Media Appearance: Kudlow & Company (7/26/07)

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Its the regular 5 pm appearance on Kudlow tonite on CNBC:

The discussion will cover today’s market schmeissing, the oil trade, and yield collapse.  Other things worth noting:

- Financials — 22% of the S&P500 — have been getting just crushed.

- Goldman Sachs (GS) is down ~20% from its peak last month

- Defensive rotation to big caps is well underway.

- NYSE Up Down volume earlier today was 1.9 Billion (down) to 55 million (up)

The Dow is off 4.6% from its recent high last week, while the S&P and the Nasdaq are off 5.6% — but the Russell 2000 is off ~9% – a huge differential.

To say the least, it should be interesting.

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Kansas City Shadow Fed / Maine Fishing Trip Recap

I am back home, rested and refreshed after a wonderful few days on the lakes of Maine (and a grueling weather impaired return trip).

I wanted to give y’all a recap of the "Kansas City Shadow Fed Meeting" up in Grand Stream Lake, Maine. This is an invitation only  gathering that David Kotok of Cumberland Advisors has been running for the past few years. We all stayed at Leen’s Lodge on Grand Lake Stream, ME. Economists, strategists, fund managers, Fed employees, traders, journalists all mingle on the water and in the lodge. The participant who traveled the furthest came from Chile. A certain Scotsman regaled us with tales in that charming brogue, frequently punctuated with exclamations of "Crrrappp!" and "Foook!"

The entire event was under "Chatham House Rule" — meaning, I can not quote anyone by name or tell you which economist got drunk and danced until midnight (but one did).

But I can say that this is a very fine group of folk. The weekend was filled with good conversation, lots of wine, fine cigars, too much scotch, and outstanding fishing. we fished all three days — it rained on Friday, cleared on Saturday, was gorgeous on Sunday. I caught more freshwater fish than I ever have (and I spent the summers of my youth fishing in upstate New York). My canoe mate was hedge fund manager Scott Frew. Most days we pulled in 30-40+ fish — everything from Bass to Pickerel to the especially delicious White Perch. We released most of the Bass, and ate most of the Perch. On my last cast of the weekend, I pulled in the biggest freshwater fish I have ever caught — a fat 19" Bass that must have weighed 4 – 5 pound. Simply outstanding.

The weekend’s second biggest highlight — the first being that 19-incher — was the Saturday evening betting. Wagers are made by the group on S&P, 10 year, Fed Funds, Oil, Gold, Dollar/Euro, and CPI exactly one year hence. I made all bets, except CPI, choosing to boycott any BLS data. It was lots of fun.

David and I started an interesting side bet on the price of oil — over/under $66 — which attracted a lot of attention, and quite a few participants.

Here’s a bit of quirkiness: My outlook on the US economy was probably the most bearish of the entire group; at the same time, I probably had the most fully invested investment posture in terms of our managed accounts versus the rest of the fund managers. Kinda weird . . .

A few other interesting items worth relating:

Economics: The general consensus seems to be that the economy is middling, with some expecting it to slow further, and a few of the economists expecting a 2H re-acceleration. No one really thinks housing has bottomed, and I got the sense that I was the most moderate person in terms of how much further real estate prices will fall.

Politics: An interesting split between the two most esteemed political observers in the group: Both expected Mitt Romney to be the GOP nominee, while Obama/Clinton as the Dem nominee.

Markets: There was general caution amongst the group, with the expectation that a 5% correction is very probable. The range of other bets covered whether the markets run much further or get hit much harder  in the future.

The Fed: Likely to be on hold for the foreseeable future. The inside line is that Bernanke is a much bigger inflation hawk than Greenspan ever was. 

BLS: Clear consensus is there is no vast conspiracy manipulating there data. They have models, all models are biased, therefore their model is biased. I was surprised to hear a very experienced, highly placed participant mention in passing that he thought the Fed paid little attention to BLS data. Rather interesting.

If you have never spent an afternoon gently rocking in a small canoe on an northern glacial-formed lake, surrounded by pristine forests, with Loons crying in the distance as Bald Eagles wheel in the skies overhead, I highly recommend it.

Bottom line is that I expect to be back in Maine next summer . . .

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Category: Commodities, Economy, Markets, Psychology