Investment Videoclips of the Week (July 6 – July 12, 2013)

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. Is Bernanke Clueless or Does He Feign Cluelessness?.

We are talking about the most powerful man in the world, the man whose sentence or two creates carnage in the entire world or brings hope to it. The Bard was merely talking about a little prince named Hamlet while we are speaking about America’s, actually the World’s, Ruler of Financial Markets. So if the word clueless is lese majeste, we humbly apologize.

The “clueless” camp seems to contain Peter Fisher, the bond guru of Blackrock and ex-Treasury secretary. He made the following seemingly soft comment on CNBC Squawk Box on Thursday:

“I’m surprised that the FOMC is surprised that rates have backed up so far”

If you think about it, Fisher is actually calling the FOMC clueless. He now joins Richard Bernstein as the only celebrity financial executive who has publicly said something negative about the Fed’s intellectual abilities.

The “feigning cluelessness” camp includes the equally guru-ish Jim Bianco who wrote on Friday:

“Count us among those that think the Federal Reserve is trying to send the market a message regarding the taper. Count us among those that think the Federal Reserve has moved away from unemployment and inflation “data dependency” and is instead focusing on stock prices and bond yields (or make use of the kind of data you can see here to make good use of both sides). That’s why Bernanke threatened to stop the taper last month and called it off (for now) on Wednesday. If stocks continue to surge and bond yields decline more, then the Federal Reserve could put the taper back on the table, maybe when Bernanke testifies next week.”

“The Federal Reserve is now in the business of managing short-term movements of markets. It is not a good game to play. It is a dangerous game. They are trying to walk this fine line because, as we read in yesterday’s FOMC minutes, fully half the committee wants to stop QE ASAP. As we noted yesterday, the FOMC is coming to the conclusion QE is not helping the economy and is only distorting the markets. They are uncomfortable with QE and want to stop it, but are only willing to reduce purchases at a pace the markets can stomach.”

Or Bernanke might be waiting for another announcement which will enable him to taper without appearing to cut stimulus while claiming to retain a highly accommodative monetary policy. How? Larry Fink explained it on BTV Market Makers on Thursday (see clip 1 below):

“Treasury in the next few weeks announces a huge reduction in their need for bond issuance. At the same time, we may see a change in FED policy where they will reduce the amount of bond purchases. … We could see a significant 20% or 30% reduction in Treasury instruments.
I would .. just as worried if the FED does not slow down purchases as the same time treasury reduces issuance. The FED would then be buying 130% of new issuance.”

This is exactly the David Tepper case for tapering, the case he made on May 14 (see clip 1 of May 11 – May 17 article).

“we have over $500 billion we’re going to buy over the next six months. Now we only have a deficit less than $100n the next six months. The net issuance versus refunding is a little over $100. … So $400billion is [going] to be taken out of the bond market.”
“so if we don’t taper back we will get into this hyper drive market. … To keep a steady pace, the Fed has to taper back. … These numbers are so tremendous that you can have the market sort of in a hyper mode potentially. … there better be a true taper. Else you are back, I think, in the last half of 1999.”

Recall that on May 22, within a week of Tepper’s exhortation to the Fed on May 14, Bernanke dropped the first taper-bomb on markets. This week Larry Fink is publicly telling us what the Fed will taper. So will Bernanke drop a taper-bomb next week in his Congressional testimony?

If he does not, if he merely reiterates what he said this past Wednesday afternoon, then the S&P could get to 1750 or even 1800 by the time the FOMC meets on July 30. If he does, then he might simply prove Bianco’s point that he is “in the business of managing short term movements of markets”.

2. Bernanke as Atlas?

Clearly, he carries the world on his shoulders these days. All those EM governments huff, puff but can’t accomplish even a bit. But Bernanke says a couple of sentences on Wednesday and EM rallies 5% on Thursday. Every single asset class shot up the day after Bernanke reaffirmed his “highly accommodative” monetary policy for a long time. Even Gold & Silver rallied ferociously.

The other reference to Atlas came from Bernanke’s own de facto spokesman Jon Hilsenrath. When asked whether Bernanke “blinked or twitched”, Hilsenrath said “he shrugged”. We don’t recall what happened when Ayn Rand’s Atlas shrugged, but all of us saw the world get lit up in bright colors when Financial Atlas Bernanke “shrugged” on Wednesday afternoon.

