CNBC vs Denninger vs Roubini
There is a fascinating fight going on between CNBC, Karl Denninger and Nouriel Roubini.
First up, see this CNBC Video, followed by Karl Denninger’s response.
Then read Roubini’s statement:
“It has been widely reported today that I have stated that the recession will be over ‘this year’ and that I have ‘improved’ my economic outlook. Despite those reports – however – my views expressed today are no different than the views I have expressed previously. If anything my views were taken out of context.
“I have said on numerous occasions that the recession would last roughly 24 months. Therefore, we are 19months into that recession. If, as I predicted, the recession is over by year end, it will have lasted 24 months with a recovery only beginning in 2010. Simply put I am not forecasting economic growth before year’s end.
“Indeed, last year I argued that this will be a long and deep and protracted U-shaped recession that would last 24 months. Meanwhile, the consensus argued that this would be a short and shallow V-shaped 8 months long recession (like those in 1990-91 and 2001). That debate is over today as we are in the 19th month of a severe recession; so the V is out the window and we are in a deep U-shaped recession. If that recession were to be over by year end – as I have consistently predicted – it would have lasted 24 months and thus been three times longer than the previous two and five times deeper – in terms of cumulative GDP contraction – than the previous two. So, there is nothing new in my remarks today about the recession being over at the end of this year.
“I have also consistently argued – including in my remarks today – that while the consensus is that the US economy will go back close to potential growth by next year, I see instead a shallow, below-par and below-trend recovery where growth will average about 1% in the next couple of years when potential is probably closer to 2.75%.
“I have also consistently argued that there is a risk of a double-dip W-shaped recession toward the end of 2010, as a tough policy dilemma will emerge next year. On one side, early exit from monetary and fiscal easing would tip the economy into a new recession as the recovery is anemic and deflationary pressures are dominant. On the other side, maintaining large budget deficits and continued monetization of such deficits would eventually increase long-term interest rates (because of concerns about medium-term fiscal sustainability and because of an increase in expected inflation), thus leading to a crowding out of private demand.
“While the recession will be over by the end of the year the recovery will be weak given the debt overhang in the household sector, the financial system and the corporate sector. Now there is also a massive re-leveraging of the public sector with unsustainable fiscal deficits and public debt accumulation.
“Also, as I fleshed out in detail in recent remarks the labor market is still very weak. I predict a peak unemployment rate of close to 11% in 2010. Such a large unemployment rate will have negative effects on labor income and consumption growth; will postpone the bottoming out of the housing sector; will lead to larger defaults and losses on bank loans (residential and commercial mortgages, credit cards, auto loans, leveraged loans); will increase the size of the budget deficit (even before any additional stimulus is implemented); and will increase protectionist pressures.
“So, yes there is light at the end of the tunnel for the US and the global economy. But as I have consistently argued, the recession will continue through the end of the year, and the recovery will be weak and at risk of a double-dip, as the challenge of getting right the timing and size of the exit strategy for monetary and fiscal policy easing will be daunting.
>
UPDATE: July 17, 2009 6:22am
Bill King described is thusly:
Stocks ignited in the early afternoon when CNBC and other fin media outlets reported that renowned doomster, Prof. Roubini, said the worst of the financial and economic crisis is behind us. After the close Roubini denied that he had changed his forecast. This led astute operators to wonder if someone planted the erroneous story as part of a well-orchestrated option expiration squeeze.
July 17th, 2009 at 3:05 am
The CNBC Business Model With the recent elimination of anything even remotely
approaching journalistic rigor or analysis, and its substitution with endless propaganda and the pitching
of “hope” as an investment conduit, many have been scratching their heads over the question of just how
it is that CNBC is still on the air, let alone make money: after all selling hope is a very expensive process.
I provide the answer.
Below is an early segment from CNBC in which Joe Kernan provides his analysis of Schwab’s just
released results. As the video quality is pretty bad (yeah, I know, sorry) I will summarize how it works:
1. Intro – Kernan: Glowing review of Schwab’s EPS “beat”
2. Kernan: “Schwab is a fine, fine company and a fine individual.”
3. Kernan: “…and quite a sponsor for us.”
4. Kernan: “…and we are ready to just be sponsored on Squawk Box.”
5. Conclusion – Kernan: “…I don’t think you can have too much [of Schwab].”
6. Cut to Charles Schwab Commercial.
So now you know.
July 17th, 2009 at 3:11 am
BR, do you ever sleep at all?
I’m on the West coast, so I have an excuse.
~~~
BR: I set these to launch at a specific time, hours — or days — in advance . . .
