Macro Viewpoints
A Cinema Rasik's View of Global Issues
Cinema Rasik

Iraq & Tibet - The Difference Between America & China


About an year ago, on July 26, 2008, we wrote an article titled Iraq & Tibet - Strategic Will of The American and Chinese People. Today, on this Fourth of July, it seems appropriate to review what has happened in Iraq and what has not happened in Tibet. Not only is this important for the two respective sectors, it is even more important for the overall debate today about the future of both America and China.

Nothing good has happened in Tibet. Tibet continues to be under the heavy Chinese boot. The Dalai Lama has accused China of conducting "cultural genocide" in Tibet. The freedom struggle of Tibet continues even though most people in the world ignore it because of fear of Chinese retaliation.

The aggressive behavior of China is being extended to China's other neighbors. China has claimed the South China Sea as its own waters and seized fishing trawlers belonging to Vietnam and Philippines. Chinese behavior has become so transparent that even Japan has begun increasing its military presence at its islands in the South China Sea. China's behavior towards India in the eastern sector has become so aggressive that even the passive Government of India has begun significantly increasing  its military presence in Arunachal Pradesh.

(Iraqis celebrating in Baghdad, June 29, 2009 - Washington Post)


Compare Tibet to the situation in Iraq. On June 30, America withdrew its combat forces from Iraq's cities and turned over the security to Iraqi police and soldiers. Jubilant Iraqis celebrated in Baghdad. As the Washington Post reported
"Out, America, out!" a group of sweat-drenched young men chanted Monday at a Baghdad park as the sun was setting. They jumped up and down to the deafening beat of drums and the wail of horns."

Can you imagine this ever happening in Tibet? We cannot.

This is not just a foreign policy issue or even a Middle East specific issue. It encompasses the entire gamut of US-Chinese relations. Consider China's seemingly relentless drive to reduce the importance of the US Dollar as the world's sole reserve currency. China seems to think that as its imports grow and its economy expands, countries around the world will come to accept using Chinese Remnimbi as a currency in which they trade and maintain a part of their reserves.

We do not think so and the parallels between Iraq & Tibet are the main reason. Chinese hegemonistic behavior towards its neighbors and towards Tibet in particular is a warning sign to countries that trade with China. They can keep their reserves in Chinese Remnimbi but taking that money out when they want may not be as easy. A superpower China would behave in the currency and economic field just as hegemonistically as it does in military matters. China has already begun showing its true colors at the Asean Development Bank by trying to block a loan to India for non-economic reasons. (see our April 18 article
China-India Border Tensions Move From The Military To The Economic Arena).

In contrast, even the worst and seemingly disastrous military adventure of America can end up with a positive result. Look at Iraq. The majority of Iraqis, the Shiite community, have gained power in the new democratic Iraq. The people of Iraq can at least hope for a free democratic rule in which they are free to create businesses and build a future for their families. The neighbors of Iraq have to wonder why they do not have the same free democratic opportunity that Iraqis now do. We believe that these aspirations had a great deal to do with the success of the elections in Lebanon and with protests by the young intellectual class in Iran.

The entire world, including China, keeps their reserves in US Dollars and freely participates in the America-led global Financial system. No neighbor of China will risk putting their reserves in any system controlled or dominated by China. Other countries will welcome Chinese infusion of capital but they will do everything possible to keep Chinese influence at arms-length.

The only people who don't understand this are American financial commentators or writers, people who can never see anything beyond today's markets, people who have remained secure in America's financial system. These are the people who believe in an era on "benign cooperation" with China.

These are people presumably like one James Fellows that David Brooks of the New York Times wrote about in his July 2 article titled 
Chinese Fireworks Display. According to David Brooks, Mr. Fellows argues that
"integration (with America), is deep and will get deeper. Many, many Chinese leaders were educated in the U.S. and admire or at least respect it.....Instead, he has described officials who are thrilled to be integrated in the world. Their mothers had bound feet. They themselves plowed the fields in the Cultural Revolution. Now they get to join the world."

Mr. Fellows is correct but he misses the most important point. We do believe that China is thrilled at its "integration" with America and that they intend to make it deeper. But that is not from a benevolent perspective.

Unlike America, China does not see a world where smaller nations can participate freely in the world's economy. Instead, China sees a two-nation oligarchic system in which America & China share the spoils and carve up the world in their centers of dominance. They have already expressed this viewpoint in the geo-strategic arena. If you do not believe us, read what a Chinese Naval Official said to Admiral Timothy Keating, Chief of PACOM in May 2009 (see our May 16 article
China's Leadership - Just Drunk Or Delusional?)

We wrote in our May 9 article "The Bubble Is Dead. Long Live The Bubble." that "
Chinese leaders live in a cocoon and are not subjected to any intellectual opposition. Their policies have been very successful during the past few years and now they seem to be drinking too much of their own concoction. They seem to believe that they are smart and their economic system has worked well while the American leaders have behaved stupidly and the American economic system is in trouble. Their actions are beginning to reflect this arrogance.This is why China today is behaving differently than it behaved during the past few years. "

We have been worried that the Chinese Leadership could end up making a big mistake based on their insular view of the world. Now David Brooks tells us that Niall Ferguson of Harvard is so concerned along these lines that he has begun comparing today's China with "Kaiser Wilhelm’s Germany in the years before World War I - a growing, aggressive, nationalistic power whose ambitions will tear through pre-existing commercial ties and historic friendships."

We have said it before and will say it again - China will be the most engaging and the most frightening story of the next two decades. We hope that people like Mr. Fellows are correct and China emerges as a more democratic, more liberal nation that respects rights of all countries, small and big. Unfortunately, we are deeply concerned that China will emerge as a hegemonistic, single-race nation that uses its power to intimidate neighbors to create an empire of sorts. It appears that people like Niall Ferguson concur with us.


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A Fourth of July Gift? - Russia Opens Route for USA to Fly Arms to Afghanistan


The Russian government has agreed to let American troops and weapons bound for Afghanistan fly over Russian territory, officials on both sides said Friday.  The agreement is expected to be announced when President Obama visits Russia on Monday and Tuesday, reported the New York Times on July 3.

“Afghanistan is one of the areas where we must cooperate,” said Mikhail Margelov, chairman of the foreign affairs committee in Russia’s upper house of Parliament. Russia understands, he said, that the United States and NATO forces in Afghanistan are effectively defending Russia’s southern flank.

This is great news indeed. Mr. Margelov is absolutely correct. Problems in Afghanistan threaten the security of both America and Russia. This is one area in the world where the interests of America and Russia are congruent.  The fact that both America and Russia are willing to recognize this and cooperate is terrific news.

This agreement is a big deal for America. Until now, Russia only allowed restricted use of its territory for the Afghan war, permitting shipments of nonlethal supplies. Under the new agreement, American officials said, military planes carrying lethal equipment as well as troops will be allowed to make thousands of flights a year through Russian airspace.

           
                                                     (Taleban crossing the river after the bridge was blown)


Until now, America was forced to transport its military supplies mainly through Pakistan, a route that has become less viable due to increased Taleban attacks. In February 2009, the Taleban blew up a key bridge near Peshawar forcing suspension of road shipments to the American forces in Afghanistan.
Uzbekistan evicted American troops from a base in 2005 and Kyrgyzstan threatened to evict America from its strategic airbase, until American negotiators persuaded it to reverse itself, in a deal that reportedly triples the rent for the airbase (see map above).

We have always felt that the Bush Administration made a grievous foreign policy mistake when it decided to be anti-Russian. It was a stupid policy because America had nothing to gain and a great deal to lose. But, Russia has always been an emotional issue for the Neocons in America. So the Cheney cabal tried to rub Russia's face in the sand by getting involved and fostering the orange revolution  in the Ukraine.

People forget that Russia is the only country in the world that can destroy America. Besides, unlike any other country, it can create substantial problems for America in most global trouble spots. Iran is just one example.

Going forward, it is imperative for America to come to an understanding with today's emergent Russia. Russia is establishing an important strategic alliance with Germany, an alliance that can change the face of Eastern Europe. Russia is cozing up to a newly aggressive China and the two seem to be forming an anti-US cartel of sorts in the IMF and other global economic institutions. Russia can single-handedly make Iran into a much more dangerous opponent for the USA.

The good news is that, where Russia has its core interests like the Baltic or South Caucasus, America does not have a critical strategic interest. Yet, the old anti-Russia haters and the Neocons trapped the Bush Administration into an anti-Russia embrace with problematic regimes like the ones in Georgia. The simple reality is that if America wins Iraq and neutralizes Iran, then Georgia is unimportant.

A nation of 140 million Russians cannot compete with a nation of 1.3 billion Chinese on its boundary. The vast oil-rich region of Siberia is the prize that China seeks desperately. It cannot seize Siberia it militarily but it hopes to do so via migration of Chinese people into Siberia. This is Russia's Achilles heel. It is this future nightmare scenario that can persuade Russia to come to a strategic arrangement with America, if America is wise enough to make an attractive offer.

We are hopeful but not at all sanguine. We do not believe that the Obama Administration is either confident enough or bold enough to make such a deal given the vociferous opposition it will face from emotional right-wing critics. It will also be difficult to persuade the American people about the benefits of such a move. The memories of the 40-year cold war are not forgotten easily.

So, we hope that a modest beginning is made in Moscow this week and America-Russia begin cooperating in areas where their interests coincide.

That is why we think the agreement on Afghanistan needs to be celebrated on this 4th of July.


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Popular Articles for the First Half of 2009 - Nos. 11-20


Every month, we publish the titles of the Top 10 Articles of this Blog- the articles that have received the largest number of reader hits since the Blog's inception.

Today, at the midpoint of 2009, we thought it would be fitting to give a shout-out to the next 10 popular articles for the first half of 2009.



11. Will The Obama Administration Occupy Pashtunistan Or All Of Pakistan? - April 25, 2009

12. New York Times vs. Washington Post - II - August 2, 2008

13. TV Specials "India Rising" - The Good - CNBC - Erin Burnett - June 25, 2008

14. Are CNBC Anchors on a Mission Against US Treasuries? - A Viewer's Perpsectives - August 23, 2008

15. First Snoop Dogg, Now Sylvester Stallone - Everyone Is Getting Aboard The Bolly-Holly Train - February 7, 2009

16. Disclosure (1994) and Aitraaz (2004) - Bolly Holly Films - 4 - June 28, 2008

17. Attock - If you have not heard of Attock, Read this Article - August 9, 2008

18. Flagrant Foul on FT's Joe Leahy and on Editors of Financial Times for Journalistic Misconduct and Religious Prejudice - May 2, 2009

19. Kudos To You Rick Santelli,The REF Of CNBC & Shame On You Robert Gibbs, White House Press Secretary - February 21, 2009

20. The Bubble Is Dead. Long Live The Bubble. - May 9, 2009



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Interesting Videoclips of the Week (June 27 - July 4)


Editor's Note: In this series of articles, we include important or interesting videoclips with brief 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 response of 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.




This was a short week and no one day dominated the videoclips segment as in previous weeks. The eventful day of the week as Thursday when the jobs number came out and disappointed investors sold & sold. The word ugly describes it completely.

This week we feature the following videoclips:
  • Discussion between Liz Cheney, former Dep. Asst. Secretary of State for Near Eastern Affairs with Greta Van Sustrand of Fox
  • Rich Harvard Poor Harvard - Vanity Fair writer Nina Munk with CNBC
  • David Rosenberg on CNBC Fast Money
  • Finding Wall Street Jobs - Career Coach Charlotte Lee on CNBC
  • Dennis Kneale of CNBC on a rant against Bloggers

1. Is Secretary Clinton bossing the President? or is the other way around? - Liz Cheney on Fox with Greta Van Sustrand - Wednesday, July 1 - 10 pm

The title of the clip belongs to Fox. No one else can turn an intelligent, rational debate into a farce with such a title. The expert guest on the show was Liz Cheney, the daughter of former Vice President Dick Cheney and a Deputy Assistant Secretary of State for Near Eastern Affairs in the George W. Bush Administration. We realize that these two sentences are enough for many readers to skip this interview.

They should not. This is really a rational, sedate and thoughtful clip. Ms. Cheney is a professional diplomat and she speaks not about the policy but how policy seems to be made in the Obama Administration.

Ms. Cheney points out that in prior administrations, "it is the Secretary of State & the National Security Adviser who are the face" of foreign policy issues whereas the Obama Administration put out David Axelrod, their political strategist to discuss Iran. Her basic thesis centers around the following comment:
  • "I think, it is causing some people to have concerns about what role Secretary Clinton is able to play and what success she has, what role the National Security Advisor Jim Jones has and whether the people who really have the President's ear on foreign policy are his political strategists.."
This reminded us of our conjectures expressed in our June 20 article Bernanke-Greenspan, Bush-Obama & An 18th Century French Diplomat.
  • In that article, we wrote, "President Obama has centralized power in his White House to an unprecedented extent. There is no policy that the Obama White House does not control completely. He has appointed several czars that report to his White House team thereby reducing his cabinet to being royal sycophants. He has even marginalized Secretary of State Hillary Clinton by his appointment of czars for every important region."
As we said, watch this clip.


2. Rich Harvard Poor Harvard - Vanity Fair Writer Nina Munk
on CNBC - Thursday, July 2 -1:40 pm

                              (photograph - Vanity Fair)

The July 7 issue of Vanity Fair will feature this article and writer Nina Munk gave a preview of sorts to Michelle Caruso Cabrera and Sue Herrera of CNBC. The travails of Harvard Endowment are widely known. The Endowment "lost" about $8 billion in 2008, a staggering sum. Writer Munk describes this as the
"worst, most dangerous crisis" in Harvard's 373-year history.

The list of people to blame includes Larry Summers, National Economics Council Chair and President Obama's main economic adviser as well as Mohamed El-Erian, now the CEO of Pimco, the largest bond manager in the world.

This is an interesting clip to say the least and we urge readers to watch it. For more details about the article, go to Rich Harvard Poor Harvard preview on Vanity Fair website.

We were very impressed by the following comment and question by CNBC's Michelle Caruso Cabrera:
  • "A frequent guest here on CNBC is Mohamed El-Erian. He is now the CEO of Pimco. We have been interviewing him for years. He is lauded. You know, Squawk Box calls him one of their Icons and Rebels. He ran the (Harvard) Endowment for little less than 2 years. Some people say very nasty things about him in this article. Give us a sense, our viewers would like to know, how much of a role do you think he played specifically in the problems of Harvard?"
Writer Munk does not really answer this question and basically says she has not figured out who is to blame for all the problems. The answer does not impress us but the question does. It is an extremely rare occurrence at CNBC when an Anchor acts like a true journalist and asks a question that might embarrass another CNBC show, & that too a franchise show like the 3-hour Squawk Box.

Kudos to Michelle Caruso Cabrera for her courage and spirit. We fervently wish that other CNBC Anchors learn from her example.


3. Outside the Stocks & Economy To Pick Up in Q3? - David Rosenberg on CNBC Fast Money - Tuesday, June 30 - 5:14 pm

These are two different segments and clips. The first clip is a conversation between Anchor Melissa Lee and Trader Karen Finerman. The second clip is an interview with David Rosenberg, the economist with the best forecasting record about the current state of the US economy.

The entire object of the first clip seems to be to provide Karen Finerman a platform to describe her views about US Treasuries.
  • Anchor Lee - "I know Karen, you still believe in the TBT trade (double short Treasuries ETF)"
  • Karen Finerman - "Absolutely, I don't love that ETF as an instrument, but it is an easy way. Nothing really has changed for me, the idea that we have so much debt yet to come & we will potentially have some inflation numbers sometime in the next few months..I can't see is it possible we don't have that? Yes it is possible but it does not seem to be the most like it outcome. That's the trade I like for the next quarter, for the next year"
Watch the clip and notice that Anchor Lee does not ask any questions of Karen Finerman. Also notice that Joe Terranova, Guy Adami and Pete Najarian do not challenge Karen Finerman or ask a single question. Heck, they do not even offer a comment.

The second clip is an interview by David Rosenberg, the former Chief Economist of Merrill Lynch. Mr. Rosenberg has had the best track record in guiding investors through the economic mess in 2008. Mr. Rosenberg has also been the Biggest Bull on US Treasuries. So we were all ears to hear Mr. Rosenberg's views about buying US Treasuries and his rebuttal of Karen Finerman's opinion.

We waited in vain. Anchor Melissa Lee did NOT ask a single question about US Treasuries or even the best investment in today's economy. She kept asking Mr. Rosenberg about his views about the equity market. When Mr. Rosenberg sounded bearish, CNBC Trader Joe Terranova attacked him.

So there you have it. Fast Money Anchor Lee asks Karen Finerman, an equity hedge fund manager, to bash US Treasuries without a single question or challenge and then Anchor Lee refuses to ask the biggest Treasury Bull on Wall Street his views about US Treasuries. To add insult to injury, Trader Joe Terranova becomes a silent accessory to Karen Finerman but attacks David Rosenberg. The other two traders, Guy Adami and Pete Najarian stay silent.

In clip 8 of our last week's article, we asked "
whether protecting the reputation or ratings of Karen Finerman is more important to Fast Money than making money for viewers or protecting viewers from losses by sticking with a losing trade. Is this why Fast Money has NEVER invited any big name expert to recommend long maturity Treasuries and thereby refute Karen Finerman’s trading convictions?"

We let our readers decide whether Fast Money behavior towards Karen Finerman and David Rosenberg provides evidence to support our question.

This is an important debate. We have argued that securing a Safe Income Stream in one of the most critical needs of today's Income-Starved America (see our 
May 30 article America's Income Problem), the sort of safe income stream provided by US Treasuries.

We have no quarrel against Karen Finerman. She is a trader and she is entitled to her investment opinion. We just wish that she would disclose to viewers that she is mainly an equities manager and NOT a Treasuries investor.

But we have deep discomfort about the behavior of Anchor Melissa Lee and the Fast Money Management. This week, they refused to allow the biggest bull on Treasuries to give his Buy Treasuries recommendation on Fast Money. 

In our opinion, this behavior is in the worst traditions of CNBC. It is eerily similar to the 1999-2000 "Qualcomm, Qualcomm" chant of Kernan-Faber and their unabashed, shrill exhortation to viewers to buy overpriced, bubblicious technology stocks in late 1999 and early 2000. We had heard then that they did not allow their guests to sound bearish on Technology stocks. The above two clips show that Fast Money Anchor Melissa Lee and the show's management are behaving in the same manner today about US Treasuries.  


4. Finding Wall Street Jobs - Career Coach Charlotte Lee on CNBC
- Thursday, July 2 - 10:16 am

Charlotte Lee was advertised on this clip as a career coach and a former investment banker. She discusses the state of today's hiring on Wall Street and gives her opinions about how to get an interview as well as how to behave during the interview.

We urge readers to watch this clip if they are interested in getting a job on Wall Street. If they know someone who is, they should send this clip to them. Ms. Lee offers sensible and practical opinions.


5. Dennis Lets Bloggers Have It - CNBC's Dennis Kneale Rants against Bloggers - Tuesday, June 30 - 8:02 pm
 
This is the most hilarious clip of the week. CNBC Anchor Dennis Kneale took offense at some blogs that had expressed negative comments about him. So on Tuesday, June 30, he went on a rant against them. This is a much watch clip and below we present some juicy excerpts of Mr. Kneale's monologue.
  • "I had predicted on Friday night that some cynical, mean-spirited bloggers would trash me for this end-of-recession proclamation. They haven't let me down.Their invective is lighting up the dark, anonymous and cowardly corners of the bloggosphere"
  • Then Mr. Kneale repeats some of the adjectives used by the bloggers to describe his show and emphasizes what he apparently considers to be the worst insult "comparing me to watching a 350 lb woman in a thong bikini on the beach" (careful, Mr. Kneale - you might have offended aficionados of what you describe if they exist - you should always add the seinfeldian "not that there is anything wrong with it" disclaimer after expressing your contempt of the physique of any group of human beings).
  • Then Mr. Kneale addresses his critics "you digital dickweed & I say dickweed became it is indeed a plant" and adds that "name calling is a lingua franca of the bloggosphere".
Now comes the most interesting part. Mr. Kneale says:
  • "We contacted 7 different bloggers who have taken a shot at me from their dark and cozy safety of their mother's basements, I presume, and we invited them to come on air & have at it."
Apparently, six of the seven bloggers refused to go on air with Dennis Kneale. One did and his conversation is best heard on the clip. Frankly, it is a pretty tame affair.

What do we have to say for ourselves and our blog after Mr. Kneale's diatribe against bloggers?
  1. We were not contacted by either Dennis Kneale or any one else at CNBC.
  2. If contacted and invited, we would happy to defend our criticism in person on air with any CNBC anchor.
  3. Our criticism of CNBC is straightforward and based on issues. We, like countless viewers, rely on CNBC for fast, accurate and UNBIASED information as well as a diverse set of opinions about financial markets. When CNBC acts in our interests, we applaud it and when CNBC hurts our interests to protect their short term ratings, we criticize it. It is as simple as that. We will defend our opinions any day and twice on Sunday. 

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The China-India Border Brawl - Read This Wall Street Journal Article



We began writing about the border disputes and the consequent rise in military tensions between China and India over a year ago. Our first article (see Editor's Note below) was triggered by what we felt was surprising lack of knowledge about this vital topic and the consequent complacency among global investors.