We asked last Saturday whether the Fed would panic this past week because of the explosion in interest rates on Friday, July 5. Paul Richards of UBS answered that question on Thursday on CNBC FM & 1/2:

I thought he blinked at first but I think it was just a twitch. Something’s bothering this guy. He comes out June 19th and says listen, I’m going to taper. We look at the FOMC minutes 2:00 yesterday – it’s a clear message of tapering, he has got consensus. Two hours later he comes out with this message. What’s this all about? Something’s bothering him, Scott. It’s the bond market. I think what he’s trying to differentiate he’s saying to you I’m tapering not raising rates. He was very concerned with the way the bond market had gone from 2.35% in the ten-year when he delivered th
at message in June to 2.70%. I think the bond market was saying you taper in September, we’ll run this thing through 3%. He’s looking at mortgage rates what’s that going to do to the housing market. He’s saying hold on, guys, I’m not raising rates.

3. Is Tapering a Tightening of Liquidity?

The central & consistent message of the Fed is tapering is not tightening. Peter Fisher of BlackRock virtually became the Fed’s spokesman this week:

I think the market always makes the mistake of confusing the end of easing as the start of tightening. This first stage is usually a short term buy opportunity. it backs up a little bit. … the beginning of real tightening has to wait for the Fed to want to slow the economy down. That seems to me to be a very long ways away. the only thing Bernanke surprised me is he didn’t emphasize the period of time he thought there would be between the end of easing and and start of raising the fed funds rate.

Forgive us, but this violates the basic rules of Arithmetic. This argument is like people saying covering a short is not same as buying. Think about a long-short portfolio of stocks. When you cover one short position, the net length of your portfolio gets longer exactly as if you bought a new long position.

QE4ever reduced the effective fed funds rate to a negative number. As the Fed tapers QE purchases, it is reducing the negative effective FF rate until QE goes to zero and, as a result, the effective FF rate goes to Zero. Then at some point, the Fed will raise the FF rate to a positive number. So reducing QE purchases is exactly the same as raising the effective FF rate from say -5% to – 4%.

Bernanke and the FOMC members are far far smarter than we are and they understand this far better than we do. But they are so afraid, so utterly petrified of the market’s reaction, that they are desperately trying to convince markets that tapering is Not tightening.

In our opinion, the markets just don’t buy their made up & convoluted logic. That is why the markets rally in euphoria when Bernanke hints later tapering and why they go down in despair when he threatens early tapering. The markets have never experienced this unprecedented level of QE and they, especially the bond markets, are terrified about what will happen when QE4ever ends.

4. Our Appeal to Chairman Bernanke

Our humble appeal to Chairman Bernanke is to reduce QE purchases on July 30. He should link the cut in QE to the reduction in the budget deficit. One simple way would be to announce a 10% cut in QE purchases every month beginning in August 2013, subject to modification based on economic data. This will be the equivalent of Greenspan’s 2004 announcement of a 25 bps increase in FF rates at every subsequent Fed meeting. But how Bernanke does it is not that critical. What is absolutely critical is that he begins in the FOMC meeting on July 30.

Chairman Bernanke, you have two tail winds behind you – the 195,000 payroll number of July 5 and the drastic cut in the budget deficit that is coming. One gives you the fundamental case for reducing QE and the second the quantitative case. And you can still argue that your monetary policy remains highly accommodative.

Trust the financial markets, Dr. Bernanke and they will trust you in return.

5. “I love everything with a symbol”

Well, after a great two weeks, we just have to tell you what Ralph Acampora said to Maria Bartiromo after the close. Watch the clip to experience Acampora’s passion. Readers just look how many times he says “Maria” in the excerpts below. The man was ecstatic:

“yesterday was a very exciting day. I was really excited two days before that when the Russell 2000 was the first major index to make a new all-time high. Maria, we’re right on schedule. We’re going from the disbelief stage to the belief stage. That just started this week and there’s a lot more upside.”
“in the face of all of the bad news, all of the problems in Turkey and Egypt and Bernanke taking his foot off the pedal, or whatever pedal he’s putting it on. you know, the market just absorbed it. and that’s fabulous. and the leadership is even better and broader. Maria, the sky’s the limit. I love everything with a symbol, Maria.”

