The Art of Investing: Forbes

A few weeks ago (May 16, 2006), I did an interview with Bob Lenzner, National Editor of Forbes. (He calls me one of the "Grizzliest forecasters" out there).

If you don’t know him, Lenzner is old school. He is not the typical TV interviewer. He is a crusty old timer who’s seen it all and asks tough smart questions.  He has no patience for bullshit. He sees through all the spin and calls it as he sees it. Guys like this are too few and far between.

Anyway, here’s a 3 parter where we round up the usual suspects.

Overview (text)



Part I: Awaiting The Sell-Off
(why do I always look stoned in these clips?)


Part II: Playing The Plunge


Part III: Bearish on Big Cap Tech



Note: Some of the video is glitchy; I had to reload the web pages to get the video to load, or launch it separately in Real Player.


StreetTalk With Bob Lenzner

Money & Investing
Robert Lenzner and Rebecca Eskreis, 05.29.06, 6:00 AM ET

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What's been said:

Discussions found on the web:
  1. Bynocerus commented on Jun 5

    Yet again, I’m reminded of why I’m drawn to this site. The discussion of COP and BP sounded like what I’ve been telling clients for the last year. If I can choose between big oil companies @8-10x earnings or big cap tech @ an average of nearly 40x earnings, which one do you think I’m gonna choose?

    Barry, one of the things I’m especially curious about is the finer points of how you define a trend.

  2. dave commented on Jun 5

    Barry, Which of the indexes do you see as most vulnerable to a slowdown in the economy? Dave

  3. Cullen commented on Jun 5

    6,800? Damn. That’s not bearish, that’s downright catastrophic.

    I knew you were bearish, but that’s pretty steep. I think it would take a 9/11 or LTCM to create such a drop in the markets in the next 7 months. Perhaps both at the same time….

  4. emd commented on Jun 5

    Wow… that was a fantastic interview. That is what I wish more of your appearances on CNBC would be like (but I understand the difference between Kudlow’s entertainment and strict information of Lenzner).

    By the way, this was my first exposure to Lenzner and i’m impressed. I love his no BS questioning. Extremely informative.

    Thank you for sharing. I enjoyed it.

  5. Mark commented on Jun 5

    Good timing to put this up! Looking “bearish” out there today!

  6. B commented on Jun 5

    The biggest announcement of last week was possibly……?

    With Bernanke slamming commodities this afternoon, the markets are going to get even more wooly. Margin requirements up across the board and price limits out the door. Time to buckle up.

  7. Mark commented on Jun 5


    Look over on Cara’s site to see the theory that it’s so that the big boys can accumulate gold and take it way up. I’m with you. I think the Fed has to take commodities down as it is at the end of its rope with rates.

  8. Joel commented on Jun 5

    Very informative. Probably one of the best blog posts i’ve seen in a while. Loved the videos.

  9. Jim commented on Jun 5

    Cheerleader Bob Pisana called today’s action a modest decline. ( Dow down 140 something ) What a joke this guy is.

  10. Mark commented on Jun 5

    Mr. Ritholtz-

    We are writing again to urge your adherence to the product placement guidelines in Section III-B of the Exclusive Marketing Agreement between you, dba Ritholtz Fashionwear Inc, and The Sweater Marketing Group LLC. Guidelines call for not less than four separate “showings” of The Sweater in settings such as that provided by Mr. Kudlow’s show or that of your recent interviewer Mr. Lenzner, in the period ending July1, 2006. Your earliest response to our concerns would be appreciated.


    Mark McCormack, President
    The Sweater Marketing Group LLC

  11. B commented on Jun 5

    You mean this Bill Cara guy? Who is he? I did a Google and found this commentary.

    I guess it is plausible but I tend to discount his commentary. It would be more plausible if the Comex just removed limits on gold.

    I would surmise it is for the opposite reasons he discusses. I have no proof but the opposite argument is more logical. The Comex raised margin requirements across the board. Not just gold. That is typically to reduce speculation. I’d expect the same actions to follow in international commodities markets as Bernanke talked to both his EU and Tokyo equivalent today about this topic.

    So, if you take that along with price limit removals, that implies they are making it more difficult to buy commodities and opening up volatility.

    That would mean possibly wild swings in all commodities coupled with increased money to required to actually trade each contract. To me that is an attempt to shake speculators out of commodities and return the market to producers and consumers. Obviously, I have no more insight other than we’ve got government officials and central bankers trying to come down on the commodities parade and this action supports their efforts.

