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.
Another Exhausting Week
A week long Rip Van Winkle would probably wake up on Saturday morning and think it was a ho-hum week. How wrong would he be? Yes, the Dow closed down 65 points on the week and the 30-Year Bond closed up about 11 basis points. But what a ride it was?
The Dow showed a 500 point intra-week move from the lows to the highs of the week. The real question is whether the panic low of 1044 on the S&P will hold in the next few months and whether the 3.95% level of the 30-Year Bond would mark the bottom of the yields for the summer.
We don’t know much but it does appear that investors have gone from an overinvested posture in stocks to an underinvested position. At the same time, even passionate bulls like Larry Kudlow have begun contemplating a slowdown in the second half of 2010.
As we said last week, all eyes will be on the May NonFarm Payroll report next Friday.
Featured Videoclips
This week we feature the following videoclips:
- Steve Wynn on CNBC on Friday, May 28
- Jim Cramer on Mad Money on Thursday, May 27
- Doug Kass on CNBC Fast Money on Thursday, May 27
- Kirby Daley on CNBC Squawk on the Street on Wednesday, May 26
- Jordan Kotick on CNBC Closing Bell on Wednesday, May 26
- Jeff DeGraff on CNBC Fast Money on Tuesday, May 25
1. Steve Wynn Takes on Washington – Steve Wynn with CNBC’s Jane Wells – Friday, May 28
Rarely have seen a CEO so passionately outspoken about what he sees happening in America. This video of Mr. Steve Wynn is an absolute must-watch in our opinion, regardless of your political beliefs. Just a few quotes to pique your interest:
- It’s common sense that has disappeared in Washington DC, it is common sense that has disappeared in years of 7 & 8 in America, and we are inheriting the awful results…of wild, uncontrolled spending.unbelievable, unsustainable debt..and yet here we are doing it again….
- 20 Billion a month to the FHA on top of what happened to Fannie Mae & Freddie Mac, (in a passionate voice, hitting his finger on his palm), we are doing it again today for 20 billion a month, we are destroying the housing market again, under the name of a stimulus, phony misrepresented names….
- Macau has been steady, the shocking unexpected Government is the one in Washington, that’s where we get surprises everyday, that’s where taxes are changed every 5 minutes, that’s where you don’t know what to expect tomorrow, to compare political stability and predictability in China and Washington is like comparing Mt. Everest to an ant-hill.
- So when you ask me to compare the unpredictability and uncertainty politically in China compared to Washington, I take China; Washington is unpredictable these days; No one in the Business community from one coast to the other has any idea what’s next?…the uncertainty of the business climate in America is frightening, frightening to everybody and it is delaying the recovery…
- We are on our way to Greece in the hands of a confused and foolish Government that is living up to the predictions of Alexis de Toqueville who in 1909 said “The American system of democracy will prevail until that moment when the politicians discover that they can bribe the electorate with their own money” and boy, it is in full bloom today, so extreme that it will probably have an end onto itself, the public is frightened, this Tea Party business is all about fear, there is a sense in the land of discomfort, there is a sense of fear that the politicians are ruining us and the people are right, its got to stop, its got to stop…
Pure, honest stuff whether you concur or not. Kudos to Jane Wells for conducting a beautiful interview. The other 2 clips of the Wynn interview are:
Jane Wells is a fabulous talent at CNBC. We have always loved her clips. Today, we find out that she can write lovely too. Her summary of the Wynn interviews can be found at Steve Wynn Takes on Washington, Vegas at cnbc.com.
Jane is a master of the CNBC recipe of making business news fun. Watch her get Steve Wynn talk about stuff (in the Vegas downturn clip above) we can relate to:
- “This generation of people that are between 22 & 40 have a different attitude, it may be this whole notion of interactivity, that instead of sitting and watching something, you want to be part of it…their idea is not sitting & watching, their idea is being in it, doing it, being immersed, they are very very hedonistic and sensual…”
Jane Wells could not show what perhaps she would have liked to show on TV as a backdrop to these comments. So she writes in her summary:
- As we spoke, scantily clad waitresses in barely-there orange bikinis prepared for one last practice run-through. “They’ll make north of a hundred grand apiece,” annually he says. The jobs pay well, and the tips are great. But wearing those bikinis isn’t easy.
