Interesting Videoclips of the Week (January 9 – January 16)

1. Bill Gross of Pimco on Wednesday, January 13
   
2. Mohamed El-Erian of Pimco on Friday, January 15
   
3. Bill Miller of Legg Mason on Tuesday, January 12
   
4. CNBC Fast Money clips of the week
   
5. John Taylor of the Taylor Rule on Tuesday, January 12
   
6. Mark Matson of Matson Money on Thursday, January 14

• At minute 4:54 of this clip, Erin Burnett asked Mr. Gross: “Are you sticking with your sense that, as you spoke a few days ago on this show, the Fed will not be raising interest rates this year and you still only think that the Treasury rates on the 10-Year are gonna go up by say by 40-50 basis points?”
  
• Mr. Gross answered: “Well, yes. I think the Fed is on hold for much if not all of the year and I do think that once they stop writing checks, which is what they suggested they will do in March, then perhaps 20 or 30 basis points higher will be the ultimate direction of rates, wherever they are in March” (emphasis ours)
  
• Erin Burnett responded “ok from March, allright, understood”.

Folks, did Bill Gross just slip a curve ball past our plate? Until January 12, Bill Gross was publicly unequivocal that 10-Year & 30-Year Treasury yields were going higher. But in this conversation, he used the “wherever they are in March” phrase. So wonder:

• Is Mr. Gross signaling that 10-Year Treasury yields could possibly fall between now and March?
  
• Is Mr. Gross no longer bearish on 10-Year Treasury yields from now until March?
  
• Is Mr. Gross making this statement to defend himself in case viewers find out that Mr. Gross has already begun buying long maturity Treasuries?

Look at the setting for this utterance by Bill Gross:

• On December 7, when Bill Gross went publicly negative on 10-Year Treasuries, his Pimco fund had already sold positions and accumulated cash (from minus 7% cash position at October end to plus 7% cash at November end) according to Bloomberg news.
  
• After his public Strong Sell type stance on December 7, the yields on 10-Year Treasuries went up approx. 60 basis points in the month of December making long maturity Treasuries far more attractive than they were on December 7.
  
• On January 8, the NonFarm Payroll Report came in much weaker than expected improving the fundamental case for long maturity Treasuries.
  
• In early December, large speculators had covered their shorts in 10-Year Treasuries and their percentile ranking of short Treasury positions was 0%. As treasury yields kept rising in December, large speculators kept increasing their short positions in 10-Year Treasuries. Finally, by January 12, one day before Bill Gross’ appearance on Erin Burnett’s show, large speculators had maxed up their short positions in 10-Year Treasuries to a 100% percentile ranking. 

Bill Gross is great tactical trader. He has forgotten far more about trading Treasuries than novices like us will ever know. If simpletons like us can see the value building up in Treasuries, does Bill Gross not notice? 

We simply point out that Bill Gross spoke on Erin Burnett’s show on Wednesday, January 13 and the next two days showed massive buying in the 10-30 Year range of Treasury Curve. Rick Santelli rated the 30-Year Treasury auction on Thursday, January 14 an “A”  and Friday, January 15 featured a huge rally in the 10-30 year Treasury sector. So we ask:

• Did Mr. Gross miss this massive rally because he stayed bearish on Treasuries as he had been publicly so?
  
• Or did Mr. Gross turn bullish and buy 10-30 Year Treasuries before or during this 2 day rally?
  
• A more direct question, did Bill Gross buy the 30-Year Treasury auction on this Thursday, one day after he used equivocation in answering Erin Burnett’s question about the direction of 10-Year Treasury yields?

Of course, Bill Gross will not answer our questions and neither will Erin Burnett. Our hope is that Bloomberg News will get the facts when Pimco releases their position data at the end of January, as Bloomberg did at the end of November 2008.

Having said the above, we do thank Erin Burnett for inviting Bill Gross on her show. Mr. Gross is by far the best tactical trader of Treasuries and Erin Burnett gives us the opportunity to listen to him. How we wish it was not so hard to decipher his Talleyrandic utterances?

Erin Burnett asked a direct question of significant importance at minute 07:30 of the clip:

• Erin Burnett – “One brief question before we go because this headline literally just crossing as we speak, S&P downgrading California Bond Rating again. California Munis – Buy Sell or Hold?”
  