Since then, we have written extensively on this topic over the past year. Our most recent article was in April 2009 titled "China-India Tensions - Views Of The Pentagon & The Indian Military". This article provides an overview as well as a geo-strategical description of the dispute with maps. In brief:
  • The dispute between China and India goes back 60 odd years. After India’s independence in 1947, Jawaharlal Nehru, the “messenger of peace” Prime Minister of India, unilaterally withdrew the Indian Army from Tibet because he did not want his India to be an imperialist power. Within a few years, the Chinese army moved in unopposed and occupied Tibet. The Dalai Lama fled to India where he now resides. China now proclaims Tibet as an integral part of China.
  • Soon thereafter, China began claiming the entire state of Arunachal Pradesh as its territory on the grounds that it uses to be a part of Tibet at one point in the past. China refuses to accept the 1914 Treaty between Tibet and India in which Tibet affirmed Arunachal Pradesh as the integral part of India.
  • The defining event in the China-India relationship is the short but traumatic war in 1962. The Chinese humiliated a woefully unprepared India and conquered tracts of Indian territory. This attack destroyed Nehru's "Hindi-Chini Bhai-Bhai" (China-India are brothers) policy and changed the course of India's defense thinking.

       
(A straight line of attack from Lhasa, Tibet)              (Arunachal Pradesh in red - Source Wikipedia)



Two weeks ago, the Chinese Press escalated the anti-India rhetoric with articles in the People’s daily and Global Times. 
  • Li Hongmei wrote in the People's Daily that Indians harboured a mix of "awe, vexation, envy and jealousy — in the face of its giant neighbour".
  • An editorial in Global Times on June 12 said, "India can't actually compete with China in a number of areas, like international influence, overall national power and economic scale. India apparently has not yet realised this... India's growing power would have a significant impact on the balance of this equation, which has led India to think that fear and gratitude for its restraint will cause China to defer to it on territorial disputes. But this is wishful thinking, as China won't make any compromises in its border disputes with India. And while China wishes to coexist peacefully with India, this desire isn't born out of fear."
These publications are considered to be the mouthpieces of the Chinese Establishment. That is why these comments were taken seriously by even the normally sedate, appeasing Indian Media and by the Wall Street Journal.
   

The Wall Street Journal Article

The article titled The China-India Border Brawl is an absolute must-read. Its author is Jeff M. Smith, the Kraemer Strategy Fellow at the American Foreign Policy Council. We include some excerpts from this article below.

The article begins with a summary of the 1962 war between China and India. Then it moves to recent events.

  • In recent years however China has been raising the temperature at the border. Chinese claims to Arunachal Pradesh and frequent Chinese"incursions" into the nearby Indian state of Sikkim have begun to multiply in line with Beijing's rising economic and political influence. Moreover, unlike India, China has methodically developed its infrastructure along the disputed border, littering the barren terrain with highways and railways capable of moving large numbers of goods and troops.
  • For its part, New Delhi has become both increasingly aware of its disadvantage and exceedingly suspicious of China's intentions. India's June 8 announcement that it will deploy two additional army mountain divisions to the northeastern state of Assam will bring India's troop levels in the region to more than 100,000 (still dwarfed by Chinese strength of 300,000 troops). The Indian Air Force,meanwhile, announced it will station two squadrons of advanced Sukhoi-30 MKI aircraft in Tezpur, also in Assam. They will be complemented by three Airborne Warning and Control Systems and the addition or upgrade of airstrips and advanced landing stations. This is part of a broader effort to bolster India's military and transportation infrastructure in its neglected northeast.
  • Upon hearing India's plans, Beijing became irate. The People's Daily, a Communist Party mouthpiece that serves as a window into the thinking of Beijing's insular leadership, published an exceptional broadside against New Delhi on June 11. It described India's "tough posture" as "dangerous," and asked India to "consider whether or not it can afford  the consequences of a potential confrontation with China." China is not afraid of India, the editorial taunted, while mocking India for failing to keep pace with China's economic growth.

The article then goes on to explain the long and sustained effort of China to build military assets all around India, its "String of Pearls" strategy with bases and ports in Bangladesh, Myanmar, Sri Lanka and Pakistan.

Finally, the article asks the most important question “What is Washington's role in this Asian rivalry?”. It goes on to answer the question in two parts:

  • In the short term, a priority must be to tamp down friction over the border. In the longer term, Washington should leverage its friendly relations with both capitals to promote bilateral dialogue and act as an honest broker where invited. But it should also continue to build upon the strategic partnership with India initiated by former president George W. Bush, and support its ally, as it did at the Nuclear Suppliers group and the ADB, where necessary. Washington must also make clear that it considers the established, decades-old border between the two to be permanent.
  • Most importantly, though, the Sino-Indian border dispute should be viewed as a test for proponents of China's "peaceful rise" theory. If China becomes adventurous enough to challenge India's sovereignty or cross well-defined red lines, Washington must be willing to recognize the signal and respond appropriately.

         
            (Border Post at Nathu-La - WSJ)                        (Attack thru Nathu-La could split off NE India)


The Greater Aims of China

The Wall Street Journal article focuses mainly on the border dispute between China and India. In our opinion, this is merely a symptom of the real problem and not the problem itself.

In our opinion, China’s main goal is to establish its hegemony in Asia and be declared as a Superpower on par with the United States. China mistakenly believes that, because of its trillion dollar reserves and America’s need for China to buy its debt, China is today the equal of America.

This explains the utterly stupid but completely characteristic demand made by China in a meeting with Admiral Keating, the PACOM naval Chief. This was covered in detail in our May 16 article  China's Leadership - Just Drunk Or Delusional?  In Admiral Keating's own words, the Chinese Official said to him:
  • "You, the US, take Hawaii East and we, China, will take Hawaii West and the Indian Ocean. Then you will not need to come to the western Pacific and the Indian Ocean and we will not need to go to the Eastern Pacific. If anything happens there, you can let us know and if something happens here, we will let you know."
This was not an idle comment. China seriously believes that the Indian Ocean and the Western Pacific Ocean are its own sphere of dominance. Recently, China has begun to seize fishing trawlers of Vietnam and Philippines to demonstrate its ownership of the South China Sea. No country in Asia is capable of standing up to China. Except, perhaps India.

China is aware that the world considers India to be a strong competitor to China and that, without putting India in its place, China would never be considered as the Hegemon of Asia. This is why, we believe that the Chinese Leadership is deeply desirous of demonstrating to the world that India is simply not in China's league. The most vivid way to do so is by administering a quick, humiliating military defeat to India and seizing what it claims to be Chinese Territory.

China has also tried to asserts its hegemony in the Financial Arena by trying to block a 2.9 billion dollar loan by ADB, the Asean Development Bank, to India. This was discussed in detail in our April 18 article
China-India Border Tensions Move From The Military To The Economic Arena.

Last week, ADB overruled China with American help and by ADB’s own desire to save face. In response, China rebuked ADB and said that the bank has tarnished its good name. According to a BBC article , “The ADB said that the organisation's charter stated that only economic considerations - and not political affairs - should be relevant to its decisions,”


Editor’s Note:

Apart from the articles quoted above, below are our other articles on this topic:
Recent reports from the Times of India on this topic:

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In Iran, Gandhism Comes of Age? - A WSJ Article That Neither Gets Gandhi Nor Iran


The Wall Street Journal published an article by Steven Waldman titled In Iran, Gandhism Comes Of Age.  The Wall Street Journal informs us that Steven Waldman is the Editor-in-Chief, President & Co-Founder of Beliefnet.com, a faith and spirituality website.

This is an interesting article and one that should be read. We liked reading this article. Unfortunately, we came away with the conviction that Mr. Waldman neither understands Gandhi nor the current upheaval in Iran. In this article, we tell why we think so.

The "Comes of Age" part of the article's title comes from Mr. Waldman's belief that the Gandhism was dependent on the "widespread dissemination of information about atrocities through mass media." That is why his initial  paragraph states "Indeed, the digital age -- when every phone is a camera and a telegraph -- makes Gandhism far more potent than it was when he was alive. Truth is, Gandhi’s approach was not well suited to his time."

It is undeniable that Gandhi made brilliant use of the media capabilities available to him. But, Mr. Waldman is overly simplistic and confuses tactics for core strategy. He should recall that Gandhi's struggle in India began in remote, deeply rural Champaranya and his successes came in persuading the deeply poor Indians all over the country to rise against the British. But, more on this later. 

We include some excerpts from Mr. Waldman's article below:

  • Gandhi’s approach was not just about the non-violent action, it was about eliciting an unjust, violent reaction. It was not about avoiding suffering of the people, but welcoming it.
  • ”Things of fundamental importance to people are not secured by reason alone, but have to be purchased with their suffering,” he said. “Suffering is infinitely more powerful than the law of the jungle for converting the opponent and opening his ears which are otherwise shut to the voice of reason.”
  • The dynamic in Iran has fit Gandhi’s understanding of human psychology. When millions peacefully protested in Iran, the government fell directly into the Gandhian trap, brutally murdering some protesters. By drawing the government into violent -- and public -- misbehavior, the protesters drew the state into a downward spiral in which the leaders progressively eroded their own authority through their own actions.
  • America’s practitioner of the technique, Rev. Martin Luther King Jr., was deeply influenced by the Hindu Gandhi who was, in turn, influenced by Jesus....But it’s an open question whether Islam has within its traditions the spiritual foundation for a non-violent civil disobedience.
  • That’s why the most important idea in President Obama’s statement yesterday may have been the most Gandhian: “Right now, we are bearing witness to the Iranian peoples’ belief in that truth, and we will continue to bear witness.”
  • It is witness that gives the non-violent approach its power, by making private suffering public. The protesters will be severely tested; restraint will be nearly impossible.
  • But if the Iranians pull it off, it will provide an inspiring epilogue to Gandhi’s story. He went to his death feeling he’d failed in part because he had been unable to convince Indian Muslims to embrace his approach. Nothing would make him happier than if it turned out to be millions of Muslims who gave birth to 21st-century Gandhism.

Before we get to our substantive as well as subtle issues with Mr. Waldman's article, we must express our concern at what we see as his evident religious bias.


Religious Bias of Mr. Waldman

Our immediate thought is that Gandhi would have been appalled to read Mr. Waldman’s comments about Muslims and his question whether Islam has the spiritual foundation for non-violent civil disobedience. In fact, Mr. Waldman’s comment reeks of the same religious prejudice that led the Judge in the Merchant of Venice to question whether Shylock as a Jew could understand the “twice blessed” quality of mercy.

European-American Christian commentators (as opposed to South African Christians) routinely write of “Hindu Gandhi” as someone who was “influenced by the teachings of Jesus”. We do not know whether this is done to make Gandhi more acceptable to American readers or whether this is due to their innate belief in Christian superiority. We do notice that Mr. Waldman has faithfully followed this tradition.

But no European-American Christian commentator in America has ever argued or even broached the possibility that Jesus was influenced by the teachings of Buddha or by the teachings of Shri Krishna despite many scholarly works on this topic by European Indologists.

We hold the truth self-evident that every religious figure in history was deeply influenced by the teachings of those who came before him or her. Mr. Gandhi clearly believed so. Just as clearly, Mr. Waldman does not concur. In our opinion, this makes Mr. Waldman unworthy of writing about Gandhism. 


The Iran Protests

We begin with the views of Hillary Mann Leverett, CEO of STRATEGA, a political risk consultancy. Below are excerpts of her views expressed on the Lou Dobbs Show on June 23, 2009. (See the official transcript for her comments in detail).

  • I think we really need to first assess this idea that the elections were stolen or somehow rigged. There's no evidence for that whatsoever. I think that's why you've seen a dramatic dwindling fading away of the demonstrators, they initially came out because there were questions, there were irregularities reported in the election.
  • Today you're left with just a hardcore of those who are looking for regime change. That is clearly not something that is supported by the broad populous inside Iran. They do now want to see an implosion of the system they do not want to see it come down, they want to see gradual opening over time. They want to see more accountability. They do want to see more prosperity. But Iranians are not in a bad state.

We have read views of other experts that concur with the above quoted opinion.  Last week, we wrote our conjecture that Mr. Moussavi was backed by the urban, student & intellectual vote while Mr. Ahmadinejad was backed by the rural, poor and devoutly religious vote. Since last week, we have read detailed counts of such communities that argue that Mr. Ahmadinejad won the election.

It was evident to any one who watched the TV coverage of Iranian protests that the vast majority of protesters were urban and educated Iranians who had access to cell phones and Twitter. These are not characteristics of the majority of Iranians, certainly not of the rural, the poor or the religiously focused Iranians.

It is now clear that there is a huge rift within the power establishment of Iran with people like Mr, Rafsanjani, Mr. Moussavi, Ayatollah Montezari rebelling against Ayatollah Khamenei and refusing to accept the power of Mr. Ahmadinejad. It is these power brokers who supported and perhaps sponsored the protests in Tehran. We find it interesting that the protests began weakening after the daughter of Mr. Rafsanjani was arrested.

It seems safe to conclude that the street protests, while intense and deeply troubling, were not reflective of the majority of Iranians. They seemed to be deeply emotional protests by a minority section of Iranians, for that minority section and sponsored by a faction of Iran's power circle.

In sharp contrast, the Gandhian movement in India encompassed all groups in India, from the Oxford educated Nehru and his class of educated urban Indians to the poorest workers in urban factories to the poorest farmers in rural India.

Therefore, we conclude that the protests in Iran cannot described as Gandhian in anything but the most superficial context. At best, these protests could be described as pre-Gandhian. It is our fervent hope that these protests do actually prove to be pre-Gandhian.  


Pre-Gandhian Freedom Movement in India

Contrary to Mr. Waldman’s belief and the belief of many European-American writers, the freedom movement in India did not begin with Gandhi. In fact, the freedom struggle was a strong nation-wide movement before Gandhi's arrival in India. The Congress Party of India was a nation-wide party with a strong organizational cadre. The movement was led by leaders like Gokhale, Agarkar and Lokmanya Tilak (whom Gandhi regarded as his mentor). This was a non-violent movement by choice. These leaders had recognized that the Indian army remained loyal to the British-Indian Administration and therefore, there was no possibility of a violent overthrow of the British Rule.

The weakness of this movement was that. like the protests in Iran, it was a movement of urban literates and by urban literates. It could not draw in the common Indian worker, the farmer, the policemen or the soldier.

The British allowed these movements only up to a certain extent. When a leader like Tilak became too powerful, he was arrested and sentenced to immorally long, multi-year sentences in far away Burmese Jails.

People like Mr. Waldman do not know and probably would not believe that the atrocities and massacres committed by the British in India were far worse than anything the Iranian regime has done in Iran. The British did so because they felt they were racially superior and they could massacre with impunity. Those who need evidence should read about the Jalianwala Bagh Massacre in Amritsar, Panjab by England's General O'Dwyer. The British knew how to massacre and how to quell the protests in England & India against these massacres.


The Gandhi Phenomenon

Into this established structure, stepped Mr. Gandhi. He realized that the biggest problem of the Indian Freedom movement was the lack of participation by the real, rural India. So, Gandhi gave up his urban clothes, his English proficiency and donned the poorest of Indian garments and used the simplest of Indian expressions to speak to the Indian common man and woman. They responded and the Gandhi movement was born.

An old couplet from North India tells the tale of Gandhi. It says “Nehru came to meet us on an elephant, Subhash Chandra Bose came on a horse, ,,,,, but only Gandhi walked with us”. Gandhi became the leader of the common Indian, of the vast multitude of Indians across the country.

This protected him from the atrocities of British rule. This is why he chose the "Fast Until Death" as his favorite weapon. The British Administration knew that if Gandhi died in his fast, a firestorm of rage would engulf all of India and the most loyal supporters of the British, the Policeman and the Soldier would revolt against the British.

So, the acceptance of Gandhi by the British was an act of self-preservation by the British. This is true but inconvenient to writers like Mr. Waldman who like to postulate that Gandhism worked because the British were inherently cultured, civil and Christian. This is also why Mr. Waldman, like numerous European-American writers, wonders aloud whether Islam has the necessary spiritual foundation to tolerate Gandhism. Mr. Waldman and his colleagues are wrong and prejudiced.

Getting back to Iran, the current protests remind us of the pre-Gandhian protests in India, protests by the urban, educated class for their values and interests. Until these protests become of the common Iranians, by the common Iranians and for the common Iranians, the protests cannot be described as anything close to Gandhian.

We fervently hope that a leader emerges in Iran who can unite all the people of Iran in a common movement for the dignity, freedom and progress of the common Iranian. Once such a leader emerges, then Gandhism will be born in Iran.


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Watch The US Congress At Work And Be Afraid About The War Against Terrorists


On Thursday June 25,  a Congressional committee subjected the Fed Chairman, Dr. Ben Bernanke, to an accusatory interrogation about the events surrounding the acquisition of Merrill Lunch by Bank of America. This was an amazing spectacle because we simply could not believe the utter stupidity of the Congressional Representatives on that committee. It was disgusting because these elected representatives apparently felt no shame in besmirching the reputation of man of unquestionable integrity. 

It was a spectacle that tells us that the American people need the legal ability to recall members of Congressional Committees or to permanently bar them from serving on congressional committees. We are not alone in our outrage. For once, Financial TV networks, Journalists as well as both Bullish and Bearish Investors condemned the behavior of the Congressional representatives.

Let us look back to last November-December.  It was a period when we faced the prospect of Financial Armageddon and the American economy was in a free fall. The stability of the global financial system was teetering.  And Nobody was in charge in the White House or the Treasury Department. The Bush Presidency was a lame duck and President-Elect Barak Obama was working on  his transition. Treasury Secretary Henry Paulson was on his way out and the new Treasury Secretary had not been named. The Congress as usual was absent and hiding in their constituencies.

Only one man was stood in the way of financial disaster. That man was the Fed Chairman Ben Bernanke. Dr. Bernanke single handedly cut interest rates to zero, launched innovative programs to provide liquidity to America's Financial System and provided swap lines to foreign central banks of allied countries including UK and Switzerland. He avoided financial calamity and paved the way for resumption of normal functioning of America's financial system.

This is why people like Warren Buffet and Jack Welch have called Ben Bernanke a national hero and publicly expressed their gratitude for his heroic efforts.

How has America's political system rewarded this hero? President Obama has virtually ignored him in public, bending only to speak tersely about his success. At least, Mr. Obama has not criticized him. That was left to the great Congress of the United States.

Now that the crisis is over and the financial markets are on a roll, the House of Representatives launched a Kangaroo hearing in which they abused, insulted and heaped scorn on Ben Bernanke for their political purposes. We have great confidence in Dr. Bernanke and we are absolutely positive that he will continue to take the right steps at the Fed until he is asked to step down by President Obama.

But, the inquisition of Ben Bernanke made us wonder about the war against terrorists being fought by the hundreds of loyal, patriotic Special Forces and CIA Agents in far away places. These people take great personal risks to locate terrorist plots against America and then take even greater risks to foil these. These agents work under cover and in areas where no CIA or Army lawyer is available to advise them about the fine points of US law.

Imagine that you are one of these people and you saw the Congressional Inquisition of a National Hero like Ben Bernanke. Would that give you courage to take greater risks for your country or would that scream at you to do everything by the book? Would you not wonder whether another Congressional committee would interrogate you months after you took risks to foil a terrorist plot against America? Would you not wonder whether actions that seem eminently reasonable in a remote corner of Afghanistan-Pakistan would seem terrible, violent and perhaps illegal under the bright lights of a Congressional Inquisition in safe, secure Washington DC?

We think it is likely that you would pause to consider this possibility and it might persuade you to lower your zeal, to pause, to reach out to your legal team at HQ for their advise. If you do so, it might result in losing that one opportunity to capture that terrorist, to interrogate that captured suspected terrorist before he gets over the shock of his capture and hardens his mental defenses. While that is highly regrettable, at least you would have protected yourself from the United States Congress.

The above is our conjecture, a logical, reasonable and emotional derivative of watching the Congressional Committee trying to entrap Ben Bernanke into an admission. We sincerely hope that the hundreds of patriotic, brave Special Forces and covert CIA operatives in Af-Pak do not think like us investors and bloggers. If they did, then we would be very afraid for the success of the current War Against Terrorists.


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Interesting Videoclips of the Week (June 20 - June 26)


Editor's Note: In this series of articles, we include important or interesting videoclips with brief 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.

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.


Wednesday June 23 was the eventful day of last week.  The Federal Reserve released its statement after a two-day meeting. But this was eclipsed by a crass but critical political play. Representative Issa of California made a public allegation that Ben Bernanke, the Federal Reserve Chairman, had engaged in a "cover up". This story hit the tape just before the scheduled release of the Fed statement. 

We have to give credit to CNBC and its afternoon anchors, Erin Burnett and Maria Bartiromo, for rising to the challenge of covering these two breaking stories of significant importance. They got the facts out to the viewers, got real experts to opine on both Ben Bernanke's integrity and the implications of the Fed statement. CNBC should be proud of the job these two anchors did that afternoon.

The Iran crisis subsided this week and that allowed more sedate, more thoughtful coverage of that momentous event. The Lou Dobbs show provided the most illuminating interview of the week on Iran. 