July 17th, 2009 at 3:43 am
@ whammer …BR can time posts to release throughout the day. Just for the likes of me and you and people in Australia etc. That is not to say that he is not wide awake and hard at work on something big.
July 17th, 2009 at 5:10 am
I liked Denninger’s response- pretty level headed critique- CNBC is nothing more than a wasteland of rah rah market bulls- and a shill for Wall Street
I can only hope GE earnings are are exceptionally awful when they report later this morning
July 17th, 2009 at 5:54 am
Nouriel Roubini is full of #2 this time. Late last year and early this year he was predicting a recovery in the 2nd half of the year. It’s another case of economists being unable to even predict the next 6 months.
July 17th, 2009 at 6:43 am
Tyler Durden-
funny stuff- so . . . you are implying there is a connection between sponsors and coverage?-
hmmm . . . implying they are shills? . . . hmm . . . but Dennis Kneale is legit- right? And Cramer is a market genius – right?
too early in the morning too have all my illusions shattered
July 17th, 2009 at 6:46 am
man I’m confused- Tyler’s comment was after supertrooper’s comment- now it’s at the top????
top billing i guess
July 17th, 2009 at 7:00 am
For the deflationists this is the witching hour. This is the time when commercial markets are wobbly, private housing is still congested and buyers are scared. The Fed wants inflation but ‘ol mr market is trying to reach the clearing price, that’s where buyers and sellers meet. It also means lower prices. Deflation is our government’s worst fear.
July 17th, 2009 at 7:05 am
sorry BR- don’t mean to hog the comments- last one on this thread- I promise- honest injun-
re GE-
“Revenue was $39.1 billion, down 17 percent from a year ago and lower than consensus estimates of $42.16 billion.
Industrial sales down were down 7 percent and financial services revenues plunged 29 percent, reflecting shrinkage at GE Capital, the company said in a statement.”
not too green shooty
July 17th, 2009 at 7:05 am
A TV station that’s a shill for their sponsors? You’re kidding. What insightful insight. Thanks. You’re looking at a Pulitzer for sure…
…and a Nobel for your own Kernan-like “work” that Goldman Sachs is front running their clients and Renaissance Technologies is a ponzi scheme…
July 17th, 2009 at 7:14 am
Even if Roubini did change his tune, I don’t think that he has the power to move markets like that. It’s more likely that this was just market noise, like usual.
July 17th, 2009 at 7:34 am
And Larry Kudlow is CSO – Chief Shill Officer or could be CSSO Chief Supply Side Officer.
Has anyone seen the new podium they prop Larry K. up on to start his show?
July 17th, 2009 at 7:37 am
This is amusing:
Mattel 2Q profit rises 82 percent on cost-cutting
“US earnings continue to buoy world markets”
“GE 2Q profit falls 49 percent, tops estimates”
Normally, they would just write something like “GE tops estimates” as the headline. This headline is slightly more honest.
Still, it’s pretty amazing that analysts can set the bar too low every time and translate their inaccuracy as a positive (“My estimates were waaaay off, but earnings beat the estimate, so it’s all good.”).
July 17th, 2009 at 7:51 am
matt:
Re: setting the bar low
I was just looking at BAC. Of course they beat expectations this quarter, since earnings “only” fell about 25% to 33 cents even with all the taxpayer subsidies and the accounting holiday. The next two quarters should be a cakewalk as the expected earnings in Q3 and Q4 are only 5 cents a share.
July 17th, 2009 at 8:02 am
Seems like someone else finally noticed this phenom over in green shoot central:
http://www.businessinsider.com/chinese-bond-auctions-keep-failing-2009-7
Michael Pettis has another post. In sum, he thinks China is just bubble blowing with loose credit and this is putting money into the wrong assets via speculation. Sound familiar? Clearly not sustainable. When it pops is the big question
.
http://mpettis.com/2009/07/i-wasn%e2%80%99t-impressed-by-china%e2%80%99s-high-reserve-and-gdp-growth-numbers/
July 17th, 2009 at 8:04 am
[...] at the Big Picture, they have the rundown on the strange events, as well as this comment by Bill [...]
July 17th, 2009 at 8:11 am
Tyler Durden Says:
July 17th, 2009 at 3:05 am
The CNBC Business Model With the recent elimination of anything even remotely
approaching journalistic rigor or analysis, and its substitution with endless propaganda and the pitching
of “hope” as an investment conduit
reply:
————–
They haven’t even scratched the surface of possibilities yet. Imagine, if you will …
1) A new segment where Mr Kernan shakes “the Crazy 8 Ball Of Wall Street” where all replies suggest massive wealth from not being under-invested, providing you buy today.
