Excerpts from Dr. Enzio von Pfeil's October 13, 2009, appearance on CNBC Asia:

Asia markets outlook

Excerpts from Dr. Enzio von Pfeil's September 17, 2009, appearance on CNBC Asia:

News of the day

Excerpts from Dr. Enzio von Pfeil's July 31, 2009, appearance on CNBC CNBC Worldwide Exchange:

1. US markets wrap for the week - what do you think about earnings quality?

Excerpts from Dr. Enzio von Pfeil's July 15, 2009, appearance on CNBC Asia Cash Flow :

US data PPI and Retail numbers were released overnight - how do they match your outlook for the economic recovery?

Excerpts from Dr. Enzio von Pfeil's July 7, 2009, appearance on CNBC Hong Kong:

What are you expecting for the G8 meeting? Will there be a debate on USD as a reserve currency?

Excerpts from Dr. Enzio von Pfeil's June 18, 2009, appearance on CNBC Asia:

1. Market check - are we seeing the end of the rally?

Excerpts from Dr. Enzio von Pfeil's May 25, 2009, appearance on CNBC Asia:

1) Discuss news flow from the U.S over the weekend and the outlook for the U.S. economy and dollar.

Excerpts from Dr. Enzio von Pfeil's May 7, 2009, appearance on CNBC Asia:

Global markets have all rebounded. The MSCI Asia Pacific Index rallied by 29% in two months and European stocks market valuations reached the highest level in more than four years. What's driving the gains, and are they overdone? How much more upside can we expect?

This week should see preliminary results on the US Stress tests for 19 banks. What is the view from Asia?

(I have taken some of my views below from today's Bloomberg ("U.S. Officials Signal No Need for More TARP Funds From Congress", by Timothy Homan and Robert Schmidt.)

Excerpts from Dr. Enzio von Pfeil's March 2, 2009 appearance on CNBC Cash Flow:

1) What is your near term view on where the U.S. dollar and markets are heading?

Excerpts from Dr. Enzio von Pfeil's January 29, 2009 appearance on CNBC Asia:

THE GLOBAL ECONOMIC TIME™ AS THE STRATEGY BACKDROP

Excerpts from Dr. Enzio von Pfeil's January 21, 2009 appearance on CNBC Cash Flow:

1. Comment on Barack Obama's inauguration speech and the immediate tasks that the new administration is likely to undertake. What are some of the urgent issues that must be tackled?
   • He will shine as a speaker.
   • His key issue is to tackle the unemployment problem.
   • But he also is going to have to placate irate tax payers about the fat bonuses being paid the bankers out of taxpayer money.
2. What is your outlook for the U.S. economy, and discuss any concerns that you may have about what's being done to prevent the U.S. economy from worsening.
   
   • Whilst what Obama is trying is commendable, you cannot skip cycles: you cannot move from autumn to spring without going through the healthy, rejuvenating effects of winter. This is the time when that which is meant to die does die, so that when spring arrives, the healthy can get on with growing.
   • What this means in plain talk is that the overall budget deficit of about $4 trillion (if you include the Fed’s $2 trillion) is going to weigh on markets: once things stabilize, global investors will worry about overpriced Treasury bonds and thus about their dollar holdings.
   • Indeed, this is why we have telling our website subscribers to short government bonds; our advice is up by 25% since the market peak of October 2007, very much for this reason.
3. What Obama means for Asia in terms of trade, economy?
   • If you accept my assessment that you cannot skip cycles, then Asia cannot look to America for the stimulus.
   • Instead, this is a golden opportunity for Asian governments to figure out how to stimulate their own, domestic demand.
4. Discuss expectations for the slew of economic data due out from China, including Q4 GDP. Also comment on China's growth outlook.
   • Not much of a change in trend: output and prices down, (reported) employment down.
   • There are some investors thinking that China may “lead the pack” and recover faster than others (see next): I hardly think so.
   • The RMB 4 trillion stimulus package obviously is not enough – otherwise, why do they keep introducing supplementary packages?
5. Is China going to be the first big economy to recover?
   • Hardly.
   • The key reason that it cannot recover quickly is that there is nothing “to recover”: with unemployment rising, people will not spend, so any stimuli along the lines of making housing more affordable are simply missing the point.
   • A quick solution for China, for instance, would be to introduce universal, free health insurance: that would remove the yoke of having to save in case of illness.
6. What are your thoughts on the U.S.- China relations under Obama?
   • Part of Obama’s job is to disappoint people.
   • Whilst he needs China for geo-political reasons (Korea, financing the US budget deficit, etc), he needs local, U.S. constituents most.
   • Indeed, in the press we read that he was more protectionist during the campaign than McCain was.
   • In my most recent book, Trade Myths, I warn of rising U.S. as well as Chinese protectionism.
   • So you will see co-operation in geo-political issues like Korea, but protectionist rhetoric in trade issues on both sides of the Pacific.

