Our prior winners for the Most Useful Financial Guest Award are:
Frankly, these two were in a zone in their respective years. It is hard to stay in a zone in any business. It is especially difficult to do so in the complex, turbulent, ever changing investing game. Take Meredith Whitney. She was prescient in 2009 but blew up in 2011 with her Muni defaults call.
Our prior winners for the Most Useful Financial Show Award are:
I. Most Useful Financial Guest of 2011
II. Most Useful Financial Show of 2011
No other show consistently performed to these high standards this year. Others may disagree. In fact, CNBC Fast Money, the 2010 winner, might argue that they did this too. And they might be right to an extent. But CNBC Fast Money has a narrow mission and a narrow time horizon. What they tell you on one day becomes obsolete in a couple of weeks and this year, even in a couple of days.
In contrast, the investments of most individual investors are Slow Money and their investment horizon is medium term. For such viewers, for such monies, CNBC Strategy Session did a heroic job in 2011. Look at the evidence:

Platt on Europe's sovereign debt crisis:
"The level of concern of what we have about what is going on in Europe is absolutely huge. When you evidence all over the markets that they are pricing for the potential of the eurozone break up, it is contrary to what everything is set by policy makers and by central bankers. We distill it down essential fact that we continue to focus on at BlueCrest Capital Management - if you look at the debt of Italy at 120% of GDP, which is increasing at a real rate of 5%, and if you look at the GDP, which now is forecast next year to be declining, arithmetically their debt is going to blow up. And we don't see anything happening at the policy level that gives us any indication that there's anything that's going to convert this situation from where it is now to a much more substantial and real crisis in the future."
On whether a blow up of Italy will force a breakup of the Eurozone:
"We need much more radical measures to prevent this from happening. If Italy and Spain are forced to roll their debt over, if they have to pay rates between 5 and 7% for this, then the situation in Europe is unsustainable. We're not going to have any euro bonds, we're not going to have a full political and fiscal union where the transfers will take place. It seems what we're going to have is an attempt to control the European situation through continued austerity, which is pro-cyclical. As the economy slows down, we end up with more austerity which creates more slowdown. We also have a requirement for banks to increase capital, therefore we're looking at a 3 trillion euro takedown in European balance sheets. There's basically nowhere I can see where we can get any growth from."
On whether cultural and political divides between nations in Europe have played a role in the crisis:
"Absolutely, it's about the cultural and political divide. The reality is that there is no willingness within the Eurozone to share wealth. In the United States, if California is having a really difficult time, the rest of the United States will send money to California. This is not the case in Europe. There is no willingness to transfer money across boundaries in a long-term and sustainable way."
"The market prices the probability of a euro breakup to be distinctly non-zero, despite what the politicians say. I believe that the eventuality of a European breakup is so awful, that more and more drastic measures will take place as time goes by. The ECB is probably the only institution that can tackle this problem, but it doesn't have a mandate to do so…As time goes by, my view of what's required is a radical change of policy from the ECB to tackle this problem."
More on Europe's problems:
"The probability that the market is putting on a Eurozone breakup, in my opinion from evidence I'm seeing from option pricing across the different markets, is steadily rising…We're going into 2012, and in our opinion, it's only going to get worse."
"There is a sensible argument you should not price and the whole loan in response to where the government trades because the government has the ability to remove assets and put them on their own balance sheets."
"The problem with Europe is that almost every part of it has gone wrong now. The banks are undercapitalized…If banks were hedge funds, and you mark them to market properly, I would say that probably most of them are insolvent. [Most of the banks in Europe are insolvent right now] if they were marked like I am at a hedge fund, yes."
On whether BlueCrest's relationship with banks has changed:
"I do not take any exposure to banks at all if I can avoid it. All the money at BlueCrest Capital Management is in Two-Year U.S. government debt, Two-Year German debt, we have segregated accounts with all of our counterparties. We are absolutely concerned about the credit quality of the counterparties."
