Editor’s Note:
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.
We have written how excess sentiment or giddiness can often signal a short term or long term top in that sentiment. Usually such giddiness is most evident when the stock market goes up. But giddiness can be found on the short side as well. It feels as if the bears got giddy on last Monday.
The bears on the US equity market have literally hated the massive rally in the stock market since March 2009. Their hate has been passionate and well-reasoned. But it has been futile. On Monday, August 17, the quasi-religious foundation of this equity market shook when the Chinese equity market suffered a quake. That day, the US equity markets went down over 2% with a 90% down day (90% of the volume was to the down side).
To the bears, it was Christmas and Thanksgiving rolled into one. It appears that they felt that redemption was finally at hand and they loaded up on selling S&P 500 short. On Thursday, Jon Najarian of CNBC Fast Money told viewers that the open interest in the S&P 500 calls at 1000 was massive, meaning that bears had sold short large numbers of S&P 500 calls at strike 1000, a proverbial big number. This was a pile of dynamite stacked together. All it needed was a fuse.
On Friday, August 21, the housing numbers were released at 10:00 am. The number was much better than expected. The market began rising and with each uptick, the bears that had shorted the 1000 strike S&P 500 calls were lit up in the explosion. Jim Iuorio of CNBC Options Action described this as being caught in “Dragon’s Jaws” . (see clip 8 below).
We wondered in our August 8 article whether the near vertical increases in low quality financials that week were the result of massive short covering, especially by the huge Quant Managers. Momentum investors, both large and small, usually pile on such short squeeze rallies resulting in near vertical moves. This week, low quality financials like AIG and Citigroup rallied furiously on Thursday & Friday and the VIX dropped substantially during these rallies just as it did during the week of August 3 – August 7. Unlike that week, CNBC’s David Faber did a segment this Friday to discuss the short squeeze in these stocks (see clip 9 below).
The US Dollar began selling off almost as soon as the housing number was released at 10:00 am but notably it did not break down. It will be interesting to see whether the US Dollar holds the Rogers-Kudlow double bottom that was created on June 4 and August 3. This week, Robert Prechter, a well-known Elliott Wave theorist predicted a major rally in the US Dollar (see clip 3 below).
We were glad to see that old Trader Santelli was back and noticed the action in the 30-Year Treasury Bond. He almost waxed eloquent in its praise on Friday morning when he pointed out that it had rallied 20 basis points this week. Perhaps, Rick Santelli jinxed it. Because the Treasury market began selling off after the housing number was released and the selling accelerated in the afternoon as the stock market rallied. It could also be the usual Friday afternoon sell-off before a week of huge Treasury auctions. Next week, the Treasury plans to issue $105 billion of 2-year, 5-year and 7-year Treasuries. It remains to be seen whether the Treasury market will rally after the auctions are completed as it has for the last two auctions.
Despite this sell-off on Friday, the 30-year Treasury Bond has rallied 10.62% since its bottom on June 10, 2009. This rally is greater than the 9.1% rally in the S&P 500 since June 10. What is even more amazing that our “Friends N Fun” CNBC anchors have steadfastly refused to tell their viewers about this magnificent rally.
All week, CNBC Anchors kept talking about the fall in the VIX, the volatility index for the equity market. But no CNBC Anchor spoke about the persistently high level of MOVE, the Merrill index of Fixed Income Volatility. Recall that when the VIX was high earlier in the year, the stock prices were much lower than they are now and the level of fear in the stock market was high. In other words, the high level of VIX then suggested that stocks were cheap and ripe for a rebound.
Does today’s high level of MOVE suggest that the long duration Bonds are cheap or that the inflation fears in the bond market remain very high? Does it suggest that the yield curve is extremely steep? Does this mean that buying long maturity bonds or putting on curve flattener trades (buying the 30 year bonds & selling the 2 year bonds) can provide high returns?
Our role here is to ask the questions. We did. Now we hope that CNBC Anchors can use their vast network of experts to answer these questions.
This week, we feature the following clips:
- John Madden on Fast Money on Thursday, August 20
- Meredith Whitney on Bloomberg on Friday, August 21
- Robert Prechter on Closing Bell on Monday, August 17
- Louise Yamada & Carter Worth on StreetSigns on Tuesday, August 18
- Walter Zimmerman & John Kilduff on Closing Bell on Wednesday, August 19
- Mary Ann Bartels on Closing Bell on Wednesday August 19
- The Good, The Bad & Ugly –
- Martin Feldstein with Steve Liesman on Thursday, August 20
- Martin Feldstein with Mark Haines on Wednesday, August 19
- Martin Feldstein with Steve Liesman on Thursday, August 20
- Jim Iuorio on Fast Money Final Call on Friday, August 21
- The Faber Report on Friday, August 21
- Glenn Hubbard on The Call on Friday, August 21
1. Madden’s Gameplan – John Madden on Fast Money – Thursday, August 20 – 5:37 pm
John Madden was described in the promo as “the best sports broadcaster who ever lived”. John Madden is a favorite of ours and we are grateful to Fast Money from bringing him on the show. He was the quintessential Madden on the show, honest, lively with real opinions and yet charming.