Excerpts from Dr. Enzio von Pfeil's January 16, 2008, appearance on Bloomberg Television Deutschland:

Global

1. Where are we in the market cycle?
   • The global Economic Time® is remains characterized by an excess demand for money and by an excess supply of goods.
   • In 4Q08 markets finally accepted the excess demand for money story: banks just won’t lend.
   • Now markets are accepting the excess supply of goods side of the Economic Clock®, namely that with cash flows drying-up, people are being fired in order to ease cash flows.
2. How long will this phase of the Economic Time last?
   • Probably through 2010, as when banks don’t want to lend, this is a profits – and not a policy – decision.
   • Indeed, in a recent piece for clients on the stock market and the lending cycle, my research shows that we have witnessed two major “down legs” in America’s lending to the real estate sector: 1978 and 1987. My pattern prediction given to our subscribers is that lending to the US real estate sector will bottom earliest in 4Q2011.
3. But what about markets?
   • My guess is that they will remain in “L” at least until the end of 2009.
   • This means that they will flop around like a fish on a hot cement sidewalk, directionless.
   • Our subscribers are up by nearly 16% vs. the market plunge of 40% since October 2007...
   • The key driver will not be profits, but will be collusion between hedge funds and props books: they will agree to drive markets, sectors and stocks in one direction.
   • Finally, expect bedlam in the U.S. Treasury bond market. Clients recently read my note on why we are shorting U.S. government bonds….

China

1. What do you make of the chances of success of the RMB 4 trillion package?
   • Not very much.
   • China is not governable like the U.S., Japan or Europe is: “matrix muddle” prevails, so nobody is “really” in charge.
   • This is why Beijing keeps coming up with new packages in order to stimulate domestic demand, now that it is accepted that the export engine will remain dead for a long time.
   • Of particular import is the non-effect of the stimulus package on the financial sector: Beijing and local governments will force banks to lend more money, so their profits have to worsen. Meanwhile, foreigners are pulling out of their stakes in Chinese banks – either because they smell a rat on account of China’s worsening Economic Time, or because they need to raise cash in order to plug other holes.
2. Any implications of what the Economic Time means for the direction of the RMB?
   • Recently we issued some research on the observation that the RMB’s “free lunch” has been over with for a good half year.
   • All politics are local, so whilst you will see protectionist screams rise in America, so will they in China. Thus, Beijing will no longer have the luxury of accommodating U.S. politicians by allowing the RMB to keep rising..

Excepts from Dr. Enzio von Pfeil's December 19, 2008 appearance on Bloomberg Television Deutschland:

Global

1. How do you rate the Fed Funds slash?
   
   • Now the Fed truly has run out of policy options.
   • Watch the place go into Japanese-style quantitative easing, which has gotten Japan precisely nowhere.
   • My concern is that the Fed is morphing into the world’s shabbiest hedge fund, carrying all of the responsibility but holding junk.
2. Are there any broader concerns that you have regarding the current meltdown?
   
   • Yes: rising social unrest.
   • This will be fueled by a lethal combination of:
     • Job losses,
     • The rich walking away with ill-gotten gains, e.g. some of America’s corporate “titans” being bailed out by the government and still collecting handsome pay packets,
     • The internet easing the publicity of this growing income disparity, and
     • A worsening global Economic Time™.
   • If too few have too much, and too many have too little, revolutions arise. In today’s world, I am afraid that Mumbai is a crass example of the poor attacking the rich.
   • The only “way out” is to enhance education policy, particularly as regards vocational education.

