Current Affairs/Investing./Television Media

Interesting Videoclips of the Week (June 4 – June 8, 2012)

Posted on by MV


Editor’s Note: 
In this series of articles, we include important or interesting
videoclips with our comments. 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.


1. This Weekend and Next Week

This was a heck of a week. But by Friday, the week was forgotten and all eyes & ears became riveted on the events expected over the weekend. The IMF reportedly met on Friday to discuss the results of a stress test conducted on Spanish Banks. This report will reportedly be discussed by EU finance ministers on Saturday. Spain is supposed to request a bailout of Spanish banks after that discussion. And investors expect a positive announcement by Sunday evening or latest by Monday morning.

The supremely connected Larry Fink, CEO & Chairman of BlackRock, was the first to hold out such a promise in his conversation on CNBC Squawk Box on Thursday morning  (see clip 4 below):

  • The market is saying now that we need a much more grand policy response and I think we are probably going to hear some thing of that nature next week.

President Obama made a public statement about Europe on Friday morning and took questions about Europe. This led observers, notably CNBC’s Simon Hobbs, to wonder whether this meant an IMF bridge-loan to Spanish banks was underway. Others wondered whether a Euro-TARP was being planned to bail out Spanish banks. Apparently, it is important to get something announced well before the Greek elections next week. Speaking of Greece, Moody’s said on Friday after the close that Greek exit from the Eurozone could lead to sovereign ratings cuts in the Eurozone. 

China, that great locomotive of global growth, is expected to provide a massive data dump over the weekend. It is expected to show further slowing of growth in China. The FT reported that IMF sees “significant downside risks” to China’s growth outlook but the labor market in China remains tight. A slowing economy and a tight labor market with upward pressure on wages may be just what China needs at this stage. If so, China may not be in hurry to add stimulus as many investors expect.

The link between China & Europe was best expressed on CNBC by Peter Fisher, Global Head of Fixed Income at BlackRock:

  • …the
    news that did matter last week was that China is slowing down a lot.
    China slowing down taking a big share of aggregate demand out of the
    world. Europe is weak. China being weaker is worse for Europe. So look
    what happened to European breakevens in the inflation market, they went
    way down.

Yet, Mario Draghi however chose not to cut the 1% euro interest rate because he is concerned about inflation! Can these people ever muster the guts to prescribe the bitter medicine Europe needs? Who knows?

What we do know is that Monday morning will be interesting.

2. The Wisconsin Vote

This, we feel, was a momentous event. It was amazing to watch this liberal, progressive state defeat the combined efforts of the labor movement and the left wing of the democratic party. Having lived in Madison and having visited the greater Milwaukee area at least once a year for several years, we know Wisconsin is a very liberal state. So we were pleasantly surprised at the margin of Governor Walker’s victory.

If Wisconsin has changed so much in the last year & half, how much has the country changed? We hope  this win points to a groundswell for lowering America’s spending and debt. We already expected a serious post-November effort by all parties and sides to take long term steps to recover America’s fiscal sanity. That expectation was strengthened materially by the Wisconsin vote.

We are rather prosaic. Rick Santelli, on the other hand, is a master of passion. Listen to him speak his mind in two minutes on Wednesday. The clip titled Who’s the Big Cheese is a must watch. The Big Cheese is not Ben Bernanke, not Mario Draghi. The Big Cheese is Wisconsin, the People of Wisconsin. We must also give a shout out to Maria Bartiromo who has begun speaking of a market rally based on a change in the political direction of the country.

Getting back to more mundane matters, we believe the Wisconsin vote to be one of the factors in Wednesday’s powerful stock rally.

3. The U.S. Stock Market

This was a terrific week for the stock market. All major indices rose by 3-4% on the week. According to Tom McClellan, creator of the McClellan Oscillator, a bottom was reached on June 4 and he predicts a  powerful rally into the November election (see clip 1 below).  To his credit, this is consistent with his prediction on March 28, 2012.

This is an intermediate term prediction. The shorter term forecasters are not that sanguine. Lawrence McMillan of Option Strategist wrote on Friday:

  • oversold conditions
    finally reached levels that spawned a sharp oversold rally. But
    oversold rallies, while often unexpectedly strong, are generally
    short-lived affairs…we would say that a
    close above 1340 should be an “all-clear” buy signal for the broad stock
    market, if the intermediate-term indicators have turned bullish by that
    time. But as long as $SPX is below 1340, the bears are in charge.