Mr. Toure may call himself that, but Ms. Wells is the real Fab.
2. Tug of War – Jim Cramer on Mad Money – Thursday, May 27
Jim Cramer gets a lot of blame but he rarely gets credit. On Thursday, May 27. the Dow Jones soared by 285 points. Most of the commentators on CNBC became giddy. CNBC Fast Money’s China & Commodities Ultra Bull, Joe Terranova went euphoric:
- Last Fast Money move? I think you are opening the books right here. I think what the market is telling you to do and what money managers are gonna have to be doing over the next couple of days is going out and putting back on positions. When I look at what I have got long in the last couple of days, I kinda feel like I am not long enough and I think right now, if you are a money manager…you have to invest, I would imagine over the next couple of days they chase the tape higher.
Then about 58 minutes later, Jim Cramer began his show at 6:00 pm. Here is Jim’s opening message:
- A glorious day at long last.Everything seems well let’s say hunky dory. With the Dow rising 285 points and the S&P up about 3%, totally different from the usual bloodbath scenarios that we have gotten used to lately, it’s my job to remind you that this is NOT the time to become bullish it is NOT the time to buy whenever everything looks up even though fundamentals haven’t actually changed you should turn seller
- ..that is why tonight I want to talk about the concept of ammunition; stock we bought when the market was getting hammered when I told you to buy on the way down like those accidental high yielders you buy these on weakness so that you can unload them on strength, like the strength we had today..
- we don’t buy up 285 dow points, that be nuts and believe me I know crazy when I see it..No. we lighten up. When the market gets euphoric, we get grimfaced and think about what we can offer on the way up, just like we get more positive on the way down and look for bargains. It is incredible, it is called Buying Low & Selling High.
- Having ammo is integral to our strategy of not having too much stock when the market turns down..that way you have enough room and cash to add to positions that you trimmed or, in the parlance of Mad Money, schnitzled on the way up
When will Jon Stewart show such a clip of Jim Cramer?
PS: The Dow Jones was down 122 points the next day on Friday, May 28. Cramer’s viewers have a reason to say “Thanks, Jim“. Terranova’s viewers, not so much!
3. Kill the Trading Machines – Doug Kass of CNBC Fast Money – Thursday, May 27
Doug Kass of Seebreeze Partners is an astute investor. He has made excellent trading calls in the past. This time, he came on the Fast Money to spin his theory that High Frequency Trading (“HFT“) is responsible for the spike in volatility. We respect the investment views of Mr. Kass. But frankly, his new theory seems dubious to us. As far as we know, HFT models fail when volatility spikes and they tend to withdraw from the markets under high volatility conditions.
You can hear real experts on HFT talk about their tradecraft at Calming the Market Storm – an interview by Maria Bartiromo with Irene Albridge of Able Alpha Trading & Manoj Narang of Tradeworx.
Perhaps, Mr. Kass was speaking about other types of Quant Managers who amplify market moves by their trading. What interested us most in his interview was his forecast that the “S&P 500 would trade between 1080-1180 for the rest of the summer“.
Read a summary of his views at Market Storm Clouds Bring Rays Of Opportunity at cnbc.com
4. Is Asia an Investment Bubble? – Kirby Daley with CNBC’s Erin Burnett – Wednesday, March 26
Kirby Daley is the Strategist of the Newedge Group. We confess we do not much about either Mr. Daley or the Newedge Group. But after listening to Mr. Daley, we feel we should know more about them. We judge an expert by what they say and not by the banner they speak under. By that standard, we think Mr. Daley is worth a serious listen.
- You can’t look at the property market, you can’t look at the numbers and say there isn’t some sort of bubble forming, we are not in some bubble territory. But it is not the same type of bubble we are used to in the US, there is not the same type of mortgage activity withdrawal and the consumers leveraging themselves up,
- …but the problem is, what is damaging in my view, China is not making the transition yet to a domestic demand-driven economy and they need to do it.. and I have said, it is going to be a 5-10 year process.