2) A new segment where people who don’t invest are exposed as Satanic Spawn. The only way to personal salvation is to buy stocks now. Perhaps a life sized cutout of 72 Virgins with a hidden microphone can have a standing bit as a new oracle of wall street and as a means to bring all religions together under one brokerage.
3) Wall Street needs new customers. Maybe Nascar week can become a quarterly sensation on the trading floor. Commentators can dress in racing suits. Maybe a prop car or two can be put on blocks in the studio and on the trading floor with actors pretending to put air in the tires. Lots of air. Since all Nascar wives and girlfriends are hot, and since it should made to look like real life, they should also have a lot of hot girls in daisy dukes and tight t shirts milling about and asking about earnings. The women should nag about the tight correlation between those on the pole position and those who invest using CNBC.
4) Playboy pictorials work wonders for reviving the careers of spent actresses. Maybe something can be figured out here … The Girls of CNBC?
July 17th, 2009 at 8:12 am
Amazing that some in the news media (Bloomberg and theStreet.com) would report yesterday that Roubini caused the market advance – total rubbish of course.
Roubini has overstayed his 15 minutes of fame far too long…most of his predictions since last fall have been wrong:
http://www.erictyson.com/articles/20081024_1
I’d like to know why Bloomberg consistently quotes this man in the fashion that they do…
July 17th, 2009 at 8:19 am
EricTyson Says:
July 17th, 2009 at 8:12 am
Amazing that some in the news media (Bloomberg and theStreet.com) would report yesterday that Roubini caused the market advance – total rubbish of course.
Roubini has overstayed his 15 minutes of fame far too long…most of his predictions since last fall have been wrong:
reply:
———–
Franklin411 is going on vacation. Are you stepping up to fill in until he comes back? We need some green shoots, dammit.
July 17th, 2009 at 8:35 am
i wouldn’t call this a “fascinating fight” i’d call it a sick sick case of market manipulation. As soon as I saw that Roubini headline i scratched my head and went to his blog – he had a piece up on Tuesday on employment that could not POSSIBLY be indicative of a bullish or more bullish view.
As I went to write a blog post about how it seemed the story was mis-reported, he beat me to the punch and wrote his own post claiming he was taken out of context.
This is the real market manipulation – the stuff we should really be mad about. CNBC/Reuters/Bloomberg reporting stories that are pretty obviously false just to pump the market is a lot more of a real manipulative threat than high frequency trading.
July 17th, 2009 at 8:36 am
@hobo –
you decoded it
eric tyson is franklin411
now it makes sense
July 17th, 2009 at 8:49 am
Here’s another for Eric Tyson:
Eric Tyson writes about Roubini and references articles written by none other than…Eric Tyson. He’s even considerate enough to give us a link.
As a personal favor, I’d sure appreciate it if you’d save your self-referencing posts for…
a post from Barry… when Barry goes third person…referencing a quote from Barry… describing a passage… from Barry’s book.
The absurdity of it would at least be amusing. Even if unintended.
July 17th, 2009 at 9:00 am
CNBC released this bogus report just before GE reported their earnings led down by their financial opns. The SEC announces investigations of hegative rumor mongers but this massive pump & dump is OK?
July 17th, 2009 at 9:04 am
Were there ever any prosecutions for the negative rumor mongering – or was it just a market confidence builder from SEC?
July 17th, 2009 at 9:06 am
@Kid Dynamite
” As soon as I saw that Roubini headline i scratched my head and went to his blog – he had a piece up on Tuesday”
—
There also was that interview on Bloomberg Radio with Schiller just last weekend (which Barry had a link to on TBP)…I listened to the entire thing, and it was Roubini as usual…
It would seem mighty odd that he would have changed his entire position since then…
July 17th, 2009 at 9:12 am
Well at least housing starts are up. Just what we need is more inventory to join the ones I see every day with for sale signs on them. And, builders have shown themselves such wonderful predictors of the housing market.
July 17th, 2009 at 9:17 am
m in nola-
no kidding- why exactly is there new housing at all- and why is that considered good?
July 17th, 2009 at 9:19 am
Story Time, that what moves the market…. When did you see a chart move a market?
July 17th, 2009 at 9:22 am
Housing starts were up 3% May to June and up 17% from April to May so things are getting better more slowly a corollary to the oft heard things are getting worse less quickly.
Emphasize the 3% MTM improvement not the more significant 50% YTY decline!