Art Cashin, another veteran, described Thursday’s rally differently on CNBC SOTS on Thursday morning:

“this looks like, smells like and feels like huge short covering. I think there is enough blood in hedge fund alley to cater Dracula daughter’s wedding. It’s very painful. and the fact that the short covering has not allowed for a pullback yet is very interesting. because usually they cover and they pull back to see if they can get something cheaper. they keep the bid right under it. so the positions must be huge and must be very, very painful, be it in stocks, gold, and even short the bonds.”
“usually you cover just enough to reduce the pain. if you have a huge position, obviously you can’t cover the whole thing. but if they’re bidding intently here, i think they have that concern, that this could be a multi-day problem for them.”
“1670 looks like pretty legitimate resistance. it should be. but again, it’s tough to tell. I can’t think of something, another shoe to drop that would panic the shorts again. but resistance will fade if there is another short panic. for now, you have to wait and see when do they finally relent and allow them to come in a little bit and get a sense of how big those short positions were. but this is — I’m telling you there’s a lot of pain out there in hedge fund land. we hear from them from time to time.”

David Kostin of Goldman Sachs gave a more intermediate term perspective on Thursday on CNBC SOTS.

“The No. 1 trade remains to sell bonds and to buy stocks because that economic scenario is a story of generally rising long-term rates. That’s good for the earnings of many companies. It’s basically a reflection of a better economy.”
“Another strategy in this environment is to focus on dividend-yielding stocks that are “likely to do very well,” while investments in bonds have real potential to lose principal as yields are on the rise. He also recommends focusing on U.S. markets versus overseas or emerging ones, because the domestic market has lower implied volatility.”
“the relationship between yields on stock earnings and bond metrics such as 10-year Treasury yields, TIPS and BBB Bond yields. “In all those metrics, equities are much more attractive than fixed-i
ncome securities,..“

James Paulson, a consistent commentator repeated his call on CNBC FM & 1/2 on Thursday

“come into the year I had a 1700 target on the S & P. when it about reached that in late May, …, I thought were going to be in a trading range for the rest of this year. I still think that’s what we’re going to do. I think we’re going have strong enough growth to not allow the stock market to fall very much, but we’re also going to have to digest several things including the big run up we’ve already had, a rise in bond yields which I don’t think is over this year. I think the 10-year will end around 3% ”
“the winding down of QE which I think is going to start happening. I personally think we’re marking some time. We might go below 1600 again and trade above 1700 again before the year’s out. But what we’re really doing in my view, Scott, we’re debunking a myth for the next six months that this is nothing but a sugar high from the Fed, and once they pull out the economy and the stock market’s going to fall apart. If we don’t, then I think we’re going to build confidence again by the end of the year to have another nice run upward in 2014“

Lawrence McMillan expressed criticism of Bernanke followers before giving his technical opinion. His criticism seems as valid as his calls have been:

“The “interpreters” are in charge of this market. They are the people who interpret what they think Bernanke said, and then they act accordingly in the stock market. Frankly, I am in the camp that Bernanke has not changed his message at all — he has consistently said that QE will remain in force until economic conditions improve (and there is no improvement — at least in the indicators he is watching).”
“In summary, the indicators are bullish, and traders should not try to fight this tape. Despite the volatility the market has displayed, and its recent ignoring of support and resistance levels, the signals from the other indicators have proven to be accurate.”

You have heard of 2-handed economists. Sometimes technicians can also sound 2-sided. The tweets below from Mark Newton on Friday after the close suggest different predictions or tactics for different types of traders.

Mark Newton ?@MarkNewtonCMT52m – For Trend followers, no real worry until Trend from late June broken, near 1630 which lines up near this wk’s lows- w/ tgt up near 1700-15
Mark Newton ?@MarkNewtonCMT53m – If these cycles turn near 20th,Wkly neg divgce, Demark confluence could produce Decline which makes #SharkNado seem like a day at the beach

Question is whether Mark Newton will tweet on 21st to report whether the cycles have turned or whether, like DeMark, he will leave us in the dark.

5. Just Missed Zweig Breadth Thrust Signal but Qualified Appel Continuation Signal?

Confused. We are with you. Actually we were so until we read this Friday’s article by Tom McClellan.

“There has been a lot of chatter this week among market breadth aficionados about a supposed Zweig Breadth Thrust signal. This is a rather famous signal developed by the late Marty Zweig, who passed away earlier this year.”
“The basic idea is that a sudden flip from really negative breadth to really positive numbers can be a sign of initiation of a strong new rally. The late Mr. Zweig found that it needed to happen in a short enough amount of time to be genuine.”

Tom McClellan does a good job of explaining the Zweig Breadth Thrust Signal as well as the Appel Continuation Signal by using Zweig’s data. We leave it to readers to read that explanation in Mr. McClellan’s article.

