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David Rosenberg And A Few Good Economic Observations: "Can You Handle The Truth?" His 2010 "Outlook"

Tyler Durden's picture


Courtesy of David Rosenberg of Gluskin-Sheff

It’s that time of the year when ‘sell-side’ research departments publish their Year-Ahead Reports (as I once did in the not-too-distant past); as do all the financial magazines.

I realized after countless emails and phone conversations (in that order) that there is a very high expectation that I publish one too. I honestly have no intention of publishing a specific set of forecasts in my current role as the Chief Economist and Strategist for Gluskin Sheff for public consumption — the granularity of my recommendations is reserved for our Investment team and our client base. Be that as it may, I am more than happy to comment on what I see as an emerging consensus and my general view on the direction of the economy and the markets in the coming year without getting into too much detail or numerical forecasts, which are the domain of the ‘sell-side’ macro teams globally.

At the outset, let it be known that when I read everyone else’s year-ahead prognostications, all I can think of is, “where do I store this stuff for a year so I can look back and say ‘That was so wrong!’.” It’s not that the reports are always bullish every year; it is that they seem so contrived. And, as I mentioned in the December 10th edition of Breakfast with Dave, this year, probably like most years, there seems to be a remarkable level of agreement. Based on my reading, here is what I conclude the consensus views are as we head into 2010:

  • Muted recovery, but positive growth, for sure! No risk of a ‘double dip’.
  • Equity markets up!
  • A barbell strategy of domestic multinational blue chips and emerging market equities.
    The U.S. dollar is…neutral, but we did locate more bulls than bears (so much for the ‘carry trade’ thesis).
  • Positive on commodities for the most part.
  • Concerned about government balance sheets, and therefore…
  • …Bearish on long term government bonds because they are the ‘competition’ and, after all, who would tie their money up for 10 years at 3.5% when you can lose 22% in stocks? And, therefore…
  • …Bullish on spread product (as long as it’s not long-term). And, therefore…
  • …Really comfortable with high yield (just for the coupon and the view that default rates will come down).
  • Certain that volatility will not be an impediment.
  • The Fed will begin to raise rates in the second half of the year, but that this will have no impact since they will still be low.

So here we are with a glorious opportunity to reintroduce Bob Farrell’s Rule 8: “When all forecasts and experts agree, something else is going to happen.”

That being said, these economists and strategists, many of whom I know, are smart guys (and gals) and they are human. To ‘talk your book’ is human; to have the courage to ‘buck the consensus’ is divine. I too am human; I also like to feel that I have courage of my convictions; and I too have a “book” (of sorts — it’s called reputation). But I have decided to take the opportunity of the “Year-Ahead Moment” to transition from sell-side to buy-side and more importantly, to reflect on the past year and really try to prognosticate from the gut. You would be surprised how a blend of intuition and experience can make a difference in a cycle like the one we are in that has absolutely nothing in common with the other recessions of the post-WWII era.

Forecasting is a humbling profession even in the best of times and I have learned a lot in the past year, especially from my partners here at Gluskin Sheff who realizes all too well that:

1. It is what is embedded in asset prices benchmarked against the forecast that is of utmost importance for investors;
2. The focus of any forecast must take into account the reality that minimizing portfolio risks is at least as critical as maximizing the returns, and;
3. Every forecast has an error term and the range around any projection in a post-bubble credit collapse can be extremely wide.

I do not view the economic events of the last two years as a classic recession/recovery phase. They only exist in the context of a secular credit expansions and contractions. We are in a post-credit bubble credit collapse that is ongoing, à la Bob Farrell’s Rule 4: “Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.”

Mainstream economists called this downturn “The Great Recession”. This is truly a gentle way of saying “Depression”. When we can have the courage to come to grips with the fact that we did in fact experience a depression of sorts, which is by definition a credit event, then and only then can we draw a conclusion that a sustainable recovery will not get underway until the ratio of household credit to personal disposable income reverts to the mean (and goes to an excess in the opposite direction). I know it sounds harsh, but we shall endure — believe it. Transition is rarely without pain.

The ratio of household debt to disposable income is up from a 30% ratio back in the 1950s to 125% today (though down from 139% at the peak in 2007). Mean reverting to a ratio closer to 60% means that the deleveraging process will be a multi-year event and by the time it is over, more than $7 trillion in additional household credit will have to be extinguished. For more on this see the unbelievably grotesque article on the front page of last Thursday’s (December 10) Wall Street Journal — The New American Dream.

