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.
What A Week?
A spectacular week in the stock market, up 400+ points in 3 days. It was a bonfire of the shorts. The stock market went from deeply oversold to a bit overbought in 3-4 days. We are not entirely surprised. Over the past weekend, stubborn bulls like Barton Biggs had capitulated and sold stocks. Jordan Kotick of Barclays (clip 3 of last week’s article) had predicted a very difficult week for the markets on CNBC. The entire CNBC network was full of negative comments about dark crosses and the possibility of impending doom in the stock market.
We noted last week that a bottom in stock prices was reached in July 2002. In fact, July has marked a local bottom for stocks on a few occasions this last decade. This may be why Doug Kass said on Tuesday that we have seen the stock market lows for the year (see clip 2 below).
Very few people are calling for a sustained rally. Just listen to CNBC Fast Money. Most of their traders are bearish. That sentiment is probably the best thing going for this rally. If the market believes that tax rates on dividends & capital gains are kept at 20% as Tim Geithner told Larry Kudlow (see clip 1 below), then the rally might even show better legs.
The earnings parade begins next week. Much will depend on the outlook of leading companies. There may be signs that at least some of the bad news might have been priced in. For example, Meredith Whitney dramatically lowered her numbers for Goldman Sachs on Thursday morning. The stock went down in the morning, recovered in the afternoon and rallied hard on Friday.
Europe & China
The Euro has mounted a real rally from about 1.19 to over 1.26. Much of the optimism about the Euro and the stock markets may well be due to the great expectations for the release of the stress results due on July 23.
If past patterns hold, we could see a rally, perhaps choppy, in Euro and Risk Assets until sometime in August. Then may come the deluge, as it did in prior years of currency crisis with a bottom in October-November. For this to occur, Europe would need to be like Asia in 1998 and not like the US in 2008. The one difference is that Trichet/Bernanke do not have the powder Greenspan had in 1998.
China is the real joker in the pack. We confess to be in the Austrian camp on China , the folks who believe that the deluge of credit and money flow into China has to result in at least a minor bust. But that may be a story for 2011 or for the fall of 2010 if Ken Rogoff proves to be correct (see clip 3 below).
US Treasuries
This week,Treasury yields crossed back above the big numbers (or small numbers) that were penetrated the week before. The 30-Year Treasury yield closed above the 4% level and the 10-Year yield closed above the 3% level. Auctions resume next week and the action of the Treasury market should provide some signals about the direction of risk assets.
We note that the position of Large Speculators in the 30-Year Treasury Bond is 90% of its peak while their position in the Australian Dollar is 0% of its peak. This tells us that the Large Speculators are on the wrong side of Risk.
Like the wily General Yoshi Toranaga of Shogun, Treasury Investors may wish to wait patiently for the fast moving Large Speculators to vacate their Treasury positions and re-embrace risk. As usual, we shall watch for the ultimate media indicator of them all, CNBC Fast Money, to resignal the rapturous embrace of risk by the Mo-Money crowd.
Recall that CNBC Fast Money invited Gary Shilling, the most fervent of 30-Year Treasury Bulls, to speak bullishly about Treasuries on Tuesday June 29, 2010. This, to us, seemed like capitulation by Fast Money. These folks have been anti-Treasuries since the inception of the their show in 2006.
Was it a coincidence that the closing high in TLT was hit the next day on June 30? Or was it the classic media contrarian indicator ringing a bell at the top? We shall find out soon enough.
Does CNBC Need Men? – II
We wrote a section titled Does CNBC Need Men? in our Videoclips Article for March 7- March 13 . That was the week when the contrast between the Mark Haines & Simon Hobbs anchor pair and the Erin Burnett & Melissa Lee anchor pair became obvious. Haines & Hobbs were a riot, they talked their heads off and enjoyed each other’s company. In stark contrast, Burnett & Lee had very little to say to each other and their chemistry was flat. That is when it struck us that CNBC has a tradition of hit shows with just male anchors but the network has never ever had a hit show with two women anchors. So, as a spoof of the Maureen Dowd book, we titled our section Does CNBC Need Men?
This week, we realized that we are more correct in our view than even we thought back in March. This hit us when we noticed that the Faberinsky odd couple (Faber & Kaminsky) had jelled and become a fun anchor pair to hear (sorry, looks are not their forte, but do they beat Haines & Hobbs?). The short jabs of Steve Cortez continue to be smart and actionable. See his comments about Gold on Friday, July 9 (at minute 00:47 of the clip). The point is that this is a show with 2 male anchors and one male trader. It does fine without a woman anchor.