  12. Bynocerus commented on Jun 5

    At the risk of being labeled a sycophant by B, Mr. Pisana is absolutely right. Hop in the way back machine with me to 2000 when the Naz was up or down 12% in one day and then tell me a 1-2% decline is a big deal. Or down 30% in three weeks (actually, I remember that fondly, given my short position and my crappy YTD performance at the time, but I digress).

    Every time I see a day like today I wonder if Barry has made a pact with the devil to predict the future. This market looks EXACTLY like 1973, when we’d get a bunch of down days interspersed with a little hope here and there for the bulls. Nothing big, nothing remarkable, just steady, unrelenting selling. I STILL think we’ll get a very powerful rally sometime this month that eventually leads us to new highs, but I’m STILL 100% cash (and kicking myself for exiting those short positions last week – stupid discipline).

  13. Mark commented on Jun 5


    I should have supplied you with a direct link so as not to make you work for it. He is a very widely read blogger [ED: Not really; see this Long term trading orientation. Sorry.

    Yes, that sounds like the playbook. First raise margins. That doesn’t seem to have worked well enough. Then raise them again. Hmmm. How about a CB-inspired raid? Still not working? Okay then, then let’s remove limits and put the Fear of God in them. If they don’t remove themselves from the sandbox after that little warning, then let’s yank them out. Seems logical to me.

  14. paul commented on Jun 5

    Excellent – many thanks. I was never impressed by Kudlow, who seems to excel at cutting people off right when they’re getting to the meat of their argument.

    Interesting about VIX.

    re: looking stoned: have you been listening to Afroman’s album _The Good Times_?

  15. B commented on Jun 5

    sycophant! :)

    so, is it really the 70s or the 20s or a twist of both? only time will tell. it is highly correlated to both and actually both were similar to a point then the 20s broke trend. there’s a fine line between inflation and deflation and the same imbalances lead to both. pick your poison but neither housing nor wage inflation nor long rates are responding similarly to the 1970s…..yet or maybe never. if they don’t we might need to look at the 20s/30s. because they are POSSIBLY setting up to respond similarly to the 20s/30s and macroeconomic events globally are supporting it much more tightly as well. we just have to see.

    a dirty little secret. we also had two bubbles in the 20s. 1921 and 1929. Today, two bubbles. 2000 and 2006/7. (hard assets and emerging markets this cycle.) cause of the 1929 bubble? similar circumstances in response to the 1921 bubble and the 2000 bubble.

    I keep harping on it but the worry is paradox of thrift. A self fulfilling deflationary cycle caused by the American consumer is what scares me the most.

    Let’s hope we don’t repeat either and have a rosier future that starts after a cleansing this year. IMO it’s all about housing.

  16. Alaskan Pete commented on Jun 5

    Barry asks: “why do I always look stoned in these clips?”

    Pete responds: Probably has something to do with the 4 bong rips of NL5 x Blueberry in the apt before you got on the train.

    BR responds: Hmmmm, NL5 blueberry . . .

  17. Nomen Nescio commented on Jun 5

    Well Barry I thought you were smart but your comment that Americans will adapt to $5.00 gas because the Europeans have been paying that for years is, how do I put it nicely, DUMB.

    Europeans do not have the same degree of suburban sprawl as we do and they have an excellent mass transit system both within metropolitan areas and between cities.

    If $5.00 gas hits during a republican administration, the Red States will riot and there will be serious social dislocation. On the other hand, NY City will hardly blink.

    The country simply isn’t ready to deal with scarce, expensive gasoline.

    Also, Crude oil is an input to lots of industrial processes – can you imagine the runaway inflation and supply shortages that would result from crude oil supply disruptions ?

  18. Mark commented on Jun 5

    May as well erase the whole Dow rally in one day, not?

  19. Bynocerus commented on Jun 5

    NL5? Blueberry? NL5xBlueberry? What the hell happened to just regular old weed? And 4 bong rips of shitbrick would turn me into a space cadet back in the dark ages, so I’m pretty sure that 4 “bong rips” of any of the genetically altered stuff would have me unconscious for about 4 hours.

    I don’t think Barry looks stoned so much as too cool for school. In my mind, ‘stoned’ always involves bloodshot eyes. Now, if we stick Mr. Ritholtz on @ 6:00 AM after a bender…

  20. Barry Ritholtz commented on Jun 5

    I’m not saying $5 gas won’t hurt — it will but we will adapt — we have no choice . . .

  21. jab commented on Jun 5

    Has Kudlow called yet ? Dow down 200!

  22. Get Long Vega commented on Jun 5

    “So then… he comes in there and I says, “Listen, bitch, I’m Rick James.”