The bottom lines:

“Since it has been more than 10 trading days from the below 0.40 reading to the above 0.615 reading, the latest instance does not qualify as an official Zweig Breadth Thrust signal. But it would qualify as an Appel continuation signal, as shown in the lower chart. The problem is that a lot of these supposed continuation signals have turned out to be just blowoff tops. In fact, most of the recent signals have carried that meaning rather than conveying a message of upward continuation.”
We are operating now in an era when the Federal Reserve seems intent on having its way with the market, and with vanquishing any and all illiquidity dragons. The question for analysts and investors is whether $85 billion a month worth of stimulus is enough, and whether the renewed excitement over the punchbowl not being pulled away is real or just another blowoff. Recent history suggests that the blowoff scenario is more likely.

What a choice? Either a strong continuation rally or a blowoff top? Perhaps, the wisest scenario is to let the market to show its hand.

Featured Videoclips:

Larry Fink on BTV Market Makers on Wednesday, July 10
David Gerstenhaber on CNBC Fast Money on Thursday, July 11

1. Fed Tapers as Treasury Cuts Issuance – Larry Fink on BTV Market Makers – Wednesday, July 10

The detailed summary below is courtesy of Bloomberg TV PR.

Fink on what CEO’s are asking him:

“In most cases, I am asking them a lot of questions. In terms of regulations and political figures, they’re asking me what we are seeing. I think the biggest question being asked today is where interest rates go. Another question is China going? Those of the two biggest uncertainties in the marketplace. It is funny – most people don’t ask the question about Europe. Europe is now third or fourth on the list of worries.”

On where interest rates are going:

“Interest rates have backed up about 90 basi
s points. We have seen a drought on mutual funds in the past few days. We are still at a historical low. This is a problem that I see for bonds. We were at such historical low rates. Normalized rates are higher. Even government estimates for treasuries for 2015 is 5%. We talk about deficits – interest rates over the course of years will be higher…I don’t get frightened when you could forecast this out over years. To me, it should not be a shock to anybody. To me, you know, rates are going to go higher. It will be dependent on economic information. So we’re going to see a buy toward higher rates…My view is the economy will continue to improve. Implement will continue to improve. Europe is stable in my view. We are going to see a rising interest rate environment.”

On whether you can be 100% in equities in a timeframe of sustained higher interest rates:

“We need to see earnings for this quarter. It is my view for many reasons that being in equities and the suggested is the right trade. We have seen some very large moves. The long U.S. Treasury Market is down close to 10% year to day. S&P is up 16%. We have had a 26% change in valuation in six months. Obviously, a lot has occurred. For me to tell you equities will rally, I need to be certain that earnings are going to remain strong. From my conversations with many people, I believe earnings are not going to be missing estimates. Earnings will come in by and large bias. We saw that already with Alcoa yesterday.

On what his survival strategy is and his advice on what people should be doing:

“For those who have the ability to lose equities – I am using that as a mouthpiece to try to have people think about that. Most people cannot do that and most people should not do that. [Insurance Companies] are not allowed to do that. If you compare 1994 to this, it is different. There was much more flexibility. You had a 6% increase in interest rates. Much of the reason why it is muted today, most institutions are inhibited to own equities.”

On whether there is anywhere that is a better bet:

“There is going to be a great rotation in bonds. It is going to be within the bond universe. We have been talking to many pension plans, insurance companies to start thinking about moving away from bond funds that are targeted to duration. Most bond funds are core that are targeted to the Berkeley Aggregate Index. The problem of being targeted to this index, we have an aggravated problem, extended duration. At the beginning of the year, it has a duration of 4.8 years of risk. The mortgage prepayment issue that is embedded in the aggregate index is now five and a half years. It is riskier to own that bond fund today that it was in January. We suggest to move to unconstrained bond funds where duration is not targeted to the index.”

On the “well-known west coast bond fund manager” who has been betting on inflation:

“It is my view that inflation will be very muted. I don’t see any inflationary risk at all…I have a different outcome in terms of economic future. I think we are going to be in a two percent or three percent economy. We are going to have improving labor markets. Much as to do with energy in this country where we see a change in manufacturing in this country. We have a huge opportunities for job growth in the manufacture sector.”

On whether he feels that the bull market in bonds is over:

“I think I said that two years ago when I said you should be in 100% equities. It is my strong view that we are going to be in a cycle now whether it is five years or ten years. We are going to have rising rates.”