Not to be outdone, Haines & Hobbs, or Stiff Upper Lip & Loose Lower Lip (as Louisa Bojesen of CNBC Europe named them), were reunited on Thursday after a long time when Erin Burnett went on assignment. They had been become a little estranged (with their massive egos, is anyone surprised?), but by the second hour they were back in form. We wish we could show you the video of the minute and half between 10:29 and 10:31 am on Thursday, July 8. You would have seen Simon Hobbs making an animated point to the camera with both arms extended and Mark Haines looking at Simon with adoring eyes. We have watched Mark Haines for years and this is the first time we have seen Mark Haines look at any co-anchor with such a look of pure adoration. CNBC Management, go watch this minute & half and see for yourselves.
But all this is really a preamble to our CNBC Moment of the Week. Melissa Francis returned to The Call this week and in just a couple of days, we saw the result – A beaming Larry Kudlow flanked by Melissa Francis & Trish Regan playing up to him. It was such a picture that a cult Bollywood song instantly flashed to our mind. The opening words of the immortal hit Huzur E Wala (from 1966) are a perfect description of the montage of Larry Kudlow in the middle with Melissa & Trish gazing at him from both sides (on Thursday July 8 morning at about 11:34 am, as we recall):
Oh Anchorman (or literally Big Guy), – “Huzur E Wala”
With Your Permission, – “Jo Ho Ijazaat”
We would reveal to the entire World that, – “To Hum Yeh Sare Jahanse Kah De”
Your Style is such a Killer for us – “Tumhari Adaonpe Marte Hai Hum”
Who says we are ashamed to admit it? – “Yeh Kisane Kahan Hai Ki Darate Hum?”
Far from being ashamed, the admiring look in the eyes of Melissa & Trish told the story better than our pathetic translation of the classic Hindi. We do not provide a link to the YouTube video. We have no wish whatsoever to suggest that Larry Kudlow would look tolerable in tight fitting Spanish Flamenco pants. Sorry Larry, no offense intended!
As we wrote a long time ago, CNBC often reminds us of Bollywood and sometimes when we watch CNBC shows, classic Bollywood songs come to mind. How we wish CNBC would hire us to produce remixes of these classic Bollywood songs with CNBC anchors?
Could you imagine Jim Cramer, Mark Haines and Erin Burnett in a remix of a Bollywood hit* from the sixties? Trust us, it is perfect fit. In this song, Mark Haines would not have to “hide behind Erin’s skirts time and time again” as Gordon Charlop of Rosenblatt Securities accused him of doing on Wednesday morning . He could be perfectly Haines in a White Jacket and Black Tie. We are confident that Jim Cramer could reveal his inner Shammi Kapoor. The catch is Erin Burnett. We are not sure if she has the moxie. She did grow up with chickens, she maintains!
Is this why CNBC Women Anchors cannot make a show fun without a CNBC Man as co-anchor?
* Can any reader guess which hit song we refer to? A small gift will be sent to anyone who guesses correctly.
Featured Videoclips:
- Tim Geithner on CNBC’s Kudlow Report on Wednesday, July 7
- Doug Kass on CNBC’s Fast Money on Tuesday, July 6
- Ken Rogoff on Bloomberg Hong Kong on Tuesday, July 6
- Scott Redler on CNBC’s Squawk on the Street on Thursday, July 8
- Steve Liesman on the Fed on CNBC’s The Call on Friday, July 9
1. Secretary of Treasury Tim Geithner with CNBC’s Larry Kudlow – Wednesday, July 7
This is an amazing interview, amazing for what Mr. Geithner said. He actually said:
- “We’re going to make sure that we keep at 20 percent the existing rates on dividends and capital gains.”
If he means it and if the Obama Administrations holds these tax rates at 20%, that would be very smart and bullish. We encourage readers to read the entire transcript of this interview at Larry Kudlow Speaks With Treasury Secretary Timothy Geithner on cnbc.com.
2. Word on the Street – Doug Kass on CNBC Fast Money – Tuesday, July 6
The market opened this week strong and rallied 170 odd points by mid-morning. But it sold off in the afternoon and closed down. That evening, Doug Kass appeared on Fast Money (minute 09:50 of the clip) and made a bold call that the Market Has Made Low for the Year.
- “…Now we have reached a yearly low for the market for the year. We have been traveling a path of fear and we have begun to dramatically disconnect from fundamentals and importantly the other risk assets, let me give you a very very quick example..the S&P was down 5.5% in June but High Yield Bonds were down, 2-Year Swap spreads were down, LIBOR was down, the Ted Spread was down and even the Spanish market was down 10%…”
Pete Najarian of Fast Money asked Doug which sector would perform the best. Doug answered “Always buy technology, it gives you beta.”