On whether he's afraid of taking risk right now:
"Absolutely. The main thing that's driving our decision about where to lend money or where to place our funds under management, the vast majority is dollars which we keep in two-year notes. We have a chunk of euros, which we keep in German two-year paper. We're not interested in taking any peripheral debt risk at all and we're not interested in taking any bank credit risk right now."
On the United States and Germany:
"I think they're the best of the bunch. I feel pretty good about the United States. I don't really have an issue because I think the complete control that the authorities have, particularly the Fed and its bond buying program, we do not have issues about having money in Two-Year securities in the United States. In Europe, you've got to put your euros somewhere. It is a much more difficult place to make a decision. Two-year German notes seem like a reasonably safe bet right now, certainly compared to anything else."
On making money in a crisis:
"The most important thing to remember about crises is you do not make your money going into the crisis. When you go into a crisis such as 2008, markets trade against positions. People have positions on and people need to get risk off. All the things that people thought were a good idea start going into reverse. The big money you make in trading is more in the aftermath of the crisis. In 2009 we made 60% with no down months on our master fund."
On whether BlueCrest is looking at illiquid investments:
"I would not touch an illiquid product with a barge pole, to be honest. We're going into an environment where banks need to delever. Illiquid assets will be coming on to the streets everywhere. The price of liquidity in my opinion will go up. I don't want to own any illiquid assets whatsoever. The strategy at BlueCrest is to be in super liquid products, things that can be turned around in a day."
"It would have been the end of my business in 2008 had I done such a thing. Anyone who had an illiquid position within their hedge funds, there were runs on those hedge funds because people wanted to get the cash out and not be side pocketed with the illiquids. In 2008 I paid out $9.5 billion to the street because I was the only hedge fund that was up a lot and completely liquid.
On whether we'll see a repeat of the 2008 credit crunch and whether those that hold illiquid assets will get crushed:
On how closely tied America's futures and the potential for investment are to Europe's debt crisis:
"Clearly it would be a huge drag on the U.S. economy. We're talking about in Europe is a situation of instability driven by pro cyclical policy, removing the ability of banks to invest in sovereign debt. We're talking about pro-cyclical policy of governments not being able to deficit spend by law. We're talking about existing deficits that need to be closed. We're talking about an increase in the amounts that governments will have to find when they're forced to refinance their rolling over paper this year at real rates of interest, which are way beyond anything they will ever be able to achieve in terms of growth."
On how BlueCrest continues to make money through the slowdown:
"Because we are traders and do not take any credit risk and we're super liquid. In the time that BlueCrest has been around, we have made $17 billion of trading profits for our investors…so in an environment like this where we are a very secure trading strategy, taking no credit risk, not buying anything illiquid, that is the kind of thing investors frankly really want to hear from someone like me."
On where he's seeing investment opportunities:
"I think the major opportunities will come post the blow up. I think for the time being you want to keep it quite simple. You do not want to take any credit risk. I think volatility in certain markets is very underpriced compared to what's potentially about to happen. I think if we go into a crisis scenario, things like German bunds could be more expensive than they are right now. And I think as the crisis intensifies through the process of governments refinancing and deficits becoming more unstable and growth deteriorating in particular, I think those kinds of trades will play out in the market and be profitable."
On moving BlueCrest from London to Geneva:
On where he thinks the euro should be trading:
On why the euro is still high:
"All the European banks have to raise capital. This is very difficult for them. So instead of raising the capital in order to increase their capital ratios, they're bringing back assets that were overseas, into Europe. So, that means a building that was maybe financed in New York by Hypobank out of Germany, that financing is going to Citibank, or J.P. Morgan, and a German bank is moving its money back into Germany, and that buys euros."
"The easiest place for [European banks] to cut back is in the U.S., Asia and Latin America, so they're taking money home."
On following these money flows into Europe:
On FX trading:
"The European banks are in trouble, so the euro goes up. That seems wrong. In 2008, we had a crisis in the mortgage market, and the dollar went up."
"For the same kind of reason because J.P. Morgan Chase, Citibank had to bring money home in order to protect their capital position in the U.S. So, also, the central banks of Asia and everybody are trying to protect Europe. They want Europe to do well."