  23. Steven commented on Jun 5

    Barry, good show

    But when he asks you about why you think the S&P will drop 30%, Here is another great reason to give him: Trailing 10 year P/E ratios are at 26 right now, for them to fall even to the HIGH END of the historical norm, they would be at 19. Which would tranlate to a 30% drop in prices or a sustainable 30% increase in earnings (does Wall street really think this is possible with record debt at all levels?)

    Its a simple question of why 10 yr trailing valuations have gone to extremes in the past 10 years, and will he bet on its sustainability? OR could China change its export growth model to a consumption model, and force an increase in US bond rates which would guide the market into its 1880-1998 valuation range.

    While I was watching you talk to him I was praying you would pull out that Trailing ten year earnings chart for 140 years!

    Keep fighting the fight!

  24. B commented on Jun 5

    “OR could China change its export growth model to a consumption model, and force an increase in US bond rates which would guide the market into its 1880-1998 valuation range.”

    I’ll take that bet all day long. No way. Obviously just an opinion but the China miracle is really not a miracle at all. It is a mirage. I mirage that is simply a reflection of the American consumer’s strength to date. Once that strength slows the mirage will likely fade.

    Mr. Ben even gave severe warning today but nobody appears to have paid attention to that message. He gave fair warning for all of these export driven economies to stimulate domestic demand because as I loosely interpreted it, our consumers are likely going to take a vacation for a while. China’s had 20 years to transform it’s economy to stimulate domestic demand but they haven’t nor will they without crisis. It requires too much change and we humans hate change. Why create so much uncertainty and gut wretching change when you can suck on the American tit for free? That mind set across the developing world has likely led to tremendous deflationary forces in the form of excess capacity all being built for one thing. To serve us gods. Or, to you and me, American consumers. Can you say conundrum? That’s likely why bond rates are still at 5% when it looks like inflation is off the charts.

    You see, it’s one thing to contemplate a change in domestic China policy for the commies. It’s another to truly think about what it involves. China has been able to push economic growth through exportation without addressing the domestic agenda. This way the communist party is allowed to “stay in power” and not address the change needed for domestic growth. Ever met a leader who works diligently to work themselves out of a job? A consumer based economy requires massive changes that would shut down as much as 25%-50% of the current economy. That being the continued rip off of international copyright and patent laws coupled with the closure of tremendous excess capacity, financial consolidation and finally and most difficult, moving away from communist controls. In addition, it means giving many social freedoms and creating many of the capital structures necessary for such a transformation. What this would really require is the beginning of an end to a communist bureacracy larger than all of the citizens of the United Kingdom.

    Does anyone actually see any changes in that arena taking place? I surely don’t. Now, I’m not in China daily and I don’t sit in on politboro meetings but externally, it simply appears to be outta sight and outta mind. That’s the good thing about human nature. It’s nearly always predictable. And so is the likely outcome.

  25. Paul commented on Jun 5


    I am leaning heavily short myself, and tend to agree that a steep decline is imminent, however still not sure as to the extent. With that said, a large decline will be accompanied by a stoppage in rate hikes and history will show us that when rates rally to multi year highs alongside equities this tends to lead to stock market declines which most often have led to recessions afterwards.

    With the U.S. going into what appears to be a likely recession….this is going to put the brakes on alot of economies aside from ours and bring heavy pressure on the prices of industrial metals and oil. That said, what is bearish for the economy is bearish for commodities. Stocks and commodities rose together and now I beleive they fall together for the next year or so.

    After that, I am a huge beleiver in the long term growth of several emerging markets and believe the major shakout in commodities from recession will bring a tremendous long term buying opportunity. The U.S. equity market in for muted returns at best for several years to come.

  26. dave commented on Jun 5

    it was nice to watch the interview without the CNBC kid in the control room and his hideous sound-effects.

    Let me know when you’re on Bloomberg and I’ll watch too.

  27. Monkeyfister commented on Jun 5


    Could you possibly address the issue of “Investing for the Peak Oil Financial Crisis” one day? I mean… It’s effecting us NOW… Isn’t it time to get real with America?

    I’m just a little guy… I’m single, 38, no kids, only make $55K (median+ income for the first time in my life), working as a GS, I’ve got $25K freshly invested in “I” Bonds (scared crapless by this horrible Bush Economy), a month’s income in the bank, only my STULOAN debt (graduated late in life), I am hoping to buy 5 acres and a humble home in October (a forclosure from some over-extended fool), and REALLY WANT to come through the next 30 years (the rest of my life) with a sustainable lifestyle, instead of in a pauper’s home. I really think that I represent the “average” Gen-Xer, well… unlike most of the rest of my Generation, I actually CARE about the future of America… and am DEEPLY worried with what I see coming in the near and long future.

    Any help for those of us staring REALITY in the teeth?


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