Asia

1. Beijing is easing the property market: will this help the economy?
   
   • It cannot: if people are about to lose their jobs, they are hardly in the mood to buy a new home!
   • Besides, even for existing home owners, a cut in interest rates cannot increase their job security.
2. Do you have any suggestion for how to stimulate private consumption quickly and effectively?
   
   • The easiest would be to introduce universal health care for free.
   • That would at least remove peoples’ fears of having to pay in case they get sick.
   • This, in turn, would unleash huge amounts of precautionary savings.
3. Hong Kong: is the monetary easing of the Fed or of the local Central Bank, the Monetary Authority, helping?
   
   • Not in the least:
     • First, banks are not reducing their lending rates, and
     • If anything, they are reducing their deposit rates, making savings even less attractive. But that won’t stimulate demand because people are income-insecure anyway.

Excerpts from Dr. Enzio von Pfeil's December 11, 2008 appearance on CNBC Worldwide Exchange:

1. Governments are stepping up measures to ward off the worst financial crisis. How effective are these measures?
   • From a structural perspective, they can be only of limited use. As Robert Samuelson posited in the South China Morning Post, “Private behaviour is neutralizing public policy.” Indeed, The Economist’s illustrious editor, Walter Bagehot (1826-1877) arrived at the same conclusion in London’s City when he said that any money given to Central Banks was not finding its way into the private sector.
   • Thus, the current Economic Time™ is characterized by an excess demand of money. But the reason that Central Banks cannot create an excess supply of money is because commercial banks are the ones who refuse to lend - only, once they re-gain confidence can an excess supply of money be created.
   • So, current measures, are at best, bail-outs. Sadly, it seems as if politicians are privatizing the gains and socializing the losses in areas such as the US car and banking industries. Thus, I am not criticizing governments for acting; it’s just that their room for response is limited.
2. How deep are you expecting the recession to be, and what will be the impact on financial markets?
   • How long is a piece of string?
   • My guess is that the world is going to “L” and will remain there until at least the end of 2009.
   • Indeed, I have likened the current state of the market to that of a fish flopping around on a hot cement sidewalk (as opposed to a cat on a hot tin roof).
   • Leery lenders won’t budge for a long time.
3. When do you see the markets bottoming out, how much more downside is there?
   • Expect to see another 30 – 50% down, once earnings start hitting and analysts have to revise down their rocketing price earnings ratios.
4. What are you expecting from the FOMC meeting next week? A zero rate policy? Reality?
   • More quantitative easing from Bernanke-san.
   • As Robert Samuelson points out in said editorial today, “…the Fed’s new loans and credits easily exceed $1 trillion.”
5. What is your investment strategy, and some trends and themes for 2009?
   • Please see below.
   • The global Economic Clock™ will keep showing an excess demand for money and thus an excess supply of goods.
6. Are there any other topics you'd like to discuss?
   • The current bailout packages are creating scary consequences down the road.
     • On the fiscal side, the US federal budget deficit will balloon.
     • On the monetary side, as Samuelson points out in today’s editorial, the Fed has moved way beyond being a lender of last resort. Indeed, now it is a hedge fund with a) the most toxic assets and b) nobody who knows how to run this hedge fund!

Excerpts from Dr. Enzio von Pfeil's December 5, 2008 appearance on Bloomberg Television Deutschland:

1. Global: Can US measures "save" American jobs and thus the market?

   • No.
   • The reason is that Washington is bailing out everyone who is vital to campaign finance - but not investigating them nor those whom they paid to lie.
   • This instills no confidence in investors.
2. China: How do you rate Wednesday's recovery measures introduced by Beijing?

   • They are a valiant attempt, but China's problems centre on governability. Beijing is not really in charge of its provinces.
   • As everywhere else, the key move is to give the policy banks RMB 100bn for lending. This lending is done under government guidelines. But, if this lending, as in America, is a glorified bail out, then don't expect any growth multipliers to be created.
   • Also, Beijing, yet again, is cutting reserve requirements and interest rates. But, if banks don't want to lend, they won't.
3. Japan: What about its policy moves?

