The Big Picture - Macro Perspective on the Capital Markets, Economy, Technology, and Digital Media

The wonders of PhotoShop:

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Original group shot:

via CNBC

(Source: http://media.cnbc.com/i/CNBC/Sections/CNBC_TV/CNBC_US/Shows/FastMoney/Common/FM_header_main_3.jpg?v=6)

Current Fast Money:

via CNBC

Source: http://www.cnbc.com/id/15838499

CNBC’s Fast money Dylan Ratigan Rants about the economic problems and what led up to the problem and who’s to blame (at least a couple of the people who are to blame…)

Well, its official: CNBC has confirmed that Dylan Ratigan is gone. As the nearby photo shows from CNBC’s site, Dylan is gone. (Not that this crowd ain’t handsome, but . . . they ain’t Dylan handsome).

The Associated Press is strongly hinting Dylan is going to ABC:

CNBC says its “Fast Money” host Dylan Ratigan has quit the financial news network.
Under Ratigan, the quick-paced late afternoon program served as a post-game show for the day’s Wall Street trading.

His contract is expiring and he’s considered a strong candidate for a new job at ABC News. ABC spokesman Jeffrey Schneider wouldn’t address those reports but said that ABC thinks the world of Dylan Ratigan.

The buzz started with NYPost’s Page Six who reported the news:

THERE was high drama at CNBC yesterday as “Fast Money” anchor Dylan Ratigan quit — sources say today will be his last day on-air — and an insider is blaming his battles with network big Susan Krakower. Krakower — the VP for strategic programming and development who co-created “Fast Money” with Ratigan — “is partially responsible for this. She’s been ignoring him for months and he couldn’t get the attention he deserved,” the insider said.”

Media Bistro reports:

“Ratigan is telling friends he chose to leave CNBC not so much to be the next David Letterman, but because he wants to continue pursuing a storyline which began on his CNBC broadcasts — the robbing of America.”

Here is the October 17, 2008 video of Ratigan going off on the systemic corruption.

See Fast Money, Faster Photoshop for the pre and post (de-Dylaned) Fast Money  Header.

UPDATE: NYT’s Bill Carter reports the ABC is not a done deal:

Mr. Ratigan said in a telephone interview Friday that despite rumors that he had an offer to move to ABC News, he had not made an agreement with any other network. “No deal is pending with anybody,” Mr. Ratigan said. “All options are being considered.”

ABC could certainly be one of them, he said. Asked why he would walk away from a successful program where he had built a reputation for fast and funny delivery of the day’s financial news, Mr. Ratigan said, “I had the benefit of my contract coming to an end. This is an opportunity to take a pause and evaluate all my options.”

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Sources:
CNBC’s Dylan Ratigan leaving `Fast Money’
The Associated Press,  March 27 2009

http://www.google.com/hostednews/ap/article/ALeqM5glZ5AxYgX8mH0Hi_4lgaCirXpUIgD976JKT80

‘FAST’ FLARE-UP RATTLES CNBC
Paula Froelich
NY Post, FRIDAY, March 27 2009

http://www.nypost.com/seven/03272009/gossip/pagesix/fast_flare_up_rattles_cnbc_161468.htm

Dylan Ratigan Departing CNBC
TV Newser, MAR 27 2009

http://www.mediabistro.com/tvnewser/cnbc/dylan_ratigan_departing_cnbc_112551.asp

Dylan Ratigan of CNBC’s ‘Fast Money’ Leaves Network
BILL CARTER
NYT: March 27, 2009

http://www.nytimes.com/2009/03/28/business/media/28cnbc.html

Perfect for a Friday afternoon:

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Thanks, Josh!

Nothing gets the speculative juices flowing like the internet sector. By the same token, when traders are piling into the shares of this group, it can signal that equity markets, especially technology shares, are ripe for at least a short-term pullback.

With that in mind, the latest reading on the total assets of the Rydex Internet Sector Fund (RYIIX) — at $63 million, it is the largest amount since the fund was first set up in April 2000 — should give the bulls cause for concern.

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Rydex data source:

http://www.rydexinvestments.com/products/mutual_funds/info/navs_historical.rails

Video-o-rama: Risk appetite rekindled on hope of better days

Following Fed Chairman Ben Bernanke’s “nuclear option” announcement of last week, the action stayed on Capitol Hill with Treasury Secretary Timothy Geithner outlining his Public-Private Investment Program as well as “new rules of the game” for the financial services industry.

Whereas Nouriel Roubini’s reaction to the administration’s new plan to buy toxic assets was surprisingly positive, James Galbraith and Paul Krugman were not impressed. These gentlemen are included in this week’s harvest of video clips, sharing the platform with the likes of Bill Gross, Paul McCulley, John Bogle, Wilbur Ross and Jeremy Siegel.