We feature the following clips in this article:

  • Warren Buffet with Becky Quick on Wednesday, June 24
  • Bob McTeer (ex-Fed President) and Jan Hatzius (of Goldman Sachs) with Maria Bartiromo on Wednesday, June 24
  • Jim Cramer with Erin Burnett on Wednesday, June 24
  • Ed Lazear (Bush Admin) and Martin Baily (Clinton Admin.) with Erin Burnett on Tuesday,  June 23
  • Paul Desmond (of Lowry's) with Bob Pisani on Wednesday, June 24
  • Bill Gross (of Pimco) and Ken Volpert (of Vanguard) with Erin Burnett on Wednesday, June 24
  • Jordan Kotick (of Barclays) with Maria Bartiromo on Tuesday, June 23
  • Jason Graybill (of Carrett(?)) on Fast Money on Monday, June 22
  • Hillary Mann Leverett (of Stratega) and David Frum (of Axis of Evil fame) with Lou Dobbs on Tuesday, June 23

1. Buffett on America's "Economic War"
- With Becky Quick on CNBC - Wednesday, June 24, 11:50 am

Mr. Buffet is regarded as America's greatest investor and his views are always a must listen. Becky Quick had the foresight to ask Mr. Buffet about Ben Bernanke a couple of hours before Rep. Issa made his allegation. (Begins at minute 04:51 of the clip).
  • Quick - You mention that Ben Bernanke did a good job. Today is an FOMC meeting day, we are going to be hearing  more about that at 2:15 today. Do you think Ben Bernanke should be re-appointed to a second term?
  • Buffet - I don't see how you could do better.  yeah,  he has taken decisive action at a  time when really decisive action was needed and extraordinary action..things we have not done before.
Mr. Buffet says we cannot do better than Ben Bernanke. President Obama, are you listening?


2. Fed & the Markets - Bob McTeer and Jan Hatzius with Maria Bartiromo on CNBC - Wednesday, June 24, 3:05 pm

Bob McTeer is a former President of the Dallas Federal Reserve and Jan Hatzius is Chief US Economist with Goldman Sachs. This 08:48 minute clip opens with a recap of Rep. Darrell Issa of California making his allegations and comments by Warren Buffet about Ben Bernanke. Then Maria addresses Bob McTeer.
  • Bartiromo - Mr. McTeer, let me kick this off with you. Obviously a lot of back and forth about the Chairman of the Fed. How do you see it? Did Bernanke do something wrong or inappropriate?
  • McTeer - I sat beside Ben Bernanke for three years at the FOMC (Federal Open Market Committee) table and engaged in private conversations and even whispered conversations. He is a Boy Scout if not a Girl Scout. I can't imagine him doing what they are accusing him of doing ...
Watch this clip.


3. Stop Trading, Listen to Cramer - With Erin Burnett on CNBC - Wednesday, June 24, 2;36 pm

We remind readers that it was Jim Cramer who shocked the investing world by his "They know nothing" rant against the Bernanke Fed in 2007. So what does Cramer say now about Ben Bernanke?
  • Burnett - There's a lot of things going on in the past 20 minutes, sort of takes your breath away, first of all you have the Fed, the market which was up 130 is now down 30, you also had heard Darrell Issa who was on our air saying there was a cover up and it was frankly a direct attack on Ben Bernanke. Which story do you think is more important?
  • Cramer - I think the cover up story, because Bernanke is a loved figure on Wall Street and no one wants to lose him. 1-2 punch - Obama didn't say he is the greatest Fed chair yesterday and now we have this assault on his integrity which I think is absolutely ridiculous, I think it is outrageous, I think the man completely had an open book here; it is so wrong to attack Bernanke.
As Bob McTeer did in the clip above, we associate ourselves with this opinion of Jim Cramer.


4. The State of the Economy - Lazear and Baily with Erin Burnett on CNBC - Tuesday, June 23, 2;04 pm

Martin Baily was the Chairman of the Council of Economic Advisors under President Clinton and Ed Lazear was the Chairman of the Council of Economic Advisors under President George W. Bush.

An hour or so before this show, President Obama had made positive but lukewarm comments about the Fed Chairman, Ben Bernanke in his press conference. Erin Burnett showed her guests the clip of President Obama's comments about Bernanke and asked for their comments.
  • Lazear - The situation is very different today and it is in large part attributable to Fed’s behavior and so President Obama would be wise to think carefully about replacing Ben; that would probably be not a good move at least to my mind
  • Baily - I think there is a good case for keeping Ben Bernanke I think he has done an excellent job in managing the crisis...and that should be taken into account.
  • Burnett - they were the chief economic advisors for Presidents Clinton and Bush and both of them in agreement on one thing, Ben Bernanke is doing a great job.

5. Fast Money Final Call - Paul Desmond of Lowry's with Bob Pisani on CNBC
- Wednesday, June 24, 3:37 pm

Paul Desmond is the President of Lowry's Research, the oldest technical advisory in the USA. This was a rare treat for us. Lowry's is probably the most widely followed technical advisory in America and we feel grateful to Mr. Pisani for bringing us their views. (We do wonder if Bob Pisani can invite such a great guest on his short segment, why can't the main Fast Money show ever invite guests on this quality. But, that topic is for clip no. 8 below.)

Mr. Desmond expresses his concerns about the quality of the rally since the March low, such as loss of upside volume, the message of their proprietary buying power and selling power indices etc. He said that they the last two Mondays have been 90% downside days (days where 90% of the volume is to the downside) which suggests to him that the uptrend has been broken.

At minute 03:42 of this short clip, Bob Pisani asks the key question and gets a frank, non-consensus answer from Paul Desmond.

  • Pisani - Paul, I am concerned about the 90% down days, we have had two of them. In a 90% downside day, there is a lot of selling pressure, doesn't that exhaust the selling interest short term, shouldn't we get a little bit of a bounce after a couple of 90% downside days or is this really a bad sign?
  • Desmond - you do typically see signs of rallies lasting from 2-7 days after a 90% downside day, but those are better used to sell into rather than buy into - we think that the market is headed to new bear market lows before it is over
  • Pisani - You think we will go back to the March lows?
  • Desmond - Below the March lows. The issue is if we could not produce a strong healthy sustained market advance from the March lows, then we are going to have to go to even lower levels to attract stronger demand than what we have had in April.

This is a different view from what we hear on CNBC every day, that the March lows were the definitive bottom of this bear market. We thank Bob Pisani for bringing us a rare window into the thinking of the oldest and most respected technical advisory in America. 

Bill Strazzullo of Bell Curve Trading was also a guest on this segment, Mr. Strazzullo is a more frequent guest on CNBC and his views tend to be more mainstream. We mean no disrespect to him when we focus on the rare opportunity to listen to Paul Desmond.


6. Fed Decision - Bill Gross and Ken Volpert with Erin Burnett on CNBC
- Wednesday, June 24, 2:15 pm

Bill Gross of Pimco and Ken Volpert of Vanguard are managers of the two largest Bond funds in the World. Their views are always worth a listen and even more so immediately after the release of the Fed statement after the FOMC (Federal Open Market Committee) meeting. This is a long clip that analyzes the statement released on Wednesday June 23 around 2;15 pm. 

We remind readers on May 28, Erin Burnett had asked Bill Gross "whether there is any rate right now that would entice you into buying Treasuries" and Bill Gross had replied that "somewhere between 3.7% & 4% is an attractive entry point (for 10-year Treasuries)". (see Clip 3 in our article Interesting Videoclips of the Week (May 23 - May 29))

We were happy to see Erin Burnett follow up with Bill Gross regarding this expression of buying interest in this clip.

  • Burnett - You had said you were a buyer right around 4 right?
  • Gross - Right around 4% for 10-year Treasuries - That is correct and we bought some long term treasuries at 4.71% as well.

7. Talking Technicals - Jordan Kotick & Ralph Acampora with Bob Pisani on CNBC-Tuesday, June 23, 3:45pm

For the past six years, the month of June has marked a turning point in the Treasury market. If Treasuries rallied into June as they did in 2003 and 2005, then they would begin a long sustained sell-off in June. Conversely, if Treasuries sold off into June as they did in 2004 and in 2006-2008, then they would begin a long sustained rally in June.

We wrote about this strange seasonality in our April 25, 2009 article US Treasuries - Will 2009 Be Like 2006-2008 or Like 2003 & 2005?

 It was sort of flattering to see a noted technical analyst like Jordan Kotick describe the same phenomenon to CNBC viewers on June 23 that we had described to our readers on April 25. It feels even more rewarding to see the Treasury market concur with us. In case, you have not noticed, the Treasury market has been on a bull run since its bottom on June 10, 2009. Will the 2006-2008 history repeat in 2009? So far, it has. 

8. Battle of the Bear - Jason Graybill with Melissa Lee on CNBC - Monday, June 22, 5:35 pm

We had not heard of Mr. Graybill or of his firm, Carrett Asset Management. In this clip, Mr. Graybill talks the language Fast Money likes - of coming inflation in America and how US Treasuries would sell off because of America's issuance of treasury debt and the inflation that would arise from it. This is the trade mark Fast Money "Shaap" (the opposite of Mantra, which by definition is benevolent and auspicious).

Frankly, we are disappointed with Fast Money for a number of reasons. First the quality of their guests. Look at the clips featured above and look at the quality of the guests in those clips. Then compare these high quality guests to what Fast Money brings on their regular evening show. Pathetic, in our opinion.

Fast Money would rather bring in celebrity guests like Joe Theisman than an expert who can add real value to their viewers. Now, we are Bollywood Rasiks and we love entertainment. But there has to be a balance and Fast Money has none.

Then there is the issue of integrity. By the end of the week, the message of Jason Graybill was discredited by the bull run in the Treasury markets. But, did Fast Money point that out? Of course not. Why should that surprise us? To this day, Joe Terranova and Fast Money have not admitted the gross error made by Mr. Terranova on March 26, 2009 (see our article CNBC's Fast Money - Playing Fast & Loose With Facts About FED & US Treasuries?).

Our next concern is more subtle and more important. On Wednesday, June 24, Melissa Lee highlighted the 2% gain in TBT, the Double-Short Treasury ETF, and asked Karen Finerman whether she still likes it. Karen Finerman she "likes TBT here". No problem, that is her opinion. The next day, TBT fell 3% when the Treasury Market rallied. But, curiously, Melissa Lee ignored this drop and refused to question Karen Finerman. In fact, the Treasury market rallied big this last week but you would never had found that out by watching Fast Money.

The fact that experts such as Bill Gross, Ken Heebner, Jordan Kotick and other CNBC guests favor Treasuries does not matter in the least to Anchor Melissa Lee and the Fast Money Management. In fact, we do not recall a single episode in which Fast Money made a bullish call on US Treasuries.

Why this aversion? In our opinion, this is because Fast Money trader Karen Finerman is associated with the hate-Treasuries position. Karen Finerman, an elegant sophisticated lady, is popular with the viewers and her ratings are high. We know some female viewers who like the presence of a sedate, dignified woman on this predominantly male show. It follows that Fast Money Management and Anchor Melissa Lee would go out of their way to make sure that Karen Finerman does not look bad on the show.

But we ask whether protecting the reputation or ratings of Karen Finerman is more important to Fast Money than making money for viewers or protecting viewers from losses by sticking with a losing trade. Is this why Fast Money has NEVER invited any big name expert to recommend long maturity Treasuries and thereby refute Karen Finerman’s trading convictions?

Louis L'Amour, the famous western writer, had a favorite phrase "Riding for the Brand", a code of the West. In his novel "North By The Rails", Louis L'Amour describes the dilemma of a cowboy on a rough trail drive who is asked to choose between two warring bosses. Finally, he is asked by the good guy "who is the brand here?". The cowboy thinks for a minute and answers "The Herd".

In the spirit of the American West, we remind Fast Money Management and Anchor Melissa Lee that their  Herd of Viewers is the real Brand of Fast Money and not any individual trader or the trading team. Their show has to be in the best interests of their viewers. Unfortunately, there is no sign yet that Fast Money understands this fact or the lack of journalistic integrity implicit in their behavior. One day, they will. But by then, the TV Brand of Fast Money will have been damaged beyond repair.


9. Situation in Iran - Hillary Mann Leverett and David Frum with Lou Dobbs on CNN
- Tuesday, June 23

Hillary Mann Leverett is the CEO of STRATEGA, a political risk consultancy. She worked on Iran and Middle East issues in the George Bush and Clinton administrations. David Frum, resident fellow at the American Enterprise Institute, was a former special assistant to President George W. Bush. If we recall correctly, it was David Frum who came up with the "Axis of Evil" line.

We found the views of Ms. Leverett to be fresh and unconventional. We encourage readers to read the entire transcript of this segment. Below we include some excerpts:

  • LEVERETT - I think we really need to first assess this idea that the elections were stolen or somehow rigged. There's no evidence for that whatsoever. I think that's why you've seen a dramatic dwindling fading away of the demonstrators, they initially came out because there were questions, there were irregularities reported in the election.
  • LEVERETT - Today you're left with just a hardcore of those who are looking for regime change. That is clearly not something that is supported by the broad populous inside Iran. They do now want to see an implosion of the system, they do not want to see it come down, they want to see gradual opening over time. They want to see more accountability. They do want to see more prosperity. But Iranians are not in a bad state.
  • LEVERETT - Well, because there's no evidence that the election was stolen and the president is acting that way, he is for all intensive purposes given up on the idea of the strategy of engagement. He has essentially bought into this policy, which is badly reminiscent of the lead-up to the war in Iraq back in 2002, 2003.
  • LEVERETT - He bought into this idea that the regime in Iran, the government in Iran has been delegitimized. It would have been hard enough to deal with them to begin with, and today they are so delegitimized and so depraved that we couldn't possibly deal with that. I think for all intensive purposes he took the engagement strategy off the table today. I think that we are looking at a situation that's going to be very dangerous for U.S. interests in the Middle East.
  • DOBBS - To be clear, so I understand, until today, then you believe that the Obama administration was pursuing the correct policy toward Iran? 
  • LEVERETT - I think there was division within the Obama administration. I think that Obama had, what I believe, was a correct impulse toward strategic engagement to resolve the problems between the U.S. and the Islamic Republic. But I think there was tremendous opposition to that from within the administration, so I do think the policy was already on the ropes and I think that Obama, today, delivered a death knell to that policy.
  • FRUM - Hillary and I have been debating these issues for a long time. I think on this point she and her husband, who are true Iran experts, are very much alone. I don't think there are many very many other people in the world who believe that this election was honest. We don't know whether it was completely stolen or that they just padded the Ahmadinejad votes. We will never know the answer to that. But we know that the opposition can get people in the streets and the government can't.

As we said, read the entire transcript of this segment.


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Situation In Iran - More Questions Than Answers


Unless you live on Mars or Venus, you know about the events in Iran. The pictures and videos of the massive protests in Tehran are amazing. Reports indicate that an estimated 3 million people attended the demonstration in Tehran last Monday.

As we write this, the situation seems to have entered a stalemate of sorts after the firm stand taken by Iran's Supreme Leader, Ayatollah Khamenei. So it seems to be the right time for us to raise questions and make some comments.

History Rhymes?

The last time such demonstrations erupted in Iran was in 1979. At that time, the demonstrations were against the autocratic rule of Pahlavi, the then Shah of Iran. Like today, those demonstrations were led by idealistic students, professors and the educated urban class who were demonstrating for freedom. Like today, these demonstrations created a wave of pro-demonstrator sentiment in America and Europe, even though Pahlavi regime was friendly to American and European interests.  After all, the sight of young people demonstrating for freedom and against autocratic rule is an inspirational sight.

The demonstrators succeeded in 1979 and the Pahlavi regime fell. The Shah left Iran with his family. Then something strange occurred. The Islamic Clergy who had backed the demonstrators suddenly took over and the demonstrators found themselves governed by an even more dictatorial regime, that of Ayatollah Khomeini. This Islamic regime runs Iran to this day.

Let us look back to the French Revolution. That was another mass uprising led initially by freedom-loving, idealistic young students, professors and the intellectual class of Paris. Their demand was Liberty, Equality and Fraternity. They succeeded in toppling the ruling House of Bourbons. Then something strange occurred. That revolution was then taken over by the Committee of Public Safety led by the infamous Maxmillian Robespierre. The committee began a campaign of terror and ended up executing over 18,000 people, mainly by the guillotine.

The point we make is that revolutions led by young students, professors and the educated urban class rarely fulfill the dreams of the demonstrators. After the dust clears, it becomes evident that some organized entity was the guiding force behind the demonstrators, cheering them on initially and then ruthlessly stomping them into submission after the demonstrators succeed.

These are the parallels we remembered when we saw the demonstrations on TV last week. The demonstrators were clearly for Mir Hossein Mossavi, the opponent of Mahmoud Ahmadinejad. Mr. Moussavi is the product of the same Islamic revolution to which Mr. Ahmadinejad belongs. Mr. Moussavi served as the Prime Minister of Iran from 1981 to 1989 and his rule has been described as ruthless. Frankly, we find it difficult to believe that Moussavi is a candidate who will lead Iran to a truly democratic, reformed future.

So we find it a little difficult to cheer for the young students and intellectuals that are demonstrating in Tehran. We adore their passion but we do not understand their end game.

Rigged Election?

Clearly, there is something strange in the final election count. We find it very difficult to believe that Ahmadinejad won the election by such an enormous margin. But we also find it hard to believe that a fraud of such magnitude could be carried out in secrecy by a few people. As Ayatollah Khamenei asked in his sermon on Friday, June 19 "Perhaps 100,000 votes, or 500,000 votes, but how can anyone tamper with 11 million votes?"

We find this question persuasive. But then, we spent our childhood in Mumbai, the urban capital of India. During our formative years, we saw popular election campaigns run in Mumbai on modern viewpoints. But, these idealistic campaigns always lost. The lesson drummed into us was that in India, cities and urban centers do not count. Only the rural vote determines the election. As the widely praised recent Indian election demonstrates, the rural population votes in a way that confounds the urban pollsters and commentators. They also respond to material promises. It is reported that Sonia Gandhi campaigned in North India on the promise of free rice to rural villages.

We remembered this when we read that Ahmadinejad had campaigned extensively in rural Iran and promised the voters free potatoes. In contrast, Moussavi seems to have restricted his campaign to the urban centers. Ahmadinejad also campaigned on the promise to end corruption, which is always attractive to the poorer sections of any electorate. We are also able to believe that Ahmadinejad was a more attractive candidate for the religiously devout voters than Moussavi.

We are prepared to believe that Ahmadinejad won the rural vote, the religious vote and the poor vote while Moussavi won the young, urban intellectual vote. So, in our opinion, the election comes down to determining the size of the rural, devout, poor vote and the size of the urban, intellectual vote. We do not have the facts to make this judgment ourselves.

Power Players in this fight

The Islamic regime in Iran is a complex organism with competing centers of power and influence. The Supreme Leader himself is actually appointed and monitored by an Assembly of Experts. Then there is a Guardian Council, the Judiciary and the Parliament. The President is actually a lower level figure in the power hierarchy. The partial map below indicates the complexity.

 

 (sources - US State Dept & Wall Street Journal)

The "reformist" candidate Moussavi is very much a part of this power hierarchy. It appears clear that Moussavi has been backed by the second most powerful player in this hierarchy, Ali Akbar Hashemi Rafsanjani, the Chairman of the Assembly of Experts, the body that appoints the Supreme Leader. Mr. Rafsanjani served as the President of Iran from 1989 to 1997. He lost narrowly to Mr. Ahmadinejad in the 2005 election. That he opposes Ahmadinejad is no secret and the contempt seems mutual. Mr. Rafsanjani has much to fear from a newly elected Ahmadinejad.

There are informed analytical reports that the current struggle in Iran may have evolved into a power struggle between Mr. Rafsanjani and Ayatollah Khamenei  with Ahmadinejad as the point of dispute. This may be why Ahmadinejad is nowhere to be seen or heard in this mêlée.

If this is true, then Rafsanjani and Moussavi seem to have made a major tactical mistake. They have elevated a smaller, limited battle against Ahmadinejad into a test of the Supreme Leader's power. No Supreme Leader in any country and in any regime can survive after losing such a test of strength.

So we are not surprised to see the Supreme Leader Khamenei come down hard on protesters. He had no other choice. Mr, Khamenei warned that the demonstration leaders "would be responsible for bloodshed and chaos" and added "If they don't stop, the consequences of the chaos would be their responsibility."

This does not seem to be empty rhetoric. Media reports indicate that all the branches of the powerful Islamic Revolutionary Guard Corps (IRGC) has been placed on high alert and the IRGC Special Units, known for their iron fist tactics, have taken over local law enforcement in Tehran.

In his sermon, Ayatollah Khamenei made this protest an issue of national sovereignty and accused America-England for fomenting the protests. "They thought Iran is Georgia" he said, adding, "Their problem is that they don't know this great nation yet."

Consequences

This episode is a setback to the Obama Administration in our view. The Obama Administration had decided to work with the Iranian Government to come to an understanding of sorts. This was a smart decision because a neutral Iran could ease America's problems in both Iraq and Afghanistan.

The US Military is planning to withdraw from urban centers in Iraq and decrease its involvement in Iraq. This was a major commitment of Candidate Obama and President Obama wants to fulfill his promise. Besides, the US troops are needed in Afghanistan and Pakistan for the major fight against the Taleban.

A hostile Iran could create severe problems in Iraq. The Iraqi Prime Minister Mr. Al-Malliki was among the first to congratulate Mr. Ahmadinejad on his victory. He knows that his Iraq needs Iranian support. A neutral Iran is no less critical in the battle against the Taleban. This was an easier deal because the Sunni Taleban is as great an enemy of the Shia Iran as it is of America. But, after the violent protests in Tehran, all bets might be off.  

Pressure is also mounting on President Obama to take a hard line on Iran. No one seems to explain how America will gain from such a hard line but this is an issue of Brand America, the brand that has favored democracy and aspirations of freedom.