   • It's the same story again in Japan: quantitative easing, iteration 17.
   • The fact is that banks don't want to lend.
4. So what is your overall assessment of policy measures?

   • You cannot "skip" a cycle. Winter, when there is an excess demand for money and thus an excess supply of goods, performs a vital function: it kills off that which cannot survive.
   • But as with climate change, this cycle is getting derailed by vote-hungry politicians who insist on bailing out that which should go under.
   • That just prolongs the misery and drags more of the healthy down with it.

Excerpts from Dr. Enzio von Pfeil's November 26, 2008 appearance on CNBC Asia Cash Flow:

If America's executives are leaving on private jets (See: America's Economy: Leaving on a Jet Plane), China's leaders are stuck on the runway...

Excerpts from Dr. Enzio von Pfeil's Novemer 26, 2008 appearance on CNBC Cash Flow:

1. Discuss expectations and outlook for the U.S. economy, on the back the economic data due this week.
   • America’s consumers as well as investment banks are de-leveraging.
   • This means that banks won’t lend, or in the jargon of our Economic Clock®, there is an excess demand for money.
   • That will intensify America’s excess supply of goods.
   • The lame duck Congress, at best, will pass an extension of unemployment benefits. (The Economist, 22/11/08: "...serious debate about a broader stimulus has been put off until the new president and legislature take over in January". Congress re-convenes on 6th January and Obama takes office on 20th January....)
2. How long will it take for the U.S. economy to recover?
   • My guess is that the consumer will see an improving Economic Time® on the horizon in the first half of 2010.
3. What are your views on Obama's top economic team, the transition of power in Washington and Obama's plans to steer the U.S. economy out of the doldrums?
   • Obama’s economic team: Timothy Geithner is fabulous as the head of Treasury, as he understands how it works, is experienced in disaster management, AND has an international upbringing.
   • The transition to power in Washington:
     
     • He inherits two wars and the worst economic crisis since the Depression, according to The Economist on 15th November 2008 (TE 15/11/08).
     • According to the same magazine, he is a good organizer. He has been working on this transition since the summer with John Podesta, a former White House Chief of Staff to Bill Clinton.
     • He is handling this in a very focused, open-minded and positive manner. The great thing is that America has a very deep pool of talented experience to draw upon.
     • For his transition, according to TE 15/11/08, he is adopting Reagan's model of transition: he, too, understood that the the Administration's real engine of power is in its White House staff - rather than in the cabinet. Besides, Obama, too, wants to hit the ground running.
     • His key challenge is manage expectations. His buzzword was "change" - but by appointing previous war horses such as Larry Summers, John Podesta, Kerry and Gore, how much room for "change" is he really creating?
   • Obama cannot do that much to get the economy going, however:
     • The chickens of irresponsibility will keep coming home to roost.
     • Another impediment is that individual states, on the whole, may not run state budget deficits, so their room for fiscal maneuvering is limited.
     • Crucially, even if the basics of the Economic Clock® keep ticking, there are some important caveats as to its structure that the investor had best be aware of.
     • There also are structural reasons why Obama's "plans" cannot "steer" the economy out of its doldrums, for instance:
       
       • you cannot “skip a cycle”. Unless you are jetting to totally different hemispheres, nature doesn't allow you to just switch from summer to spring without going through winter first!
     • Besides, never forget that certain investment banks have vested interests in driving the market, and thus the economy, down...
4. What are your views on the U.S. government's move to save Citi (C), and the implications for the U.S. financial sector?
   • This is really where the chickens of irresponsibility come home to roost. Compare the executive pay and perks with the money that these guys have lost, and the whole thing becomes an acerbic joke. I wonder how many private jets Citigroup has? More than the "Three Musketeers" festooned as running "VIP" car companies? Maybe the $306 bn Treasury injection will help to upgrade their fleet of luxury cars and jets?
   • Citi just moved itself into the “too big to fail” league, as did the Club that got the USD 700 bn bailout funds, and as did the "big 3" automakers.
   • But, in most instances, executive pay levels have remained the same.
   • Implications for the US financial sector:
     1. It seems like “why me” will rear its head, as in, "why did 'they' let Lehman go under but not Citibank?"
     2. I hope that tax payers won’t stand by idly to watch their banking friends’ compensation “protected” by the US government!
     3. Having said this, it is good that Washington is doing something; thus, it is stopping the rot.
5. What should investors do in the present investment environment?
   • Fear has to overtake greed.
   • In God we trust, but cash is better!
   • Beware of holding time deposits at your “trusted” bank.
6. Are there other issues or concerns that you would like to highlight?
   • How China could influence the US economy. There are two routes:
     