Listen to Doug’s words and read Doug’s comments at Market Has Made Low For Year on cnbc.com. The next day Doug Kass came back and recommended Google, Apple & Amazon.
3. Ken Rogoff Interview on Global Financial Markets – Ken Rogoff with Susan Li of Bloomberg TV in Hong Kong – Tuesday, July 6
The definitive book of this market cycle could well prove to be the book This Time is Different by Carmen Reinhart and Ken Rogoff. The most interesting statement from Mr. Rogoff in this clip is that China Property Market Beginning Collapse That May Hit Banks .
This we think is the biggest macro development on the horizon. We have seen what happened to stock markets & Treasuries when US Banks had a problem; we saw what happened in Q2, 2010 with problems surfaced with Europe’s banks. We shudder to think what would happen when global investors finally understand the precarious condition of China’s banks.
The only portfolio insurance against this menace? 30-Year US Treasuries?
4. Red Dog Reversal – Scott Redler of T3Live with CNBC’s Simon Hobbs – Thursday, July 8
We have been impressed with the short term calls made by Scott Redler. We find him to be honest, smart and humble about trading the stock market, a relief from the usual “equity-fee collecting” stock managers who talk glibly about being invested for the long term. Yes, the same managers who tell us that “this is a stock-picker’s market” but are always wrong in their own stock picks.
On Thursday morning, Scott Redler turned bullish from his bearish position quickly, perhaps too quickly for Simon’s taste. So Mr. Stiff Upper Lip Hobbs questioned him:
- Hobbs – “Call it the Red Dog reversal, after being very bearish, he has turned his attitude around and quickly…Scott, what happened?”
- Redler – “basically, everyone in the world started getting bearish, you heard the head & shoulders pattern from the mailman, from the milkman,… everyone was looking to get short and that we were going to break 1,000 (on the S&P 500); Dougie Kass came out and made the call saying that 1010 could be the low for the year.. So I started to look at similar patterns and if you remember back in 2009, when we had that head & shoulders pattern, we were below the neck line, everyone was bearish, Meredith Whitney came out and upgraded the banks, you had an hour to act..the market traded above 890, quick traders turned tail and did the red dog reversal, went from short to long and stubborn hedge funds wound up rolling up their shorts for months, they got put out of business because they thought that they were smarter than the market, they did not listen to the action…and yesterday when we we went above 1040-1043 and took back that neck line, we had to cover, some did not believe and get long but some did act quick, got long and now we need to figure out as we move forward.”
- Hobbs – “ah..hang on, hang on, hang on, are you saying that this is a bottom in the market or not?”
- Redler – “Right now, we have short term pivot point, we have a point of reference, 1010. You are now gonna look to see how we can hold up, is their commitment buying to this move? Right now, the go-to stocks look great, Apple had a big move yesterday, VMW had a big move, Netflix, Baidu, the Semis, some banks acted well. So right now there is reason to believe that we are back at glass half full..but we need to see this rally hold up, we need to see how we handle certain resistance levels, and we need to make a higher high in this market; We are in a series of lower highs, 1217 to 1180, to 1131 and now we need to see if we can eclipse that lower high, and create a new trend”
- Hobbs – “Scott, thank you very much for the analysis.”
Thank you Scott Redler. Thank you Squawk on the Street and Simon Hobbs.
5. The Fractured Fed – A Segment by CNBC’s Steve Liesman – Friday, July 9
In this excellent clip, “Professor” Steve Liesman reveals the heated debates going on inside the Federal Reserve and the split in the usually united team Fed Governors & Presidents.
Steve began with the two opposing viewpoints:
- Dallas Fed President Richard Fisher – “I think we’ve done enough…It’s not the cost of money that’s the issue. It’s not even the availability of credit.”
- St. Louis Fed President James Bullard – “If the economic situation changes, policy should react…You shouldn’t sit on your hands…I think there’s plenty more we could do if we had to.”
Then Steve discussed the views of Fed Governor Kevin Warsh, a top lieutenant of Chairman Ben Bernanke and outlined the things the Fed could do if it chose to:
- More Quantitative Easing (“Replace the Roll Off”)
- Cut Rates on Excess Reserves
- Hyperextend “Exceptionally Low”
This was followed by a discussion between Larry Kudlow and Steve Liesman. We like discussions of monetary policy and a debate between Kudlow & Liesman is always interesting.
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