• Bill Gross – “well, I wouldn’t buy them, I wouldn’t buy most Municipals because their deficits, Erin, are in the 200-300 billion dollar for a two-year time frame camp; that’s a lot of deficits. That has to be closed via yes the government spending programs that have been a part of the past 12 months, we need to see it again and to a certain extent, the governator was right because California and other states are paying a huge burden of medicaid and they need to get some relief there until they do the fiscal stability of California and the other states is a question “
  
• Erin Burnett – ‘Thank you very much. We appreciate it.”

• “You come to the conclusion that the market simply hasn’t priced in the reality of what we talk about every single day,”
  
• “On the one hand we expect the banks to lend, to extend credit to get the economy going again. But on the other hand there’s a tremendous desire to tax them to target leverage, to target size.”
  
• “”serious, sequential contamination”” of world balance sheets will be a larger issue in 2010 and require corrective measures.”
  
• “The history of crises is very clear. They expose structural problems and when you look at the structural problems you need a structural response, and so far we’ve only had a cyclical response.”

• “We have a recovery that’s just beginning,..The financial crisis is mostly over, but the recovery is just underway.”
  
• “The second half of 2010—when the stimulus begins to wind down and when the inventory rebuild begins to slow—there’s a question there, but the current outlook is very positive,”
  
• “investors don’t have to dig too deeply to find “great values.””
  
• His recommendations – “IBM, JPMorgan Chase, Bank of America, General Electric, Amazon.com”

4. CNBC Fast Money Useful clips

We have been critical of this show in the past. So far in 2010, we are pleasantly surprised. The show has featured a diverse group of guests and provided cogent tactical recommendations. For the most part, the recommendations have worked. So we commend Fast Money and sincerely hope that they keep it up.

Below are some clips & comments that made money for investors this week:

• Gary Kaminsky is a relatively new trader on Fast Money. We understand that he managed individual portfolios in a long distinguishes career at Neuberger Berman. His keen insight on how money managers behave early in the New Year was evident in his appearances on Fast Money this week. In particular, on Tuesday January 12, he said that big-cap technology was a crowded sector (his comments begin at minute 04:52 of the clip). This clip also contains a good discussion about new inflows into money managers between Gary Kaminsky, Karen Finerman and Tim Seymour.
  
• Doug Kass, the veteran Hedge Fund Manager visited Fast Money on Tuesday to explain why he is looking for a correction in the stock market.
  
• On Wednesday, January 13, Fast Money brought back Steve Cortez to speak bullishly about Treasuries (a rare event in itself). The discussion between Steve Cortez and Karen Finerman should be watched.
  
• Guy Adami was contrarian and correct when he advised against buying Intel & JP Morgan ahead of their earnings announcements. Tim Seymour’s perspective about the Google-China situation was smart and rational.

Of course, many calls of Fast Money Traders proved to be wrong. But that goes with the prediction territory. We look for honest opinions of experienced practitioners, not a perfect record. If we get honesty and diversity of opinion from Fast Money, we would be satisfied.


5. In Defense of the Taylor Rule – John Taylor with Larry Kudlow on CNBC Kudlow Report – Tuesday, January 12

Professor John Taylor of Stanford is the renowned creator of the Taylor Rule, the rule that has governed monetary policy of the US Federal Reserve for a couple of decades. No where on TV can you hear a discussion of monetary policy except on The Kudlow Report. Thank you Larry Kudlow.

Read Larry Kudlow’s summary of his conversation with John Taylor and his analysis of the factors behind reconfirmation of Ben Bernanke at Bernanke’s Days May Be Numbered on cnbc.com.

But frankly, The Kudlow Report could use a pick-me-up to stimulate viewer interest, that is the interest of viewers who are not so focused on monetary policy. We have long wished for a segment that makes fun of the daily follies of CNBC Anchors. CNBC shows create a range of emotions in their viewers on a daily basis, anger, jeering, fun and occasional laughter. 

So why not get someone to poke fun at CNBC mistakes of the day. Besides creating viewer interest, this may actually increase CNBC’s credibility and keep the various CNBC anchors on their toes. 

In addition, Larry Kudlow could host a daily fight al la Liesman-Santelli between anchors & reporters. CNBC has  superb reporters like Diana Olick, Phil LeBeau and Jane Wells. Why not try a segment in which honest, aggressive CNBC Reporters summon CNBC Anchors for a roasting or, when the occasion demands it, for withering criticism for the anchor mistakes of the day? 

A sort of joint Jon Stewart and Bill O”Reilly segment on a daily basis.