This situation makes it harder to reach any accord on the nuclear issue. All parties in Iran will now be determined to show that they are as patriotic as Ahmadinejad and nothing is more patriotic than working to get a nuclear weapon. In the west, Ahmadinejad is a lightening rod and the Neocons in America & Israel will be gunning for a strike on Iran. 

Paradoxically, the greatest danger might come from the lack of clarity about President Obama. The Iranian regime understood President Bush. It is not clear that they know President Obama. For that matter, America does not know President Obama. No one in the world knows how President Obama would react under severe pressure and therein lies the greatest danger of this crisis. 

So far, President Obama has reacted to the Iranian situation with nuanced speech and a delicate strategy. We hope that continues to work.


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Bernanke-Greenspan, Bush-Obama & An 18th Century French Diplomat


"La parole nous a été donnée pour déguiser notre pensée." -
Speech was given to us to conceal our thoughts. - Talleyrand


Nicknamed as the Prince of Diplomats, Charles Maurice de Talleyrand-Périgord is regarded as one of the most versatile and influential diplomats in European history. Talleyrand served as a minister to the House of Bourbons before the French Revolution, then to Napolean in his reign and then to the new Bourbons after the fall of Napolean.

This is an amazing accomplishment of survival and success. We are certain it is due to Talleyrand’s famous maxim quoted above. Talleyrand was very well compensated for his skills by the various governments and parties that sought his help. The picture below is of Chateau de Valencay which he bought in 1804. His Paris residence on the Place de la Concorde was sold to James Mayer de Rothschild in 1838 and is now owned by the American Embassy. 

 
(Talleyrand's Chateau de Valencay) (Source wikipedia)

In contrast to respect for his skill, Talleyrand's accomplishments have not been judged kindly by history. In fact, in retrospect, historians have concluded that his treaties and successes sowed the seeds of World War I.

Bernanke-Greenspan

In our opinion, the modern day version of Talleyrand was Alan Greenspan, the Fed Chairman, appointed by President Reagan in 1986. Dr. Greenspan proved to be a successful and respected Fed Chairmen under the successive administrations of President Bush (senior), President Clinton and then President George W. Bush. When he retired in 2006, Dr. Greenspan was a globally revered figure. 

During this long tenure, Greenspan had to speak at length and often. He understood the perils of being understood by the various constituencies, the Media, the Congress, the Executive Branch and Global Investors. So to protect himself, Greenspan developed GreenSpeak, a way of speaking that soothed everybody, impressed many but revealed nothing of his thoughts and plans. In other words, Greenspan became the ultimate master of the art of speaking to conceal his thoughts. Talleyrand would have been astounded and knelt before Greenspan, his master. 

After his retirement, Dr. Greenspan became a wealthy man by writing his memoirs, by consulting with large financial institutions and via lucrative speaking fees.

Unfortunately, like Talleyrand, Mr. Greenspan's tenure has begun to be judged negatively. It is now widely acknowledged that Greenspan's easy money policies might have sowed the seeds of the Credit Bubble and may have caused the Housing Bubble. 

The approach of the current Fed Chairman, Dr. Ben Bernanke is diametrically opposite of the Greenspan-Talleyrand maxim. Dr. Bernanke came to the Fed determined to make the Fed's thoughts and actions transparent to investors and the public. He has succeeded in his mission. 

Dr. Bernanke's accomplishments have been phenomenal. He has single-handedly prevented a depression in America and rescued the American (& global ) financial system from collapse. In our opinion, Dr. Bernanke has been a great Fed chairman and might end up being the greatest Fed chairman if reappointed to a second term.

Yet, Ben Bernanke remains unrespected and unapplauded. The reason in our view is simple. Bernanke succeeded in his mission to make his thoughts and his actions transparent. That seems to have doomed him. The sad reality is that what we understand, we do not respect. When we understand something, we can easily debate it. We can imagine scenarios under which it would not work, however unrealistic such scenarios might be.

In our opinion, President Obama owes the success of his first six months to Dr. Bernanke. Yet, President Obama has not praised Dr. Bernanke in public and he has abstained from expressing his trust in Ben Bernanke.

So we are afraid that while history will judge Dr. Bernanke as a great Fed Chairman, he will not be reappointed by President Obama. That will be America's loss.


Bush-Obama

The tale of Talleyrand applies equally to President Bush and President Obama.

President Bush was probably the most direct and the most transparent President in recent times. You may have liked or disliked George W. Bush, but you knew exactly where he stood. Bush was the ultimate anti-Talleyrand because he apparently believed that speech was given to us to simplify our thoughts and to speak them without regard to their reception by the audience. Only George W. Bush could make a lovely idea seem terrible. Because people understood Bush and disliked him, they berated Bush for being dumb at best and idiotic at worst.

In contrast, President Obama is a brilliantly soothing speaker. He has the rare talent of making his actions seem very benign and positive. Look at what he has accomplished in such a short time.

President Obama has centralized power in his White House to an unprecedented extent. There is no policy that the Obama White House does not control completely. He has appointed several czars that report to his White House team thereby reducing his cabinet to being royal sycophants. He has even marginalized Secretary of State Hillary Clinton by his appointment of czars for every important region. Last week, President Obama recalled Dennis Ross from the State Department to the White House to advise him personally on Iran.

Tim Geithner, the Treasury Secretary, is no more than a aide to President Obama. It is the Obama White House that makes Economic-Treasury policy and Geithner is sent to justify it to the Congress and the media. The Obama White House decided on and implemented the GM-Chrysler policies. We cannot think of a single material thing that Obama has delegated to his cabinet.

President Obama is in the process of making massive changes to the American system, changes that America will live with for decades. Yet, this exercise has been done softly and with a wonderfully benign, hopeful public message. Like Dr. Greenspan, he has lulled America into soft, sweet complacent belief that everything is in good hands and will only get better. Had George W. Bush even attempted a fraction of the power grab of Obama, he would have been castigated as a dictator by every newspaper and every TV anchor in the world.

However, there are nascent signs that the rehabilitation of George W. Bush has begun. Old critics like Tom Friedman of the New York Times have begun looking at the Iraq war as a limited success. In his recent article "Winds of Change?", Mr. Friedman quotes Michael Young, the opinion editor of The Beirut Daily Star as saying "Bush had a simple idea, that the Arabs could be democratic, and at that particular moment simple ideas were what was needed, even if he was disingenuous.....It was bolstered by the presence of a U.S. Army in the center of the Middle East. It created a sense that change was possible, that things did not always have to be as they were."

Friedman then gives his own views of Bush's Iraq policy “There are a million things to hate about President Bush’s costly and wrenching wars. But the fact is, in ousting Saddam in Iraq in 2003 and mobilizing the U.N. to push Syria out of Lebanon in 2005, he opened space for real democratic politics that had not existed in Iraq or Lebanon for decades.”

Our own views of the Iraq involvement are reflected in our July 2008 article Iraq & Tibet - Strategic Will of The American and Chinese People

Recent polls show some nascent signs that the Obama magic has begun to wear a little thinner. Soon, we think, President Obama will have to make some tough choices and articulate these to the American people, We sincerely hope that when he does so, he does it simply and directly. History has proven that the Talleyrand approach eventually fails and fails big.


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Bollywood and the Global Credit Bubble


Editor's Note: We are indebted to Mr. Raj Mundhe, an avid reader and an old friend, for bringing the Wall Street Journal article to our attention. Mr. Raj Mundhe, a noted Financial Advisor in metro Boston, has helped this blog on earlier occasions as well. For that, we thank him.


During our visit to Mumbai last December, we kept hearing the phrase America's Sub-Prime or Housing Bubble. When we tried to explain to our friends that it was not a subprime or housing bubble and more importantly it was not America's bubble, no body believed us.

What was our point? It was a credit bubble created by a massive expansion of money. This money flooded one asset class after another creating a series of bubbles all over the world. In America, it created bubbles in sub-prime, prime, home-equity loans, commercial real estate and in corporate loans. Globally, it created housing bubbles in the UK, Spain, Ireland, and Emerging European countries like Hungary and the Balkans. It also created bubbles in trophy assets such as Art.

Now a recent Wall Street Journal article points out that this money also created a bubble in Bollywood. The article by Eric Bellman titled
Slump Deflates Bollywood Bubble describes how the chill in global financing has stalled India's recent film making boom. Perhaps, now our friends will believe us.

Let us be clear. Bollywood is NOT and NEVER was a bubble. Bollywood has produced superb films for nearly 8 decades without any bubble money. These films were made on regular size budgets and almost always made money.

But in 2007, bubble money discovered Bollywood. According to the WSJ article, "more than $700 million from abroad that was invested in Indian film and broadcasting through mergers and acquisitions last year, up five-fold from the previous year". As the article describes, "In recent years, international studios, hedge funds and Indian media companies invested as India's growing middle class watched more movies, bought more DVDs and paid for more cable and satellite television channels. Sony Pictures Entertainment Inc., Walt Disney Co., Reliance ADA Group and UTV Motion Pictures were visible in the market."

The peak of this bubble was the first Hollywood production of a Bollywood movie "Chandni Chowk to China",  a Bollywood kung fu movie set in China. The movie was a bust and barely made money after sale of DVD and Television rights. The article quotes Rohan Sippy, the producer of Chandni Chowk to China as saying that he had never seen so much money sloshing around Mumbai over the past few years. "It was crazy," Mr. Sippy says, "Input cost went through the roof and actors were asking for five times what they were taking earlier."

     
     (source - WSJ)                                             (A scene from Chandni Chowk to China)


Now that the global credit bubble has burst, so has the influx of money into Bollywood. According to the WSJ article, " So far this year there has been only $25 million in foreign investment through mergers and acquisitions". As a result, "this year has seen the release of 22 Hindi films compared with more than 100 Hindi films in the same period last year", the article states. According to this article, Indian film industry could have its worst decline in revenues in a decade.

Our view is that Eric Bellman is wrong in his title. The slump has not deflated Bollywood, only the crazy bubblicious interest of Hollywood money in Bollywood.

Frankly, we are happy.
Bollywood will thrive regardless of the bubble. Unlike Real estate, the strength of Bollywood is in its people, its talent. Bollywood will go back to making classic Bollywood films in the classic Bollywood way, films that mesmerized audiences like us and films that made money.

Say good buy to the Bubble and say hello again to the old Bollywood.


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Cricket Lets In The Rabble - Anglophilia or a Tinge of Racism? - Our opinion of a Wall Street Journal article


In our May 2 article Wall Street Journal vs. Financial Times, we wrote about the Limousine Liberals of the 1980s.  "In those days, it was fashionable to praise England for being a "cultured" society. We felt then and we know now, that "cultured" was a code-word for absence of colored people and colored influences. In those days, racial relations in New York were not what they are today. So, the Limousine Liberal sub-culture fashioned its own code-word for praising England for its racial segregation and deriding America."

To our surprise, we found one such class-obsessed limousine liberal at the Wall Street Journal. His name is Thomas Dyja and he has written an article bemoaning the loss of "Cricket’s spiritual core". We find this to be really a low quality article, an article we expect to find in the Financial Times of London rather than in the Wall Street Journal. We tell you why below.

Mr. Dyja begins his article the way a proper American Anglophile would.  "Lord's, the "home of cricket," in St. John's Wood in northwest London, is Cooperstown, Augusta National and old Yankee Stadium all wrapped into one. ..Around here, "old money" can date back to the Tudors. Lord's is the official keeper of cricket's relics and its history, the game's spiritual core."

Then Dyja laments that "in the traditional bastions of the game, there's fear that T20 is forcing England to lose control of a sport considered fundamental to its identity."

Finally Dyja sighs for a world lost forever, "Losing control over their pastoral, class-obsessed ideal of the game means in some profound way losing their place in the world." Heck, even Scarlett O'Hara did not pine for Tara the way Dyja does for the proper English game. But then, Scarlett was a brave, forward-looking, optimistic American girl, not an Anglophile like Thomas Dyja.

So what is England's problem? Dyja explains that his cherished Lord's is "no longer where the money is, or the power -- India has those now. A global mutiny has swept the cricketing world, pitting the realities of the marketplace against the purity of the game, and it all centers on a faster, louder, harder-hitting version called Twenty20, whose World Cup is being played here at the leafy, proper Lord's."

To make sure every reader sees how leafy, proper Lord's is being defiled by rowdy crowds, he inserts a photo of Indians celebrating at Lord's.

  
(Dyja's caption - The crowd gets rowdy as England plays India at Lord's last week.)


Dyja then describes how Indians are further damaging the spiritual core of cricket - "To satisfy 1.2 billion people who suddenly couldn't get enough of T20, the Board of Control for Cricket in India (BCCI) launched a three-week tournament called the Indian Premier League (IPL). A Rotisserie-style player auction was held where the eight franchise owners, ranging from India's Reliance Industries Ltd. to Bollywood stars, threw hundreds of thousands of dollars (and in some cases millions) at the game's biggest names for three weeks of work."

Why should this impact England? Dyja explains that
"Considering that the very best cricketers in England don't get that for a whole year, the IPL upset the economic balance of global cricket."

Now we understand why Perry Mason spoke so disparagingly of Americans who spoke with a British accent, of Americans who wore cultivated British airs in the 1950s to proclaim their "cultured status" over what they considered to be Ordinary Americans. Thomas Dyja seems to belong to that type.

Those pretentious Americans did not understand that America was a land of the future and it was galloping towards to a great global role while class-obsessed England was going down a path to mediocrity.

Like these spiritual ancestors of his, Thomas Dyja does not understand that India and Twenty20 rescued Cricket and positioned it on a path to unprecedented success. India combined the magic of Cricket with the panache and unbridled joy of Bollywood creating one of the greatest sports franchises in the world. The result? Today, we see that Brazil and China are building Cricket teams and investing in the game. 

Perhaps it is we who do not understand Dyja's sadness. But, then we are after all rabble. Of course, unlike Dyja, we are proud of it. 

Dyja ends his article with a quote from an author named O"Neill that reads "This is (as Mr. O'Neill puts it), "the moment when the colonized element finally has its vengeance on the main."

Dyja does not seem to recognize that his publisher, the Wall Street Journal is an American institution and therefore, like us, a part of the colonized element. Now you understand why we would have expected such an article from the London Financial Times but not the Wall Street Journal.

We do not wish to be unfair to Mr. Dyja. So, in the tradition of this Blog, we invite Thomas Dyja to send us his response. We will print it verbatim.


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Interesting Videclips of the Week (June 13 - June 19)

Editor's Note: In this new series of articles, we include important or interesting videoclips with brief 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.

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 that should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.


Two weeks ago, we featured a CNBC Hall of Memories clip of Jim Rogers and Larry Kudlow trash talking the US Dollar and the abilities of the Fed Chairman, Ben Bernanke. Then we asked the question whether that giddy segment would end up signaling the bottom in the US Dollar. So far, it has.

Wednesday June 10 was the day of the 10-Year Treasury Auction. This was a big event and CNBC devoted a great deal of coverage to this auction. Predictably, the coverage was about how long maturity US Treasuries were a terrible asset class to own because the deluge of debt offerings from the Treasury Department. Even Jim Cramer got into the act by heaping scorn on bond buyers by proclaiming "Let them trade bonds, I am buying a building."

James Grant, Editor of the Grant's Interest Rate Observer, was invited as guest on CNBC Squawk Box on June 10 to discuss his anti-Treasuries views. Jim Grant has termed CNBC as Bubblevision in the past. So CNBC's David Faber asked Anchor Joe Kernan why they invited some one so critical of CNBC. Joe Kernan demurred but we can guess. Like Jim Rogers, Jim Grant is very negative on long term US Treasuries and that made him acceptable to CNBC Squawk Box.

We ask whether CNBC's anti-Treasury hype on June 10 would end up signaling a peak in long maturity Treasury Rates. So far it has.

This week, we introduce a videoclip that is not investment related but is newsworthy because of an unusually strong and innovative defense by a wife of her husband.

We feature the following clips in this article:

  1. CNBC Anchor Larry Kudlow berating CNBC's knowledgeable and honest reporter Diana Ohlick for being factually straightforward and firm - June 19
  2. Charles Biderman with Maria Bartiromo - June 19
  3. Fast Money Traders discussing the above Charles Biderman interview - June 19
  4. Gary Shilling discussing possibility of long term Deflation in America with Maria Bartiromo - June 16
  5. Marc Faber discussing certainty of long term Hyper-Inflation with Erin Burnett - June 19
  6. Jordan Kotick discussing a Summer Correction with Maria Bartiromo - June 18
  7. Larry Summers with Maria Bartiromo - a Three Part Interview - June 17
  8. Mrs. Ahuja claiming her Bollywood actor husband, Shiney Ahuja, was "framed" and offering an strong and unusual defense.


1. Has Obama's Housing Bailout Gone Bust? - Anchor Larry Kudlow berating Reporter Diana Ohlick simply for stating facts 
- June 19, 11:20 am

We have written in the past that CNBC has excellent reporters who are very knowledgeable, fair in their presentation,  firm in their convictions and unafraid of the anchors who try to browbeat them. We have praised Rick Santelli, Phil LeBeau and Diana Ohlick for these qualities. 

We are delighted to state that Diana Ohlick justified our trust by standing up to browbeating anchor Larry Kudlow and responded to his attacks with firm statement of facts. We encourage all readers to watch this clip. The first exchange between Kudlow and Ohlick begins at minute 02:18 of the 07:13 minute clip.

  • Ohlick - Larry, I got to disagree there.

Larry Kudlow tries to mock Ohlick but Ohlick continues.

  • Ohlick - 5.5% is where most people refinanced or bought their homes during the housing boon. If they need to refi to a lower rate, it has to be under 5%.
  • Kudlow - You don't know that
  • Ohlick - I do know that. I know it from the facts.
  • Kudlow - You are misleading people if you say that.

Then Kudlow begins speaking to others. When Kudlow begins to hype the housing sales in Southern California, Ohlick corrects him and lays out facts and her views. So Kudlow attacks Ohlick again (minute 06:30 of the clip).

  • Kudlow - You can look at the glass half-empty as much as you want
  • Ohlick - I am not looking at the glass half-empty, I am looking at it clearly.

As we said, we are proud of the courage and steadfastness of Diana Ohlick. It is this viewer's opinion that Larry Kudlow was misleading viewers and Diana Ohlick was presenting facts. But then, Larry Kudlow has transformed himself from an economist to a politician. That is his choice. It is also his choice to present a hyped version of facts and events to meet his politico-economic convictions. But, as CNBC viewers focused on getting investment value from CNBC, we think Mr. Kudlow should restrict his biased views to his 7:00 pm show. As an anchor of a 11:00 am show during market hours, Mr. Kudlow should behave in an unbiased, thoughtful manner for the benefit of the show's viewers. 


2, Tracking Market Flows - Charles Biderman with Maria Bartiromo - June 18, 4:28 pm

Charles Biderman, CEO of TrimTabs Research, has the best market data on the street. His views are highly respected and followed. This is his 3rd interview of 2009 with Maria Bartiromo. Like the previous two, this five minute clip is a must watch.


3. Are We Just Suckers? - Fast Money Traders discuss Charles Biderman Interview - June 19, 5:15 pm

The fact that Fast Money devoted a segment to the Biderman interview shows the respect of the trading community for Mr. Biderman. Not to be picky, but we wish to point out that Fast Money Trader Guy Adami seems to have misunderstood Mr. Biderman's point. Mr. Biderman was talking about Insiders not buying their company' stock for their personal account. Mr. Adami incorrectly interpreted this as Companies not buying stock for their Corporate account, a completely different thing. 

We want to give a shout out to the entire Fast Money Trader Team for warning viewers about the possibility of a correction in stock prices. Guy Adami was the initial leader and the rest of the team has followed his example by warning viewers. Joe Terranova has been very good in asking viewers to get off the Energy and Natural Resources trades before this week's correction. Well done Fast Money. This viewer thanks you.


4. Pricing Pressures Ease - Gary Shilling and Steve East with Maria Bartiromo - June 16, 3:41 pm

This is a segment devoted to discussing the prospect of inflation or deflation in America. Both experts agree that currently America faces deflation. Then Gary Shilling goes farther and states his view that America faces the prospect of Chronic Deflation for the next 10 years. This is a must watch clip for all serious investors.

What we found amazing is that a CNBC Anchor tolerated this viewpoint and actually let Gary Shilling state his case of long term deflation without unduly interrupting him. But then, we are becoming fans of this balanced, rational Maria Bartiromo. She also seems to have accepted the current state of US Economy. We know this because she mocked the notion of green shoots in a conversation with her colleagues on her show. 

We have a great deal of respect for Gary Shilling. It was Dr. Shilling who gave us his data and showed us that 25 Zero-Coupon Treasuries have dramatically outperformed S&P 500 since 1982. For more details, see our August 2008 article Are CNBC Anchors on a Mission Against US Treasuries? - A Viewer's Perpsectives.


5. The Gloom & Doom Trade - Marc Faber with Erin Burnett - June 19, 2:48 pm

Didn't we know it? When Maria Bartiromo does an interview about Chronic Deflation in America, then Erin Burnett would do an interview about Hyper-Inflation in America. (If you do not get the connection, read our April 18 article CNBC's Bartiromo And Burnett - The Rivalry Continues And Evolves Into A Proxy War?)

Marc Faber is a well-known commentator and his Gloom, Boom & Doom report is widely read around the world. We encourage all readers to listen to this interview.