He began by saying “you guys have way too much fun”. He felt his words could be misunderstood and added softly ” and that’s the way it should be”. Fast Money is one of our favorite shows and we concur.
One of the funniest moments in sports broadcasting was a conversation between Pat Summerall and John Madden before the internet came into widespread use. It was either 1997 or 1996. The game telecast had aired an IBM commercial which said at the end “go to IBM.com”.
Apparently, at that time, John Madden did not know what “go to ibm.com” meant and he went into a quintessential dry but hilarious Maddenologue about what “going to ibm.com” could mean. Then he asked Pat Summerall “what would you do if someone told you to go to ibm.com?” Pat Summerall replied in his deadpan voice “I would call the airline”.
May be you had to be there to appreciate the wit and the humor of the Madden-Summerall pair trying to figure out dot.com terminology before the Internet invaded our consciousness. We have no way of getting this clip but CNBC might be able to. The Fast Money team should try to get this clip and air it. If the viewers do not find it great, we will buy the Fast Money quartet & the anchor dinner at our favorite restaurant.
2. Bank Failures Will Rise to More Than 300 – Meredith Whitney on Bloomberg – Friday, August 21
Oh! Meredith, how have you fallen from grace? This is the Meredith Whitney who caused bank stocks to fall off a cliff when she made a negative comment. This is the Meredith Whitney who sparked the monumental rally in financial stocks and the stock market by her positive comments about Goldman on July 13.
How the mighty have fallen? On Friday, Meredith Whitney gave a negative interview about bank stocks to Bloomberg’s Margaret Brennan. The market essentially said “Meredith who?” The market is in the throes of a vicious short-covering of bank stocks, the trashier the bank, the more vicious the short-covering and the market simply does no care what anybody thinks.
We think this interview is a must watch because Ms. Whitney has been virtually prescient on the fundamentals of bank stocks. We are pleasantly astounded that Bloomberg.com listened to our complaints and added a web link to their videos. We do not know how well this link would work. So we say Watch this clip and read the summary “Whitney Predicts More Than 300 Bank Failures” on bloomberg.com.
How did CNBC let Margaret Brennan, an ex-CNBC reporter, beat them to this punch?
3. Robert Prechter of Elliott Wave International with Maria Bartiromo – Monday, August 17, 3:17 pm
The title of this interview on CNBC.com says “Perma-Bear’s Perspective”. The producers at CNBC must love the word Perma-Bear.
As Maria Bartiromo points out in her first sentence, Robert Prechter correctly forecast the rally by advising people to cover their shorts in late February, 2009 and Mr. Prechter says ” I can remember the days when I was a perma-bull” as his opening sentence.
Now Mr. Prechter is bearish again because he is seeing the opposite signs of what he saw in February. He also states that he sees a completed “Elliot Wave Pattern”, for those who know what that means.
The most interesting aspect of this interview is Mr. Prechter’s prediction for the U.S. Dollar. He says that the “U.S. Dollar is forming a major bottom and beginning a multi-year advance.” He makes his points with the help of a terrific chart.
Watch this clip.
4. Charting the Right Course – Louise Yamada & Carter Worth with Erin Burnett – Tuesday, August 18 – 2:09 pm
Louise Yamada and Carter Worth are both veteran market technicians and we have a high degree of respect for both. Technical Analysis is like a fine single malt. You can try to describe it but you really have to taste it to appreciate it. Yamada & Worth are rare single malts which we cannot afford to taste on our own. So we thank Erin Burnett for bringing this interview to us.
Watch this clip.
5. Hurricane Season: The Energy Impact – Walter Zimmerman of United I-CAP & John Kilduff of MF Global with Maria Bartiromo – Wednesday, August 19 – 3:30 PM
John Kilduff is a fundamental analyst and Walter Zimmerman is a technical analyst. This clip begins with the impact of the Hurricane season on oil prices. Then it gets into the China story. John Kilduff argues that China and Chinese consumption will be with us for a long time.
In contrast, Walter Zimmerman says “near term, if you look at the Shanghai Stock Index, it looks like a big bubble just burst. It is in a free fall. That does not bode well for those long the US markets on the hope that China is going to bale us out. We see much more down side risk than upside potential here in Commodities and Equities and the only market we see significant upside in is the US Dollar because we see a crushing wave of deflation over the next couple of years that is going to boost the Dollar up to parity with the Euro, crush commodity prices and beat down the stock market well below the March lows.”
Parity with the Euro? That would mean the Euro will have to fall from its current level of 143 to 100 vs the U.S. Dollar. That would be a huge move if it happens. This is a similar call to the major turn in the Dollar call by Robert Prechter of Elliott Wave International (See clip 3 above).
John Kilduff disagrees and responds with his own arguments. Watch this clip.
6. Markets’ Bottom & Beyond – Mary Ann Bartels with Maria Bartiromo – Wednesday, August 19 – 3:15 pm
What is with CNBC folks and “bottom”s? They never seem to like “top”s. Look at this clip. Mary Ann Bartels speaks about an intermediate “Top” in the stock market in September or October. Yet, CNBC titles this clip as Markets’ Bottom.
This is among the rarest of CNBC clips. Mary Ann Bartels is actually bullish on long maturity Treasuries and Maria Bartiromo actually allows her to say so on CNBC. We could not believe our ears. Then, of course, reality set on because Maria totally ignored this bullish views of Treasuries and went back to discussing stocks.
7. The Good, The Bad & Ugly – Two CNBC Anchors with Martin Feldstein
Martin Feldstein is the former Chairman of the Council of Economic Advisors and Chairman Emeritus of the National Bureau of Economic Research. His views are widely respected because they are well- reasoned, balanced and often correct. This week he was interviewed on two different CNBC shows by two different anchors. Neither the anchors nor the interviews can be described as book-ends.
- The Great Recovery? – with Steve Liesman – Thursday, August 20 – 8:00 pm
- Obamacare Will Lead To Rationing – with Mark Haines – Wednesday, August 19 – 10:35 am
Steve Liesman of CNBC interviewed Dr. Feldstein at the annual Federal Reserve Conference at Jackson Hole. Wyoming. He began the interview with “One of the biggest players at this conference is Martin Feldstein….he is a man who has made some very bold and, as it turned out, correct calls from Jackson Hole in the past”.
We urge readers to watch this clip to get Dr. Feldstein’s views directly from him and to see what a thoughtful analyst he is. The clip will also show readers how a knowledgeable anchor like Steve Liesman can enhance the interview and make it more useful to the viewers. We have been fans of Steve Liesman for some time. His core honesty, good humor and knowledge comes through in this interview. This is “The Good” Feldstein interview to paraphrase the title of the great classic “The Good, The Bad & The Ugly”.
Unfortunately, the interview by Mark Haines fits the roles of both “The Bad” and “The Ugly”. Mark Haines begins the interview by mentioning the Op-Ed page article by Martin Feldstein titled ObamaCare Is All About Rationing.
We recommend readers read the opinion in the Wall Street Journal. Because, they will not get any facts from the interview by Mark Haines. Mark Haines began the interview by jeering at the Wall Street Journal. Then he began unloading on Dr. Feldstein.
Mark Haines asked Dr. Feldstein “you mean we don’t have it (meaning rationing) now?” As Dr. Feldstein began to answer, Mr, Haines interrupted “You bet your bippie we got it. we got it now, come on!!!” Then Mr. Haines went into a tirade of his own. This pattern continued through out the interview but with Mark Haines getting more and more rude in our opinion. We ask readers to watch this Haines-Feldstein conversation and make up their own minds about the behavior of Mr. Haines.
We had discussed what we thought to be rude behavior of Mark Haines towards the respected technician Phil Roth on July 7 in our article Interesting Videoclips of the July 5 – July 11 week (see clip 5 of that article). In that interview, Mr. Haines essentially asked Phil Roth to shut up by saying “it is after all my program”. Do not take our opinion for it. Watch this clip and decide for yourself. You will see Erin Burnett, the co-anchor visibly shaken and still trying to make up for Mr. Haines by describing him as passionate about the issue.
We hope CNBC understands that we do not watch their channel to hear the views of Mr. Haines. We watch the shows to hear the views of experts like Martin Feldstein and Phil Roth. Squawk on the Street is not The O”Reilly Factor or The Lou Dobbs show where the main offering is the opinion of the host. CNBC calls itself the “First In Business Worldwide” network, a network about business & financial markets that prides itself on bringing accurate market opinion and expert investment opinions. If CNBC is not that and if CNBC wants to remake its 9-11 am show into The Mark Haines Show, then it should say so explicitly.
We may be doing injustice to the Eli Wallach “Ugly” role. Eli Wallach may not look great in that movie and his actions were not always good, but the Eli Wallach role in the movie was clearly “anti-bad”. In our opinion, the behavior of Mark Haines towards Martin Feldstein was both ugly and anti-good, or simply put, repulsive.
8. Fast Money Final Call – Jim Iuorio with Bob Pisani – Friday, August 21 – 3:23 pm
Many people do not understand how options expiration days like Friday, August 21, have their own dynamic that may have nothing whatsoever to do with the fundamentals of either the economy or stocks. In this clip, Jim Iuorio explains the “caught in Dragon’s Jaws” phenomenon that might have caused the big stock rally on Friday.
9. Up, Up, & Away – CNBC’s David Faber – Friday, August 21 – 10:41 am
The action in AIG and Citigroup has been simply amazing, if that is the word. We wrote about this action in our article about Interesting videoclips of August 2 – August 8 . In that article, we wondered whether the nearly vertical rise (AIG was up 50% that week) in the share prices of AIG, Citigroup and other low-quality financials was due to short covering. We specifically wondered whether this was short covering by huge Quantitative Funds that specialize in factor-based strategies. In that article, we urged CNBC to use their contacts to get some answers.
Better late than never and better a little than nothing. In this segment, David Faber sheds some light on the factors behind the surge in the stock prices of AIG & Citigroup.
10. Fed’s Independence at Risk – Glenn Hubbard with Trish Regan & Amanda Drury – Friday, August 21 – 11:30 am
Glenn Hubbard is a former Chairman of the Council of Economic Advisors and the current Dean of Columbia Business School. He is interviewed by Trish Regan, anchor of The Call and by Amanda Drury, a visiting anchor from CNBC Australia.
We are firm believers in diversity of opinion. So we were interested in seeing how Ms. Drury would question Mr. Hubbard. We literally dumbfounded to hear the following question:
- Ms. Drury – “It is not uncommon to hear these days that the US Dollar is in for a real crash…obviously the US Dollar is weakening. But I am not talking about weakening, I am talking about a serious plunge in the value of the US Dollar.”
What is this? Is hating the US Dollar the global slogan of CNBC? Ms. Drury was at CNBC USA all week. Did she not hear the views of market gurus like Robert Prechter (clip 3 above), Walter Zimmerman (clip 5 above) and Mary Ann Bartels (clip 6 above)? Or does she only believe in voicing her own biases without taking the effort to learn?
It probably took mental discipline for Mr. Hubbard to not laugh at Ms. Drury. He gently explained:
- Mr. Hubbard: “I think it is difficult to see that because if you get out of one currency, you must get into another and so given long run trends of productivity and inflation, which currency would you prefer? I think the answer is still the Dollar – weakness yes, crisis no.”
Ms. Drury did not seem fazed by this put down. She launched the next all-CNBC prejudiced question –
“Even with the massive expansion of the Fed’s balance sheet. with the massively bulging budget deficit?”. Again Glenn Hubbard was patient and gentle in answering this question.
CNBC has enough American anchors who swear by the “Love China, Hate US Dollar, Hate US Treasuries” faith. Did CNBC really need to import an anchor from Australia to add to the chorus?
This is not the first time CNBC has invited Amanda Drury to appear on CNBC USA. We find this curious. CNBC is a global network and seems proud of that fact. But, as far as we can recall, CNBC USA has never invited an anchor from Latin America, Africa, South East Asia, Japan, China or India.
Is Amanda Drury invited because CNBC thinks Australia is of unique importance to American viewers? Could it be because the blond Australian Ms. Drury fits the profile of what CNBC Management feels its American Anchors should look like?
Perhaps CNBC should learn from CNN and Fox. America is now a multi-cultural, multi-religious society. Latin Americans form the second largest race in America. Asian-Americans are increasingly visible in prominent American positions and roles. Fox and CNN have encouraged anchors from smaller minorities but CNBC has refused to do so.
We should not be overly unfair. This may well be an NBC practice rather than a CNBC one. We have been frequent viewers of The Chris Mathews Show that airs on Sunday on NBC. Chris Mathews often invites a blond English reporter from BBC for an international perspective. We do not recall seeing a Latin-American or Asian-American journalist on The Chris Mathews Show ever. Perhaps, his quest of diversity is met by a blond Englishwoman.
Is CNBC following that path of Chris Mathews by inviting the blond Australian Amanda Drury as their sole global guest? We hope not. We do not care about The Chris Mathews Show. We do care about CNBC.
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