Todd Gordon, a CNBC Money in Motion contributor, looks at the S&P 500 from a FX point of view. He said on Friday:

  • Earlier in the week, Risk FX put in a low and then the S&P got the memo a day later. So we rallied. Now the reverse is happening. Risk FX closed on the lows (on Friday) but the S&P is at the high. The S&P is always the last man on the deal team, the last to know. So this might be setting up for a little bit of a monday (?) .

Robert Sluymer of RBC Capital Markets called this week’s bounce in his detailed conversation with CNBC’s Simon Hobbs on Monday morning. But he is cautions on the longer term:

  • … the bigger point beyond a trading bounce is that we think the cycle that began in 2009 and peaked in April of 2012 is rolling over and that the next six to nine to possibly 12 months could be quite challenging for equity markets looking through 2013…
  • the divergences between what we are seeing in the emerging markets and the small caps…which did not confirm the highs in the S&P in April. That’s a different story than what we saw last year. They really began to struggle in the 4th quarter and 1st quarter of this year. That is much important technically, in my opinion.
  • Oil, another global macro barometer getting very, very oversold. I think this low $80 range is going to provide at least tactical or trading support for the commodity. I’d expect a rebound from these levels.
  • I think the more important commodity to look at here, though, is Gold. There is where we’re starting to see some divergences develop… Gold is starting to hold up. I think it’s a much bigger and more important event technically beginning to develop there. We think Gold is heading higher off this 1550 level, probably back to the old highs.

Mr. Sluymer’s view dovetails with what Louise Yamada sees as 2-3 year topping patterns in foreign markets (see clip 3 below). She also believes that the bull is getting long in the tooth.

And then you have Gary Shilling who reiterated his target of 800 in the S&P 500 as the bottom of the bear market (clip 2 below).

4. U.S. Treasuries & the U.S. Economy

The 30-Year Treasury bond fell every single day this week and its yield rose by 22 basis points. The Treasury ETF, TLT, fell by 4% and the Treasury zero coupon ETF, EDV, fell by 6% on the week. The steep reversal on Friday afternoon was ugly. The 30-Year Treasury bond was up almost 1.5 points in the  morning. But it reversed fast in the afternoon and closed in the red.

What’s next for Treasuries? Peter Fisher of BlackRock told CNBC’s Becky Quick:

  • I think we squeezed out the remaining shorts in the market last week….Central
    Banks are hoarding duration    , the Fed certainly is. So if you want to
    make money, you have to be trading volatility or picking up credit
    spread    . Those are the only two options that are out there. wherever your
    duration neutral is,  that is where you are likely to want to be,
    because you can’t get too cute.

Gary Shilling, the most accurate forecaster of this cycle, said on BTV (see clip 1 below):

  • the 10-Year may go to 1% and the 30-Year, my target was 2.5%, we are there now, and it could go to 2%….if you go from 2.5% to 2%, you make over 10% in a 30-coupon bond and you make almost twice that in a zero-coupon bond

Dominic Chu of BTV spoke with David Rosenberg of Gluskin Sheff and Lacey Hunt of Hoisington Investment  Management about their target for the 30-Year Treasury Bond. His videoclip is a must watch.

  • David Rosenberg – the most attractive part of curve is the very long end – should be closer to 2% yield with possibly a 15% return in 1 year.
  • Lacey Hunt – 30-year bond yields headed towards 2% in volatile fashion, extensive indebtedness hollows out & weakens economy.

So the three gurus who have been right so far see the same 2% target on the 30-Year Treasury yield.

It seems BTV’s Sara Eisen has taken over the Anti-Treasuries mission borne earlier by CNBC Anchors. Her ardor actually exceeds that of the most fervent CNBC anchor. In March-April, she kept blaming David Rosenberg for being a perma-bear. This week, she laughed at Gary Shilling (see clip 2 below) despite his totally accurate forecasts to-date. Not content with mere criticism, Ms. Eisen provoked Marc Faber with a leading question:

  • Eisen – is this the biggest bubble ever and when does it top?”
  • Faber – I don’t know. .. I don’t know whether tomorrow or in 3 months, I suspect sooner than later because the consensus is now buy U.S. Government bonds.

This was a comparatively tame response for Marc Faber, wouldn’t you say?

Frankly, the yields on US Treasuries could rise for several reasons in the short term. If Mr. McClellan is correct about a powerful rally in the stock market, if Europe does come through with a plan to push the can down the road for at least several months and, above all, if Ben Bernanke comes through with an aggressive QE type stimulus (a 60/40 probability according to a Bill Gross tweet), then we could easily see a sell off in Treasuries.