Unlike Gary Shilling who makes his points softly and almost diffidently, Marc Faber favors a more bombastic style and flamboyant predictions. Gary Shilling has a superb track record of being correct on the US Economy. Marc Faber unfortunately has a more spotty track record. 

At the end of the interview, Marc Faber says that he does not like US Real Estate. Then he adds, "I would rather be in real estate than in 30-year US Government Bonds".

The same Marc Faber says in his June 15 interview in Barron's - "I would short US Treasury Bonds when the yield declines to 2.8% to 3% on 10-year notes.". Hmmm! If the 10-year note yield were to decline from today's 3.78% to 2.8%-3%, the price of the 30-Year US Treasury Bond would go UP by about 15%-20%. Seems like a nice trade to us and seems like in the short term, Marc Faber is actually bullish on 30-year treasuries and not bearish as he said to Erin Burnett. 

Another example of an expert making anti-Treasury comments on Erin Burnett's show while saying something different to other journalists? The other example was that of Bill Gross on May 21, 2009 in his segment Will US Eventually Lose AAA Rating? 


6. Signs of a Summer Correction - Jordan Kotick with Maria Bartiromo - June 18, 4:49 pm.

Jordan Kotick is a well-known technical analyst and he has been right on the markets for the past several months. So, we present his views about a summer correction to our viewers. Briefly, Mr. Kotick thinks that a 10%-20% correction in the stock market is likely and he thinks money will rotate from stocks to bonds during this correction. He also thinks that the US Dollar will get stronger. Larry Kudlow, are you listening?

We have praised Maria Bartiromo for bringing on her show experts like Gary Shilling & Don Galante who are bullish on long term Treasury bonds, especially the 30-Year Treasury Bond. But, we know that Maria Bartiromo is a CNBC anchor and the anchor who was the biggest cheerleader for equities during the boom years. So we were not surprised when Maria Bartiromo refused to discuss Mr. Kotick's comments about Bonds being a good buy and when she redirected the conversation to other types of equities. 

Come on, Ms. Bartiromo! It is OK to talk about buying US Treasury Bonds and it is OK to ask your viewers to consider buying Treasuries. Try it. You might even like being bullish on Treasuries. 


7. Larry Summers, National Economic Council Director, with Maria Bartiromo - June 17

This is a three-part interview. Larry Summers is the National Economic Council Director and a confidant of President Obama. So his views are important to the global markets. 

One On One With Summers, Pt 3 - 4:16 pm - Maria Bartiromo, to her credit, asks the trillion dollar question about the desire of Mr. Summers to become the Chairman of the Federal Reserve by replacing the current Chairman Ben Bernanke in 2010. Larry Summers refuses to give a direct answer. This question and answer is worth watching.

Summers On Regulation Revamp - 3:17 pm  - Mr. Summers talks about the new financial regulations. 

One On One With Summers - 2:00 pm - This short clip is notable not for its content but for its time slot. We find it interesting that the Summers interview with Maria Bartiromo was launched on Erin Burnett's show. As a result, Erin Burnett and Maria Bartiromo end up speaking to each other and actually exchanging pleasantries. Our is an evidence-based blog and so, with this clip, we have to shelve our series on these two anchors that included articles like CNBC Stars - Bartiromo and Burnett - A Bollywood Rasik's Perspective.
 

8. A woman can rape too - Mrs. Ahuja in defense of her husband Shiney Ahuja - Times of India clip

Shiney Ahuja is a well-known Bollywood actor. From Indian media reports, we learn that Mr. Ahuja has been accused of rape by their young maid. Mr. Ahuja, we understand, has claimed that it was consensual. Mrs. Ahuja has stepped forth and strongly defended her husband. Mrs. Ahuja has claimed that her husband was framed. She said she has known him for 15 years and he is incapable of such a terrible act. 

So far, Mrs. Ahuja has followed the noble example of wives who loyally and resolutely step forward to defend their husbands. But as this clip shows, Mrs. Ahuja has now mounted an unusual defense. Our words cannot do justice to this news conference and this clip must be watched to get the full impact (http://timesofindia.indiatimes.com/A-woman-can-rape-too-Shineys-wife/videoshow/4672501.cms).

Below we include Mrs. Ahuja's remarks at the beginning of the clip.

  • "Rape as a word is a very heinous crime. In today's world, rape cannot just be committed by a man, it can also be committed by a woman. We all know that and I am sure our judiciary system as it evolves and as it supports(!),  will come out with laws that protect both the genders. That's all I have to say."

We do not know the facts and we might stepping out of our comfort zone by discussing this topic. But, we confess that we admire Mrs. Ahuja's courage and determination. Watch her face angry questions after making this statement.


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This Blog's 10 Most Popular Articles

There are four changes to our Top 10 list since our last monthly update on May 9. 

A breakdown of the Top 10 list by topic is as below:

  • India Related - 5 Articles
  • Geo-Strategy - 3 Articles
  • CNBC Related - 2 Articles

Below is the complete list of this Blog's
10 Most Popular Articles (in terms of viewer hits) as of Sunday, June 14, 2009.


1, "Jeffrey Sonnenfeld Of Yale & Erin Burnett Of CNBC - Read The China-India Article in Foreign Affairs"- February 28, 2009
 


2.
"CNBC's Fast Money - Practice What Your Anchor Dylan Ratigan Preaches" - February 21, 2009
 


3. "India & Greece - A long, deep and ancient relationship" - May 31, 2008
 


4. "Shabana Azmi on "Indian Democracy is unfair to Muslims" - Our views and the Relevance to America" -
August 23, 2008
 

5. "Iraq & Tibet - Strategic Will of The American and Chinese People" - July 26, 2008
 


6. "The Greatest Publishing Project of Recent Years - Conceived and Implemented in America" - June 28, 2008
 


7. "Flagrant Foul on Mark Haines and Erin Burnett - Their Conversation about India's regard for "sacred cows" - May 16, 2008
 


8. "Slumdog Millionaire and The Merchant of Venice"
-
January 17, 2009
 
  

9. "Afghanistan-Pakistan - Will the Sins of England be visited Upon America?" - August 9, 2008
 


10. "The Karna-Arjun Battle in The Maha-Bharat - Beyond Adjectives" - September 20, 2008


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My Old Friend Bob, Today's Inflationists & The Taleban


One day, I got the happy news that my friend Bob had become the proud father of a baby girl. After two boys, Bob really wanted a girl. So I expected Bob to be very happy when I went down to his office to congratulate him.

Instead, I found Bob scowling to himself and crumpling papers on his desk. So I asked him what the problem was. Bob explained that he was very happy at first and then he started thinking about the day when boys would come to his house to date his daughter. Bob made some very nasty comments about what those boys would want to do to his sweet daughter and swore about what he would want to do to those boys.

This sounded insane to me because his daughter was not even a day old that time. I told him so. He said he knew he was being nuts but that he simply could not stop thinking about the day a boy would knock on his door to date his lovely innocent daughter. I can still see scowling Bob’s face to this day.

I thought of this tale when I watched this week's crazy CNBC segment with Jim Rogers and Larry Kudlow*. In this segment, these two intelligent and seemingly sane people rant wildly about how hyperinflation would arise in America and how it would destroy the US dollar. It does not matter to them that there is no sign of inflation anywhere in real America, America which again lost over 340,000 jobs this month, America in which real Americans (unlike CNBC Anchor Guzillionaires) are seeing their incomes being squeezed and their credit lines being cut. But, it does not seem these facts matter to them because their anti-inflation phobia reached a messianic fervor in that CNBC segment.

It occurred to me that all these years I had done an injustice to my friend Bob. He was so much saner than these guys.  After all, it was a fact of life that his daughter would grow up to an age where she might want to date. But Inflation? It has not even been conceived yet. And there is no guarantee that it will. Look at Japan. They have been trying to conceive inflation for the past 20 years without success even after pouring massive amounts of money and stimulus. 

In addition, my friend Bob is a normal father and not a Talebani. He did not keep his daughter at home like the Taleban do. He did not force his daughter to wear a head-to-toe veil to protect her from the wandering eyes of boys. I feel fairly certain that Bob would allow his daughter to date when she grows up to that age.

That is not true of the Inflation-Taleban like Jim Rogers, Larry Kudlow and their fellow inflation-jihadis at CNBC.

  • Just as the Pakistani Taleban see signs of nascent immorality everywhere, today’s Inflation-Taleban see signs of nascent inflation everywhere.
  • Just as Pakistani Taleban want to destroy schools for girls and keep girls locked up at home, the Inflation-Taleban want to destroy treasury bonds and keep the inflation potential locked up in Inflation-Protected securities.
  • Just as Pakistani Taleban are willing to create destruction and hurt innocent civilians to prevent rise of the dreaded immorality, the Inflation-Taleban are willing to create bond destruction and hurt innocent working Americans by skyrocketing commodity prices to prevent the rise of the dreaded inflation.

The Pakistani Taleban have done this for many years. As the mountain snows melt, the Pakistani Taleban come out of hiding and begin their violence. When their campaign is over, they withdraw leaving behind an impoverished society and a damaged population in their wake.

The Inflation-Taleban have done this for the past 3 years. Since 2007, every April they come out of their winter hibernation and begin their campaign of exploding commodity prices, destroying the value of the dollar and violently selling off US Treasuries. When they withdrew in 2007 and 2008, they left behind impoverished portfolios and a damaged economy in their wake.

For years, American Presidents have requested moderate Pakistanis to speak up against the Taleban amongst them. Here we follow their lead and request moderate CNBC Anchors to speak out against the Inflation-Taleban amongst them. Are you listening, Jim Cramer? Or is being a "team player" more important to you than safeguarding the portfolios of CNBC viewers?

The Pakistani leadership is finally suffering the consequences of tolerating and supporting their Taleban for short-term tactical gains. Will CNBC Management eventually suffer the consequences of tolerating and supporting their Inflation-Taleban for short-term ratings gains?


Note:

* See the first clip in our article Interesting Videoclips of the Week (May 30-June 5)
**Those who do not believe us about inflation should get and read the April 9, 2009 report by Goldman Sachs  titled “Hyperventilating About Hyperinflation”.


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Attacks on Indian Students in Australia


About 18 months ago, a Chinese graduate student we knew was killed in a race-based violent incident near Columbia University. This was a very bright, personable young man of great promise. His senseless death appalled the Chinese Student community in Columbia and galvanized the University into taking steps.

The highest officials at Columbia got involved; they worked actively with the US State Department and obtained a visa for the student's parents within 24 hours. The University flew the parents to New York City for memorial services for the fallen student, services that were arranged by Columbia University. 

In addition, Columbia officials worked with the Chinese student community to create awareness as well as to develop solutions. The University also worked with the Police Stations near Columbia to ensure safety of the Chinese student community.

Recently, the Indian student community in Australia has been subject to violent, racist attacks by native Australians. The attacks have been persistent and savage, especially in Melbourne. From the media reports we read, the Australian Universities have paid very little attention to these attacks and have not taken any serious steps.

The problem got so severe that about the Federation of Indian Students of Australia organized a protest rally in Melbourne. Media reports suggest that 200 Australian cops met the rally and meted out fairly violent treatment to the peaceful protestors.*

The continuing racial attacks on Indian Students and the inaction of the Australian authorities have inflamed feelings in India. The Bollywood legend Amitabh Bachchan declined to accept an honorary degree from Brisbane University in Australia and Amir Khan, another major Bollywood figure, has raised his voice in protest as well.

The Chinese Government has raised its concerns about the safety of Chinese students in Australia. There are about 130,000 Chinese students studying in Australia. 

This is not just a racial issue but a major economical issue for Australia. The  Australian "Overseas Student Industry" has revenues of $15.5 billion Australian dollars and is Australia's third largest export industry. So, Australia is worried that crippling sanctions by Chinese and Indian Governments could damage this industry. We are delighted that China and India are working together on this issue.

When we read the media stories on this subject, we again realized how America differs from Australia and other Anglo-Saxon countries like England. It also shows that the human rights beliefs and standards of American Universities like Columbia are far, far superior to those of Australian Universities.

In our opinion, the Australian Society and Australian Government as a whole have tacitly accepted racism as a part of their official policy. This tacit sanction is akin to Pakistan's acceptance of the Jihadi element in its society.

As far as we are concerned, we have begun an immediate boycott of Australian products and will maintain this boycott until Australia takes corrective steps and pays substantial damages to the families of students killed in Australia. We urge all readers of this blog to support this cause by boycotting Australian products until this issue is resolved.

This reminds us of our May 2, 2009 article Where Are India's Bill O'Reilly, Sean Hannity, Joe Scarborough? An Indian Bill O"Reilly would have galvanized Indian society around this issue in a way timid Indian Anchors simply cannot. The loser once again is Indian Society.

This issue again brings to fore the essential differences between Australian and Indian Society, especially the educated middle-class segment of Indian Society. After all, the vast majority of Indian students in Australia come from this segment. These students are taught to be nice, polite, to concentrate on their education and to not get involved in any disputes. This makes them ideal students but unfortunately it leaves them clueless about dealing with racism, hate and violence.

A couple of years, a similar problem had erupted between the Indian Cricket Team and the Australian Cricket Team. At that time, an Australian writer had said to an Indian commentator (as reported in bbc.com) that "Indian players were good, middle class boys whereas the Australians were a team of "goondas" or  a thuggish group of nasties". Finally, the Indian Team chose the young, confident, aggressive Dhoni as its captain. We described the impact of Dhoni is our April 10, 2009 titled  Dhoni Captains The World - When Will An Indian Leader Do That? 

Just as Dhoni changed the character of the Indian Cricket Team, India needs a leader to change its character from a meek society that tolerates abuse and shrinks from embarrassment to a confident, aggressive society that warns others to not tread on it and its people. 

Such a leader will teach young Indian society and Indian students in particular that

  • if they get attacked, it is not their fault, 
  • it is not their fault, if someone hates them for their color or race and,
  • how to recognize danger and how to defend against it.

Above all, such a leader will teach Indian society that an attack against one is an attack against them all and the only way to protect against such attacks is to punish the attackers so severely that they will not dare to attack again. 

The last of course is the province of the Indian Government and so far we have seen some stirrings but no concrete action. Hopefully, this will change soon.


Sources for this article:

China joins India, wants Australia to ensure students' safety - June 4, 2009

*Australian cops punch, stomp on peaceful protesters - June 2, 2009

 

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Interesting Videoclips of the Week (May 30 - June 5)


Editor's Note: In this new series of articles, we include important or interesting videoclips with brief 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. Please let us know whether such articles are useful to you.

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 that should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.


It is our axiom that a strong trend does not become a Bubble until CNBC gets giddy about it,  We have news for you. CNBC got really giddy this week. We show you why we think so and let you judge for yourselves.

In this article, we feature 6 clips:

  1. A hilariously zany clip of Jim Rogers and Larry Kudlow about how Hyperinflation in America, the Collapse of the US Dollar and of course their belief system of "Chinese Leaders are so Smart and American Officials are so dumb" - An absolute must watch, in our opinion.
  2. CNBC's Joe Kernan gets giddy about the stock market and berates perma-bull trader Jack Bouroudjian for being cautious - You will think you are seeing the ghost of the 1999 "Qualcomm, Qualcomm" Kernan - You got to see this clip to believe.
  3. A conversation between Bond King Bill Gross and Joe Kernan. Also a shorter conversation between Bill Gross and Erin Burnett.
  4. Maria Bartiromo restores balance and reason from St. Petersburg, Russia.
  5. A comment from Hedge Fund manager Doug Kass that rocks the CNBC belief system.
  6. An excellent interview by David Rosenberg, previously Chief Economist at Merrill Lynch - views of an economist with a stellar record of predicting the economy and bond markets - a must watch for any serious investor.


1.  A three-clip interview by veteran investor Jim Rogers on CNBC Power Lunch - Thursday, June 4, 2009

The first clip titled Bear Market Rally  is a serious clip.

  • In this clip, Rogers says that he is "wildly bullish on commodities"; "wildly bullish on China"; he sees "crazy inflation coming" and "he will short bonds"; "he would rather short bonds than stocks"; "for the first time in a long time, he is not short any stocks."

The second clip titled Talking Treasuries features a conversation between Jim Rogers, Larry Kudlow and the eminently sane Howard Lutnick, CEO of the bond firm Cantor Fitzgerald. 

This is a zany clip with outlandish opinions delivered in a highly entertaining format by two wild & crazy guys named Rogers and Kudlow. Believe us, Dan Aykroyd and Steve Martin  just cannot compare. Heroic Lutnick tries to knock some sense into these crazy guys but gives up. The main theme of course is that Chinese Leaders are so smart and American officials are so dumb. Two main excerpts:

  • Kudlow - "why any one would want to buy treasury bonds right now is beyond me"
  • Rogers -  “Bernanke is in over his head, he does not know what he is doing, poor man - he is out of his league”

In our opinion, this is a CNBC Hall of Memories clip. The key question is whether this giddy segment ends up signaling a bottom in the US Dollar? Time will tell!

In the past, Jim Rogers was not so welcome at CNBC because he used to be bearish on stocks. But, this week Rogers was bearish on long maturity US Treasuries and that got him a hero's welcome at CNBC Power Lunch. First Larry Kudlow walked into the show to welcome Jim Rogers and later Bill Griffeth walked in to greet "old friend" Jim Rogers. Now do we sound credible when we ask Are CNBC Anchors on a Mission Against US Treasuries?

The third clip titled Trader Talk is a love fest between Jim Rogers and CNBC's Rick Santelli. This is a serious clip.


2. May Nonfarm Payrolls Down 345K - Watch a giddy Joe Kernan berate perma-bull trader Jack Bouroudjian for being cautious on the stock market - Friday, June 5, 2009 - 8:30am

After the nonfarm payroll numbers were released, stock index futures shot up reflecting a 100 point increase in the Dow Jones Industrial Average. Joe Kernan got positively giddy about the wisdom of the stock market and then began berating perma-bull Jack Bouroudjian for being cautious.

  • Bouroudjian - "…you can see it played out in the 2-10 spread – it is the highest we have seen in a generation, it is a clear warning signal"
  • Kernan dismissed this. Then:
  • Bouroudjian - "..for those of us who have traded this market for 25 years…you can hear the sucking noise, you can hear the sucking noise.."
  • Kernan - "what sucking noise?"
  • Bouroudjian - "..the sucking noise is , it lures people back in, if it loses half of what we have just done which is 20%, it will scare people right of – that’s the biggest concern"

This conversation begins at minute 11;30 of this clip. You got to watch it to see the bullish giddiness of Joe Kernan. It is not quite the wild Kernan of 1999 tech bubble but it is pretty close.

Less than two hours after Bouroudjian expressed his concern about the 2year-10year Treasury yield spread, guess what happened. This spread corrected violently with the 2 year Treasury yield rising 34 basis points on Friday. The early morning stock market rally also reversed at that time. This reminds us of the last week of June 2008 when the 2year-10year spread reversed violently and the 2 year treasury yield rose by 61 basis points in that one week, the highest such rise since 1982. Also that week, a large hedge fund allegedly lost about $3 billion on this spread reversal.



3. Bond King Parses Jobs Data - A conversation between Bill Gross of Pimco and CNBC's Joe Kernan - Friday, June 5, 2009 - 8:43am

This is a good conversation and should be watched in full. Mr. Gross says he expects the 10-Year Treasury Note to trade to a 4% yield by early next week.

It might have appeared to some that we have been critical of the Bill Gross interviews on CNBC. Not at all. Mr. Gross is one of the greatest bond investors of our day and we are always eager to listen to every word he says.

But, we are just as aware that Mr. Gross is the manager of a huge Bond Mutual Fund as well as the Co-Chairman of Pimco. So we realize that it is his first and foremost responsibility to support the bets made in his fund at each and every occasion. Mr. Gross has no obligations whatsoever to worry about the suitability of his recommendations for the individual bond buyer viewers of CNBC.  

That, in our opinion, is solely and absolutely the responsibility of the CNBC Anchor interviewing Mr. Gross. Unfortunately, we find that CNBC Anchors are fascinated by Mr. Gross’s celebrity status and get caught up in an attempt to show off their own knowledge by debating with Mr. Gross. In doing so, they end up ignoring their responsibility to individual bond buyer viewers of CNBC.

This is, of course, our opinion and we ask Mr. Kernan whether we are being unfair. If you do not concur, Mr. Kernan, please tell us why.  

Mr. Gross also spoke with CNBC’s Erin Burnett on Wednesday, June 3, in her segment Pimco's June Investment Outlook. He said that investors should stick to short maturity treasuries for safety and avoid long maturity treasuries. Two days later, short term maturity treasury prices took a big hit as the 2year-10year Treasury spread reversed violently on Friday, June 5. This shows that even the Bond King is fallible.     
 

4. Preventing Another Global Crisis - A report by Maria Bartiromo from the International Economics Forum in St. Petersburg, Russia - Friday, June 5, 2009 - 10:34 am

Maria's collection of quotes from major figures at the Forum:

  • Former Japanese Prime Minister Koizumi - "He is more worried about deflation in Japan than inflation over the near term"
  • Former German Chancellor Schroder - "anybody who thinks the recession is going to end this year is flat out wrong"; He is expecting a tough year-two years in Europe led by weakness in Germany - "Europe is so dependent on exports and export market as we know it is weak given the US consumer's ability & desire to spend right now".
  • Robert Mundell - Nobel Laureate and Professor at Columbia - " The US is going to emerge from this recession sooner than any body else"


5. Running With The Bulls - Hedge Fund Investor Doug Kass with Larry Kudlow - Tuesday, June 2, 2009 - 7:15pm

It is a deep and abiding belief at CNBC that the stock market is a leading indicator of the economy. As Carl Quintanilla said on Friday, June 5 "clairvoyance of the market continues to astound you".