- When I was on your show in NY in September, I talked about the fact they are investing in overcapacity, they are driving this economic growth through investment infrastructure, that sound s great, they can use it in future, the problem is that the world is not going to be there to buy the products to make it a good investment,
- that leads to NPLs (non-performing loans) and to get out of NPLs, they can’t magically use their reserves to pay that off and the laughing gas breathing China optimists say there was not a NPL problem, the last time there was a NPL problem, they got out of it with no damage, this time they are going to get out of it through financial repression, which is what they did the last time as well, that means keeping interest rates low for consumers, keeping the spreads low for the Banks, and the consumer will not be able to pick up..
- that is what Japan went through, that is what is going to happen to China and that is what is probably going to happen to the US. That is what worries me more than a housing bubble.
In response to a question by Erin Burnett, Mr. Dale said:
- there is domestic consumption because we have a wealth effect from the housing bubble, it is different from the wealth effect in the US, people are making money here and they are spending it, but in general, we need the entire economy, how the economy is structured and driven, to change, and that is not happening…
Then Erin asked an excellent closing question:
- Burnett – How do you trade China right now given those concerns which are serious and macro and given the immediate concern about the situation in Europe, 20% of China’s exports go to Europe, single biggest market for them, how do you trade China?
- Daley – It is very difficult, it is a great question, because the stock market is not overvalued, however, the chances for the stock market to really rally substantially from here are fairly low because of the worries about the real estate bubble. So many corporations are invested in real estate, that if real estate does start to come off because of the tightening on the real estate sector thats going to affect corporate bottom lines….It is a tough play right now
Words to ponder, we think!
5. Red Flags for Markets? – Jordan Kotick with CNBC’s Trish Regan – Wednesday, May 26
As the title suggests, Jordan Kotick, Barclays’ technical analyst, sees red flags everywhere. The worrying signs he sees are:
- Germany-Italy 10 Year Spreads – This market is getting back to the wides. This is a story about Italy and Spain, of contagion concerns that are back in the markets.
- US 5Yr5Yr forwards – 5yr5yr forwards* are rolling to the downside. When the markets are doing well, investors buy inflation protection. What you are seeing now is that they are not buying inflation protection but yet again it is actually starting to break to the downside. That is a troubling sign. It shows that the market is still concerned about risk.
- Indian 5-Year Swaps – Not the most liquid market but for American investors it matters. India 5-year swaps look like the Nasdaq, look like the FTSE. What you are starting to see here is a market that is topping out. That means money is starting to go into the Bond Market. What that suggests to us is that money is going into the Bond market and out of the stock market, on the verge of breaking down. Again, a sign of risk aversion.
- USD-Israel Shekel – That, the USD-Shekel is based out and starting to roll to the top is, to us, a very troubling sign. It does suggest that the EM currencies are still in trouble. The Dollar is gonna continue to do well.
His basic message “Risk is still at Risk here. That is what we are seeing through out all these asset classes.”
Risk is still at Risk! Nice line, Jordan.
PS: David Faber of CNBC did a rah-rah segment earlier in 2010 about inflation and how large hedge funds were putting on 5Yr5Yr forward based trades to take advantage of inflation. David, are you listening to Jordan Kotick and do you have any plans to update your segment?
6. Chartology – Jeff DeGraff on CNBC Fast Money – Tuesday, May 25
Jeff DeGraff of the ISI Group is rated as the #1 technician by Institutional Investors. He came on CNBC after a tumultuous day in which the Dow was down 290 points (& S&P touched 1044) in the morning and closed down only 22 points, a day when 30-Year Treasuries traded in the early morning at 3.95% and closed at 4.06%, only 2 basis points down on the day.
This is a good clip. Mr. DeGraff points out that the 10-day TRIN is very high and the last 13 times the TRIN has been so high since 1965, the S&P 500, on a 65-day forward basis, produced a return 3 times what the S&P normally produces. The one caveat DeGraff had was Credit. He also said he would like to see the 2-year & 10-year rates go up. On this topic, he said he would short the TLT, Treasury 20-year ETF, because the reversal in the TLT on Tuesday was more striking than the reversal in the S&P 500.
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