Perhaps inflation is a consensus forecast but deflation is the present day reality and often lingers for years following a busted asset and credit bubble of the magnitude we have endured over the past two years. The fact that China’s voracious appetite for basic materials will continue to exert upward pressure on commodity prices does not detract from this view, especially given the widespread excess capacity in the manufacturing sector and the new frugality that has gripped, and in many cases, been embraced by the retail sector. Higher raw material prices, owing to developments in Asia as opposed to demand pressures here at home, will prove to be a sustained source of profit margin compression for many sectors and companies linked to finished consumer goods and services.

So, much of what I have read in various Year-Ahead Reports predict corporate earnings, GDP growth here and abroad, interest rates and relative values of currencies. As I mentioned earlier, the error term is bound to be very wide in this new paradigm (since WWII) of a secular credit collapse. GDP growth in 1934 was 10%, but the Depression wasn’t over until 1940.

Since 1989, the Japanese stock market has had no fewer than four 50%-plus rallies and there still has been no period of growth that can be called a sustained expansion. Today, we have our own special set of conditions and it is bound to be tricky as is typical during a post-bubble credit collapse, no matter how intense the government reaction. Prematurely committing to the ‘risk’ trade is probably going to be the most lamentable action over the next few years.

Suffice it to say, we believe that the dominant focus will be on capital preservation and income orientation, whether that be in bonds, hybrids, hedge fund strategies, and a consistent focus on reliable dividend growth and dividend yield would seem to be in order. To reiterate, I see the range of outcomes in the financial markets and the economy to be extremely wide at the current time. But one conclusion I think we can agree on is the need to maintain defensive strategies and minimize volatility and downside risks as well as to focus on where the secular fundamentals are positive such, as in fixed-income and in equity sectors that lever off the commodity sector.

This, in turn, underscores my primary focus of favouring Canadian dollar based investments over the U.S. because at no time in my professional life have the downside risks — economic, fiscal, financial and political — been so low on a relative basis and the upside potential so high as is the case today. The near-2,000 basis point gap this year between the TSX and the S&P 500 — the former leading — should be taken in the context of being just past the halfway point of a secular (ie, 16-18 year) period of outperformance. Northern exposure never felt this hot.


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Wed, 12/16/2009 - 18:18 | 166584 Gimp
Gimp's picture

And his outlook is???  Everyone has become so good at verbose gobbledygook that you need at least three UN translators to understand anything written in or by corporate America. Keep it simple.

Wed, 12/16/2009 - 18:35 | 166612 just.a.guy
just.a.guy's picture

It's actually clearly written and concise given the complexity of the subject, but I'll MTV-generationalize it for you.

deleveraging will continue

this will mean substandard economic growth

people piling into equities thinking the worst is over are going to get burned.  japan went through the same thing.

buy high quality credit and equities in materials producers. 

buy canada.

eat poutine and hunt moose.

rosie out.


or if THAT's too complicated for you i'll just summarize it as pearls before swine.

Wed, 12/16/2009 - 19:14 | 166655 AN0NYM0US
AN0NYM0US's picture

and here is one of Rosies Pearls from May 2009


In other words, there is still more substantial downside risk than upside risk
to the U.S. corporate earnings outlook. I doubt the recession is going to end
as quickly as the consensus of economists and strategists believe (next
quarter). And, even if we manage to see $70 on mid-cycle EPS, what is the
appropriate multiple? The fair-value P/E should approximate the ‘real’ Baa
corporate bond yield, which means a 12x multiple is appropriate. Though this
can clearly change — judging by the growing share of government in the
economy, more regulation and less free trade, the implications for
productivity, the potential GDP growth rate and the fair-value multiple will
likely all be lower.


Slap 12x multiple on to a $70 mid-cycle earnings estimate, which I think is the
best we can accomplish and we are at 840 on the S&P 500. But assuming
that S&P 500 operating EPS first has 30% more downside before we see the
trough (which would be $30), and then apply a typical 60% premium to that
under the generous assumption that we see a typical mid-cycle rebound from
the lows, then we would be talking about mid-cycle earnings just below
$50. Slap on a 12x multiple and there you have the downside story: 600 on
the S&P 500.