     1. First, via interest rates. China could stop buying so much Treasury debt. This would push US long bond yields up.
     2. Second, via the Chinese operations of US MNCs.
   • The chickens of irresponsibility are coming home to roost
   • So where were all of today’s “smart guys” nine months ago? Who was foretelling a global slowdown?
     1. Where were the rating agencies, the regulators, Congress, indeed the IMF, etc.?
     2. What about the lies propagated by the chief economists and chief strategists of some major investment banks – propelled by what their gods were telling them to say?
     3. Now they all “authoritatively” talk of the meltdown – which makes one suspicious of just how conflicted all of this “research” is.
     4. In this age of the internet, it is striking just how “mental independence”, too, has vanished down the drain of cyberspace…

Excerpts from Dr. Enzio von Pfeil's November 18, 2008, appearance on CNBC Asia, Worldwide Exchange:

1. Asian economies are in technical recession - how does that impact your investment strategy and asset allocation?
   • Investors have discounted this mess for the past six months.
   • Thus, I have no major changes to my investment strategy/asset allocation.
2. What are some investment themes up to the first half of 2009?
   • The next bubbles that have to burst are:
     • Long-dated bonds, on account of the rising US and other budget deficits, and
     • The dollar itself.
3. Which markets and sectors do you especially like?
   
   • No markets, as the global Economic Time™ is virtually the same everywhere: the chickens of irresponsibility are coming home to roost.
   • If one must be in markets, then invest in “vital” sectors like consumer staples, food, healthcare. At least, they won’t get hurt as much because people still have to have these products and services.
4. Current earnings so far - what's your outlook going forward?
   • Earnings will go down even more. The Economic Clock™ is clanging for:
     
     • Excess demand for money, and
     • Excess supply of goods.
   • Under such a scenario, it is impossible for corporate earnings to improve. Indeed, “layoffs” news has just reached our shores in Hong Kong.
   • This implies that neither turnover nor margins can rise.
5. Is there anything else you may want to highlight?
   • Obama’s influence on China and vice versa. It seems like Obama will have to go protectionist, as many of his voters expect this. Meanwhile, Chinese officials will start taking their wrath out on the local operations of U.S. multinationals – something which my most recent book, Trade Myths: Globalization and the Trade Balance Fallacy, warns of.
   • Bond blow out. Seems like markets are not quite aware of the extent of public debt that is being created now that the chickens of irresponsibility have come home to roost.
   • Cost push stagflation. We have been bleating on about this since Spring 2006, so at some point this will occur. This will hit particularly those countries/areas whose currencies have fallen the most against the US dollar, e.g. Euroland (rapidly morphing into Neuroland).

Excerpts from Dr. Enzio von Pfeil's November 10, 2008, appearance on CNBC Asia's Cash Flow:

1. What are your reactions to the jobs data out on Friday in the US?
   • Last week, 481,000 workers filed jobless claims – so the number of people staying on benefit rolls was the most since February, 1983.
   • All of this has to do with the worsening global Economic Time™: the excess demand for money is intensifying an excess supply of goods – so why hire? More importantly, why not fire?
   • Behind this is that America’s earnings outlook remains bleak: S&P 500-member companies have reported third quarter contractions of over nine percent, and analysts guess that for the full year, earnings will contract by eight percent. Based on what the Economic Clock™ is suggesting, “eighteen” is more likely than “eight” percent earnings contraction. After all, when you have an excess supply of goods, margins as well as turnover wilt, so what else can drive profits?
2. What are Obama's economic policies, and will they help the US combat the slowdown?
   • At least he has a fantastically deep pool of experienced talent to draw upon (e.g. Messrs Summers, Volcker, and Geithner, to name but a few) as well as leaving the very astute and erudite Dr. Bernanke at the Fed.
   • Nobody can change cycles: winter is a very useful cycle in that during it, the bad stuff is cleaned out and paves the way for Spring. This is how we view the current cycle, the Economic Time™ (see www.EconomicClock.com) in our jargon. It is characterized by an
     