Watch veteran Doug Kass commit the heresy of debunking this CNBC belief system:

  • Kudlow - "You think it is ahead, but that is almost by definition tautologically not possible, stocks are a leading indicator of the economy"
  • Kass – "I don’t believe that at all; I heard that for the last 3 weeks; and I think there is very little causality between stock prices and the economy"
  • Kass - "60% of the companies missed sales forecasts for the first quarter but 2/3rds of the companies beat earnings and what that means to me is there is a down side to the cost-cutting process and the Achilles heal of the recovery is going to be that the consumer still cooked"

You can either watch this exchange on the clip or read Mr. Kass's summary at Kass: 'The Kudlow Report' Recap The clip is more entertaining in our opinion.


6. ADP & The Economy - David Rosenberg, Rick Santelli & Two Other Guests - Wednesday June 3, 2009 - 8:30am.

In virtually any other week, this would be the leading clip we discuss. David Rosenberg has had a stellar record of predicting the economy and the bond market . Any one who followed Mr. Rosenberg's advise made positive returns in 2008. Need we say more except watch this clip.


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Interesting Articles of the Week (May 30 - June 5)


Editor's Note:
In this new series of articles, we include important or interesting articles from various newspapers with brief comments. Please let us know whether such articles are useful to you.

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 that should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.



1. China – Watch The Body Language – Wall Street Journal – June 4, 2009

The past 3 weeks have seen an eruption of concern about China and how its actions would affect America’s AAA rating, the US Dollar. Fears that China will cut back on its purchases of US Treasuries have created a violent sell-off in the Treasury markets.

If you worry about any of these issues, this article by Andrew Baston in the Wall Street Journal is a must read for you. The article argues that China has little choice but to park the proceeds in U.S. Treasuries. A couple of excerpts are below:

  • “It is in expectations for inflation that China's influence is really being felt. Its manufacturing surveys have turned into positive territory well before those in the developed world. Perhaps more importantly, China is gobbling up commodities:”
  • Yet China has made no secret of the fact that it has been taking advantage of lower prices to build up reserves of oil and metals. If that stockpiling falls off in coming months, and isn't matched by a pickup in real demand from developed nations, current expectations for rising commodity prices might start to look stretched.”


2. Germany Blasts ‘Powers of the Fed’ – Wall Street Journal – June 3, 2009 and Merkel for the Fed - Wall Street Journal - June 4, 2009.

The German Chancellor Angela Merkel delivered a rare rebuke to the US Fed, the European Central Bank and the Bank of England in a speech on Tuesday, June 2, 2009. This is an important subject and this article is definitely worth a read.

We totally disagree with Ms. Merkel. Germany like China is an exporting country and it lives off other countries in the world, mainly America. If you do not believe us, read what former German Chancellor Schroeder said last week at the International Economic Forum is St. Petersburg, Russia. He is expecting a tough year-two years in Europe led by weakness in Germany. In his opinion, Europe is so dependent on exports & export markets that they will suffer due to the lack of ability & desire of American consumers to spend.

The second article is a more detailed article and is a must read in our opinion. Below is Ms. Merkel's statement and Dr. Bernanke's response.

  • Merkel - "I view with a great deal of skepticism the extent of the Fed's powers."
  • Bernanke - "The U.S. and global economies, including Germany, have faced an extraordinary combination of a financial crisis . . . plus a very serious downturn. I am comfortable with the policy actions that the Federal Reserve has taken."

We are totally on  the side of Chairman Bernanke. We respect him and trust him. In fact, as we have written before, we would even morally support a "Bernanke for President" slogan.

Media reports have surfaced that there is stiff tension between Chancellor Merkel and President Obama. It is well known that Chancellor Merkel was close to President Bush. The fact that Obama has dismissed any talk of tension between them of course confirms the severity of the tension. 

May we respectfully suggest that Chancellor Merkel devote her attention to the financial crisis brewing in Sweden and Latvia.


3. Latvia Fails to Sell Debt, Sending Tremor Around Baltic - New York Times - June 4, 2009 

This may appear as a distant problem to many readers. But, unfortunately it is not. We encourage all readers to read this article. Below are two excerpts:  

  • "Latvia failed to sell nearly $100 million in short-term debt Wednesday as bidders shunned the small Baltic nation, whose economy has been one of the hardest hit by the financial crisis in Europe, and whose currency, the lat, is threatened with devaluation."
  • "The failure of the debt auction hurt bank shares in Sweden, as well as the krona, and raised fears regarding the economies and currency stability of other former Soviet states, from Estonia to Romania, that are now members of the European Union, The Daily Telegraph reported."


4. Uneasy Engagement - Australia, Nourishing China’s Economic Engine, Questions Ties – New York Times – June 2, 2009

This is the first in a series of articles examining stresses and strains of China's emergence as a global power "And suddenly, Australians are stepping back, realizing that their new best friend is someone they really do not know very well, much less trust". This is an article worth reading.

This is not just theory. This week, the much criticized deal between Chinese Company Chinalco and Rio Tinto fell through. Under this deal, Chinalco was to pay $19.5 billion dollars for an 18% stake in the Anglo-Australian mining giant. Now capital is more readily available after a rip-roaring rally in equity markets and metal stocks. So Rio Tinto walked away from the deal and signed a Joint Venture with the Australian Giant BHP Billton.


5. Bollywood dispute hits India's movie fans – BBC.com – June 4, 2009

Bollywood has been withholding films from release in recent months because of a dispute over box office takings. BBC's Prachi Pinglay in Mumbai reports on how the dispute is affecting movie fans. The ongoing strike between film producers and multiplex owners has gone on for more than two months. This strike is creating serious withdrawl symptoms among Bollywood fans in India and around the world.

We are suffering as well and hope that this strike ends soon.


6. Analysis: Why Attack Lahore? – BBC.com, May 27, 2009

This is a sensible article that looks at the reach of the Taleban and the new struggle between the Taleban and their one-time sponsor ISI, Pakistan's Intelligence Service.

"Lahore is the only city in Pakistan which has remained relatively peaceful since the 9/11 attacks," says a security official. "It has been Pakistan's saving grace, and whoever wants to destabilise the country or the government, would go after Lahore," the official says.


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America's Income Problem


Editor's Note: This is an article that expresses our personal opinions about economic or social issues and 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 were fortunate to hear an interview by Mr. Charles Biderman, CEO of Trim Tabs Research on CNBC on May 20. In this interview, he spoke about the problem of income in America. (see Interesting Videoclips Of the Week (May 16 - May 22). To quote: 

"Incomes are plunging; we track income tax collections and they are falling off a cliff; there are no “green shoots’ that we see; savings by all retail money market funds, bank savings, CDs  are plunging, people are taking money out of savings..."

He went on to add that $83 billion have been taken out of America's savings accounts in April 2009, the largest such outflow in the history of the data.

Other researchers are also worried. Deutsche Bank released a report on May 21 titled "Household income concerns cash shadow over recovery". The report includes the chart below. This chart below speaks more eloquently than we ever could about how incomes are plunging in America.

                          Withholding tax receipts are plunging dramatically  
                          (Chart courtesy of Joseph Lavorgna - Chief US Economist - Deutsche Bank)


Recently, we saw a BAC-Merrill Lynch ("BAC-ML") report on the same topic written on March 30, 2009 by David Rosenberg, the then Chief economist of that firm. This reports states that "Total personal income, excluding government benefits has contracted by $234 billion since peaking six months ago – a plunge of unprecedented proportions."

When we read these reports and see the chart above, we simply cannot comprehend the hysteria about inflation in today's markets. If consumer incomes are plunging and, as we all know, their credit has been squeezed, how will consumer spending increase to the point of creating inflation?

In our opinion, this unprecedented drop in American income will likely lead to a problem of falling demand leading to price reductions by merchants which will lead to lower profits and lower wages which will lead circularly to demand falling further and so on. This is a classic vicious circle that leads to Deflation and not Inflation.

Ben Bernanke understands this danger and that is why he has being so heroic in his efforts to create liquidity in the American financial system.


Why don’t Financial TV Anchors and Journalists see this?

The answer is starkly simple. The salaries of TV Anchors and TV reporters are very high compared to that of the median American household. These salaries are also stable due to the health of the Cable Broadcasting industry. These TV reporters and anchors tend to hob-nob with rich traders-analysts and even richer hedge fund managers.

Should we be surprised that they do not have a clue about the serious lack of income in the American household? Is it any wonder that the TV folks do not see the deflation in the assets of American household and their struggle to service their debt load with decreasing income?

Financial journalists can’t stop talking about inflation and high interest rates of the Reagan years. If they look back, they would realize that the salaries of TV anchors-reporters during the Reagan years were a pittance compared their salaries today. So relative to the American household, the TV folks are far, far better off than they were in the 1980s. This is perhaps why the TV Anchors see inflation everywhere they look. After all, inflation is a problem of too much money.


Problem is more acute for Boomers - America's demographic megatrend

The first of the Boomers is 63, the median Boomer is 52 and the youngest boomer is 45 years old. The BAC-ML report estimates that boomers lost about $20 trillion of net worth during the 2008-Q12009 bear market.

Given their age, boomers simply do not have enough time to make up for their loss of wealth. So the report argues that focus on safe income generation will become the critical investment focus of the boomer generation.

Think back to 1982 when the long bull market in stocks began. The median boomer was 25 yrs old at that time. In other words, the median boomers were then entering the earning growth period of their lives. In 1995, the median boomers were 38 years old , entering the highest earning period of their lives. Are these facts relevant to the birth of the bull market in 1982 and the explosion of the stock market from 1995-1999? We think so.

The boomers have been a demographic mega-trend for America. They are now past their peak earnings period as a group and that poses a very large income problem for America and America’s prosperity. After all, you cannot manufacture demographics.

Unless of course, America embarks on a renewed drive to enable immigration of ambitious, highly educated immigrants into America. Given today’s politics, this possibility seems even more remote than the possibility of creating inflation in today’s income-deflating America.


What is Safe Income?


Bill Gross, the manager of the largest bond mutual fund in America, told CNBC on May 21 that investors should buy high quality corporate bonds and municipal bonds rather than US Treasury bonds. This is a message that is drummed daily into individual investors on Financial TV.

Clearly corporates and municipals provide a higher level of income than US Treasuries do. Interestingly, the day Mr. Gross advised individuals to buy corporate bonds, hapless GM bondholders were protesting the near total loss of their bond investment in Washington DC. One tearful individual told CNBC that he was not a speculator but a buy-and-hold investor. He had bought $260,000 of GM Bonds five years ago and this money was now gone.Another lady said she has invested $160,000 of her retirement savings in GM Bonds and now that money was gone.

Remember GM was a successful company five years ago and GM stock was around $45. So it was natural and safe for individual investors to invest in GM bonds rather than in Treasuries that generated far less income.

This illustrates a big difference between Mr. Gross and individual investors. Mr. Gross's fund can sell GM bonds when needed because Wall Street will accommodate his requests. After all, he is the largest bond investor in America. Unfortunately the individual investors are out of luck if they try to sell their bonds when the company's condition deteriorates.

There is another big difference. As a fund, Mr. Gross can buy CDS or insurance against a default by a company. When the company defaults (like GM), Mr. Gross can present his bonds plus the CDS to get back the bulk of his money. Most individual investors cannot buy CDS insurance and so they are helpless when a company defaults. Their only choice is to suffer their loss with dignity.

Municipal Bonds have been relatively safer but one wonders how long that will be true? Look at the budget mess in California. Also look at the sharp fall in tax revenues for states like New York. This is why many states have approached the Obama Administration for a bailout of their municipal bonds.

In our opinion, individual investors should treat the casual advise of fund managers like Mr. Gross with caution. In addition, TV Anchors should ask guests such as Mr. Gross to talk about difficulties of selling bonds they recommend on TV.

What does the BAC-ML report say about "Safe Income"? It says "it looks like the household sector will have to come to grips with the lower-yielding but higher-safety and liquidity offered by the Treasury Market".

We concur absolutely. US Treasuries are the ideal vehicles to provide "safe income" for American households.


Is what is good for American Households also good for America?

The BAC-ML report provides data about the assets owned by American Households. We used this data to create the self-explanatory chart below.


                                        What American Households Own
             (
Figures in $billion - source BAC-Merrill Lynch Report dated 3/30/2009)


If US Treasuries are the ideal vehicle for safe income, it follows that American Households have to dramatically increase their ownership of US Treasury securities.  Look at the chart above. If American Households merely raise their Treasury ownership to the level of their agency bonds, then they would buy about $640 billion of the new issuance of Treasuries, a figure that is about 50% of all Treasury issuance expected in 2009. 

If American households raised their Treasury ownership to the level of their Corporate Bonds, then they would have to buy about $1.4 trillion of the new issuance of treasuries. If they replaced only half of their equities with Treasuries, then they would have to buy about $4.2 trillion of Treasuries. This figure is higher than all the new issuance expected from the United States Treasury Department.

If they followed any one of the three scenarios above, we would not have to worry about begging China to buy Treasuries. This is a case where providing safe income for American households will result in solving America's major problem.

A true win-win situation for Americans and America.


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Are CNBC Anchors on a Mission Against US Treasuries - A Viewer's Update


Editor's Note: This is an article about CNBC and Financial Television media in general.  It is NOT an investment article. No one should NOT invest or consider any investment based on any information contained in or inferred from this article or any portion of  it. All investment decisions or conclusions should be discussed with your investment advisor and should be subject to your suitability requirements and risk tolerances.



Last August, we wrote an article about attitudes of CNBC Anchors towards US Treasuries, the most liquid and most credit-worthy bonds on the face of this earth. The article, titled Are CNBC Anchors on a Mission Against US Treasuries? - A Viewer's Perspectives, went on to become one of the top 10 popular articles on this Blog.

Today, we provide an update. Allow us to say that a couple of anchors have reduced or eliminated their past bias. Maria Bartiromo has actively found and interviewed real experts who recommend investing in Treasuries. Erin Burnett has begun an effort this week to gently persuade viewers to buy Treasuries.

These are welcome signs but, in the CNBC terminology, these are merely a couple of "green shoots". The rest of the CNBC pasture remains gray, full of anti-treasury weeds. Read on to see why we think so.


Difference Between How CNBC Anchors Treat Equities and US Treasuries


This year has been a rocky ride for both equities and treasuries. From mid-January to early March, equities suffered a terrible decline. At one point, the S&P 500 index was down 25% for 2009.

CNBC Anchors were distraught and tried to find experts to tell them when the stock market would bottom.
  • Not one CNBC Anchor told the viewers that the sell-off was justified or celebrated the sell-off.
  • Instead, all the guests and all the CNBC Anchors told viewers that the decline was unjustified and the markets were deeply & violently oversold;
  • They all told viewers that when markets get oversold, they eventually bounce upwards.
  • They all told viewers that the violence of the sell-off was in itself a buying signal because of the nature of markets.
  • In addition, they kept telling viewers that as stock prices fall, stocks become undervalued and better buys.

Then one day in March, the stock market bottomed and there was a rush among CNBC Anchors and guests to take credit for calling the bottom.

During the past month, the Treasury market suffered a steep and violent sell-off. Interest rates have shot up and prices of long term Treasury bonds have fallen dramatically and swiftly. 

We notice that the behavior of CNBC Anchors towards the Treasury Bond sell-off has been radically different than their attitude towards the earlier equity sell-off.
  • Most anchors seem to be believe that the sell-off in Treasuries  is a good thing, a righteous action by markets or a bursting of the hated Treasury Bubble.
  • Anchors on shows like Power Lunch celebrated the sell off in Treasury Bonds telling each other and the viewers that the era of risk aversion was finally over. Michelle Caruso Cabrera drew the picture of the yield curve in her infomercial and showed how 30 year treasury rates could go to 6% or 7%.
  • Fast Money Traders*, the wild west bunch of CNBC, got ever so giddy about the sell-off in Treasuries. They celebrated with wild abandon and opined how inflation was a systemic problem for the US Economy. Then they told viewers that long term Treasury rates could skyrocket and stay there for a long time.

As far as we can recall, not a single anchor stepped forward to say what every one of them said about the stock sell-off  – that panic sell-offs become buying opportunities and when bond prices fall, bonds become more undervalued and better buys.

Then on Wednesday, May 27, the CNBC celebration about the bond sell-off suddenly fell silent. Why? Because the stock market sold off that day and it dawned on the CNBC Anchor crowd that if bond prices fall, stock fall prices could also fall. So, even Melissa Lee, the Calamity Jane of the Fast Money Cowboy Spread, expressed worries about rates going up.

Does this serve as evidence that CNBC Anchors are intrinsically biased against US Treasuries? We leave it to our readers to decide.


“Chance Favors The Prepared Mind”


What surprises us is that CNBC Anchors were so surprised about the Treasury sell-off in May. We see them trying everyday to fathom the reason for the sell-off and to concoct new but pacifying reasons for this sell-off.

Readers of this blog are surely not surprised. They have read out article on April 25 titled US Treasuries - Will 2009 Be Like 2006-2008 Or Like 2003 & 2005?

In that article, we pointed out the trading patterns of treasury bonds for the past six years. At that time, Treasury bonds and TLT, their ETF, were sitting on their 200 day moving average. We wrote that day, if the 200 day moving average gets broken decisively, then the Treasury Bond market would suffer a steep sell off until June 2009.

That is how Treasuries had behaved in 2006-2008, the 3 bubble years. In each of these years, the bonds sold off steeply and violently in the May-June period. So, once the 200 day moving average was broken in late April, it was a signal to sell Treasuries or even short them.


2009 - Son of the 2007 Bubble


In our May 9 article The Bubble Is Dead. Long Live The Bubble, we argued that we were seeing a rebirth of the 2007 bubble. The past three weeks have proved this assertion with a vengeance.
  • Oil is up 29% in May and the Commodities index, CRB, is up over 14%, its best month since July 1974. Gold is marching back towards $1,000. US Dollar has been sold mercilessly and US Treasuries have been sold violently. Long only institutional investors (or dumb money) are again investing in commodities as an asset class - the same madness that drove Oil to $147 in the real bubble.
Inflation is back as public enemy Number One and comparisons to past inflation fears are put forth with glee.
  • Melissa Lee compared the rise in 10-year yields to the June 2008 period;
  • This brought back memories of June 2008 when Dylan Ratigan had compared that month to June 2006 as a period of high inflation;
  • Tim Seymour of Fast Money compared the spread between the 2year-10year treasury yields to the October 2003 period.
But none of them stopped to consider or tell their viewers that each of these periods had proved to be superlative buying opportunities for long term treasury bonds.  In fact, in each of the past three years, the Treasury sell-off in May-June was a great buying opportunity with returns exceeding 20% by November-December of the same year. 

But no CNBC anchor disclosed this to their viewers. Do they not know? That is easily fixed. They can ask any Wall Street Trading Desk or they can simply read our blog.

Or is it because they know the history too well? Because they know that while Treasuries enjoyed a huge rally from June to December in 2007 and 2008, the stock markets collapsed.

We wonder whether this serves as yet another piece of evidence that CNBC Anchors are inherently biased against Treasuries.


Why Are US Treasuries So Important?

In our opinion, there is no asset class in America that is as critical as US Treasuries. In fact, in our opinion, US Treasuries are the foundation upon which America’s prosperity rests.

  • The US Economy is terribly leveraged, a fancy word for the bald statement that the US Economy has a huge amount of debt, roughly 350% of its GDP. This debt-ridden economy cannot, repeat cannot, handle high interest rates. This is why, in the past decade including the bubble years, when market treasury rates shot up, the economy slowed down and that created a new bull market in Treasuries.
  • When US Treasuries fall in value, other bonds such as Municipal Bonds and Corporate Bonds fell even faster. Witness the rout in the mortgage market on Thursday, May 27. These bonds are very hard to sell when prices are falling, especially for individual investors. Only US Treasuries can be sold quickly at the market price. So there is no substitute, in our opinion, to US Treasuries for safe income.
  • American households suffer from income stagnation. It is a sad fact that incomes in America have not grown even during the bubble years. Today, the average American household suffers from a shortage of income and a severe cutback in credit. They are in no condition to tolerate a rise in market interest rates. (for more details, see our article America's Income Problem).
Some day, this will change, some day when the US Economy comes out from its debt burden and the income of the average American begins to rise in a sustained manner.

Secondly, the US Economy needs foreign inflows of capital to survive. The US Treasury market is the world’s safest and most liquid bond market. That is why foreign central banks tend to keep their safe money in US Treasuries. If US Treasuries suffer a sustained bear market, these central banks would pull their monies out like every other investor.

This is why we wonder why CNBC Anchors like Michelle Caruso Cabrera, Sue Herrera, the Fast Money* crowd, (to name a few true anti-treasury "jihadis") gleefully cry out for long treasury rates to go higher and higher. We simply do not get it. But then, we never could understand the "jihadi" mindset.

Frankly,  in our opinion, being anti-Treasuries at this time is like being against American people and against America itself.


The Equity Cult remains as strong as ever 


It is a sad fact that Americans got caught in 2007 with a large chunk of their portfolio in stocks. These American households saw the value of their stock portfolios cut in half in 2008. This decline will take years to heal, time that middle aged Americans may not have. We expect this to create a Retirement problem in America, if not a crisis.