But at least we know what the range of outcomes can look like: 600 to 840
on the S&P 500. On March 9th, there was much more upside; today at 892,
quite the opposite.



likely a lot of impoverished swine running around if they invested in equities based on Rosies predictions

Wed, 12/16/2009 - 19:32 | 166720 Anonymous
Anonymous's picture

"likely a lot of impoverished swine running around if they invested in equities based on Rosies predictions"

That is right and despite ZH bashing the dollar, the buck still has not reached a new all time low. The end of QE did not bring a market black swan. If I had listened to Cramer, I would be in great shape right now. C'est la vie.

Thu, 12/17/2009 - 11:56 | 166916 WaterWings
WaterWings's picture

Dammit all to hell! Will the zombies stop being right, Gddmn it!


Wed, 12/16/2009 - 20:03 | 166760 I need more asshats
I need more asshats's picture

oooooooooooooooH SNAP!

Wed, 12/16/2009 - 22:33 | 166957 deadhead
deadhead's picture

I have stated this several times and will do so again.

on several occasions during the period of approximately may through july Mr. Rosenberg wrote that he felt the spx could hit 1200 before the bear market rally reverted and he warned people about this.  I  read it in his reports on at least 3 occasions.

i'm not going to go through rosie's reports to quote as you did but it is there.  that is simply a fact and your quote does not tell the whole story.

Wed, 12/16/2009 - 19:13 | 166679 Ripped Chunk
Ripped Chunk's picture

"deleveraging will continue

this will mean substandard economic growth"    Is the standard with or without the 25% of previous years consumption fueled by home equity and credit card borrowing?  Because that is a big variable.

Wed, 12/16/2009 - 19:33 | 166709 etrader
etrader's picture

Thanks Tyler !

Are you guys on best behavior this week on posting full articles ;-)

Wed, 12/16/2009 - 23:18 | 167011 Anonymous
Anonymous's picture

True but a list of bullet points make it clear and it
seemed foggy at best. I'll go with the Gimp.

Wed, 12/16/2009 - 18:54 | 166641 Anonymous
Anonymous's picture

This guy got it wrong but he just can't admit it.
I have but I only report to my wife.

Wed, 12/16/2009 - 19:14 | 166682 Ripped Chunk
Ripped Chunk's picture

And once your assets return to a better level (if they ever do) you probably won't report to her anymore either.

Wed, 12/16/2009 - 19:50 | 166744 Anonymous
Anonymous's picture

Those losses represented the 5% equity investments of
my 8 figure portfolio not including my wine country
estate and unlike Tiger and most probably you
I don't fear an honest conversation with my wife,

Wed, 12/16/2009 - 18:32 | 166601 Green Sharts
Green Sharts's picture

Mainstream economists called this downturn “The Great Recession”. This is truly a gentle way of saying “Depression”. When we can have the courage to come to grips with the fact that we did in fact experience a depression of sorts, which is by definition a credit event, then and only then can we draw a conclusion that a sustainable recovery will not get underway until the ratio of household credit to personal disposable income reverts to the mean (and goes to an excess in the opposite direction). I know it sounds harsh, but we shall endure — believe it. Transition is rarely without pain.

The ratio of household debt to disposable income is up from a 30% ratio back in the 1950s to 125% today (though down from 139% at the peak in 2007). Mean reverting to a ratio closer to 60% means that the deleveraging process will be a multi-year event and by the time it is over, more than $7 trillion in additional household credit will have to be extinguished.

Why doesn't Rosey have the courage to say we are experiencing a depression instead of we did experience one, i.e past tense?  Nothing else he writes suggests the worst is behind us.  It's like his projection that stocks will return "only" 6% from current levels over the next decade.  If 10 year treasuries are yielding 3.6% there's no reason for investors to expect more than 6% from a basket of stocks.  Rosey's rhetoric is far darker than his forecasts.  I guess he is at the outer boundary of a tolerable distance from the consensus.

Wed, 12/16/2009 - 18:51 | 166637 BG_rulez
BG_rulez's picture

How about the explosion in government debts then? The overall indebtedness still grows!

Wed, 12/16/2009 - 19:03 | 166660 Shiznit Diggity
Shiznit Diggity's picture

Why doesn't Rosey have the courage to say we are experiencing a depression instead of we did experience one, i.e past tense? 

There's a limit to how far an economist can stick his neck out of the consensus cocoon and still retain mainstream credibility.


