Media Appearance: The Kudlow Report (8/11/10)
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Back on the Kudlow Report at 7:00 pm this evening to discuss the Fed, today’s big market drop, and maybe even some housing.
Here is food for thought regarding the Fed action, via (former) Dallas Fed Prez Bob McTeer:
The FOMC’s decision to limit the shrinkage of its balance sheet is modest indeed since allowing any shrinkage is, in effect, a tightening of monetary policy. They didn’t adopt easy money; just less tight money.
People argue that other things are more important in getting the economy moving again: removing the threat of major tax increases; removing the threat of major regulatory burdens, etc. Okay, but fixing those things are not an alternative to monetary measures. They are a complement. Do both. It really doesn’t matter which would be the stronger medicine.
It is important to remember that the Fed did not ease monetary policy yesterday. It acted to limit the tightening that would automatically have taken place with the run-off of mortgage backed securities. It may not be enough. We need gradual growth in the balance sheet to support gradual growth in the money supply. (emphasis added)
As always, it should be fun.
~~~
UPDATE: August 11, 2010 7:30pm
That was fun.
(I always feel like I am speaking to quickly, trying to get everything out in 30 seconds. The beauty of radio is you get time to discuss things in more details).
I’ll post the video whenever it shows up online . . . (Video is posted here)
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August 11th, 2010 at 6:13 pm
And a full hour’s notice, too
August 11th, 2010 at 6:52 pm
Gentle Ben is running out of tricks but he still needs to keep some powder dry to help his buds in the Immortal 19 when their bad mort loans become unignorable
August 11th, 2010 at 7:37 pm
OK — BR you played nicely into Kudlows desire to have an optimists (congrats on your Kudlow Nobel Prize) …
but, do you really think we are going to see a Q3/Q4 recovery rise in the economy ??? Spurred by the mid-terms ???
With the predicted Rep change over in the house and gains in the Senate – Kudlow/Hogan hope of a grid lock repeat of 80′s market growth is just that hopium. With the huge crush of the financial crisis and the overhang of de-leveraging and deflationary environment, I don’t think historical references to foresee future events will hold up.
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BR: How is a 25% drop optimistic?
Seriously, some of the comments lately have been so off the wall
August 11th, 2010 at 7:52 pm
You did a fine job Barry, as always you call it like you see it…maybe a time for better entry point to increase a long exposure in equities in the near future. Bonds are looking bubbly and with yields and mortgage rates continuing to drop (thanks to Fed intervention) it’s only a matter of time before you get some more refi activity in the housing market. If equities continue to threaten to head lower Lil’ Benskie & Co. (along with the Financial News Media) will start Pharting about (and DEMAND) Q.E. 2.0. Then there’s the November elections and the extension of (at least some) the Bush tax cuts…
In my view, despite a short term/decent sized pull back in equities, these factors would indicate stocks head higher and break out of this trading range.
That’s about the only time I watch Kudlow anymore (Mr. Goldilocks… or I guess it’s ‘Mr. Free Market Capitalist’ now) is when you give a heads up notice that you’re going to be on.
Although I did stay and watch Santelli… he’s about the only one on CNBS (WORST in business Worldwide) that’s worth a Sh*t on that channel.
August 11th, 2010 at 8:58 pm
I’m buying calls ahead of expiration.
The VIX is generally down. Gold is strong. The TED Spread is well down. The Baltic Dry Index has been trending up for quite a while, up 7.5% today.
There is a volatile upside profit to be had. A lot of money is on the side, this is a trading burp.
August 11th, 2010 at 9:32 pm
BR-
dude- got home from work @ 7:10 – turned on Kudlow- didn’t see you once-
top of the hour obviously
August 11th, 2010 at 9:47 pm
Markets in Turmoil
Airtime: Wed. Aug. 11 2010 | -0400 T) ET
Discussing Cisco’s shares slumping after hours and the market sell-off, with Arthur Hogan, Jefferies; Barry Ritholtz, Fusion IQ; Jim Lacamp, Macroportfolio Advisors and CNBC’s Herb Greenberg.
http://www.cnbc.com/id/15840232?video=1564518716&play=1
August 11th, 2010 at 11:17 pm
Hilarious,
GDP numbers without the financial “hobo unicorns” would have been negative, but we are still not close to a double dip.