As stock markets look set for a straight third week of gains, the debate as to the longevity of the nascent rally rages on. The featured video material sees Mark Mobius saying “the next bull market has begun”, Jeff Saut arguing the “odds are pretty good stocks have seen their lows”, but Laslo Birinyi taking a bearish stance and advising to sell stocks that gained in the rally.

The selection starts with a great discussion across the pond on the “future of capitalism” and ends with an educational clip about the ins and outs of quantitative easing.

Financial Times: Future of capitalism – London panel
“Does the financial crisis signal the end of the Reagan-Thatcher model of free markets and globalisation? FT editor Lionel Barber leads a discussion with Howard Davies, director of the London Schoof of Economics, Donald Brydon, incoming chairman of the Royal Mail, and John Studzinski, of US private equity firm Blackstone.”

Source: Financial Times, March 26, 2009.

CNBC: Geithner & toxic assets
“Treasury Secretary Timothy Geithner discusses his plan to deal with financial institutions’ toxic assets, with CNBC’s Erin Burnett.”

Part 1

Part 2

Source: CNBC, March 23, 2009.

Financial Times: Geithner’s toxic asset plan
“The government has given the financial sector what it has wanted for a long time; it will pay investors to take the toxic assets off banks’ balance sheets. But the supercharged political environment could endager the program, says FT’s Francesco Guerrera.”

Click here for the article.

Source: Francesco Guerrera, Financial Times, March 23, 2009.

CNBC: Bill Gross buys in
“Pimco is intrigued by the potential double-digit growth from the toxic asset plan, says William Gross, co-chief investment officer/founder.”

Source: CNBC, March 23, 2009.

CNBC: Market masters wigh in on the Treasury’ plan
“The economy’s performance utimately drives stock prices, with Abby Joseph Cohen, Goldman Sachs, Paul McCulley, PIMCO, John Bogle, The Vanguard Group, and Bob Doll, BlackRock.”

Source: CNBC, March 24, 2009.

PBS News: Toxic asset plan may woo investors, but long-term impact is unclear
“While markets rose Monday on details of the toxic asset plan, critics voiced concern over taxpayer risk and the need for a long-term fix to financial sector troubles. New York Times columnist Paul Krugman and Donald Marron of Lightyear Capital debate the details.”

Click here for the article.

Source: PBS News, March 23, 2009.

Bloomberg: Roubini says Geithner plan won’t stop nationalizations
“Nouriel Roubini, economist and professor at New York University’s Stern School of Business, talks with Bloomberg’s Maithreyi Seetharaman about US Treasury Secretary Timothy Geithner’s plan to remove toxic assets from the books of the nation’s banks. Roubini, speaking in London, also discusses the outlook for the meeting between the Group of 20 leaders in London.”

Source: Bloomberg, March 26, 2009.

Tech Ticker (Yahoo Finance): James Galbraith – Geithner plan “extremely dangerous”, banks “massively corrupted”
“Professor James Galbraith didn’t pull any punches on TechTicker this morning. He hates the Geithner plan, calling it ‘extremely dangerous’. He says the banks may game the plan to bid up the prices for their own crap assets and that getting bad assets off their books won’t get them lending again. Like Paul Krugman, Galbraith thinks the FDIC should just put the banks into receivership and have the banks’ subordinated bondholders pick up some of the cost of restructuring them.

Part 1: Getting crap assets off bank books won’t save economy

Part 2: Massive corruption

Source: Tech Ticker, Yahoo Finance, March 23, 2009.

Read the rest of this entry »

Alan Greenspan continues his campaign to deflect attention from his failure to regulate the shadow banking system. In today’s Financial Times piece he points to the success of FDIC-insured institutions as evidence that what is needed to prevent a crisis like the current one is adequate supervision of capital requirements:

What, in my experience, supervision and examination can do is set and enforce capital and collateral requirements and other rules that are preventative and do not require anticipating an uncertain future. It can, and has, put limits or prohibitions on certain types of bank lending, for example, in commercial real estate. But it is incumbent on advocates of new regulations that they improve the ability of financial institutions to direct a nation’s savings into the most productive capital investments – those that enhance living standards. Much regulation fails that test and is often costly and counterproductive. Regulation should enhance the effectiveness of competitive markets, not impede them. Competition, not protectionism, is the source of capitalism’s great success over the generations.

New regulatory challenges arise because of the recently proven fact that some financial institutions have become too big to fail as their failure would raise systemic concerns. This status gives them a highly market-distorting special competitive advantage in pricing their debt and equities. The solution is to have graduated regulatory capital requirements to discourage them from becoming too big and to offset their competitive advantage. In any event, we need not rush to reform. Private markets are now imposing far greater restraint than would any of the current sets of regulatory proposals.

What’s amazing about the American public is that the pitchforks come out over the AIG bonuses–the more we learn about them, the clearer it is that Liddy made the right call paying the bonuses and Obama should have gotten out in front and explained why they were justified–but we sit here complacently allowing Greenspan to peddle this hogwash.