But will that sell off prove be a superb buying opportunity again? It depends on the trajectory of the US economy which seems to be slipping further as ECRI’s Lakshman Achuthan tweeted on Friday morning:

  • US Weekly Leading Index falls to 21-week low of 121.6, growth rate down to -2.0%.

 
5. President Clinton, Maria Bartirmo, Becky Quick & Larry Fink

Maria Bartiromo interviewed President Clinton on Monday afternoon, an interview that roiled Presidential politics this week. President Clinton expressed his opinion that the entire Bush Cuts should be extended into next year, a statement that totally contradicted President Obama’s position. Republicans reacted with euphoric glee and the President (via his aides) with utter outrage. First President Clinton’s office put out what sounded like a “misquoted” defense. But that is hard to do when you speak on live national TV. So finally on Thursday, President Clinton, in another interview, said he was sorry.

There was another statement on CNBC this week. It was made by Larry Fink, CEO & Chairman of BlackRock, during his appearance on CNBC Squawk Box on Thursday.  Mr. Fink has been vocal on financial TV and print media in exhorting investors to get invested in stocks. He has told investors to stop being chicken and he beat his proverbial chest to exclaim that he would 100% invested in stocks if he could. These exhortations have been criticized because the stock markets have gone down instead of up.

During his appearance, CNBC’s Becky Quick asked him a direct question about his views on stocks:

  • Quick – Larry, back in February, you talked about how the market was this great place to be and people should be 100% in equities. We have seen some ups and downs since then. And how do you feel about it right now?
  • Fink – My views haven’t changed at all. You know, from my first call in October, we are still higher. I repeated that in February, so its probably 300-400 points lower than it was, may be 500 points lower than the February numbers. It just gets back to my whole idea about longevity.

Focus on the words “my first call in October“. Larry Fink is telling Becky Quick that he first made the call to be invested in stocks in October 2011. The evidence says otherwise:

  1. Friday June 10, 2011 at 10:32 am – Mr. Fink appeared with CNBC’s Tyler Mathisen. In this interview, Mr. Fink, explained why he preferred stocks over bonds. You can hear him yourself in the CNBC videoclip titled Nervous Investors or read our coverage of that interview in Clip T3 of our article Interesting Videoclips of June 4 – June 10, 2011.
  2. Wednesday, July 20, 2011 at 4:30 pm – Mr. F
    ink appeared with CNBC’s Maria Bartiromo. Mr. Fink told her that the market is actually getting cheaper and equities are relatively cheap vs. almost any other asset class. You can hear him yourself in the CNBC videoclip titled BlackRock’s Profit Surge or read our coverage of that interview in Clip 2 of our article Interesting Videoclips of July 16 – July 22, 2011.
  3. Wednesday, July 20, 2011 at 11:34 am – The Wall Street Journal published an article titled Larry Fink to Investors: Stop Being Chicken. This article writes:
    1. BlackRock Inc.’s CEO Laurence Fink says his clients are de-risking. He says he thinks “that’s a mistake.” In an earnings call this morning, Fink pointed to great political uncertainty and future doom in Europe as reasons for concern. One of the greatest inhibitors of growth in the U.S. and Europe “is essentially politics,” Fink said. “We need to move beyond this.”

The above mentioned CNBC videoclips and our articles do demonstrate Mr. Fink made his “buy equities” call in June 2011 and not “first in October”, 2011 as he now says.

Actually we urge you to hear him in his October 19, 2011 appearance with (who else?) Maria Bartiromo in the CNBC videoclip titled BlackRock’s Fink One-on-One . Or read our coverage in Clip 2 of our article Interesting Videoclips of October 17 – October 21, 2011. If you do so, you will notice that Mr. Fink was less bullish on equities in  October 2011 than he was in June-July 2011.

Mr. Fink is a very successful CEO and he is known as a smart investor. We called him prescient for his warnings in his interviews with Maria Bartiromo in 2007. But any one can make a mistake. We don’t mind the mistake. We do mind the twisting of the record by him and by his adoring flock of CNBC anchors. Will Mr. Fink set the record straight? We hope so. President Clinton did.