"So enough though we look at it as a good deal, the central bankers might because they want to protect their brethren."
On Washington, D.C.:
"One of the things [I'm watching in Washington, D.C.] is, what is Ben Bernanke going to do? If we do QE3, that's bad for the dollar."
"What are the Republicans and Democrats going to do about extending the tax benefits that existed in 2011 into 2012? If they don't, that will put the U.S. into a recession, which is again one of these perverse things that will strengthen the dollar. The dollar is negatively correlated to its growth: when the U.S. is doing great, the dollar goes down. When the U.S. is doing lousy, the dollar goes up."
On currencies in Europe:
"The Norwegian krone is one of the best currencies because they have all the oil. They don't belong to the European Union so they're completely free -they can do what they want. [The krone] a strong currency, a stable currency."
"We own more dollars than anything else but in Europe our favorite currencies are Norway and Sweden."
"The Canadians are looking fairly good because they're close to us. We have the best economy. They import a lot of raw materials we need, and we're using them, so they look very good."
"For Norway, the price of oil is somewhat dominated by the OPEC decisions. If OPEC keeps the supplies tight, oil won't go down very much. I'm more worried about Australia, New Zealand, countries that are selling a lot to China."
"[If China slows down], I think commodities could do something like they did in 2008, I'm not saying it will be that aggressive, but if they dropped in half, it will really kick Australia in the teeth."
"I am long the Australian dollar, and short New Zealand."
On why he is long the Australian dollar and short New Zealand:



Assemble together, Speak together, let your minds be all of one congruence,
As ancient Gods unanimous sit down to their appointed share.
Common are the invocations, Common the assembly, Common the mind, so be their thoughts united,
A Common purpose I lay before you and worship with your general oblation,
One and the same be your resolve, and be your minds of one accord,
United to the thoughts of all that all may happily agree.


Chanos on his recent trip to Hong Kong and Australia:
"I think we probably came back a little bit more bearish….Our concerns about what we saw in Australia: an economy clearly tied to China has hitched its wagon to the tail of the tiger. In terms of the general complacency, what we heard over and over from investors and clients and potential clients is, 'yes, yes, there are some excesses, but the government will figure out a way. That the government is this all-knowing, omniscient basic entity that will not (?) prevent me from losing money."
"[The Chinese government] doesn't [have money], and that's the problem. The banking system in China is extremely fragile, and that's one of the messages we wanted to get to people."
"In fact, because what happened the last two crises, in '99 and '04, when non-performing loans went crazy in China without even a recession, the Chinese banking system was not re-capitalized like ours was, it was papered over. Going into this credit expansion, Chinese banks are sitting on lots of bonds from the so-called asset management companies set up in 1999 and 2004, and they are keeping them on the books at par, at full value. In the case of Agricultural Bank of China, which we're short, those restructuring receivables are equal to over 100% of their tangible book. The Chinese banking system is built on quicksand, and that's the one thing a lot of people don't realize. When they talk about the foreign reserves of $3 trillion, what everybody forgets is there's liabilities against that."
"Everybody seems to think it is a free and clear open checkbook. It's not. That is what we have been trying to tell people. Focus on the lending system over there, because everything occurs through the banking system."
On the Chinese economy:
"Property prices and transactions are really beginning to decelerate. We saw that starting in August, that's continued into November. Transactions are down 40% to 50% year over year in the tier 1 through 3 cities. Prices are down. In some cases, we've seen riots in sales offices, where people are amazed that prices could actually go down. There's lots of indicators on the side. There's a growing sense that the Chinese government will ease. We point out that credit this year will grow between 30% and 40% of Chinese GDP. If that’s tight, I'd hate to see it ease."
On the scenario in which Chanos would cover his shorts in China:
On the U.S. going into a double-dip recession:
"I am worried. We've had two bits of unfavorable news in the last 24 hours. One you reported this morning, which is that we have less economic momentum than we thought we had - 2% growth as opposed to 2.5%. The second is that yesterday we had no policy momentum. We're worried about the concept of stall speed, that 2% growth may not be enough for an economy that still has to de-lever. We put the chance of a recession at one-third to one half, which is really high given initial conditions."