The Fed Chairman is a bank regulator. To have the Chairman who presided over the biggest failure of the banking system lecture the world on regulation is breathtaking, not to mention tone deaf. Whatever the complexities of regulating the shadow banking system or supervising the ratings agencies are, acting as if the Fed Chairman bears no responsibility for the excesses that took place on his watch is a recipe for moral decline.

Source:

We Need a Better Cushion Against Risk
By ALAN GREENSPAN
Financial Times; March 27, 2009

http://www.ft.com/cms/s/0/9c158a92-1a3c-11de-9f91-0000779fd2ac.html

The front page of today’s WSJ highlights the sharp rally we’ve had off the lows and whether it’s an indicator of future action and has a ‘bull market’ started. Also, others are making comparisons with prior periods when we had double digit one month gains as we currently have in March so far and what that may mean for the future.

To me, all this action is just indicative of a secular bear market where we have very sharp declines followed by some mean reversion when we get dramatically oversold. The March gain comes after 6 month’s in a row of declines that took us down about 40%. It’s the longest monthly stretch since ’02 and the early ’80′s before that and a big bounce was inevitable.

But, while we’re not in another great depression in its depth, from other perspectives, this market should be compared to the movements in the ’30s where we had many double digit monthly losses followed by a few double digit gains.

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Feb Personal Income fell .2%, .1% more than expected and Jan was revised down by .2% to a gain of .2%. Jan was influenced by an increase in COLA payments and some one time transfer payments. Spending rose .2%, in line with estimates but Jan was revised up by .4% to a gain of 1%. Because the PCE rose .3% in Feb, REAL spending was down by .1%. The Savings rate was 4.2% down from an adjusted 4.4% in Jan (revised from 5%). The savings rate I believe is headed to the 7-9% range over the next year and for every 1% increase, is about $100b of less spending. Thus, we may be only half way there in the deleveraging and saving process of the US consumer. We can talk about all the things the Fed, Treasury, Congress, and President want to do to ‘save the economy’ but nothing will stop the inevitable deleveraging that needs to happen at the household level.

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An aside, oh to be a fly on the wall in the meeting of Obama with bank execs today at 12pm. Spending, Income and Confidence are out today.
 

When the Secretary of the Treasury admits that the financial system has failed, as he did in his Congressional testimony yesterday, you would assume that the country is in for a sweeping overhaul of Wall Street and the banking establishment. But that hardly seems the case with what we’ve seen proposed. Part of the problem seems to be where the Obama administration is getting its advice: from the same characters who built the over-leveraged, under-capitalized mess.

Case in point, the Wall Street Journal held its Future of Finance Intitiative in Washington, DC earlier this week to contribute principles to the reform debate. On the whole, the assembled group went for incremental adjustments over wholesale reform. The lone voice of radical reform was Nassim Taleb, but he couldn’t stay past the opening night festivities. Here’s what he would have told the conference the next day:

First, he says, we have to unmask the charlatans of risk like Myron Scholes. To Taleb, Scholes is the Great Oz in this Emerald City because his work on options and derivatives allowed the whole of the financial system to adopt poorly understood products-like the ones that brought AIG down-that hide risk. To Taleb, Scholes’ academic work, which enabled the widespread use of complex derivatives, was like “giving children dynamite.”

“This guy should be in a retirement home doing Sudoku,” Taleb says. “His funds have blown up twice. He shouldn’t be allowed in Washington to lecture anyone on risk.”

With complex derivatives unmasked and, in Taleb’s vision of the future, outlawed, the next step is to create a more robust version of capitalism. Taleb calls it Capitalism 2.0. Robustness begins with a dismantling of debt. Leverage was the gas that inflated the financial system until it was too big, too fragile, and too volatile.

Taleb’s solution? It’s fairly simple. Get rid of the leverage. That’s the problem with the PPIP, it uses leverage to try to cure the problems of over-leverage.

We cannot have both debt leverage and a hyper-efficient system—the volatility is just too great. What Taleb explains—which no one else does—is that efficiency is already a form of leverage. A highly efficient system removes slack and magnifies small changes. Think of the efficient system as a high-performance aircraft. Each minute of steering input creates a rapid and violent shift of course, speed, or altitude. The system itself is souped up even before you add the debt. Once you do, the pilot is equally jacked up and twitchy, creating an explosive combination. Now imagine that fighter jet trying to fly in a 1,000-plane formation, and you get an idea of the world financial system in the 21^st century.

We can’t erase the technology that created the planes, so we’ll have to make sure we fly sober, maybe even with an onboard computer that dampens the controls. That means getting rid of the debt. It’s that simple.

Source:

Mr. Taleb Goes to Washington

A Black Swan Meets Some Ugly Ducklings
by MARION K. MANEKER
The Big Money; March 26, 2009

http://www.thebigmoney.com/articles/judgments/2009/03/26/mr-taleb-goes-washington

Deadline — last few pages go in today.

We will back to normal after lunch today . . .