Above all, we object to the behavior of CNBC Anchors, Becky Quick and Maria Bartiromo. These anchors are supposed to uphold the truth and hold their guests accountable. But, in our opinion, Ms. Quick and Ms. Bartiromo acted to obfuscate the facts and to provide a defense for their honored guest Mr. Fink against what seems indefensible.

We have felt for some time that CNBC cares only about its ratings and ratings are generated by interviews with celebrity investors like Larry Fink. This is why CNBC, in our opinion, cares far more about protecting its celebrity guests than worrying about whether its viewers are being shortchanged or damaged. Every one has an inner-Cramer and our inner-Cramer wants to shout “Shame on you, CNBC, Becky Quick and Maria Bartiromo” but we shall refrain out of politeness and let our evidence speak for us. 

We have presented evidence from CNBC’s own website to explain how we reached our opinions. But we have no wish to be unfair to either Mr. Fink or to CNBC. So we welcome feedback or response from both Mr. Fink and CNBC. We shall print it verbatim.


Featured Videoclips:

  1. Tom McClellan on BTV’s Street Smart on Thursday, June 7
  2. Gary Shilling on BTV’s InsideTrack on Tuesday, June 5
  3. Louise Yamada on BTV’s Surveillance Midday on Monday, June 4
  4. Larry Fink & Lee Sachs on CNBC Squawk Box on Thursday, June 7

1. Powerful Rally into the November Election – Tom McClellan on “the next big trade” segment of BTV’s Street Smart (03:57 minute clip) – Thursday, June 7

We appreciate consistency in a technician, especially when it is combined with accuracy. Tom McClellan, co-founder and editor of the McClellan Market Report, appeared on BTV on March 28, 2012. Read what he said then (section 4 of Videoclips of March 26 – March 30, 2012):

  • “now we are in a pause mode until June, then a huge rally into the election. Between now and June we are in a corrective market and the market does not even seem to know it yet because everybody is excited about Apple, they are excited about new home sales acting better, they are excited about whatever..but come June get ready for a big hunking rally but don’t get impatient waiting for that..”

Mr. McClellan’s main indicator seems to be the Euro-Dollar chart, his thesis being that there is a one-year lag between behavior of the Euro-Dollar chart and that of the S&P 500. He explains in this clip:

  • Viewers should understand that when we talk about the Euro-Dollar, we are not talking about the Euro vs. the Dollar in the currencies. This  is Euro-Dollar futures which are time deposits denominated in Dollars that are in European Banks. I am looking at the Commitment of Traders data  published by the CFTC telling us how the commercial traders are positioned. We find that when we shift that data forward by a year, the same dance steps are repeated in the S&P 500. So we have known a bottom was due around June  4th for about a year.

Mr. McClellan does the same with the NYSE advance-decline line. When asked by BTV’s Matt Miller why he does so, Mr. McClellan replied:

  • Matt, we had the expectation a bottom was due just about now. When
    we saw the higher low in the Advance-Decline line when compared to prices, that was a confirming sign telling us that the momentum had gone out of the decline and we were seeing bottoming type conditions at the time when they are expected. So you have both the expectation and confirmation working for you, letting you know what is happening. That’s the most powerful way to understand the markets.

Mr. McClellan is calling for a powerful rally from now into the November election. How big will be the rally? He demurs:

  • I am not going to put a price target on it. I try to get the direction right and let the ‘how far’ take care of itself.

What about the fundamentals? Mr. McClellan replied:

  • When it comes to fundamentals about the stock market, I like to say that there are only two that matter. How much money is there and how much does that money want to be invested? You change either of these two fundamentals, you will move the market. 

We adore simplicity. But we wonder whether forecasting the stock market is as simple as retracing the behavior of the Euro Dollar futures a year ago. Surely, this can be programmed and executed efficiently. If this always works, then why, we wonder, isn’t every managed futures trader doing it?

But, so far, Mr. McClellan has been correct and we certainly hope he proves right about a huge rally into the November election.  That certainly would be the Next Big Trade.

2. 30-Year Treasury Yield at 2% and S&P 500 at 800 – Gary Shilling on BTV’s Inside Track (10:56 minute clip) – Tuesday, June 5

If you want consistency and accuracy of market forecasts, you begin and stop your search at Dr. A. Gary Shilling. No one, literally no one we have heard, comes close to his record of making his listeners money. His forecasts usually sound outlandish but they tend to prove accurate. So those who listen to him, make money. For example, read what he told BTV’s Street Smart on April 11, 2012 (see clip 1 of Videoclips of April 9 – April 14, 2012):

  • [I am] long treasuries, short stocks, short commodities and long the dollar…My 30-year favorite long Treasury bonds, I we’re headed for 2.5% there…I think 1.5 is possible on the 10-year…the S&P 500 index (SPX) would be around 800, a 43 percent drop from its recent level.