We believe that the culture of "equities as the best long-term investment" led to this imbalance in the portfolios of American households. The biggest cheerleader of this culture was CNBC, in our opinion. The equity rally during the past three months and CNBC’s euphoria about the equity rally might already have done serious damage to investor portfolios.

Merrill Lynch Economists reported on Wednesday, May 27, that “households are growing increasingly bullish on stocks and increasingly bearish on bonds”. They also reported that the spread between those bullish-bearish on stocks “jumped to 5.0 – the highest since the cyclical peak was put on equities back in October 2007”. In addition, they reported that “the percentage of respondents expecting interest rates to go up jumped to 47.0 in May – the highest since October 2008”, just before interest rates collapsed in November-December 2008.




What Do We Expect from CNBC? – Do the right thing for American Households & America


The rise in interest rates in the past couple of months have given CNBC another chance to do the right thing:
  • To educate the American Investor that buying bonds when rates are high is the right thing to do.
  • To educate their viewers about the virtues of investing in the safest, most liquid bonds on the face of the earth.
  • To educate the American Investor about getting guaranteed safe income.
Then, if 2009 turns out like 2006-2008, CNBC viewers can generate real capital gains for themselves. Now, that is a consummation devoutly to be wished.

CNBC keeps talking about the vast mountain of money ($9.2 trillion by some accounts) sitting on the sidelines that is "just waiting" to get into the stock market (or so say CNBC's Joe Terranova and many CNBC guests).

Now imagine if just 10% of that money went into safe Treasuries at 3.5%, the entire issuance of the US Treasury for 2009 could be bought by American households. America would not have to depend on China, on Hedge Funds or on any one else. (for more details, see our article America's Income Problem).

The American household would get a safe income generating investment yielding almost 5% above today’s inflation rate and America would eliminate its dependence on China. That is a true win-win situation for American Households and for America.

If CNBC does not take this opportunity and if CNBC sticks to its "buy stocks – sell treasuries" mission, CNBC could once again damage the American household, America and finally end up damaging itself.



* PS - We do not intend to tar all Fast Money Traders with the same wide brush. Guy Adami and Pete Najarian have been voices of balance & reason. They stay true to the Fast-Quick trading mission of the show. They stay away from the long term anti-inflation Talebani fervor of the "Run TJK" team of Tim Seymour, Joe Terranova, Karen Finerman. We recall that the original Run TMC team never won any title.


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China, Mo-Force & CNBC's Fast Money vs. USA, Bernanke Fed & American Individual Investors


Editor's Note: This is an article that expresses our personal opinions about economic or global issues and 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.


Once again, it has become fashionable to blame Dr. Ben Bernanke, the Fed Chairman, for pumping too much money into the American Financial System and for creating the danger of future rampant inflation. This criticism is not new. Ben Bernanke has been criticized by the inflation-phobes ever since he became the Fed Chairman in 2006.

Jim Cramer criticized Ben Bernanke in August 2008 for the opposite reason. He blamed Bernanke for not being aggressive enough in cutting interest rates. We thought this was unfair and said so in our article Jim Cramer on Ben Bernanke - Fair in August 2007 and Unfair in August 2008”.


As we said in that article,
"Bernanke has had to face a great force that has driven global financial markets for the past few years, a force greater than the Fed and all the Central Banks in the world put together". We described that force as "the enormous, gigantic pool of capital that has been given to short-term, performance-oriented investors or commonly called the force of momentum money (Mo-Force in short)."

We described how Mo-Force punished Bernanke every time he lowered interest rates or tried to help America's financial system, such as arranging the acquisition of Bear Stearns by JP Morgan. As we wrote then, "
Mo-Force exploded the price of Oil upwards, shot up the price of Gold, crashed the value of the US Dollar and poured money in to Emerging Markets". The favorite weapons of Mo- Force are shorting the US Dollar and shorting long-maturity US Treasuries.


2007 & 2008 Redux

The Mo-Force actions are being repeated in 2009. The price of Oil has exploded from $30/barrel to over $65/barrel; the price of Gold has risen and now threatens to get to $1,000; Emerging Markets have exploded upwards to an all time high relative to developed markets.

Like all killer species, Mo-Force gets very aggressive when it smells blood and did they get aggressive in May!
The price of Oil rose 29% in May and the broad commodities index rose over 14% in May, its best monthly performance since July 1974. Look at what was done to the assets Mo-Force does not like. The US Dollar was sold off aggressively to the lowest level of 2009 and the long Treasuries were sold violently to the point of creating panic in bond markets.

This is the exactly what Mo-Force achieved during the April-June period in 2007 and 2008. The message to Bernanke Fed was also same as in 2007 and 2008. Stop adding liquidity and stimulus into the American system because that will create Inflation.


Change in China's Role in 2009


China and Chinese growth have been the altar at which Mo-Force prays. In 2009, China moved from being an idol of Mo-Force to being an active partner of Mo-Force. This year, China has put a great deal of pressure on the American Treasury to stop providing so much stimulus to the American economy. They have demanded that America put the job of fighting future inflation (inflation that has not even been born yet) above the job of resuscitating the American economy. 

These are exactly the demands that Mo-Force has made for the past three years. That is why we say that China is now an active partner of Mo-Force and why 80% of large financial institutions or money managers are now Overweight Chinese Stocks.



Impact on America & the American Economy

Just look at the impact of last two weeks. The US Dollar has been sold off to new 2009 lows and US Treasuries have been shorted with abandon, thereby raising market interest rates in America. As of last week, Large Speculators are short 118,273 contracts of the 30-year Treasury Bond and short 179,409 contracts of the 10-Year Treasury (each contract is sized at $100,000) With such massive anti-Treasury positions, you have to wonder whether the Bernanke Fed is beginning to question  its decisions to help the American economy.

When market interest rates rise, that rise translates into higher borrowing costs for every American individual and business. This ends up slowing the debt-ridden American economy. If you don't believe us, look at the what happened to the American economy in the second half of 2007 and 2008 after the steep sell-offs in Treasuries in May-June of 2007 & 2008. It was pretty awful.

We are deeply concerned that the steep rise in market interest rates last month will end up damaging the American economy that is just beginning to stabilize. If you think we are being dramatic, look what happened to the mortgage market last week. The rise in treasury market rates finally forced a violent and steep sell-of in the massive mortgage market thereby raising mortgage rates for every American who wants to buy a home or to refinance an existing mortgage.

So the actions of Mo-Force directly damage the American economy and the financial well-being of all Americans, except of course, the Mo-Force crowd and their media friends.


Impact on American Individual Investors

The impact on markets of Mo-Force actions is so great and the price rise is so dramatic that the average American Individual Investor gets drawn into owning commodities, emerging market stocks and into selling or under-owning bonds. This is what happened in 2007 and in 2008.

Then, by July-August, Mo-Force begins to get out of these trades leaving American Individual Investors holding the bag. Then the prices of commodities and emerging markets fall steeply and interest rates come down sharply. So the average American investor sits with loss-ridden portfolios stuffed with commodity stocks and emerging market stocks. Because of the drop in market interest rates, bonds are no longer an attractive option for them at that time.

This seems to be happening again in 2009. According to a research report last week, American investors have grown increasingly bullish on stocks, especially Emerging Market Stocks, and increasingly bearish on Bonds.  


Role of CNBC and CNBC Fast Money

Some anchors at CNBC have begun blaming Ben Bernanke for creating of future inflation just as Mo-Force does. So far, they have done so softly and diffidently.

But not Fast Money, the wild west of CNBC. The Fast Money traders make regular CNBC anchors look like sissies. For the past couple of months, the Fast Money Traders have repeatedly and consistently raised the scepter of future hyperinflation on their show. In addition, they have publicly suggested that the Bernanke Fed should follow what China does and recommends.

That does not surprise us. Since the inception of the show, CNBC Fast Money Traders have demonstrated their allegiance to Mo-Force by cheerleading the same trades that Mo-Force puts on. They always exhort their viewers to buy the things Mo-Force likes such as Commodities, Oil, Gold and Emerging Markets. They also exhort their viewers to sell or short whatever Mo-Force does not like, such as US Treasuries and the US Dollar.

This would be fine if the Fast Money Trader got their viewers out of these trades before the trades crash. But, as we recall, the Fast Money Traders did not do so in 2007 or in 2008. They left their viewers holding the proverbial bag, in our opinion.

This is why, in 2009, we have asked Fast Money Traders in print to close their recommended trades on their show so that their viewers can get out with a profit.

We believe that today Jim Cramer is as much a fan of Ben Bernanke as we are and that he does not believe in the dire prophecies of inflation that the Fast Money team propounds.

If we are correct in our belief, then Jim Cramer should go on a 2009 version of his "They Know Nothing" rant, but this time against CNBC Fast Money Traders. That would be consistent with his prior actions and it would serve the best interests of CNBC's viewers.

Is Jim Cramer brave enough to do that?

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Interesting Videoclips of the Week (May 23 - May 29)


Editor's Note: In this new series of articles, we include important or interesting videoclips with brief 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. Please let us know whether such articles are useful to you.

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 that should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.



 

1. Taking On Economy & Stocks – Richard Bernstein , former Merrill Lynch chief investment strategist with Joe Kernan – Tuesday May 26, 7:03 am

 

Thank you for this interview, Mr. Kernan. Mr. Bernstein is a balanced and astute thinker whose views have been prescient. If you had followed his thinking, you probably would have obtained positive returns in 2008. Need we say more except to suggest viewing this entire 05:48 minute clip at http://www.cnbc.com/id/15840232?video=1133070724&play=1. Below are some key quotes:


Bernstein"People are really not thinking through what goes on. ..One example would be the rise in commodity prices, right; if the global economy is heating up and you get say rise in gasoline prices, what does that do to the consumer? If the global economy heats up and the dollar continues to weaken, what does that do the consumer? Over the past 3-5-10 years, we have made up for the lower standard of living by increasing leverage, by the household sector increasing leverage, well that is not feasible any more. So if the dollar weakens, our standard of living will go down dramatically without the possibility of levering up as we have been doing. Those are types of things I don’t think people are actually considering.."
Bernstein"I think what people are misunderstanding is that bubbles create capacity and that is what they do in a economy. And we have just had a monstrous global credit bubble; what is happening now is that we are now seeing the consolidation phase, …..An economy with immense overcapacity does not function well."
Bernstein – "…I am not particularly worried about inflation because of this huge excess capacity you have in the global economy right now..it is not just happening here, it is true all around the world; if you look at someplace like China, their solution to the problem is to build more capacity which to me is even more befuddling..I don’t know how you solve the problem by building more capacity.."
Bernstein - "..So I think the rise in commodities … I don’t think it is a lasting event and if you look at things like the valuation of commodities right now to Treasuries, commodities are pretty overvalued relative to the treasuries.."


Our Comment


Again, Thank you Joe Kernan for this interview. We were relieved to hear about Mr. Bernstein’s views about China and China's solution of hoarding commodities to protect against inflation. We had expressed similar views in our May 9 article The Bubble Is Dead. Long Live The Bubble.

Joe Kernan is somewhat of a conspiracy theory buff. So we feel emboldened to ask why he ignored Bernstein’s comment about liking Treasuries. Readers who watch the video will notice that Joe Kernan engaged Bernstein on many points except on his views regarding Treasuries and China. Should we read some pro-China, anti-Treasury bias in this behavior, Mr. Kernan?

Joe Kernan has claimed on his show that he is not afraid to respond directly to viewers. We wonder whether he will respond to the doubt we have raised. 


2. All About Bonds - Don Galante of MF Global and Michael Hasenstab of Templeton Global Fund – with Maria Bartiromo on Tuesday, May 26, 3:44pm

Maria Bartiromo asks both managers about their views about the US Dollar and the worries about America’s AAA rating. This is a good conversation and we recommend readers watch it at http://www.cnbc.com/id/15840232?video=1133564559&play=1


It was Don Galante that provided answers that were contrary to the current hysteria in financial markets. Thank you Maria Bartiromo for this interview.

Bartiromo – Would you as an investor be looking at alternative currencies to the dollar?
Galante – "I think, diversification-wise you want to be in a couple of different currencies, but if you are a dollar holder, you have to invest in dollar securities and I like dollar securities; I think this is a global problem in the economies, it has been and it is not going away tomorrow and I think the market is going to be a lot different going forward, I think the economy is going to be different, how we come out of it is going to be different and in general yields are getting to levels that are very comfortable"
Bartiromo – So how are you investing right now?
Galante"I like Bonds; you know 4.5% on the long bond, these are levels we saw 18 months ago when the funds rate was upwards of 4.75-5% and same thing with ten year notes; the long end of the market is being whipped around, short end is pretty much anchored considering that the Fed’s not moving, I think right now the capacity of the long end to trade and to take the amount of paper that is coming in is being challenged and will continue to be challenged but I think these levels over the next couple of weeks are going to hold and they are OK as an own"


Our Comment:


We featured Mr. Galante’s comments because they differ in direction, content and balance from those we read in Newspapers and hear on Financial TV like CNBC. The discussion with Michael Hasenstab about global economies is also interesting but more mainstream. We do recommend that readers view this entire 05:23 minute clip.


If you watch the clip, you will notice how Maria Bartiromo lets her guests like articulate their views without interrupting them. This to us is a sign of a self-assured veteran interviewer. We wish that the new CNBC anchors like Melissa Francis and Trish Regan learn from Maria Bartiromo’s example.
 

3. The Bond King Speaks - Bill Gross with Erin Burnett on CNBC - Thursday, May 28, 2:52pm

This is a good interview in which Bill Gross speaks about the "new normal" state of the US Economy. He also says that, in his view, you can get decent single digit returns in the stock market and in the bond market. Watch this clip at http://www.cnbc.com/id/15840232?video=1135507255&play=1

Gross -
“because of delivering, because of re-regulation, because of de-globalization, because of United States consumer that is forced to save, that growth will be much less than what we are used to, that does not mean ice, that doesn’t mean depression & it doesn’t even mean negative growth in 2010 but it does suggest 1-2% growth & that will significantly affect corporate profits and stock prices.”
Burnett - whether there is any rate right now that would entice you into buying treasuries?
Gross"I think at today’s level 3.7%, that yes it is much more attractive than what it was – that somewhere between 3.7% & 4% is an attractive entry point…"

Our Comment:


This is what we want to get from an interview with an expert. A specific trade idea with a specific entry point level. Thank you Erin Burnett.


So, finally Erin Burnett and Maria Bartiromo are on the same side of Treasuries. Pimco and BlackRock are also now on the same side of Treasuries trade. If you do not know what we mean, read our April 18 article CNBC's Bartiromo And Burnett - The Rivalry Continues And Evolves Into A Proxy War? 

We had noticed that both Bill Gross of Pimco and Peter Fisher of BlackRock appeared together on Erin Burnett’s show a few weeks ago. The question remains whether we will ever see Erin and Maria on the same show or at least on the same segment. We sort hope not because that would deprive us of a topic that our readers seem to like.


4. Stocks vs. Bonds - Rob Arnott and Jeremy Siegel with Erin Burnett – Tuesday, May 26, 2:08 pm


This is an insightful interview in which two luminaries discuss whether stocks or bonds provide long term returns. Serious students of investing should watch this clip at http://www.cnbc.com/id/15840232?video=1133452968&play=1


5. Bernanke & the Bond Market - John Taylor, Jim Bianco and Rick Santelli with Larry Kudlow – Thursday May 28,  7:02pm.

  • We like Larry Kudlow as an economist. But he often tends to mix his politics with economics.
  • John Taylor is the economist who created the Taylor Rule we wrote about in our March 21 article What Is "Taylor Rule"?What Does It Say Now? Was It A Factor In Bernanke's Decision?
  • We were disappointed with Mr. Taylor's comments. He can argue that his rule is no longer valid but he should not change a formula in an offhand manner without publishing a detailed rationale for it.
  • We have been fans of Rick "REF" Santelli for his bond trading calls. But Rick also has his political viewpoints and those are what he expresses in this clip.
  • Jim Bianco is as balanced and candid as ever.

Watch this clip at http://www.cnbc.com/id/15840232?video=1135850277&play=1 and then read Paul Krugman, another economist turned political pandit, discuss his views in The Big Inflation Scare on May 28.


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India's Election - The Stories Underneath The Story


This was a phenomenal election and a spectacular result. The Indian voters are absolutely amazing. They may be poor and illiterate but they make great decisions that astound analysts and commentators. The reason for the success of the Indian Democracy is the wisdom of Indian voters.

The election machine is just as phenomenal. The election takes place over a month in stages. The election is held in all remote corners of India, some so remote that the only way to get there is by a helicopter (a decade or so ago, officials used elephants to get to these locations). No one is denied the opportunity to exercise their right to vote regardless of the difficulty of their location. The voter is not asked to figure out how to get to a voting booth. It is the responsibility of the election machine to get the voting "booth" to the voter.

Despite the long process, the results are not leaked. This is evident by the enormous surprise delivered by the voters to the country. The verdict of this election was such a surprise that
the Indian stock market exploded to a gain of 17% in one day, mainly due to foreign institutional investors who rushed to buy Indian stocks on Monday morning.

There were many positives about the election:
  • For the first time since 1972, the sitting Prime Minister and the incumbent party got re-elected.
  • The recent disturbing trend towards smaller regional, ethnic parties winning at the expense of the two national parties was reversed decisively. This is a major positive for stable governance.
  • The Communist parties were utterly defeated,  a huge positive for India’s economy and for India’s foreign policy.
  • Every single group in India's diverse milieu of religion, language, race and caste, had a reason to feel satisfied about the election's verdict.
Much of the Newspaper and TV coverage we read is along traditional lines. Below we present our viewpoints as a "Rasik" of India. 


I. A Dual-Leader Campaign


For the first time, the Congress party ran its campaign on a dual-leader platform, with Prime ManMohan Singh as the party's Chief Executive and the Gandhi family as the party's Political Leader. This allowed Sonia Gandhi and her son, Rahul Gandhi, to campaign tirelessly for Dr. Singh. This allowed the Congress to sidestep attacks on Sonia Gandhi for her Italian roots and on Rahul Gandhi for his inexperience. This was a superb tactic that played on Indian Society's reverence for renunciation of power.

BJP, the main national opposition party, recognized this danger and tried very hard to convince the voters that Dr. Singh was just the initial nominee and Congress intended to install Rahul Gandhi as the Prime Minister. This failed. Then, the BJP tried to attack Dr. Singh as a weak candidate who had exposed India to terrorism.

Prime Minister ManMohan Singh is probably the most respected man in India today. He is calm, sedate and regarded as very capable. He has managed India for 5 years through economic crisis and terrorist attacks. He is non-confrontational and acceptable to all of India.

India is probably the most diverse country on earth. By some counts, about 62% of the country is officially declared as a minority. There is a great deal of underlying tension among these various divisions. But in an election, the Indian voters have usually preferred a conciliator, a person who prefers to bring people together rather than one who confronts the divisions. The previous Prime Minister, Atal Behari Vajpayee of the BJP, was such a leader. He was widely respected by all religious groups. We recall Pakistani Taxi drivers in New York telling us that they trusted Vajpayee while adding that they don't trust Mr. Advani, his number two.

Mr. Advani's views and personality can be understood from the simple fact that he was Vice President Dick Cheney's favorite Indian leader. Unfortunately for Mr. Advani, that personality type and those types of views were not deemed acceptable for a Prime Minister of India. This, we believe, is a verdict of this election.

So today, Dr. ManMohan "Singh is Kingg" to paraphrase a block buster Bollywood movie title.


II. The Influence of America

We spent several weeks in Mumbai in November-December 2008. During that visit, every one we spoke with seemed shell shocked by the unfolding specter of America's economic mess. They saw huge American banks go virtually kaput overnight. The problems of giant firms like Citibank, Bank of America, AIG, Merrill Lynch, Lehman created an atmosphere of deep fear.

We recall a conversation with a Taxi Driver in Mumbai, a man who had migrated to Mumbai from a small town in North India. He did not speak a word of English. Yet he knew about the problems of American Banks and discussed this topic with us during the 30 minute tax-ride. Finally he said “I just knew that US banks were going to be in deep trouble some day; because the banks over there are not owned by the Government as our banks are.”

This was the prevalent view in India, the view of the "educated" middle-upper income professionals as well as the view of the common workers and taxidrivers.

Sonia Gandhi understood this and so she said to the voters “It was my Mother-in-law Indira Gandhi who nationalized India's Banks. That is what protected India from the global economic crisis”.

This was a master stroke.
  • It addressed the core belief of India’s voters.
  • She took credit for saving the Indian economy from the American mess. This nullified BJP's attacks on her party for the slowdown in the Indian economy.
  • This also nullified attacks by the Communist Party on the Congress for being too pro-American and for undertaken American style reforms.
  • She linked her government with Indira Gandhi, the strongest leader India has ever had, a figure that is revered in India, especially in North India.
  • In a subtle manner, she reemphasized her winning theme from the 2004 election. At that time, she had appealed to the Indian voters as Indira's daughter-in-law and one who is devoted to the her husband's country and not to Italy, her country of birth.
  • This is powerful stuff in India, all of India, not just rural India. To this day, many of the popular Urban soaps revolve around the mother-in-law & daughter-in-law relationship.
Her claim that Indira Gandhi's nationalization of Indian Banks had protected India rang true to Indians in all walks of life regardless of their education, profession or wealth. Last year, petrified by the banking crisis in America, most people in India transferred at least a portion of their money from private Banks to old style nationalized Indian banks for safety.