Thu, 12/17/2009 - 00:10 | 167051 el Gallinazo
el Gallinazo's picture

Well, he starts out saying that he doesn't pull out the best wine for

the non-paying guests.  I am no financial genius and can't

understand half the stuff written on this blog, but Rosie's statement is

perfectly clear to me.  As to your point, he says that we were in 

a depression and it will take years to come out of it.  I guess that

means we are still in it.  Look at U6.


Wed, 12/16/2009 - 18:33 | 166606 E pluribus unum
E pluribus unum's picture

What did he say?

Wed, 12/16/2009 - 18:42 | 166617 Leo Kolivakis
Leo Kolivakis's picture

Leo Kolivakis's outlook for 2010:

  • The shift in fundamentals will continue as the US labor market will urprise to the upside. In this context, the euro and other currencies will depreciate against the greenback in coming quarters.
  • Improving US fundamentals will send gold prices much lower in coming quarters but oil prices will rise (despite appreciation of greenback) as the US economic recovery becomes firmly entrenched.
  • Liquidity rally will continue and improving fundamentals will drive earnings and stocks higher in the first half of 2010. Watch for speculative flows in renewable energy sector (solar stocks in particular).
  • As the recovery becomes firmly entrenched, the market will start pricing in rate hikes for the second half of 2010. On Tuesday, the Fed announced that it's removing a lot of the excess liquidity (allowing liquidity facilities to run their course) and cost of repos is going up (indirect way of removing excess liquidity).
  • Rate hikes will not kill stocks right away, especially not in the speculative sectors. In fact, some banks will experience windfall gains as they charge more on existing lines of credit and housing lines of credit.

Please do not attack my views. Come back in a year to tell me how stupid they were. :)

Wed, 12/16/2009 - 18:42 | 166623 Green Sharts
Green Sharts's picture

You're enough of a buffoon without referring to yourself in the 3rd person.

Wed, 12/16/2009 - 18:47 | 166628 Leo Kolivakis
Leo Kolivakis's picture

Sorry, didn't mean to steal your spotlight.

Wed, 12/16/2009 - 19:11 | 166675 Anonymous
Anonymous's picture

April Fools?

Thu, 12/17/2009 - 00:25 | 167058 greased up deaf guy
greased up deaf guy's picture

agreed.  i stopped reading after that first sentence fragment.

Wed, 12/16/2009 - 18:49 | 166636 I need more cowbell
I need more cowbell's picture

Nah, I can't wait a year. You're an idiot.

Wed, 12/16/2009 - 18:54 | 166643 Leo Kolivakis
Leo Kolivakis's picture

Judging from your pic, you don't need more cowbell but more blood flowing to your brain. I am going to remember you and slam you hard next year. Don't forget to renew your membership to Mensa International..LOL!

Wed, 12/16/2009 - 18:58 | 166649 I need more cowbell
I need more cowbell's picture

Unless I missed the "Golly gosh, I wonder what Leo thinks?!!" post, your hijacking this thread leaves you wide open to all commentary.

Don't feel bad, every village needs an idiot.


Wed, 12/16/2009 - 19:04 | 166661 Leo Kolivakis
Leo Kolivakis's picture

Words are cheap. I put my balls on the line and my money where my mouth is. You can slam me till those cowbells start ringing, but I stand by my 2010 outlook. This is not hijacking a thread, but adding my views. Go back to your village, you're embarassing yourself again.

Wed, 12/16/2009 - 19:06 | 166663 I need more cowbell
I need more cowbell's picture

Well, your words are cheap, thats for true.

 As for you putting your money on the line and your balls where your mouth is, wow, good for you- I'd never leave the house if I could do that.

Wed, 12/16/2009 - 19:08 | 166669 Leo Kolivakis
Leo Kolivakis's picture

Get ready to bend over and grab your ankles's going to hurt!

Wed, 12/16/2009 - 19:10 | 166672 I need more cowbell
I need more cowbell's picture

Leo, are you having prison flashbacks again?

Wed, 12/16/2009 - 19:16 | 166690 Ripped Chunk
Ripped Chunk's picture

Now girls, can't we just get together and settle this in a civilized manner?  With 8" blades??

Wed, 12/16/2009 - 21:54 | 166910 Anonymous
Anonymous's picture

Hey this is Fight Club you guys. You know the rules. Lets get it ON!

Wed, 12/16/2009 - 22:58 | 166990 Molon Labe
Molon Labe's picture

Prison Rules!