Dr. Shilling’s targets on the 30-Year & 10-Year yields were hit on June 1, 2012 after the release of the awful Non-Farm Payroll number. What would have been your returns had you implemented his recommendations?

  • TLT, the Treasury ETF, rose from 115.46 on 4/11 to 130.36 on 6/1 – a gain of 13% and EDV, the Treasury Zero-Coupon ETF, rose from 112.79 on 4/11 to 135.62 on 6/1 – a 20.31% gain.

His stance of being long Treasuries, short Stocks, short Commodities and long the Dollar
has been  absolutely correct and a money-maker. The only forecast yet to be realized is 800 on the S&P 500.

So what does Dr. Shilling say now? Watch the long clip. It is both entertaining and scary at the same time. His salient points are below:

  • Schatzker – Gary, how much longer has the Treasury rally to run? with the 10-year at 1.5%?
  • Shilling – the 10-Year may go to 1% and the 30-Year, my target was 2.5%, we are there now, and it could go to 2%. …This is a matter of a safe haven and a developing global recession, I think we are in a US recession right now. Europe..and China is in for a hard landing.  and the 3rd thing is deflation. Deflation is really starting to pop out all over, we are seeing declining oil prices, commodity prices, and those 3 factors could drive the long bond, the 30-Year yield down further to 2%…
  • Shilling – Most of it (the rally in Treasuries) is over but the interesting thing is even at low yields, a relatively minor drop in that yield gives you a big appreciation. I mean, if you go from 2.5% to 2%, you make over 10% in a 30-coupon bond and you make almost twice that in a zero-coupon bond.
  • Schatzker – what are the near term risks to your outlook? what could cause treasury yields to jump to say 2.5% on the 10-year between now and the election or into the first quarter?
  • Shilling – if there were a resolution to the European crisis, if US consumers went on a wild spending spree so we didn’t have a recession, if China somehow got itself straightened out and didn’t have a hard landing, and finally, probably the greatest risk is that the Fed comes in with a QE3 or something like that and gives a temporary bump to stocks, that’s the idea of putting more money into the economy, then you could get a comparable sell-off in Treasuries,….

Then the conversation shifted to housing.

  • Schatzker – every time I talk to you, you predict that housing prices could fall another 10-20%…do you see the outlook for housing continuing to deteriorate? could they go down another 20% from here?
  • Shilling – I think the next event to watch is what happens in the next few quarters because we do have this big settlement with the five big mortgage servicers, that was over this robo-signing, while that was going on they did not want bad PR of a big wave of foreclosures. so we they really held off on foreclosures. Now I think they are going to go back to them with a vengeance….at the current rates of household formations and housing starts , our estimate is that it will take another 4 years to absorb this excess inventory…

Finally, an update on his S&P 500 target:

  • Schatzker – Gary, put it all together for us….what’s going to happen to stock prices?
  • Shilling – I think, you have heard me say we are probably going to have $80 of S&P operating earnings this year and I put a 10 multiple on that for a bear market low. You multiply the two together and what do you get? 800.
  • Schatzker – So, from 1278 yesterday, we are headed down to 800. Guess, everybody wants to know when? This year?
  • Shilling – look at the good news, that is only 36% down from here…

That makes Gary Shilling smart, really smart. He follows the old adage of don’t predict both a target and a time frame, only predict one or the other.

3. 2-3 Year Topping Pattern in Foreign Markets – Louise Yamada on BTV’s Surveillance Midday (05:41 minute clip) – Monday, June 4

This is obviously a condensed clip of the interview with Louise Yamada, one of the most respected technicians around. We really dislike this behavior of BTV and Bloomberg.com. They tend to compress and edit their interviews based on the whims of the editors. In an ideal world, this would be regarded as journalistic malpractice. Normally, we would no
t cover any such edited interview. But we always like to hear from Ms.Yamada. So something is better than nothing.