On policy makers in Washington, D.C.:
"[Policy makers] are totally off the track. It's not a failure to agree on medium-term fiscal reforms, it's also a failure to give air cover for other things that need to be done -- in housing, in the labor markets, in credit. We have no policy momentum. Let me tell you what I find most terrifying: we’re having this discussion about a risk of recession at a time when unemployment is already too high, at a time when a quarter of homeowners are underwater on their mortgages, at a time when the fiscal deficit is 9%, a time when interest rates are at zero."
This is essentially what David Rosenberg said to Bloomberg's Carol Massar & Matt Miller back on September 8 (see clip 3 of Videoclips of September 3 - September 9) :
Rosenberg - It is problematic, We are in uncharted territory. Here we are talking about 0% Fed Funds Rate going on for 3 years, a Fed balance sheet that has tripled in the stratosphere and end-less fiscal stimulus. I mean FDR never ran a deficit over 6% of GDP in the New Deal, we already are running them 8-9% of GDP. Once the recession starts, my big dilemma is what is it that is going to pull us out? When you consider that China is fighting an inflation problem, Europe is fighting a sovereign debt problem, it is going to be very problematic what gets us out once we get into it.
On what factors could be driving a double-dip recession:
"This is a fragile economy. It doesn't mean we don't have strength, we certainly do - the corporate sectors are as strong as we have ever seen it in terms of balance sheets. We have incredible entrepreneurial spirit. But we're facing all these structural headwinds, and the big concern is the possibility of us being tipped over by Europe. Things in Europe, as you mentioned a few minutes ago, are getting worse, not better."
On solutions in the U.S.:
"Unlike Europe, the U.S. doesn't face an engineering problem - it faces a political problem. The solution is not an engineering nightmare. You can actually put it on paper and get it done. But it's been a political nightmare. What we'd like to see is the political class to come together and agree on the steps that need to be taken."
"As you have heard us say over and over again, Bill Gross has been saying it, I've been saying it, other PIMCO colleagues have been saying it -- it's structural in nature. We need medium term structural reforms to increase the growth potential and job creation potential of this economy. We can do it. This is different from Europe. Europe has both a political problem and an engineering problem. Our problems are small relative to Europe, but if we wait they will become larger."
On the S&P's statement that US rating is unaffected by the supercommittee:
"That is what S&P is telling us. We have to remember that S&P still has us on negative outlook which means unless things improve over the next three years, there could well be another downgrade. The ratings agencies in general are in a very tough position. We talked about at PIMCO's investment committee yesterday. They've been beaten up a lot, both for what they have done and for mistakes that disrupted the markets for a while. It is hard to be a ratings agency today. You have to read these comments in that context. They are under fire."
On Joseph Stiglitz's comments that austerity measures make the crisis worse:
"I think [Stiglitz] is right, in the sense that the muddled middle, where Europe has been, is no longer sustainable. The crisis that started in the outer periphery, Greece, not only has shifted to the inner periphery and the outer core, Spain and Italy, but it has also impacted France which is the inner core."
"Europe needs to make a choice if it wants to save the euro, and it should save the euro. There's only two choices: one is a full fiscal union, a political decision with a very large bill. The other [choice] is a smaller, less-than-perfect euro zone, which has political implications but has a smaller bill. That is a political decision that Germany must take. The quicker it takes it, the more likely it will be able to save the euro."
On the options that could save Europe:
"There are no easy options. That's why the process is paralyzed. Wherever the policy makers look, they see tremendous costs and tremendous disruptions. The tendency has been to do too little, too late. There is no costless way forward at this point, and that is a problem that all of us have to internalize and understand, that there are no easy solutions."