Wed, 12/16/2009 - 18:57 | 166647 Anonymous
Anonymous's picture

I'll second that opinion. Leo is the Steve Liesman of

Wed, 12/16/2009 - 19:09 | 166670 Leo Kolivakis
Leo Kolivakis's picture

Steve who? Leo is Leo and you'll remember my call when it becomes reality.

Wed, 12/16/2009 - 19:21 | 166701 AN0NYM0US
AN0NYM0US's picture

166647 - you have that wrong  - Leo is more like the Laszlo Birinyi or Mario Gabelli of ZH - bullish and correct

Wed, 12/16/2009 - 18:56 | 166645 Rainman
Rainman's picture

I agree with your view that rate hikes will not kill stocks right away.

They'll be planted firmly in the ground by then.

Wed, 12/16/2009 - 19:06 | 166664 Leo Kolivakis
Leo Kolivakis's picture

Really? Why? All I see is shorts that are going to get whacked hard again in 2010. The market is on a tear and the US economy will follow.

Wed, 12/16/2009 - 19:26 | 166711 basehitz
basehitz's picture

"All I see is shorts "


You assume rampant pessimism. It's the opposite. Bears haven't been this low since '07. See  "2 year" chart.


Wed, 12/16/2009 - 19:50 | 166746 SWRichmond
SWRichmond's picture

The market is on a tear and the US economy will follow.

What will we make, and who will buy it?

Wed, 12/16/2009 - 23:02 | 166993 delacroix
delacroix's picture

where is the growth engine. what will drive these improving conditions, HOPIUM ?

Wed, 12/16/2009 - 19:58 | 166755 Rainman
Rainman's picture

There is absolutely, positively no way that massively declining real asset values in CRE and RRE (layered together) can avoid pulling down the economy in 2010. And we sit on an an S&P earnings valuation that must improve 20% + to meet current pricing.....even with the financial industry earnings overstatements.

The interconnection of RE value + MBS + CDS is a worrisome trio of live bombs that will go off in pension funds, insurance companies and other institutional holdings sooner than later. All that's keeping the fuse unlit is the voodoo accounting associated with the marking of assets.....a subject that has received limitless attention here for months.

Furthermore, we must factor in the coming rollback of public sector employment. It functions presently off a stimulus prop that cannot last through next year without a politically brutal Stimulus II battle....and this Congress is losing its guts fast going into the midterms. Employment pullbacks in this sector adds a couple clicks to the unemployment rates and all the other resulting issues with higher unemployment rates.

I do agree with you on very selective opportunities and that will always be the case. But I keep seeing distorted valuations via gubmint stimulus. Once removed, things become clearer. And it is an error to think popular resistance to U.S. debt isn't going to get even stronger legs next year. It will be the wild card on all value projections. 

I could go on . If any of these clouds has a silver lining that you are seein', I'm all eyes !! 


Thu, 12/17/2009 - 01:46 | 167124 Anonymous
Anonymous's picture

there are no shorts left fool, only irrational exhuberance

Wed, 12/16/2009 - 19:07 | 166667 AN0NYM0US
AN0NYM0US's picture

Leo - how about some specific numbers both for the US and for the great white north

Goodness knows you have been far more accurate this year than Mr. Rosenberg

Wed, 12/16/2009 - 19:17 | 166692 Leo Kolivakis
Leo Kolivakis's picture

I forecast GDP growth north of 3.5% in the US and close to 3.3% in Canada in 2010. Strong first half will surprise a lot of economists and financial analysts.

Wed, 12/16/2009 - 19:22 | 166703 AN0NYM0US
AN0NYM0US's picture

will you put a number (range) on the S&P and TSX 60  e.g. high low finish for 2010

Wed, 12/16/2009 - 19:48 | 166740 Misthos
Misthos's picture

Peak Oiler here. I disagree about a sustainable rebound.  Even if it's possible (only thru gov't stimulus) oil prices will snuff it out due to increased demand, if we don't have a financial panic first.  I'll check with you next year.

Wed, 12/16/2009 - 23:06 | 166999 Anonymous
Anonymous's picture

hey Leo, you have links to your prev predictions? Please post them here. If you do not then STFU!!!!

Thu, 12/17/2009 - 09:31 | 167289 Leo Kolivakis
Leo Kolivakis's picture

They are all over my blog moron...go to my archives and read all my predictions. Otherwise, STFUP right back at ya!

Wed, 12/16/2009 - 19:11 | 166674 jm
jm's picture

Appreciate you laying it out there.