  • Yamada – I think, it is a little late to short.
  • Yamada – If we look at the S&P 500, one can identify 3 legs, each separated by a corrective trend and independently generous. There is no doubt this bull is long in the tooth.
  • Yamada – a lot of the global markets are already there (in a bear market), we have been warning about these long-term sell signals since last summer, July-August, a lot of foreign markets went in long term sell signals, we have triple tops in place in many of those markets..and you have to understand that topping process is a very slow erosion, it is a sense of complacency which is in place for a period of time..and if you look at some of these other markets, one of the characteristic things that one can do when you get 2-3 year topping patterns, is turn them upside down – if then they look like a bottom, then you have a top…
  • Yamada – the energy patch is either discounting possibly an economic problem globally and this is a global environment here, or …

Here anchor Tom Keene abruptly interrupted with a gratuitous joke and so Ms. Yamada couldn’t finish the thought…talk about an anchor’s arrogance. Guess Mr. Keene doesn’t understand that viewers primarily want to benefit from the experience of guests like Louise Yamada rather than listen to an anchor’s banter.
 
This is followed by a rambling conversation about whether a bottom is being formed. Finally, Tom Keene asked about the Dollar:

  • Yamada – you can certainly go long DXY,…the DXY has broken out nicely…

4. European Investors as fiduciaries….Not Buying European Bonds – Larry Fink & Lee Sachs on CNBC Squawk Box (13:02 minute clip) – Thursday, June 7

Lee Sachs, Alliance Partners founder & co-CEO, was an advisor to Secretary Geithner according to CNBC’s Becky Quick. In this clip, he is joined by Larry Fink, the CEO & Chairman of BlackRock. This is a long clip and we shall only focus on key comments. We think this clip is important, but CNBC did not think enough of it to provide a transcript.

  • Fink (06:55 minute) – I was in Europe a few times over the last 5 weeks and I had roundtable sessions with all the large investors in Europe. And to an investor, most of them are saying they are not going to be rolling over their southern rim sovereign debt and I am talking European investors, I am not talking about European investors. So we have a systematic problem there, these auctions are becoming more and more difficult to succeed. They are more reliant on the banks itself to buy it.
  • Fink – (07:26 minute) – But getting back to the plan that we are hearing about, there is a real comprehensive plan that’s talking about the recapitalization of banks, there is some noise in Europe about contemplating this idea of deposit insurance…the other thing they are talking about is extending these austerity programs for growth…there are going to be compromises that will appeal to the Germans, to the French…we have heard some extreme positions from different points and I think they are coming together….
  • Quick – Larry, will you repeat a point that you just made for people who weren’t paying close attention? You have just come back from a lot of meetings with European investors who told you what?
  • Fink (09:56 minute) – They are worried about the ability of the southern rim countries to finance themselves. So as their ownership of southern rim country bonds, as they mature they are not rolling over and repurchasing that debt. So the problem is getting exasperated with time. This is not a US vs. Europe. These are European investors who are saying as fiduciaries to our pensioners and fiduciaries to our insurance clients we are frightened of what we see and we are not rolling over and repurchasing government debt.
  • Fink (11:48 minute) – you know at the same time we have seen weaknesses in the northern rim countries; Germany is showing weaknesses. In fact, the small and medium sized companies are starting to have weaknesses and so this is not just a southern rim issue.
  • Fink (12:02 minute) – The other thing I want to just say Europe needs… is policy responses to stabilize and the stabilization with time will do healing. There are some macro economic issues that you have seen time is healing. In the last year, you have seen a 3% increase in wages in Germany whereby in southern rim countries you have seen a 8% decline in wages so some of the fundamental macro problems of how we got there are being modified by time. and so we are focusing on headline issues,..but we are actually seeing positive momentum to stabilize Europe. It is going to take time. The market is saying now that we need a much more grand policy response and I think we are probably going to hear some thing of that nature next week.

What a set of comments? First the prediction about seeing a grand policy response next week. We think every one should Mr. Fink’s warning about the weakness spreading to northern rim Europe and Germany seriously. It adds to the prospect of a global economic slowdown. But we confess to being confused by his last two sets of comments.

  1. First he states that the problem in southern rim countries is being exasperated with time. This we understand.
  2. Then he argues that macro problems in Europe are healing with time. Consider his example of German wages increasing by3% and southern rim wages declining by 8% – is this healing? It seems the divergence between the fortunes of northern rim and southern rim population is becoming larger – isn’t that the fundamental problem of the Eurozone?

We are simple folk and we tend to get confused easily. But what about the distinguished CNBC anchor trinity of Kernen, Quick & Sorkin? Did they all understood perfectly or were they too afraid to ask?

Send your feedback to [email protected] or @MacroViewpoints on Twitter

 

MV