On Europe being the single biggest threat to the U.S. economy:
"Left to our own, we would muddle along with the risk of stall speed, but one thing we cannot cope with is the major shock from one of the largest economic areas of the world, Europe. Already we're seeing investors stepped back from markets because of the anxiety. The more that happens, the more dysfunctional these markets become."
On whether the Fed should implement QE3:
"I smiled when one of your guests said earlier that the Fed has been the only adult in Washington. That is true. It has been the only institution willing to take steps. As you pointed out, because the Fed has taken these steps, it has taken pressure off of the rest of Washington to do its part…Other agencies haven't stepped up to the plate. It is time for other agencies to step up. The effectiveness of the Fed is declining, unfortunately, day in and day out."
On what the Fed should do:
"Chairman Bernanke has made it clear and he's repeating it three times, saying that when they look at these unconventional policies, they recognize the benefits but there are costs and risks. What we call collateral damage, unintended consequences."
"[Bernanke] recognizes that that equation, that balance, is shifting from potential benefits to costs and risks. Looking forward, if they were to do QE3, they may get some benefits, but I suspect there would also be quite a bit of collateral damage and distortions put into the system that would take us years to overcome."
Fink on whether now is an appropriate time to be taking risk:
"If you have the fortitude to look beyond the next cycle of information, if you have the fortitude to look beyond the next few years, and then you have the capability of investing for 10-year cycles, then a larger allocation in equities will probably pay off. But it's going to have to be with equities that are multinational in nature so you're not country dependent. And that's one of the real themes that we're talking about. Don't be so U.S. dependent. Don't be so China dependent. Try to get companies -- that's the beauty of corporations. They are in multiple locations throughout the world, and their earnings streams are less dependent on one nation."
"And so I do believe one has to accept more risk today. And I think the PE ratios of the world are pricing in that fear. And so in my mind, even today, I'm very worried about Europe and the resolution of Europe. I do believe a larger than normal allocation in global equities with a bias towards dividend will pay off over a long cycle."
Gross on risk:
"Here's the critical factor as I see it. Can developed economies successfully reflate? Can the Bernanke helicopter stay aloft? Can we produce a nominal GDP growth rate, whether it's laden significantly with inflation or more significantly with real growth? But can we produce an old normal economy of four to five percent nominal growth? You know, it's not necessarily a slam dunk that we can. Japan has proven that for the past several decades. There are two lost decades."
"The critical element in terms of risk taking going forward is to decide whether or not developed economies can successfully reflate. If they cannot, then -- then a higher quality, safer choice is the best alternative. If they can, then obviously equities, which can cope with inflation, which can produce growth in a reflationary environment is the better choice. But it's critical going forward. And an investment company and an investor must, you know, attempt to make that decision on an annual type of basis because the outcome is not determined at the moment."
Gross on how he's investing his own money:
"A barbell mix of both. I have a substantial amount of bonds. You know, not treasury bonds. In many cases, municipal bonds. But I have a decent mix in terms of global growth companies. I once suggested if we can successfully reflate, and that's the barbell alternative on the optimistic side, then a Procter or a Johnson & Johnson or a Coca-Cola, a global company with half of their revenues coming from outside the United States, with dividends of three and a half to four percent and at least with some growth prospects, obviously much better than a treasury. But that's a choice that you shouldn't make with a hundred percent certainty. That's a choice that you should make with the potential for a deflationary outcome, minimal as it might be in the minds of policy makers."
Gross on what he would take from BlackRock to make it a part of PIMCO:
Fink on entrepreneurship and job creation in the U.S.:
"The entrepreneurialism of the country is quite unique. You know, we are still a nation that has created the Facebooks, the PIMCOs, the Googles, the Apples, the Bloombergs. You know, we are still the intellectual capital of the world when it comes to software development. We are the innovator of medical research still. There are so many things. So much of this does not create as many jobs as it used to. We've had enormous success in productivity and that productivity is a way for us to be differentiated versus the China and the other places. And all the other countries have this same issue of productivity and how it impacts jobs….I see all the same pitfalls, all the same problems. And the problems are enormous."
Gross on entrepreneurship and job creation in the U.S.:
