s 200 point drop comment.

The US Equity Market

The drop on Friday was a fitting end to a bad week capping a six week long streak of weekly losses in the US stock market. This was last seen in August-September 2002. So where will the market find a bottom? Here are a couple of levels from technical analysts who have been right in the near past:

  • 1220 – according to Rick Bensignor of Dahlman Rose
  • 1240-1260 – according to Scott Redler of
  • 1150 and at 1040 you back up the truck – according  Richard Ross of Auerbach Grayson
  • Mr. Ross was the most vocal of the three. Read his opening salvo:

    • let me be frank, the correction is just getting started, quantitative easing has been an abject failure, unemployment is a disgrace, wage growth is nonexistent, housing markets are anemic despite the interest rates and and depressed prices, commodities are rolling, look out below, we are going lower.
With such unanimity, we wonder whether a short term bounce is near. After all, the market has not gone down for seven consecutive weeks in the last 40 years, we are told. Also next week is expiration and based on the negative sentiment, the put position must be skewed. So it would not surprise us to see a bonfire of these put positions in the latter part of next week.

But if we don’t and the 1250 on the SPX gets broken, then all bets are off.

What about the Banks? – Dimon vs. Bernanke

This week something amazing happened. Jamie Dimon, CEO of JP Morgan Chase, asked Chairman Ben Bernanke a tough, almost accusatory question in public:

  • Has any one bothered to study the effect of all these things? And do you have a fear like I do that when we look back and look at them all, that they would be a reason it took so long that our banks, credit, our businesses and most importantly job creation start going again? Is this holding us back at this point?
Bernanke’s reply in short – Not really. Why should we comment on this reply when we can quote Jim O’Neill of Goldman Sachs:

  • Goodness me, they are doing all these things and and they don’t have the slightest idea of quite what it is going to do for the broader issues, they are just picking on it for the sake of it…are they gonna keep going until they find something that does?

If Banks go down, so does everything else? Was that not the lesson of 2008?

Look what happened on Friday at 2 pm and 3 pm. The Dow was down near its lows at 2 pm and all Bank stocks were down. Then CNBC’s Steve Liesman reported that the additional capital requirements on large Banks would be reduced. Bank stocks flew up, Bank of America went from being negative to being up 2.5% in ten minutes and the Dow rallied about 60 points. The rally held until 3 pm when news broke that the additional capital requirements would be 2-2.5%. The Dow began falling and closed down 125 points. Bank stocks gave up most of their rally.

So the Dimon question may be much more important than perceived by the media.

Treasuries & the US Dollar

The Trichet conference on Thursday seems to have marked a critical inflection point in the Euro. The Euro fell hard on Thursday and Friday. And with the Euro, the Australian Dollar and the Pound also fell. Is this a turn in the Dollar? Jim Rogers seems to think so because he is now long the US Dollar for a trade (see clip E4 below).

The Treasury rally has been spectacular. If the markets believe Tepper about QE3, will we see a flattening of the 30-10 year spread? The 30-year Treasury Bond has underperformed in this rally which has been led by the short end of the curve.

This week, we feature 5 different clips from very successful Bond investors, including Larry Fink, Bill Gross and Gary Shilling.

Emerging Markets & Richard Bernstein’ s Call

The permanence of growth in Emerging Markets has been a quasi-religious article of faith among investors. This week, Richard Bernstein (ex- Strategist at Merrill Lynch) argued that this growth has been the result of a credit bubble.  As a result, Bernstein warns that investors face ‘Monstrous Risks’ in Emerging Markets.

Nobody, in our experience, has been better than Richard Bernstein in alerting investors to major turns in asset allocation. Those who read and followed his Investment Strategy piece on February 22, 2008 protected  themselves from the ravages of the 2008 Bear Market. We wrote an article highlighting this research in our August 23, 2009 article  titled Fall of the Super-Rich – A Lesson in True Diversification.

We revisit this history because this call of Richard Bernstein, if correct, could end up receiving the same accolades that his February 2008 piece did. And more importantly, investors who profit from this call, if correct, could saving their portfolios from an echo of the 2008 crash. But we do remind people that Mr. Bernstein is often early in his calls. For example, the crisis in 2008 did not materialize in full until November 2008, almost 7 months after his research piece.

In brief, how is Mr. Bernstein positioned in his fund?

  • Our strategy …is to shield ourselves from the emerging markets…and have exposure to the United States.
Since the foundation of global growth now rests on Emerging Markets, this call has implications for all asset markets. This is why we feature 4 different EM related clips from experts, beginning with Richard Bernstein’s call in our pole position for this week (see clip E1 below).

Meredith Who?

Meredith Whitney came on CNBC and was interesting as always. She reiterated her Muni Bond call and the Muni market yawned. This week, we ourselves find other topics like EM & Treasuries more important and timely than her views. We encourage readers to check the transcript of her appearance on Also of interest might be the article $49 Billion Later, Munis See 1st Inflow Post Whitney Scare on

But we do wonder whether this treatment of Whitney’s call may end up being a contrary indicator. After all, the danger we ignore is the one that gets us. 

Featured Videoclips

We feature a total of 9 clips in two sections:

Emerging Markets:

E1. Richard Bernstein on CNBC’s Kudlow report on Thursday, June 9
E2. Mark Mobius on CNBC on Tuesday, June 7
E3. Jim O’Neill on CNBC Closing Bell on Thursday, June 9
E4. Jim Rogers on CNBC Closing Bell on Wednesday, June 9

T1. Eric Pellicciaro  on CNBC Squawk Box on Wednesday, June 8
T2. Gary Shilling on CNBC Fast Money on Tuesday, June 7
T3. Larry Fink on CNBC Squawk on the Street on Friday, June 10
T4. John Brynjolfsson on Bloomberg’s Street Smarts on Tuesday, June 7
T5. Bill Gross on CNBC’s Kudlow Report on Thursday, June 9

Emerging Markets:

E1. Is China About to Pop? – Richard Bernstein with CNBC’s Larry Kudlow (07:00 minute clip)Thursday, June 8

This is a discussion about China between Larry Kudlow, Richard Bernstein and Zach Karabell. Without any disrespect to Mr. Karabell, we will only focus on Bernstein’s comments on Emerging Markets.This is a good discussion with Larry Kudlow acting as an economist and as an investor. But we are mainly interested in the asset allocation comments of Richard Bernstein:

  • People have forgotten, we all talk about growth in China, we have forgotten what’s been spurring that growth…it is abnormal credit growth; that’s why they have the abnormal inflation, that’s why they are tightening and it is not just China, but it’s going on in Brazil, India and in many emerging markets now.
  • I do think people are too sanguine, normally the kiss of death for equity markets, the early warning radar is an inverted yield curve. Last week, the yield curve inverted in India and it inverted in Brazil, it is close in China…
  • we are seeing the emerging markets in general, not just China, leading the world in negative earnings surprises and we are seeing very high valuation, that’s not usually a very good combination…you think about the United States, it is quite different; we are leading the world in earnings surprises, we are leading the world in revenue surprises...we have the steepest yield curve in the world right now..
  • Our strategy …is to shield ourselves from the emerging markets…and have exposure to the United States…I think where most strategies are, you buy the emerging markets or you buy multinational companies that sell to emerging markets. Our portfolios are now structured almost the exact opposite,  trying to shield ourselves from the emerging markets.

This is a really bold and contrarian call. Mr. Bernstein was apparently more vocal in his presentation to Reuters on Wednesday, June 8. This presentation was summarized in the article titled ‘Monstrous Risks’ in Emerging Markets on We include a couple of excerpts below:

  • Emerging markets face “monstrous” risks this year, with investors continually ignoring intensifying inflationary pressures and credit bubbles,
  • I think what people are completely missing is that the risk is not here in the United States,…..The risk is in emerging markets. There are just monstrous risks in emerging markets right now in my opinion.
  • emerging market investors are putting a blind eye to the warning signals of a deep decline in emerging markets….The common thing you hear, is ‘well, they are overheating,’ which is such a positive spin,…The markets are still priced for very rapid unhindered growth, and I just think the probability of that is getting less and less.
In short, Bernstein argues that the massive growth in EM was essentially because of a Credit Bubble. And when that bursts, EM markets will fall steeply.

We were in India for a long visit in April-May. Based on our observations, we believe that India is on a secular growth path but we also see a credit bubble from large foreign fund flows. The amount of money thrashing around in India is much larger than India has seen before. A bust would hurt India badly. But, India’s credit bubble is tiny compared to the money that has gone into China. We have maintained for some time that the 30-Year Treasury yield will trade with a 2% handle again when investors realize that the China’s Credit Bubble will be followed by a Credit Bust.

But the views of Mr. Bernstein will probably sound as heresy to most investors. After all, this entire cycle has been based on the “quasi-religious” conviction about the permanence of EM growth. So the pain in the markets will be deep and debilitating if and when markets realizes he is correct. 

We must point out that Bill Gross, the most celebrated Bond Manager of our time, has gone all out (All to the Wall in a David Tepper Lite terminology) on Emerging Markets Debt and shunned US Treasuries. We must also caution readers that Mr. Bernstein is not a market timer. For example, his February 2008 call took about 8 months to be fully realized.

E2. Emerging Market Opportunities – Mark Mobius with CNBC’s David Faber – Tuesday, June 7

Two weeks ago, we featured clips of three smart investors, Jeff Gundlach, Carl Icahn & Asher Edelman, who warned that another financial accident was ahead of us. Today we add another illustrious name to this list, Mark Mobius, one of the most renowned global investors on the planet in the words of David Faber.

Watch this clip or read the summary at Investors Can Profit From “Inevitable” Financial Crisis:Mobius on A couple of excerpts are below:

  • Another financial crisis is “inevitable”…The financial problems created by the subprime mortgage crisis “have not really been solved. Banks that were too big to fail have gotten bigger. Bank balance sheets around the world are not that healthy. So you have a situation which, if not corrected, will result in another crisis.
  • But that crisis is “no big disaster”. In fact it could be an opportunity to buy cheap stocks again,…so I don’t consider it a very bad thing to happen.
  • Mobius is cautious on China keeping the emphasis on shares of oil companies and anything related to the consumer…

The most interesting comment of Mr. Mobius – “you must remember a bubble is not important until it bursts.”

We wonder whether the bursting of a bubble is like a tidal wave because if you wait until the wave comes, you drown for sure. And the China bubble, when it bursts, will create the mother of all tsunamis, not just a simple tidal wave. 

E3. Goldman’s O’Neill on Global Economy – Jim O’Neill on CNBC Closing Bell – Thursday, June 9 

Jim O’Neill is the man who invented the acronym BRIC. He has been a fervent bull on Emerging Markets. When asked about the US Economy, Mr. O’Neill was honest in his reply:

  • I am bit baffled to be honest with you; I started off in the confident camp that things were on the way back and you know, out of nowhere, not entirely obvious, things have slowed across the board in the US, as they have done in a few other places……on balance I am in the camp that this is a temporary slowing because I didn’t expect, I am on the watch to see what comes next, because I am a little bit worried about it.
When Maria asked him about Emerging Markets and the slowdown in China, Mr. O’Neill replied:

  • from all the indicators I track it it seems that China is slowing quite a bit, certainly in my judgement, a bit more than the consensus seems to be forecasting,…
  • … feels to me that the commodity markets professionals haven’t still fully taken on board what’s been going on both cyclically as well as structurally in terms of the longer term strategic plans of China where they are trying to be a lot more efficient on the use of energy….I think the commodities markets need a bit of rethink there…I think China is slowing down to a different pace of growth,….
  • ….in the near term Brazil looks like the one that needs to do more policy tightening, I think China and India have done a lot to slow things down…In Brazil it is a little more troubling…
  • …..Russia is cheap and everybody hates the place, that’s usually not a bad combination…
  • …it is tough for me to to be anything other than a bull on equities still…I am very aware of the Sell in May and Go Away …but the fundamental bull market that came out of the shift in Chinese policies…I really don’t see that changing…

E4. Jim Rogers One-on-One – Jim Rogers with CNBC’s Maria Bartiromo – Wednesday, June 8

Mr. Rogers virtually lived at CNBC for the past two days with three different interviews. We chose this particular interview because it contains his current investment trades:

  • I am long commodities and I am long currencies.  I am not long anything in the US, I am short emerging markets,and I am short American Technology Stocks and I am short a major American Financial Company…its the bank that hasn’t gone down as much as the others..
He is also long the US Dollar as a trade.

The rest of his comments should be known by now (likes Chinese Yuan, Gold, Silver and despises Bernanke). If not, they can be read at US is Nearing Even Worse Financial Crisis on

Mr. Rogers make an interesting comment about Brazil:

  • the problem is the Brazilian Government is turning into the old-time Brazilian Government; they think they can tax everybody in sight, put on controls to everybody in sight…
But of course, he would rather be in Brazil than in the USA “because they have a lot of natural resources”.


T1. Treasuries Still A Treasured Asset? – Eric Pellicciaro from BlackRock on CNBC Squawk Box
– Wednesday, June 8

Mr. Pellicciaro is the Head of Global Rates Investment at BlackRock and Co-Manager of Strategic Income Opportunities Fund. We include this clip not for any specific targets but for his reasoning for liking the bond market here.

  • We have been fairly constructive on the bond market through this and we continue to be constructive. We think we have entered a new regime. It’s not simply a slowdown, temporary pause in the data. Something much more ominous is going on. Probably the true start of is was the probably commodity breakdown that we had at the beginning of the last month and signalling something much deeper, signalling probably that the peak of headline inflation, the peak of real growth, at least  for this mini cycle here, is behind us. If you think what’s ahead of us, its no more monetary stimulus,….. and there is no fiscal stimulus which will turn into a drag. From our perspective, we are in a new reality here…….arguably what we have seen in consumption in the fourth quarter may be the best we have seen this year….if commodities are pointing to a peak and if 4th quarter consumption was a peak, then you have lower yields. Bond markets tend to do fine in those environments.
So what does he want to do:

  • “we want to be somewhat defensive, we want to lower our beta to the equity market, increase liquidity….some bonds have gotten very cheap…commercial mortgages and residential mortgages are back to some of the cheapest levels we have seen since December, early January.”
He dismisses the talk of a 3-4% GDP for the second half and says:

  •  “my biggest concern is….that the economy is susceptible to a feedback loop meaning that consumer confidence, spending, business confidence are more fragile than we thought…I think you’re open to wealth effects..if the equity market should take a 4-5% hit, I think our second half is going to look a lot worse…… I think we should realize that’s a probable scenario here given how fragile things have become. One of the things we are watching therefore would be continued signals from confidence, continued signals from the equity market and lets see where that gets us.”
We concur with Mr. Pellicciaro’s assessment of the economy and his statement about something ominous going on. That is UNTIL the Bernack comes in with another stimulus, the size of which will increase in size the longer he waits to stimulate.

T2. Long Bond will get to 3% – Gary Shilling on CNBC Fast Money – Tuesday, June 7

The Shilling interview begins at minute 14:45 of the 17:49 minute clip. Dr. Shilling has been one of the most accurate predictors of the Treasury Bull market that we know. When asked about his forecast of Treasuries, he said:

  • I think they (30-year Treasuries) are going to 3%; now that would make you about 30% on a coupon bond and 40% on a 30-year Zero…because the economy is weakening; we are in a weakening economy in this country and globally. I think US will be a safe haven. By the end of the year, I expect all the inflation fears will be back to deflation concerns….I think we are headed for a recession next year, stocks are selling off. I like Treasuries. I like the Dollar. I think stocks are extremely vulnerable here.
In full disclosure, we concur with Dr. Shilling but we don’t think the 30-Year yield will drop to 3% in a straight line. To get there, the “quasi-religious confidence” about growth in Emerging Markets
would need to be shattered. Only when investors give up on growth in EM, will we see a peak in Treasury prices and the lows in Treasury yields.

T3. Nervous Investors – Larry Fink with CNBC’s Tyler Mathisen Friday, June 10

When Larry Fink, the Chairman & CEO of BlackRock, speaks, we listen. Listening to him in 2007 paid off brilliantly. He was rather wrong the last time he was on CNBC in March. To his credit, Tyler Mathisen asked Mr. Fink about that call.

  • Fink I don’t see any reason to think we need a QE3. We are in a soft patch today but we still have positive growth. I think we are going to be in the band of 2%-2.5% for the entire year….In the banking system, there is over a trillion dollars of C&I and structured bonds maturing in the next 12 months and there is just not that much new growth in C&I loans and I believe Banks are going to be forced to invest in Treasuries.  
  • MathisenLet me go back to something you said in recent weeks, that you preferred stocks over bonds, especially dividend paying stocks…..Do you still favor stocks? and why?
  • Fink….over a five year and ten year horizon, you will do far better owing dividend stocks; you will see 3ish% on the dividend and even under a bearish scenario over the five years, owning large cap global stocks you could earn may be 4% so….with the dividend and beta, you are earning 7%….I would be a bigger buyer of doing that today…
This is true, we think. But unlike a pension fund, an individual would be very upset to lose 10% of the capital over the last or next few months before getting the 7% annualized return in 5-10 years.

