Friday, August 14, 2009

Interesting interviews with Tobias Levkovich.

As far as investment bank strategists go, I actually enjoy listening to Tobias Levkovich. I had written about him more than a year back here, where he argued for a W-shaped downturn, a collapse in commodity prices, emerging market declines, higher taxes and other interesting stuff.

Perfect for a hopefully slow Friday, here are some of his interviews on CNBC these past 2 months. I've posted my notes as well. Enjoy!

Interview 1.


  • Production will climb in H2 and into 2010.
  • Increase in production rates drive earnings growth. Could provide bump to GDP data. Cost control merely provides operating leverage to the upside.
  • In last 30 years, all growth in consumer expenditure as a percentage of GDP has come from health care expenditures.
  • Our debts went up, but so did our wealth. When the debt went up by 6 trillion dollars, consumer assets went up by 24 trillion. They’re still up about 14 trillion.
  • Strength of Q2 earnings and probability of H2 earnings power supportive of further gains.
  • Possibility of a correction later in the year. Issues:
    -2010 earnings estimates are too high.
    -Some companies like mortgage insurers are in trouble, hitting the European banks.
  • Overshoot to 1100 on the S&P 500 possible.

Interview 2.

  • We’re still going somewhat higher. Still an environment where people doubt that stocks will be moving higher, and earnings will be going up.
  • The big discussion is this whole cost cutting, not revenues driving earnings thing.
  • We’re also at a stage where production has to tick up as we have been destocking at a severe rate. Inventories will not build up. Only destock at a more moderate level.
  • CEO confidence is a great inverse indicator.

  • Mutual funds and pension funds have performed better than hedge funds in this environment.

Click here for Interview 3.
  • This is a cyclical bull not a secular bull. Next secular bull will launch around 2012-2013. Secular bull markets have to break above the previous highs.

  • Production of cars in North America is 4 million units, with sales of 7 million units. Under producing very severely to reduce inventories. Car makers can increase production by 75% and not build a stitch of inventories.
  • Historically production rates drives earnings. Every cyclical recovery has started that way. Not generated by end market sales but by production increases.
  • Bullish but realizes that there will be setbacks along the way.
  • Labor costs are a major part of inflation, and with unemployment at 10% and global labor losses, unless we put in major protectionist measures, hard to see inflation.

Dated but still good fourth interview presented without comment.

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