July 17th, 2009 at 9:31 am
Another program in which lenders accept principal reductions to refinance homeowners into government-guaranteed mortgages has stalled, with only 51 loans refinanced.
Why should banks take principal writedowns when there is the likelihood of the US buying these foreclosures at “fair” prices? Just thinking about the US buying a few million foreclosures at “fair” prices and then managing them and collecting “fair” rents with former owners staying as bitter tenants.
However it’s probably necessary, tough to imagine just stepping back and letting 5% of the housing stock fall into foreclosure esp concentrated in geographic areas. Trying to imagine the consequences if a flood of foreclosures callapsed the RE market 90% in the sand state, it’s already happened in Detroit.
July 17th, 2009 at 9:40 am
JC:
Any more giveaways to the banks and Obama will be a one-termer. Hopefully he knows that. Like a lot of Presidents, Obama seems more interested in foreign policy then domestic policy.
July 17th, 2009 at 9:43 am
Dan Duncan: You’re welcome but apparently like other web addicts suffering from ADHD – there are four links in my piece to outside articles but I guess you would have missed that in the 10 seconds you spent on the post…since you like outside links, try this one out: http://www.theaddanswer.com/
July 17th, 2009 at 9:44 am
CNBC is very willing to jump in with both hands and feet on a story if it pumps stocks irrespective whether it has been confirmed or not, yet will NOT do the same when the story won’t pump. Denninger called them out on this and bravo for doing so. CNBC has to start doing more DD before its obvious and flagrant pumping. The network is basically a tabloid equivalent of a business channel.
July 17th, 2009 at 9:55 am
Nothing has helped the housing mess much.US paying sticker for millions of foreclosed homes would be blindingly expensive but stepping back now and letting massive waves of foreclosures wreck further havoc would be painful to say the least. The average mort holder only has 20% equity now – nationwide. There are no good solutions
July 17th, 2009 at 10:00 am
OT, the surprise Intel results were attributed to increased sales of Atom processors for netbooks. I smiled yesterday when I got an offer of a free Atom powered HP netbook from VZ if I signed up with them. ‘Free” $300 netbooks from VZ isn’t the whole Intel story but …Kind of like “buy a bank, get a free toaster”
July 17th, 2009 at 10:10 am
jc
They’ll make it up on volume.
July 17th, 2009 at 10:24 am
I saw this elsewhere and just had to steal it to share with this crowd:
“Companies have rigged the game of beat the number by setting the bar low. That investor’s get excited by it reminds me of an infant that gets excited about “peekaboo.”
Too funny, and true.
July 17th, 2009 at 10:25 am
Got a Press release from Roubini/RGE, in which NR backs way off the CNBC report.
That said, Roubini seems to have looked into the abyss and chosen not to grasp the reality he saw. Denninger, OTOH, stays loyal to the numbers (the reality) and provides an honest, conservative assessment of what he thinks are our short and mid-term options.
I don’t think either scenario — NR’s or Denninger’s — is dire enough (sorry). What they fail to include in their assessments is the fact that we will have a substantial and transformative social response to our economic decline (especially when the negative events already on the horizon clearly indicate that we have worse than the “subprime crisis” in store for us in the mid-term).
Social change will have a much more serious and profound effect on our political and economic systems than any legislative, policy or regulatory actions the government/banking bastard hybrid might enact in the near term in its attempt to maintain the status quo.
Chaos will have its way. This will get much more interesting.
July 17th, 2009 at 10:37 am
Onlooker from Troy Says:
July 17th, 2009 at 10:24 am
“Companies have rigged the game of beat the number by setting the bar low. That investor’s get excited by it reminds me of an infant that gets excited about “peekaboo.”
reply:
————
Actually, it’s probably worse than that. Imagine computers doing high frequency trading playing peekaboo. (One of which is probably front running the entire NYSE)
July 17th, 2009 at 10:42 am
Marcus
I agree re: social unrest. I can’t help but believe that the feeling of betrayal that’s already out there will continue to grow as the reality of this sinks in over time and it’s increasingly apparent that they’ve been lied to, misled, and manipulated.
Those who haven’t been burned will get burned (in the housing and stock markets), and some will have to get burned for a second time before learning. But when they do, they’re gonna be pissed. And when they’ve got nothing else to lose, watch out. That’s when it’s dangerous.