Wed, 12/16/2009 - 20:52 | 166825 BoeingSpaceliner797
BoeingSpaceliner797's picture

". . . as the US labor market will urprise to the upside."


Been in the labor market since late March.  I wish I saw what you are seeing to predict that the US labor market will surprise to the upside.  I respect your optimism. 

52k temp jobs created in November?  Go ask a person involuntarily on temporary assignment if they feel like they are employed full time or feel secure in their situation. 

I can list reams of anecdotal evidence of just how bad the job market is but I won't take up that much space.  I hope your prognostication about US labor is correct.  Perhaps I will start seeing, applying and getting interviews (heck, maybe even get hired) for something other than an $8-9/hr jobs in retail.

My prediction for 2010?  The nation will become much more broadly cognizant of exactly how badly the US that we've come to know in our lifetimes is on life support.  Exactly what events transpire to make more aware of our plight I cannot say.  But the rude awakening of our country is still in its early stages.


Wed, 12/16/2009 - 22:40 | 166965 deadhead
deadhead's picture

I'll look forward to it Leo, with ease, particularly in light of your previous comments that you see no major events on the horizon. 

I still think that statement of yours (which you confirmed to me in a gentlemanly fashion recently) is the most ridiculous thing that I have read in the past year, bar none.

i'll also remember this one from your note above:

"In fact, some banks will experience windfall gains as they charge more on existing lines of credit and housing lines of credit."


Wed, 12/16/2009 - 23:14 | 167005 delacroix
delacroix's picture

things must look a lot better from canada, kinda like a transvestite looks like a hot chick, from across the street, when you've been drinking, but as you sober up, or get closer, it's like WTF was I thinking.  solar panel prices reduced again , 2nd time in last 6 mos.  boy they gotta be getting that profit margin thin. I plan on buying some, in a few months, when they're selling them for less than they cost to mfg.  like my chevy truck, and we know what happened to chevy. sorry leo you might be a nice guy, but like my brother, I love him, but he's an idiot.

Thu, 12/17/2009 - 03:20 | 167178 Anonymous
Anonymous's picture

I'm not exactly sure why, but reading ridiculous posts like this makes me think I might actually enjoy the next phase of the credit contraction.

Wed, 12/16/2009 - 18:39 | 166619 gookempucky
Wed, 12/16/2009 - 18:44 | 166629 Anonymous
Anonymous's picture

capitalism dead in USA it's alive and kicking in ASIA

Wed, 12/16/2009 - 18:44 | 166630 Anonymous
Wed, 12/16/2009 - 19:22 | 166702 Ripped Chunk
Ripped Chunk's picture

She does not speak from a position of leverage.

All that needs to come up is that she did not get the limited edition Mercedes with a yellow bow on it Cristmas 198X and threw a fit.

Just hate it when love goes wrong don't you.

Wed, 12/16/2009 - 19:02 | 166656 kennard
kennard's picture

The relative optimism of DR's recommendations versus his dark global view results from his largely Canadian audience. Commodities are good. I would stay away from fixed-income, however, even C$-denominated. Why accept a 3.5% yield when you can lose 22%.

Wed, 12/16/2009 - 19:06 | 166666 Sutton
Sutton's picture

My Financial Prediction:

An Extinction Level Event


Wed, 12/16/2009 - 19:14 | 166680 Anonymous
Anonymous's picture

After last period, I demand you go to the principal's office.

Leo K is right down the hall, last office on the left.

Wed, 12/16/2009 - 19:13 | 166678 exportbank
exportbank's picture

Wow.. Rosie and Leo with what seem to be upbeat views on 2010. I hope they're right because I'll guess at some point everyone gets tired of being bummed-out. I just worry a bit about the boomers heading into retirement (and the medical costs of old age), every government going into the monetary ditch - look at California and Ontario as prime examples. What's going to happen to CMHC when real estate reality hits Canada and nearly every jurisdiction jacks up property taxes and fess across North America. Most corporate and bank balance sheets are hiding every error they ever made and mark to market will be delayed (again). The Euro is in worse shape then the USD so I'll simply wish all a Healthy 2010. I hope Rosie and Leo are right although I worry about the solar call.

Wed, 12/16/2009 - 21:40 | 166897 Anonymous
Anonymous's picture

I would love to give the CMHC a really thorough prostrate a exam. People don't realise the enormous role it plays in the Canadian economy and just how opaque this Crown Corporation is.