Now that the election has been won, this master stroke of Sonia Gandhi might come to be seen as roadblock to reforming India's finance sector. It is not clear to us that increased foreign ownership of India's Finance sector would be acceptable in the short to medium term.

If you don't believe us, listen to the comments of Mr. Kamal Nath who said "In the U.S., we are seeing government giving money to banks. In India, banks are giving money to government.". Mr. Kamal Nath was the influential Commerce and Industry Minister. For his views, see the Wall Street Journal article on Monday May 18 titled "
India's Nath Downplays Prospects for Reforms".


III. Victory of the Indian Farmer and of Rural India


It is the urban Indian that gets noticed by the world. The World now considers India as the IT country; the country that made offshoring and outsourcing household words in America. India is also known in America as a country of Doctors and now of Bollywood, the amazing industry that now competes globally with Hollywood.

The reality is India is a rural country and about two-thirds of India's population works in the agricultural center. The rural Indian is the final arbiter of victory in India's elections.
The Congress party has always won on the strength of the rural vote. In contrast, the BJP has been the party of the small trader and the small businessman.

For the past few years, the business sector had tried to promote special economic zones modeled after Chinese zones. These zones often involved seizing of rich farmland from farmers in the name of industrial progress. Many states tried to ramrod these zones and evict farmers ruthlessly.

It was Sonia Gandhi who, a year or so ago, asked Prime Minister Singh to cool down this campaign. Her political instincts told her that this was a mistake, both morally, economically and politically. This was the right decision and a politically smart decision.

With strong support from rural India, the Congress won most of the major constituent groups in the Indian electorate. That is why the verdict was so definitive.

This means that the Doha round of global trade talks is in trouble. America and Europe want to open the agricultural sectors of the developing world to their exports without removing the subsidies to their own farmers. At Doha, India was the leader of the developing countries group opposed to these concessions.

Since Dr. Singh and his Congress party won on the strength of the rural vote, there is little chance they will now turn their back on these rural voters. Mr. Kamal Nath, India's minister and trade representative will be even more opposed to opening up India's agricultural sector without reciprocal concessions from the West.


IV. The Influence of Pakistan


Last December, passions in India were running very high with most people asking for a strong military response to the attack on Mumbai by Pakistani terrorists. The main opposition party, BJP, is a right-wing party considered to be more hawkish on Pakistan. The "softness" of Dr. Singh and the Congress was a major election platform for the BJP. 

By April 2009, the mood in India had changed. In our opinion, the main reason is the collapse of Pakistani society and the success of the Taleban.
Being tough against a strong Pakistan is one thing and it is quite another to get in the middle of the disaster unfolding in Pakistan. The main rule of Politics, War and Business is that when you opponents are blowing up on their own, you simply let them blow up without getting involved.

The Indian voters, both Hindu and Muslims, realized this and their overwhelming message in this election was to elect a calm, sedate leader who would ensure the stability of India. This required a leader who was acceptable to all the groups in India and that leader was clearly Dr. ManMohan Singh.

In our opinion, this desire for a strong, national Government that would ensure the stability of India was the critical reason for the defeat of small, regional, ethnic parties that had been favored in the earlier elections. The Indian Voters realized that it is one thing for a regional party to run a particular state but it is another to have a motley group of such parties run the national Government. This is why they voted for a strong national party at the national level. 

That party was the Congress Party and that leader was Dr. ManMohan Singh.


V. Out-Lefting the Leftists - The Tata-Nano Saga


The state of West Bengal had become a stronghold of the Communist Party. The Congress Party needed their support to form a national government in 2004. The Communist Party managed to block a number of reforms that Dr. Singh wanted to implement. They were virulently against the Indo-US partnership and they condemned the Indo-US nuclear deal. In fact, they left the governing coalition as a protest against this nuclear deal.

In this election, they accused the Congress Party of surrendering to America and of damaging the interests of India's poor. Not only did they fail at the national level, but they were routed in their core state of West Bengal. The saga of the Tata-Nano factory is a big part of this story.

The communists had come to power in Bengal by championing the rights of the poor farmer and the poor worker against the “exploitation” by business. A few years ago, the communists changed their spots and welcomed Foreign-Indian business & capital into Bengal. That was fine until they began trampling the rights of the farmers. The communist government began seizing farmlands to make space for economic zones and factories.

Ms. Mamta Banerjee, the leader of her party and an ally of the Congress,  saw the opportunity to out-left the communists. She chose the Tata-Nano factory as her vehicle. She led a vociferous public battle against this factory claiming that the Communist Government had seized farmland from farmers and given it away to the Tata-Nano factory.  Eventually the Tata group decided to leave Bengal and they were welcomed by the western state of Gujarat.

Ms. Mamta Banerjee won a big public victory that established her as the Champion of Farmers and exposed the Communists as agents of Big Business. This clearly worked in her favor. Her party won the state of West Bengal and routed the Communist party by out-lefting the left.

This is an amazing tale of Indian democracy, a tale in which every good entity won.
  • Tata-Nano won big because they got a great deal from the business-friendly state of Gujarat,
  • Gujarat won big because they got a new factory that could establish Gujarat as a center of automobile industry.
  • Bengal won because the state was finally rid of the Communists. Now their new government, with the aid of the national government in Delhi, will be able to land more business and financial help.
  • Ms. Mamta Banerjee won big. Her party now rules West Bengal and she will probably become the Minister in charge of Indian Railways, the largest single employer in the World.
  • Of course, the Communists lost and that is a big win for India, its economy and foreign policy. 

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How Does The Indian Election Influence The World?


Last year, the world was amazed when America elected its first African-American President, a man who brought hope to America and the rest of the world. The entire world looked at America and wondered why their societies are not able to achieve what America achieved.

We believe that last week's election in India had a similar impact on the world.  At first glance, this may not seem valid. After all, America is the world's richest country and the most dominant power. What America does and how America behaves has an enormous impact on the world.

On the other hand, India is like much of the developing world or much of the developing world is like India. The rich in India, like the rich in any country, are global in outlook and access. The middle class in India is growing fast and may be different that of many countries in the world. But the majority of Indian Society is poor, illiterate and uneducated like much of the developing world.

In other words, any developing country in the world can theoretically do what Indian society did last week. But hardly any other developing country does.

Every person in the world wants to have a say in how his or her life is run. Every person in the world wants to choose the leaders of his or her country and wants to have the right to throw them out if they do not satisfy his or her wishes. We consider these truths as self-evident.

But, hardly any other society in the developing world allows its citizens this right. Hardly any other developing country allows this right equally to citizens of all religions, races and ethnic groups, the right to collectively install and remove its leaders. We believe that many people in Asia, Africa and Latin America looked at the Indian election and wondered why their countries are unable to achieve what India has achieved.


Europe & India


This is also true of Europe. A United States of Europe is the best analog to India. Each state in India is similar to a country in Europe. For example, Gujarat-Maharashtra are as different and similar as France-Germany in almost every way, in terms of language, culture, social mores and societal characteristics. The farther the distance between countries in Europe, the greater the differences. The same is true in India. 

Just like in India, there is a basic sense of Europe and being European. Yet, Europe has never achieved a cohesive integrated society as India has and did almost 5,000 years ago. That is why when conditions worsen, Europe tends to break.

Ten years ago, Europe achieved a major success by forming the European Economic Union and creating the Euro, a single currency for all of Europe. But this "union" is mostly a paper concept. Unlike America and India, the workers of one state in the European Union seldom migrate to other states of the European Union and if they do, they are not received well. The European Union has not been able to create a unified Treasury Department in the last decade. Today, there is widespread concern that the European Union will break under the stress of the current recession and because of the inability of Europe to create a flexible economic system that meets the needs of its diverse constituents. 

So far, Europe did not have to deal with religious diversity. But, that is changing. During the past decade, Muslim migrants from Africa have entered European Society in relatively large numbers. So far, European society has kept them secluded and isolated in their own ethnic neighborhoods. This is a volatile mix and one that Europe will have to deal with reasonably soon. India has already mastered this art.


America & India


Strange as it might seem, America and India are similar societies. Both are multi-ethnic, multi-cultural and grew through immigration. Both societies have created successful assimilation processes and both societies have created a sense of  "country" that supersedes narrow, ethnic considerations.

Unlike India, America has a single language and the vast majority of Americans believe it should remain so. On the other hand, it is an inherent human right to speak one's own language. The Latin American community has already become the second largest race in America and this figure will only grow. America faces the challenge of making Spanish a fully American language without creating two language blocs. This may be America's greatest social challenge yet. 

This is also an economic challenge for America. American students and workers find it difficult to work in multi-language environments. As the world grows and markets like Brazil, China, India grow in importance, global companies will require the ability to work seamlessly in multi-language environments. This is a structural disadvantage for American executives and a structural advantage for Indian & European executives. India has a lot to teach America in this key area.

President Bush saw the vision of a USA-India strategic partnership and he created it. President Obama seems committed to build on it. The Indian Election solidifies this partnership. Imagine, if you were the American President and you had to choose a society as a long term partner for America. Whom would you choose? We think the answer is clear. It is India.

America will remain the predominant economic and military power over the foreseeable future. But, the desire of America to be the single-handed policy maker and enforcer for the world is getting old. After all. Empires are expensive things. Sooner than later, America will need partners, societies that share America's value systems of democracy and free markets, partners that have the size, power and desire to shoulder a greater role in the world. Again, the answer seems clear to us. It is India.


China & India


A couple of years ago, President Hu Jintao visited India. He traveled to different cities including Mumbai and Bangalore. One of his aides was reported to have said aloud "India is so diverse, with so many languages and religions. If they can have a democratic society, why can't China, which is essentially a one-race country?"

We hope China does or at least it tries. China has grown from the top, by dictates of the state and with the support of the state. It is a totally different model than the democratic, grow organically from below, model of America, Europe and India. 

It is our fervent wish that China becomes a democracy. The stability and growth of China is of paramount importance to the world and we believe an eventual if slow transition to "people's rule" is essential for the People's Republic of China. 

On a narrower tactical basis, the Indian Election is a blow to Chinese aims.  In our opinion, the Communist Party of India was China's ally inside India. Take the case of the USA-India Nuclear Deal. China did everything it could to block this deal outside India and within India. Finally President Bush placed a personal call to President Hu Jintao to ask him to not oppose this deal at the International Nuclear Supply Group.

Inside India, China used the Indian Communist Party to try to torpedo this deal. The Indian Communist Party was a member of the coalition government of Dr. Singh. They became strident opponents of the USA-India deal. Finally, when Dr. Singh went ahead with the deal, the Communist Party resigned from the government and the coalition. Then they tried to topple Dr. Singh's government with other opposition parties. None of this worked and the USA-India Nuclear Deal was signed by both countries.

The utter rout of the Indian Communist Party is a big blow to China's goals inside India.


Pakistan

Pakistan is ethnically Indian. Some sections of the Indian Muslim society decided to break away from India and form a non-Indian society for themselves. India was unbelievably stupid to let them go. Both societies have paid an extraordinarily heavy price for this separation. In fact, Altaf Hussein, the London-based leader of the party of immigrants from India to Pakistan has called the Partition as the greatest mistake of the 20th century.

The reality is that when Pakistan separated from India, it also separated from Indian culture and the deep unifying strength of Indian society. 

Look at the results. BanglaDesh broke away from Pakistan in 1971 cutting that country in half. Now, Pakistan is embroiled in a war with its Pashtun minority, a war that might end up breaking up that society. When a Pakistani Panjabi or a Pakistani Sindhi looks at the Indian election, they have to wonder why India works so well and why their own society continues to self-destruct.

The case of Pakistan shows that democracy is not just the ability to vote, but it is a structure of true self-governance, of building institutions that are for the people, by the people and of the people. Unfortunately, Pakistani society does not own its institutions, it is owned by its one functioning institution, its Army.


Nepal


The biggest strategic impact of India's election may be on Nepal, a country that lies between India and Chinese Tibet. The Maoists of Nepal have waged a guerrilla war against Nepal's king for years. A couple of years ago, the Maoists won the election and became the largest party in Nepal. They terminated the monarchy and established a republic. This was a strategic victory for China, which uses the Maoists as its weapon.

The Nepali Maoists were supported morally and physically by Indian Maoists, who are waging a war against Indian Society. The utter rout of the Indian Communist party will be a major negative for India's Maoists and for Nepali Maoists as well.

This is a huge positive for the young democracy of Nepal.


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Interesting Videoclips of the Week ( May 16 - May 22)


Editor's Note:
In this new series of articles, we include important or interesting videoclips with brief 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. Please let us know whether such articles are useful to you. This week Bloomberg TV had a couple of clips we wanted to discuss. Unfortunately, Bloomberg.com does not provide access to prior videoclips. We do not believe in discussing videoclips without giving the readers the means to watch the clips.

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 that should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerances.




1. Will USA Eventually Lose AAA Rating? - Bill Gross of Pimco on CNBC and Bloomberg - May 21, 2009

On Thursday May 21, the rating agency Standard & Poor's put UK's credit rating on a "negative" watch for a potential downgrade from stable. By late morning, stories hit the tape that Bill Gross, the best known bond manager in the country, had said that the USA will eventually lose its AAA rating as well.  Mr. Gross explained to both Bloomberg and CNBC that the markets consider the U.K. and U.S. to be relative twins (see http://www.cnbc.com/id/30870842 for the article & videoclip).

The Bloomberg anchor asked Mr. Gross “where do you go with your money?” Mr. Gross replied:
“Our money is substantially US –based although Pimco is a global firm. I think, you want to go to hard currency countries if you have a choice, such as Germany, countries that are exhibiting less of a trend towards higher debt, let me cite, the Quantitative Easing programs in US and UK so far vs. what we have seen in Japan, Euroland & Canada.”

But when CNBC’s Erin Burnett asked Bill Gross “for an investment opportunity, where do you see it?”, Mr. Gross gave a different answer:
“Well, I think what you want to invest in, certainly not Treasuries, you want to invest basically in sectors that are not subject to tremendous supply like treasuries & that have potential demand going forward; in the bond market, I think it is in municipals & high-quality corporates and in the stock side it is in companies that have a very steady stream of income going forward i.e. stable dividends and outlook for increasing earnings going forward”


Our Comments

We are intrigued by the two different answers given by Mr. Gross to the same question at two different networks. He did not say do not buy treasuries to the Bloomberg anchor while he went out of his way to say that to the CNBC anchor. Was Mr. Gross simply being a good CNBC guest? Does he wonder like we do whether CNBC Anchors are on a mission against US Treasuries and was he therefore being accommodative of their wishes?

In any case, Kudos to Ms. Burnett for letting Mr. Gross for express his opinion without piling on. In contrast, the Fast Money team became hyper-emotional and proclaimed "This is a Sell America moment". Then, the Fast Money Team (with the exception of Pete Najarian) began hyping “Short America” trades - short the US dollar and short US Treasuries, because of America's debt binge.   

We went looking for hard data about America’s so-called debt binge and to our surprise we found it on CNBC's website. CNBC had posted the list of
The World’s Biggest Debtor Nations on that day. According to this list, the USA is the 15th largest debtor nation in terms of External Debt as a % of GDP.

Which countries are the most debt-ridden? Ireland is No. 1 with debt/gdp = 811%, UK is No. 2 at 336%Belgium is No. 3 at 327%,  Switzerland is No. 6 at 264%, France is No. 8 at 168%,  Germany is No. 8 with 137.5%, Norway is No. 14 with 114% and the USA is No. 15 with 0.95% ratio.

Did the Fast Money Team know this data when they began blaming America for going on a debt binge? Do they read their own website? It does not appear so.


2. Tracking Fund Flows - Charles Biderman of Trim Tabs Research
on CNBC - May 20, 2009

In our opinion, this is one of the most useful interviews of 2009. It is insightful and tradable with real data. This interview as arranged by Maria Bartiromo as a follow-up to her earlier interview with Mr. Biderman in March 2009. Watch this interview at 
http://www.cnbc.com/id/15840232?video=1129252657&play=1

Mr. Biderman's statements about consumer income were an eye-opener for us:
"Incomes are plunging; we track income tax collections and they are falling off a cliff; there are no “green shoots’ that we see; savings by all retail money market funds, bank savings, CDs  are plunging, people are taking money out of savings to pay bills, hopefully not to buy stocks here"

Then Mr Biderman provides the data - In  April 2009, consumer savings posted an outflow of $83 billion, the highest outflow since they began keeping records. The breakup is as follows:
  • $33 Billion out of savings accounts,
  • $20 Billion out of small certificates of deposits,
  • $30 Billion out of retail money market funds.

Mr. Biderman also spoke about the 8-week long rally in the equity markets. Some of his quotes are:

  • "Companies insider buying is way down, insider selling is more than 10 times insider buying; we are seeing record amount of new offerings; last time we saw this amount of new offerings was in 2000 and what happened after 2000 wasn’t pretty if we remember correctly." 
  • "Historically when companies have been buying, stocks have gone up and when the companies have been selling, the market has gone down except for now and in 2003 and we have been tracking this since 1987. (Biderman also explains why 2003 was different than now)
  • “Remember house money in the stock market casino are the public companies; that it their shares that they are playing with”

That is why he was gently dismissive of “commentators, journalists and hedge fund managers who think they are smarter than the company guys”

Then he said:
  • “I am not wanting to stay long in front of this and I would recommend those who have made a lot of money to get out and those who are traders to go heavily short.”


Our Comment:

We remind readers that last week , Meredith Whitney said in her interview with Maria Bartiromo "
the consumer is not going to spend, you are still going to see massive contraction in consumer liquidity". We notice that Wall Street Firms are beginning to sound an alarm about the drop in wages of the American household.

Are consumers taking money out of their savings because their credit liquidity has collapsed and their wages have dropped? The American consumer is about 70% of the US economy. So what does this portend for the US Economy?

The American consumer is 20% of the global economy, twice the size of Japanese economy, three times the size of Germany's GDP and four times larger than the UK. When the US consumer is in this much trouble, what happens to these countries? You do not have to guess. Just read the title of May 21 Wall Street Journal article “World Economies Plummet”.

We forget. So many people on TV tell us that China is the magical key to all our problems and we should only worry about the outbreak of inflation that will result from America's debt binge. See the next clip for the possibility that China might be bubbling over. 



3. Fund Manager Survey - Michael Hartnett of BAC-Merrill Lynch on CNBC - May 20, 2009

Michael Hartnett spoke to CNBC's Mark Haines about the findings of the monthly Merrill Lynch survey of 220 global fund managers who manage $617 billion in total. Any one who invests in equities and in emerging market equities should watch this video at  www.cnbc.com/id/15840232?video=1129183203&play=1.

Some quotes:

Hartnett - "Very Bullish; a complete reversal of what we saw in March; if you remember back in march the bearishness in the Fund Manager Survey was apocalyptic. Eight weeks later, we have got bullishness about the global economy, we have got investors loving technology, loving energy, loving materials, adoring emerging markets to almost a worrying degree. so yeah, the bull is back."
Haines - "The reversal, Michael, quite frankly worries me." 

They discussed several aspects of  this survey. Then they switched back to Emerging Markets and China.

Haines - "You do note bubble-like levels of enthusiasm for emerging markets."
Hartnett - "Investors are all in on China now.....Now we are a little bit nervous because we see this optimistic view on China; if the Chinese economic numbers disappoint in nay way in the next 4-6 weeks, ..., there are a lot of places that could pull back on that news."

Mark Haines is a veteran anchor and it shows in this interview.


4. Other Videoclips


We also recommend watching an interview by Carter Worth on CNBC on May 20, 2009 titled "VIX Retreats to Pre-Lehman Bankruptcy Levels". Every equity investor should watch this clip at www.cnbc.com/id/15840232?video=1129243381&play=1.


5. In a lighter but semi-serious vein

Erin Burnett of CNBC did a great job covering Africa as the final investment frontier on Thursday, May 21. In her clip "Investing in Africa: Opportunities & Risks", she made the following point.
"And Mark, you know you mentioned China, and it is pretty interesting when you look the markets today, down 130, when you think about the economic crisis you got to think about China; maybe part of it some say is cultural; they are thinking over an extremely long time frame and that means in the midst of this economic crisis, the President of China, the commerce Minister of China are coming to Africa, they are now the largest lender, and they are investing left and right ; and this is something mark we saw everywhere, from Libya down to South Africa, in the Congo, on your plane,  in the airport, on the street, Chinese people are everywhere" 

As soon as we heard the phrase "some say is cultural; they are thinking over an extremely long time frame", we immediately thought about the scene from the Clint Eastwood movie "In The Line of Fire". Near the end of that movie, Larry the Assassin is sitting with a portly fund raiser and he says to the fund raiser "American companies only think about the next quarter; the Japanese think of the next quarter century".

We do wonder whether the Chinese Banks of today are in the same condition as that of the Japanese banks in 1990-1991 - Strong, large and dominant on the surface but deeply loaded with bad debts kept hidden from investors due to lax disclosure requirements.

We also recall that at that time, Japanese were everywhere in the world as the biggest lender. Today might be different from 1991 and China might be different from Japan. But you have to admit, the parallels are intriguing.



PS: - Last week, our first videoclip featured a call by CNBC's Rick Santelli who said on May 12 that ""As an old  technician, I see that we probably trade under 3% before we trade back over 3.25%, w.r.t. to the ten year - that's my own opinion." This week, Rick Santelli proved to be wrong as the ten-year treasuries never rose to 3% but went back to 3.25% and then crashed to 3.36% on Thursday May 21.  This shows that even Rick the REF Santelli can make a wrong call.


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