     1. excess demand for money (banks won’t lend), and thus an
     2. excess supply of goods.
   • All that Pres. Obama can do is to alleviate/lessen/anaesthetize the pain: he cannot “skip” this part of the cycle. Reason: it is the commercial banks - NOT the Central Banks – that are creating an excess demand for money. They are regulating themselves and thus are choosing not to lend. That choice is based on profitability, and will take a long time to undergo transformation. Meanwhile, when Central Banks change policy they are driven by policy – NOT by profits – and thus they can choose to alter policy at one board meeting. Beware of holding money at your bank: time deposits are risky and the very fewest of bankers will have given you the full story about how unsafe your deposits and other "assets" with the bank really are...
   • I am afraid that he can do little to stop cost-push stagflation, which we identified “in the coming” back in Spring of 2006. Nor can he stem a spike in bond yields.
3. Obama made comments about China being a currency manipulator. How will that affect relations?
   • This is where things get truly dangerous: he must manage expectations.
   • My latest and very short book, Trade Myths: Globalization and the Trade Balance Fallacy (see www.TradeMyths.com), is designed to counter such a myth, namely that only exchange rates drive trade balances. Indeed, if this were the case, why do Germany and Japan – with every-strengthening currencies – have growing trade surpluses, while America, with an ever-weakening currency – has a swelling trade deficit?
   • Thus, his argument is misplaced and dangerous.
   • He would be wiser to focus on praising the successes of America’s Multinationals operating abroad: they not only are giving America a global trade surplus of nearly USD 3 TRILLION. If Obama uses this cheap rhetoric that China has to stop “manipulating” her currency, then there is very little to prevent Chinese officials, at a grass roots level, from impeding the operations of those American multinationals operating so successfully abroad.
   • Already America has fanned China’s ire by adamantly continuing to sell arms to Taiwan – just as she is angering Russia with the construction of her missile defence shield in the Czech Republic.
     • of course, China has picked precisely this moment to send her Taiwan envoy to Taipei to deepen ties between both places, precisely where the US is in policy limbo.
4. What about a more protectionist America?
   • This is precisely what happens – not only in America – when the Economic Time™ worsens: instead of looking at their own domestic failures such as failed education and tax policies, politicians anywhere chase the cheap vote by blaming the “bad” foreigner.
   • In my book, Trade Myths, I counter this by including the very successful roles of multinationals’ overseas operations – and show that America has a global trade surplus while China has a global trade deficit.
   • Obama has to manage expectations, and I am afraid that despite all of his “it’s time for a change” hype, this issue of trade, too, will be painted with lipstick – but remain a pig.
5. What is your reaction to all the interest rate cuts? Are they helping? Needed? Are we on the right track in tackling the credit crunch?
   • These are like ice water drunken after a night of heavy drinking: they only alleviate the pain, but they cannot cure anything.
   • The reason is that greedy banks got so carried away that now that they have swung from greed to fear.
   • The good news is that they are regulating themselves; the bad news is that this creates an excess demand for money, which in turn intensifies an excess supply of goods. The chickens of irresponsibility have come home to roost.
   • Stagflation, driving by cost-push inflation, is on the way. There are various sectors to be aware of.
   • So, lower rates only alleviate the pain, but they are not a sufficient reason for banks to resume lending.
   • Faced with lower turnover (by lending less), they now are supporting margins by not passing lower interest rates on to the consumer. Indeed, crazily enough out here in Hong Kong, banks are actually raising their mortgage rates, even though their funding costs are falling.