July 17th, 2009 at 10:54 am
On a related note, it was refreshing to see that Margaret Brennan jumped over to Bloomberg because she apparently wanted to further her journalistic career. I don’t particularly want to jump in the fracas between Messrs. Tyson and Duncan, but I’ll label Bloomberg as a far superior financial news outlet than is CNBC. Perhaps Roubini is quoted too often. If so, however, it is also true of any number of other bullish and bearish personalities cited on either network. Seems to me that Bloomberg is exponentially more objective in their reporting.
I must also admit an amusement over Dylan Ratigan jumping off the CNBC mother ship too. (“Ah, there’s a life raft over there!”) Makes me wonder if we’re just a few months away from CNBC consisting solely of the following:
Kneale, Kudlow, Caruso-Cabrera, Kernan, Regan, Francis, Cramer, Bartiromo, Bouroudjian, Gasparino
…and their pom-poms. (aka: the people on the other side of the trade) Hope I haven’t missed anyone…
Hey, I’m all for confidence and optimism, but I’m also a fan of reported reality versus cherry-picked journalism (oxymoron intended).
From the immortal words of Mr. George Costanza: “It’s not a lie if you believe it.”
That’s true…in the world of sitcoms.
On yet another note, I did enjoy Karl Denninger’s great response, but let’s take a step back and put this into perspective:
Who lost money because of the bogus (some would say “negligent”), CNBC report yesterday? Perhaps I’m off on this one, but if you are buying and selling stocks because of what one economist believes (not) is going to happen six months down the road, then you deserve to lose your money. Of course, the market will have its short term bounces when the widely followed (for good or otherwise) Roubinis and Whitneys of the world finally make their bullish calls (they HAVE NOT YET), but unless you stole Goldman’s black box and catch the move before the move, you missed it. Is the market still moving on Ms. Whitney’s “bullish” call? That’s so 4 days ago…
Last I checked, analysts (…and I think Whitney is fantastic) and economists don’t have much to do with companies earning profits.
July 17th, 2009 at 10:54 am
CNBC Sucks might be interested in this rather unexciting cnbc story
Bartiromo or Burnett: Who will be No. 1 at CNBC?
http://www.marketwatch.com/story/cnbc-money-honey-bartiromo-or-burnett
July 17th, 2009 at 11:20 am
Great, now TD from ZH is posting here? What a way to tart up the blog.
Sorry guys, Franklin is of particular annoyance to many of you. TD does that for me.
July 17th, 2009 at 11:56 am
manhattanguy Says:
July 17th, 2009 at 10:54 am
Bartiromo or Burnett: Who will be No. 1 at CNBC?
http://www.marketwatch.com/story/cnbc-money-honey-bartiromo-or-burnett
reply:
———-
I think they’ll combine NASCAR with a little T&A and a morning cartoon. Something for everybody. When Jack Welch goes on to his celestial reward, they’ll probably replace him with a life sized doll that is said to have superior management skills, but he only speaks to one person on the AM team. Where’s the business news? Leave that to the guests as infomercials.
July 17th, 2009 at 12:16 pm
Onlooker @ 10:42am .. my worst fear is Disaster Capitalism .. a WW2 type theatre on USAs continent .. not far fetched with a civil war start and the rest of world disliking us and world trade needing a boost in GDP
- insurance companies off the hook because of the war clause
- green rebuild initatives from scratch in the rebuild years
- destitute cheaper homeland workforce
- a pc natiolization of sold off factories plots
- foreign WTO GDP upgrades
hence the EATR
on a local sidenote – a number of area factories sold off to foreign interests over the last decade and naturally idling down .. and a Cold Roll Reduction Mill is being dismantled and sent to Brazil and the Temper Mill to France … via write up from inside blue collar worker to “letter to editor” NewTrib 6/11/09 … is Carnivore4.0 picking up on this Mr Gates now that I webisized it
July 17th, 2009 at 12:20 pm
I just had a disturbing thought. I will give you the view from 50,000 feet, but anything similar to research would be beyond my tolerance levels.
If you take a step back and abstract the situation a little, doesn’t CNBC look an awful lot like Pee-Wee Herman’s Playhouse? While no one strong personality emerges as the central theme, the cacophony of back characters is eerily similar. As a group, these are some odd birds working together tightly.
July 17th, 2009 at 12:50 pm
@dh
I just had a disturbing thought…
“You remember Pee-Wee’s Playhouse”…jk
July 17th, 2009 at 2:39 pm
on steel export/imports from earlier referenced blue collar letter:
“I understand that foreign steel imports are restricted as long as US steel production has not reached 100% ….. So once US steel production reaches 100% (which will now be 1.2 million tons sooner) we will be abe to start importing steel made on US exported equipment.”
the letter is not online