On whether he worries about a market that some say is addicted and hooked on quantitative easing:

“I think the two things that have happened why the statements aggravated the market so much. It is the change of direction. It is the beginning of a major change. We were accustomed to the old. That is upsetting to the world when you have a major policy change. I don’t think it will be as bad as people fear. The markets are not giving enough attention to this. I will be very surprised if the Treasury in the next few weeks announces a huge reduction in their need for bond issuance. At the same time, we may see a change in FED policy where they will reduce the amount of bond purchases. At the same time, the Treasury is reducing its issuance. That is not on the market yet. There may be a timeframe for stability. We could see a significant 20% or 30% reduction in treasury instruments. They will announce in the next few weeks or so. The CBO are confirming what other estimates came up with, a reduction. I would have been just as worried if the FED does not slow down purchases as the same time treasury reduces issuance. The FED would then be buying 130% of new issuance. At the same time the FED is changing policies and people started running to reduce exposure in bonds, we have had regulations inhibit and in some cases prohibit activities by the market makers. So the Volcker Rule is inhibiting positioning by broker-dealers of bond holding to capital charges. It makes it even more restrictive for those institutions. If you look at the footings of these market makers their bond holdings are down 70%.“

On whether that is an unintended consequence that we’re going to regret:

“I think it is an intended consequence…What this tells me is there is a faster development for electronic bond trading. We are going to need a vehicle in which there are better exchanges of buyers and sellers. I see this evolving toward an electronic market.”

On whether there is room for firms like BlackRock to be “Market Makers”:

“No. There may be but I will not do that. BlackRock will remain percent fiduciary to out clients. If I were a Market Maker, it changes my role with my clients. When we were talking about doing electronic bond trading – we were not going to take any commissions. We found a better solution by partnering with the market and they will do the market maker.”

On what he sees will happen to the Fixed Income business:

“[JPMorgan, Goldman Sachs, Bank of America/Merrill Lynch] will still be committed to that business. They do a very good job. We will like to see 10 more firms be committed as those three firms. That is why we have the shrinkage in inventory and that is why we are experiencing at the moment some stress in the markets of buying and selling bonds, especially corporate bonds.”

On whether he trusts big banks to rate their own
assets:

“Basel does not impact government security. Institutions could have leveraged balance sheets and conform. That raises a huge issue. If this goes through, these institutions have two ways to mitigate the problem. They could raise more equity to keep the balance sheet or they are going to have to shrink their balance sheets… The market is very demanding. I would not be surprised that earnings are going to be coming out this week and next where the financial analysts will ask the leaders of these firms what are you going to do about it? Would you shrink your balance sheet or are you going to differ dividend payments? It is either capital or retained earnings or striking the balance sheet. If they balance sheets, we will have a more aggravated problem in the future. Banks are the largest owner of U.S. Treasuries.”

On what an aggravated problem looks like:

“The FED has taken their foot off the pedal and buying assets. At the same time, you would have banks also not buying, rolling over into new treasuries. Then we would hope the deficit reduction is larger. We may have an imbalance. This could be another reason for a rise in interest rates…If interest rates go up fast enough and impairs opportunities you have an equity. Equities still present a better risk return.”

On what is going on in China:

“Role of having cheap labor. As a result, the economy has moved itself to the largest economy in the world. China has done it cheaply on the back of exports to parts of the world. China cannot grow at 8% or 9% when trade partners are growing at zero or two. With the size of the economy, China has to be more dependent on domestic consumption. We are not seeing the increase in consumption domestically to keep the economy growing. The question is, we are seeing a decelerated economy. This has been consequences for an emerging world and other trading partners. I believe there are two structural thing that China needs to address. I believe party leadership has mentioned this so I’m not saying anything that is new. China is living with a one child family policy. Also China has a no safety net for retirement and healthcare. A working couple now with the presumption that the grandparents are alive are caring for them too because there is no safety net…Here we are, two working people trying to help five other people. There is no safety net. What is going on is, their saving more and more and more to prepare themselves for retirement. Demographic issues in China are getting bad. A problem is you’re not seeing consumption because people are frightened about the future. They are saving more.”

On the imminent concerns about the stress in the banking system in China:

“The party is trying to cut that corruption. They are being aggressive with corruption and aggressive with conspicuous consumption. That is another reason why there is slowdown. People are not buying watches and those cars that they were because they don’t want to be showing off as much. That is slowing down the economy a little bit. The other issue is we have seen a lot of provincial government building more factories, roads and more things without having necessary demand for that. You have a growing excess of housing and other forms of construction in China. The Central Bank started pulling back liquidity as a warning. You just can’t do this once the warning was loudly heard and you had the rates pop up, they reasserted liquidity. I think that they are they’re warning banks, slow down. That is another reason why the economy is slowing down.”