Wed, 12/16/2009 - 19:19 | 166689 saturno_v
saturno_v's picture


Typical US centric forecast if you ask me.


The standard of living of 2 billion+ people in Asia will stop its historical steady strong growth?? Fat chance...


What are the probabilities that your typical American household will increase its number of automobiles (or getting a second fridge or fifth TV) vs. the typical Chinese family getting its first car??


Eventually the Chinese will sever their link to the dollar and let their currency revaluate..they got the production capability and the size of the consumer the long run they do not need us so you realize the pressure this will put on commodities??


We will adjust downward our standard of living in line with what we really produce and their will rise.


Actually if the incoming inflationary turmoil would re-establish the principle of sound money (and possibly full reserve banking...I know I'm dreaming) this would be very welcome in the long run....But I don't think the financial oligarchs wll give it up that easily.


I believe we are on the verge of a serious (and badly needed) restructring wave in Corporate America (both listed companies and private) either acting on their own or forced by PE to rebalance towards production and real industry. It will rival the '80s middle management holocaust in scope. That fat layer regrew during the 1990s and 2000s fueled by cheap money.


Whoever tells you that companies nowdays are already "lean and mean" doesn't know what he/she is talking about...I meet every day people drawing 6 figures salaries that are not capable of telling you in 30 seconds what they exactly do with fancy pompous titles..we need less marketing departments, ad offices, "Chief Innovation Officers".....and we need lower salaries to match with our real productivity contribution.


It's happening...

Wed, 12/16/2009 - 19:36 | 166726 cougar_w
cougar_w's picture

Oh, and it's happened before. Used to be, the sun never set on the British empire.

Small can be good. Small can feed you. Small can get you into the crack where a minute part last year's wheat was left behind on threshing room floor. But it will only keep you alive if you are that small.

Wed, 12/16/2009 - 19:39 | 166731 ghostfaceinvestah
ghostfaceinvestah's picture

Good post.  What do you think the reaction will be to our falling standard of living?  I see more money printing and deficit spending.

Wed, 12/16/2009 - 20:04 | 166761 saturno_v
saturno_v's picture



Until the kind foreign investor will say "no mas"...

What is my reaction to getting laid off and finding a job with half pay?? Cutting my expenses....either a family or a nation the concept is the same.

Wed, 12/16/2009 - 19:18 | 166695 Anonymous
Anonymous's picture

I am buying puts on polar bears. I have seen a commercial where it was raining with polar bears in NY. That means we are going to have a lot of them so the price should go down.

Wed, 12/16/2009 - 19:28 | 166714 Anonymous
Anonymous's picture

I thought you said he was contrarian for once but then he says he thinks everything's going to be okie dokie because the government says so and he's capitulating to the marching cadence of boot stomping hi kicking heil Bloomberg's n stuff.


Ok he did say Japan had 4 50% rally's on hot air during their downslide. We'll probably have the same.

I'm want to start a hedge fund. Schrodinger's Financial Asset Management company.

Our premiere product shall be the Computer Assisted Transparency fund. The CAT fund.


Wed, 12/16/2009 - 19:40 | 166732 Anonymous
Anonymous's picture

There is some Canadian co's doing OIl in Columbia. If I was you I'd hedge that solar stock Algore sold you. Just saying.

Wed, 12/16/2009 - 19:40 | 166733 zenon
zenon's picture


Solar panels have fallen 40% from a year ago. You solar stocks may be good for a punt but don't stick grandma's savings in them. And be sure to buy her some gold, you know what she sold as a downpayment for the mortgage/ American dream kind of stuff.  The system is borken and a currency event would not be too kind to your investments.

Wed, 12/16/2009 - 21:20 | 166870 Leo Kolivakis
Leo Kolivakis's picture

Solars will melt up in 2010 and melt gold away...we are just in the early stages.

Wed, 12/16/2009 - 22:45 | 166970 deadhead
deadhead's picture

Solars will melt up in 2010

I remember that being said when I was in college in the mid 70s....  Jimmy Carter sitting there in his cardigan......

Wed, 12/16/2009 - 23:30 | 167019 delacroix
delacroix's picture

leo, I'm a believer in solar energy, I just don't believe you will be able to make any money at it, for a long time

Wed, 12/16/2009 - 23:50 | 167040 Anonymous
Anonymous's picture

And the 10-year Au chart says?