The interesting portion of this clip is when Larry Fink talks about Bill Gross in response to a question from anchor Simon Hobbs:

  • Hobbsanother big asset company whose name cannot be mentioned here, their number one guy went out and stuck his neck out and said Treasuries – it was time to short them, it was time to get out of Treasuries. Do you think there is going to be a major bear market involved?
  • Fink – …..the answer is no…. there is a need for bonds more than ever before especially if you are converting your pension plan from a defined benefit to defined contribution. ..If you are going to do a target date type of ladder, you are going to have bonds as a part of that strategy…I think the bond manager..Bill Gross has an incredible track record, he is a great long term investor, he has a view..our view is a little different…..our view is that there is so much demand and so little supply for bonds, it will not be… rough; could I see interest rates going back to 3.50 or 3.60 ten year, absolutely….
For a celebrated Bond King to discussed in such a charitable manner by a rival Bond King, Oh My, as Dick Enberg would say. If that were not enough, the next clip has a previous employee speaking in a charitable way about King Bill. 

T4. Got Religion – John Brynjolfsson on Bloomberg’s Street Smart (03:56 minute clip) – Tuesday, June 7

John Brynjolfsson, the chief investment officer at Armored Wolf, LLC, used to the portfolio manager of Pimco’s $80 Billion TIPS Fund. Mr. Brynjolfsson, like Jim O’Neill (see clip E3 above), is a rare breed who admits his mistakes. We titled this clip “Got Religion” because Mr. Brynjolfsson admits that he was short the 10-Year Treasury and he took some pain when 10-Year Treasuries rallied from 3.60% to 3.10% and he “got religion” at that point.

He thinks the yields on Treasuries are going lower. He makes an interesting prediction that Bernanke “will change his tune 2 weeks from now, he has to…”. Regarding an announcement about QE3, he said “the private balance sheet is 60 trillion, the Fed’s balance sheet is 3 trillion, so he..has more leverage knocking rates down verbally”. Then he added if he can guarantee rates will be low for 3 years, we will buy the 3 year, that’s what happened today…..”.

The most interesting portion of the conversation began at minute 3:31 of the clip when he asked “what do you think about Bill Gross’ stance about staying away from Treasuries?” Mr. Brynjolfsson was diplomatic – “He has done reasonably well this year and kept up with the pack despite the fact that he has no Treasuries. He has other assets in its place. It’s not as if he is sitting in cash.”

Complimenting Bill Gross for merely “keeping up with the pack”. If this is not charity, we don’t know what is.

T5. Stay Out of US Treasuries – Bill Gross with CNBC’s Larry Kudlow – Wednesday, June 8
Mr. Gross has been dead wrong on his US Treasuries call for the past 3-4 months. Unlike John Brynjolfsson, ex-portfolio-manager of a Pimco fund, Mr. Gross hasn’t “got religion” yet. In fact, he is even more convinced of his views.

This is an interesting and informative interview. Fortunately, you can read the complete transcript on We include a couple of key excerpts below:

  • I mean, Larry, our view is always that treasuries were the vehicle to avoid in terms of their low yield relative to corporate and to mortgages, and to developing country bonds in non-dollar space.
  • We’ve simple said that treasuries are the most overvalued bond in the universe.
  • I think bonds, you know, in emerging market developing space, corporate space, can produce 4 to 5 percent types of yields.
  • But going overseas, going into developing markets, such as Brazil, where real interest rates of 6 and 7 percent as opposed to a negative .5 percent are offered, you know, makes all the sense in the world to me. It does involve some currency risk. It involves buying the real vs. the dollar. But in any case, it’s a less repressive atmosphere in terms of interest rate space, and it’s a higher growth environment in terms of developing markets.
Mr. Gross is now “All to the Wall” (to paraphrase David Tepper) in his positive conviction on Emerging Markets Debt.

But what if Richard Bernstein is right and the EM growth is essentially a Credit Bubble, then wouldn’t the EM bonds of Mr. Gross go the way corporate or high yield credit went in 2008 in the USA? Or is it a Mobius case of “a bubble is Not important until it bursts.”

If the EM credit bubble bursts, US Treasury yields are likely to drop to lows with the 30-Year Treasury yield dropping to 3%. What would happen to Mr. Gross’ Pimco fund then? Would it suffer like a hedge fund that finds its longs cascading down and its shorts exploding up?

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