 
5. Afternoon Market Check – Mark Matson of Matson Money & Todd Colvin of MF Global on CNBC Power Lunch – Thursday, January 14

At minute 00:35 of this clip, Mr. Matson begins to speak:

• “The market can always go up, ah let me throw some optimism what we were talking about, hope, real hope not politically correct hope. Look statistically speaking, the market goes up 2 out of every 3 years..the market is largely a random walk so we don’t know when those periods are coming…long term equities do a great job.outpacing inflation..if you are worried about inflation you need to be in equities long term..but as far predicting the short term lets get away from that because the economy always comes back long term …we have been through worst depressions, recessions,  wars; no one has a magic formula for knowing exactly how it is going to happen but it will happen..”

We could not believe our ears at this utter garbage. Was he Rip Van Winkle? Did he not hear of Robert Shiller, David Rosenberg, Nouriel Roubini, Meredith Whitney in 2007? The downturn of 2008 was perhaps the most widely predicted crash in memory.

We waited for the veteran Power Lunch Anchor crew to pounce on this idiot, there we said it. But to our horror, CNBC Anchor Dennis Kneale asked:

• “Are you surprised at how rapidly the market has come back and has it come too far?”  Matson replied – “I don’t think we have come too far. all the known & predictable information is in the price today. I think what we need to do to go further to get this economy to continue to go is to lay off big business. I have a better recovery plan for getting this money back.” Then he threw out an asinine rhetorical  idea to which Dennie Kneale replied “great point“.

Where was Jim Cramer? Where was Rick Santelli? Jim Cramer is first an investor and then an anchor. He watches CNBC all day. Why didn’t Cramer storm into the Power Lunch studio, throw out Mark Matson and launch in to a rant against Dennis Kneale and the rest of Power Lunch Anchors?  Rick Santelli listens to CNBC all day as well. Why did he not interrupt the show and launch into a justifiable tirade against both Matson and his accomplice Dennis Kneale?

Frankly, both Cramer & Santelli need to learn from O”Reilly and Hannity. These two anchors launched a public tirade against the management of their own Network when they thought Fox was making a big mistake. Do Cramer & Santelli not care about what their own network does? Or are they afraid?

Our first question would be to ask Mark Matson about his own performance of managing client monies or his own monies in 2008.  Then we would have asked about his performance for the past decade. It must be horrendous if he practices what he preaches.

After all, during 2008, most long-term buy & hold investors lost about 50% of their capital. Speaking of long term, these investors have just endured an entire decade in which S&P 500 lost money and the Nasdaq lost 43%. Power Lunch Anchors themselves covered the topic of the lost decade of stocks during the first week of 2010. 

So why did Power Lunch Anchors allow Mr. Matson articulate his nonsense on their show? If this were not enough, (at minute 03:11 of the clip) Dennis Kneale asked Mark Matson a final question about the Fed raising interest rates and the impact on stocks.

• Mr, Matson replied – “I fall in the I don’t know exactly what is going to happen camp..so what we do is diversify, for example we talked about a decade of stocks… but emerging markets are up 10%, small US value companies are up 8% over the last decade so you never know what’s going to happen in the short run, you gotta own these more diversified asset categories with dissimilar price movements; don’t be a sucker on betting on the short term”.

Again, we could not believe this utter bilge. In 2008, all these equity asset classes tanked and small caps, emerging markets got routed. Then in 2009, all equity asset classes rallied with small caps and emerging markets shot up higher than larger stocks.  This is what Matson calls dissimilar price movements? After the eye-opening events of 2008, Matson still preaches that stocks of one type can be diversified by stocks of other types? And Power Lunch Anchors let him get away with it?

With one performance, Mark Matson has become the leading candidate by far for our Least Useful CNBC Guest of 2010 award. He certainly fits the criteria we laid out for this award in our January 2, 2010 article  Macro Viewpoints 2009 Awards for CNBC Guests, Shows & Anchors. 

What about these Power Lunch Anchors – Sue Herrera, Dennis Kneale & Tyler Mathisen?

• Herrera and Mathisen are long term CNBC veterans. This just means that they share the worst habits of CNBC over the past 20 years, a period in which Anchors interviewed fund managers who blithely kept recommending buy & hold stock funds. The markets were kind and this worked. But this has not worked for the past 10 years.
  
• These days, Herrera & Mathisen demonstrate on a daily basis that they do not understand that markets have changed and so have their viewers. These two “veterans” feel it is enough to smile on TV and be nice while uttering platitudes about stocks for the long term. It is evident to us that these journalistic anchors have never been investors and do not understand anything about investing. Dennis Kneale is a pure political breed and rarely has anything sensible to say about investing. He is useful when discussing political events and views.