The market was down on…not enough QE, too much QE, not too sure QE.
Obviously, everything and its contrary makes sense.
What the fuck is wrong with you people?
No work, not enough money for the not paid enough masses, no consuming, no busy business, all finance and no play makes population a dull population.
August 11th, 2010 at 11:41 pm
Mc Teer Said:
“People argue that other things are more important in getting the economy moving again: removing the threat of major tax increases; removing the threat of major regulatory burdens, etc. Okay, but fixing those things are not an alternative to monetary measures. They are a complement. Do both. It really doesn’t matter which would be the stronger medicine.”
—
Why do I get the feeling that some of the market drop is manipulation to make sure those Bush Tax Cuts on the Wealthy don’t expire? And, that “regulatory burdens” (i.e. making sure the weak Financial Reform just past gets even weaker?
McTeer goes on and says that those above issues are not an “alternative to monetary measure.” He says “Do Both.”
Every time Wall St. has needed something from this Administration the Market Drops. I wish I had the timetable…so this is anecdotal from memory. Reading around the Financial Sites it does seem that there’s a full out push to force the Administration to make sure those Bush Tax Cuts don’t expire because the “buzz is” from Heritage Foundation and others…that the economy is too fragile to re-tax the wealthy and that this unneccesary regulation on top of the Tax Hikes will cause major problems for a recovery.
CNBC is all over it for weeks…and Heritage guy is on C-Span, along with others mouthing off about Bush Tax Cuts…Regulation killing the economy.
It gets kind of boring after awhile because it’s so much part of a pattern that many of us have observed.
Maybe I’ve been reading too much Zero Hedge :)
August 11th, 2010 at 11:53 pm
Barry, would you please ask Larry whether the markets are tanking in anticipation of a GOP victory this Nov?
August 11th, 2010 at 11:57 pm
@takbak04
I get the feeling that the Bush Tax issue is all anyone can understand in Washington so they’ll make it an issue.
Seems like the headline should be:
Vapid Bimbo’s find sideline $30bil issue to be bi-partisan on.
Mongo for Congress:GSE’s make me head hurt, give me airtime issue. Me want votes.
August 11th, 2010 at 11:59 pm
I remember 30bil per year number as the number I may be wrong.
Feel free to correct if needed.
August 12th, 2010 at 2:31 am
The BOG’s remuneration rate @ .25% on excess reserves (interbank demand deposits – IBDDs), held at the District Reserve Banks, owned by the member banks, now exceeds the Daily Treasury Yield Curve all the way out to 1 full year.
In effect, the FED has tightened monetary policy as IORs (interest on reserves), are the functional equivalent of required reserves. I.e., an increase in the volume of outstanding un-used IBDDs (other things being equal), acts just like an increase in the volume of required reserves would; both types of reserve balances decrease the legal lending capacity of the member commercial banks (by siphoning the funds out of the commercial banking system).
Note: the Board of Governors of the Federal Reserve System (BOG) defines legal reserve requirements as: “the amount of funds that a depository institution must hold in reserve against specified deposit liabilities”. Bank reserves are held as vault cash & as District Reserve Bank deposits.
I.e., the FED has doubled the maturity distribution (based on Treasury securities), now covered under the level of the remuneration rate (in just the last couple of months).
By increasing the variety, and thus the volume, of competitive instruments and yields (vis a’ vis IORs), the FED makes it less and less likely that the member banks will want to make new loans, or purchase new investments (i.e., it is less and less likely that the money supply will grow). Note: every time a commercial bank makes a loan to, or buys securities from, the non-bank public, it initially creates an equal volume of new money.
