Europe Economy

SquawkBack Europe: New Year, Same Old Skepticism

Stephen Sedgwick,|CNBC Anchor

A belated Happy New Year to all our viewers and readers from me and the rest of the "Squawk Box Europe" team.

This year has got to be the year when these markets are shown the proof in the pudding. We all need to see that the massive rally off last year’s March lows has some real foundations under it. The problem is that opacity remains high and we’re all going to need constant reassurance to avoid a revisit of last year’s lows.

You, the viewer, continue to show real concern that the big questions of 2009 remain the big issues of 2010 and, as such, we’re launching SquawkBack Europe. We pride ourselves on Squawk Box in being fully tuned into the burning issues bothering you, and we make a point of bringing you into the three hour show every day.

Now we’re taking this interaction a step further by launching a Web piece that takes the best of your e-mails and puts them online. I’ll be adding a little commentary here and there and we’ll see if, between us, we can’t get a little daylight on what is really going on out there.

Incidentally, there are no rules of engagement. Anything goes. Whether it’s criticism or praise of anything or anyone, from analysts to politicians, from bonuses to QE, from my monologues to Guest Host orations, it’s no holds barred.

And for our inaugural edition, it looks like viewers are starting 2010 in the same skeptical manner that you finished last year. Good for you!

It’s my first day back on Squawk this year and already banker bonus indignation and the disconnection between financial market exuberance and real economy doldrums remain hot topics.

I’ll get to those later on after we go through your points on the value of volatility indices. We’ll also discuss whether this is such a thing as the infuriating concept of the "New Normal."

On volatility and the VIX, Johan believes volatility gets softer:

“…because of the very slow, rising US indices the VIX can go lower from here.”

And yet how valuable a measure of markets is the VIX? I get a little agitated by the lazy, standard commentary that is rolled out every time it’s raised. "Index of Fear" is the description commonly used? Really? Why? To my understanding, and I spent over a decade of my life standing in derivatives trading pits, it’s no more or less a gauge of fear than any other product. If we’re going to look at volatility then perhaps we can inform people of the fact that VIX just measures a segment of the "skew" in the near month most active options. Still, why let the facts get in the way of a good headline?

Jean-Paul in Los Angeles echoes my thoughts:

“It (VIX) is neither an indication of bears or bulls.”

…and don’t even go there on call/put ratios! We’ll save that one for another day.

Your thoughts on the accuracy of the nonfarm payrolls data are always appreciated.

Following the disappointing job losses Friday, PJ in Seattle asks:

“Why is anyone surprised the unemployment was 85,000? Thousands of companies hired temporary help to get through the holidays; FedEx and UPS hired thousands. Many were laid off the day after Christmas.”

Jack thinks the payrolls could be a sign that more problems on the horizon:

“… Chinese autos are oversupplied and their housing is a bubble … Dubai property down 54 percent for the year and Steel prices are high … the next bubble is in commodities.”

Of course, your empathy for those having a hard time in the jobs market is the other side of the coin from your distaste at what promises to be a bumper bonus season on Wall Street and elsewhere in the banking sector.

Michael in Sydney says this channel should call the bluff of the industry:

“CNBC should issue challenges to those major companies who have stated that they would lose top staff should no bonuses be paid to senior staff members. Let them resign.  What other companies would hire these overpaid individuals? I bet they would not resign should payments never occur.”

And Richard compares the wealth being lavished on bankers with the lack of lending in the real economy despite the best efforts of politicians to curtail cash bonuses by extracting punitive taxation:

“Banks wont lend and the economy will grind to a halt because all of the their money will have to be spent on their bonuses due to a 50 percent tax"

I picked up this point in the show today. Surely there is an argument that if bankers still want to pay cash bonuses, despite the increased tax take, then the rest of the economy will gain from the increased tax take? Er, no, not according to Jean-Paul at least:

“Steve, the IRS does not collect anymore tax revenues from these highly paid bankers.  That is a myth. It is a proven fact that they have so many deductions that they pay much less taxes than the middle class worker.”

How naïve I still am. Peter bravely puts forward the idea that bankers are now de facto civil servants and should be remunerated as such. His formula for compensation goes like this:

“… (B)anks have been bailed out and have government stakes, ergo they work for the government and are civil servants because the support and do not add economic value. Do we want civil servants to have bonuses equal to 10 times salary or 4 times? How about just 10 percent until sovereign debt gets to 30 percent of GDP, or another number which doesn't imply debt interest taking more than 3 percent of the economy?”

Yeah, let’s do it. Who’s going to tell Lloyd Blankfein?

Finally, what on earth is the New Normal? Apparently it’s another one of those annoying phrases that people invent to try and say things are different this time round. A bit like how EBITDA was used in a carefree manner right up until the dot-com bubble burst.

Paul in Cardiff for one is not amused:

“Here’s a challenge for the team, can we get through the whole show without mentioning ‘the new normal’?”

Paul, I tried and failed but I do agree that it really is a futile exercise to try and invent new ways of telling us this time will be different. After all, that’s what they told me about the use of leverage in 2007!

As alwyas, please send your comments and questions, along with your name and city, to

(E-mails may be edited for content, spelling and grammar.)