On whether the world is overestimating the speed in which China is slowing down:

“We may have a slower China economy than people have forecasted. We started the year thinking the economy will be at 7.5% and it may come in at seven percent. I don’t think it will penetrate under seven percent.”

On whether there will be a protesting middle class in China like we do in Brazil or Turkey:

“Turkey has the middle class. You have a very rapid advancement of middle class in the emerging world. Tremendous changes in the demographics of the world in terms of the rise of the middle class. In the last few years, that rise has stopped. Whether it is building better education, better opportunities – they’re saying you’re supposed to help us rise more. This is very interesting moment in world history that we are not seeing the poor being the protesters. We are seeing the middle-class saying we want more…There is a large population that is still underserved in China, if they don’t see advancement in their opportunities.”

On whether over an investment cycle, one could see further weakness:

“Absolutely. I don’t think you should have an horizon of six months for emerging markets. For long-term investors, I think emerging markets represent value today, emerging world economy markets are cheap but they could get cheaper if there is further weakness.”

On how Ben Bernanke has done as a communicator of monetary policy:

“I was surprised at how negative the market reaction was to the chairman’s speech in past meetings. I thought he was very good, very open, very transparent in terms of where the FED Reserve is thinking. I applauded him for what he said. I actually do not think he said as much as the world thought he did. He said there is a change in policy, but he also talked about how we will have a lot of options. If the economy deteriorates, he’s adjusted, I would buy more. If the market improves, he would accelerate the slowdown.

On the different voices coming out of the FED:

“I would listen to the chairman more than the other Governors. More importantly, we are talking about tight changes in opinion. We are not talking about that many differences. In reality, if you’re a long-term investor, it will not mean that much.”

On whom he would like to see as the next FED Chairman:

“All the candidates are capable. We hear about Janet Yellen and Larry Summers even Tim Geithner. All are confident and capable. I believe [the President] has the good fortune of having choices.”

On whether he plans to get more politically active:

“I don’t think of myself as a political active CEO. There needs to be more spokespeople for issues like retirement. A big issue on what we do with social security fund, what we do related to the new security laws and how that impacts favors. I am putting myself in a more public position. I do believe t
here is a role to be played, helping investors and retirements.”

On whether he plans to support Hillary Clinton should she run for president in 2016:

“I have three years to make that decision. A very interesting candidate.”

On how President Obama is doing:

“I am not here to talk about the President.”

2. Buy Dips in Stocks, Bernanke wont tough taper – David Gerstenhaber on CNBC Fast Money – Thursday, July 11

Summary of Gerstenhaber’s comments on CNBC.com.

Stocks

A few opportunities should arise after stock indices hit all-time highs on remarks from Federal Reserve Chairman Ben Bernanke, David Gerstenhaber of Argonaut Capital Management said Thursday.

“I think you have to buy the dip that you get out of the market at this point,” he said on CNBC’s “Fast Money.”

Bernanke’s Comments on Wednesday

But what Bernanke did last night was important. He came on and he essentially said, “Look, you guys have misunderstood what I’ve been trying to communicate to you.” The tapering is not going to happen as powerfully and as quickly as we believe. We need to separate tapering from tightening. You need to understand that short-term interest rates aren’t going up anytime soon.” And I think that’s what the market took relief from.
Gerstenhaber said that signals that the Fed would continue its $85 billion-per-month asset purchases would through the end of 2015 presented a few opportunities. … He was bullish on euro/dollar futures and on equities.

Interest Rates & Bond Market

And although U.S. Treasury bills had seen a sell-off, “we know that it’s going to be higher in yield looking out a year than it is now,” Gerstenhaber added. “Probably 100 basis points.”
“The market priced in significant tightening earlier, and that really got the Fed quite upset, based on our understanding of what was going on down in Washington, and this was an opportunity for Bernanke to walk back that tightening, and he did, and you got a response out of the front end of the bond market this morning,” he said.

Japan

you’re talking about a market that when you look around the world you’ve got no growth in Europe to speak of. minimal growth in the united states on an earning basis. in japan you’re talking about 50, 60% earnings growth, a market on the forward PE of 14 and a half times earnings roughly. depends where you think the yen is going to be.

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