This senario is contractionary. It belies a downward contraction, and a cumulative and reinforcing, deflationary spiral, i.e., credit destruction. It belies a full scale depression.
August 12th, 2010 at 4:13 am
Thanks for the underlining in the above excerpt. Contrary to media coverage, not tightening is not the same as turning on the spigot. Of course, the Fed move to not tighten is of little consequence right now, since the banking system has over $1tn in excess reserves. If the Fed had, say, reduced the interest rate it now pays on excess reserves, that would have been QE. It also would probably not even have been noticed by the media.
August 12th, 2010 at 4:46 am
You can discuss things in detail on television, just not American television.
Unless it’s a missing white girl, and then CNN will rabbit on about it for an hour every night for weeks.
August 12th, 2010 at 5:24 am
@TakBak04
Why do I get the feeling that some of the market drop is manipulation to make sure those Bush Tax Cuts on the Wealthy don’t expire? And, that “regulatory burdens” (i.e. making sure the weak Financial Reform just past gets even weaker?
I was thinking exactly the same thing. In these days of smoke and mirrors, the cynical (Accurate?) interpretation of everything is an entirely reasonable starting point!!
August 12th, 2010 at 5:27 am
@Drewbie
You can discuss things in detail on television, just not American television.
It’s tailored to local tastes and, in general the US does have a very short attention span?
CNBC Europe actaully has very good discussions with a lot more audience participation, which provides balance and some very good questions.
August 12th, 2010 at 5:47 am
Barry – Your view that a 25% correction from the April high being possible is an eye opener. That takes the SP 500 down to 914 or simply put low 900s. Did I hear you correctly on Kudlow tonight?
August 12th, 2010 at 6:02 am
Milt, you did hear me correctly.
The odds are we will continue to correct as the summer rally has probably played out its course. The secular Bear chart I showed August ’09 helps explain why the odds favor a 25% (+/-) correction.
GDP expectations are too high (still) and the Fed is finally coming around to this realization. I would expect a retest of the recent June lows — and possibly a break of those lows.
The most positive market factor is the historical election cycle bullishness. A large year end rally coincides with this.
Note that we moved to 100% cash on May 5th, and since late June, we have added long exposure that was between 40% long, 10% short, 50% cash late June/early July. By the end of last month, we had hit upside targets on some names and been stopped out of others, and we are now at 85% cash . . .
August 12th, 2010 at 6:38 am
BR: Nice job.
Too bad Larry can be such a schmuck sometimes interjecting personal views. I’m not watching to hear his; he ain’t trader. Is it a CNBC policy that they always have to have people with opposing views on at the same time (unless it’s a permabull) so they can argue instead of having a rational conversation with one person on why he thinks the way he does? You don’t get drawn into it, but sometimes it looks like the Jerry Springer show.
Although I often hate the guests, morning Bloomberg radio does a good job of asking intelligent questions and letting the guests talk.
August 12th, 2010 at 7:31 am
BR: nice, succinct explanations. to me, the scariest factor is the Obama admin. seems to believe that 9.5 percent unenjoyment has become an acceptable, while not necessarily ideal, plateau. this to me seems an unprecedented attitude since WWII. the beatings will continue until morale improves? thoughts anyone?
August 12th, 2010 at 10:58 am
my comment was more about Kudlows interpretation of what you said, he zoned in on your comment about the economy (Not Market) recovering in Q4. He either did not hear or want to delve into the 25% pullback from April highs statement.
August 12th, 2010 at 11:23 am
br – kudlow – ugh.
August 12th, 2010 at 9:24 pm
Reasonable projection of 2011 GAAP (As Reported) earnings (Operating earnings or, earnings before all the sh*t) is about USD 74. Operating earnings are only used to calculate P/E multiples by “Stock salesmen on CNBC)
Markets normally bottom at single digit P/E’s but let’e be charitable and say it will bottom at 10X GAAP earnings. Now, where is my calculator……………………..