Wed, 12/16/2009 - 19:57 | 166751 I need more asshats
I need more asshats's picture

“where do I store this stuff for a year so I can look back and say ‘That was so wrong!’.”

I pity the fool who thinks he can predict the future.

Wed, 12/16/2009 - 20:33 | 166807 moneymutt
moneymutt's picture

I don't get the go Canada...they are very dependent on US and commodities, if we deflate and commodities deflate, Canada deflates...and given US dollar is historically low to Canada's, there is risk of dollar rally via Canadian again.

So why buy Canada...if de-leverging is on, isn't cash the thing to do?

Thu, 12/17/2009 - 09:18 | 167272 heatbarrier
heatbarrier's picture

Excellent point, Mutt.

Wed, 12/16/2009 - 20:56 | 166844 Anonymous
Anonymous's picture

Why buy Canada? The sold more cars in China this year than in the US. Commodities are just getting started and are going to show you what hyperinflation is all about.

Wed, 12/16/2009 - 21:06 | 166853 Anonymous
Anonymous's picture

What's Rosie's record? Would you invest on his market chatter?
He's a Canada bull but look at this:
Ontario is the California of the North. Very broke with extremely generous social programs that are deeply exploited by criminals. I live in Toronto and I see firsthand the disgrace that is the Ontario guv... I wonder if Loomis and Sayles are ready to swallow $25billion (probably closer to $40billion once the final tally is in) of crap this year and about the same next year.

Wed, 12/16/2009 - 23:10 | 167003 Anonymous
Anonymous's picture

canada sucks ice if we do not have money to buy their crap

Wed, 12/16/2009 - 22:09 | 166927 Anonymous
Anonymous's picture

Let's see: 20% unemployment, 38 million on food stamps, record deficits, more taxes, most states BK, 50% of homeowners with mortgages have negitive equity, forclosures rising again, commercial real estate crash just getting started (two year lag from residential), record BK filings, credit card rates soring and limits being cut, etc.... The future's so bright I've got to wear shades!

Beans, bullets and bullion.

Wed, 12/16/2009 - 22:11 | 166929 Anonymous
Anonymous's picture

one could make the case that the consumer was tapped out with debt two years before everything came unglued. One could have made a lot of money long in those two years. Everything in the economy stinks right now but the Fed and congress will keep pumping (elections coming). And it will keep working (care to count the Bear traps in the last year) until is doesn't. One can rent stocks now but not short. There will be time for that later (sometime??).

Wed, 12/16/2009 - 22:18 | 166942 Anonymous
Anonymous's picture

How long can a counterfeiter enjoy the good life? Until he gets caught. When the Fed gets audited the party will end. They put at least $3 trillion into the market this year, they put $3 trillion more into it next year....the only thing that matters for the market is how much the fed and their surrogates are going to pump into it....there are only 2 options remaining ...the market or the dollar....if the dollar goes the Fed goes...and the fed isn’t letting that happen.....the entire real estate market can have zero occupancy and operate off of a .1 cap rate and no cash and the Fed will squeeze the shorts and buy the equity and if its 2007…..

Wed, 12/16/2009 - 22:57 | 166988 Anonymous
Anonymous's picture

the granularity of my recommendations is reserved for our Investment team and our client base
then just STFU!!!!!

Wed, 12/16/2009 - 23:14 | 167007 Anonymous
Anonymous's picture

Some people think that the Great Depression didn't end until 1946, because living in a fox hole isn't exactly recovering your economic circumstances. How could have the Great Depression ended in 1940 when rationing of everything from gas to women's nylons continued until the end of the war.

Wed, 12/16/2009 - 23:16 | 167010 pooplagrande
pooplagrande's picture

 Anyone predicting the future is an ego-maniac and desperately wants to get a little spotlight for being "right"...which is inherently just plain annoying. It is fun to see the predictions, but please...don't take yourselves so is a guessing game...and those who don't recognize that are either ignorant or full of shit.

Wed, 12/16/2009 - 23:35 | 167023 Anonymous
Anonymous's picture

Sure, don't use your instrument panel nor your windshield when driving next. Your steering is equally as good as the next guy's, especially if he's blind.

The future is a derivative of past activity and the measuring and quantifying meters we use are far better than the 'know nothing' attitude you espouse.

There are some soothsayers that use time-worn, trustworthy tools.

Thu, 12/17/2009 - 13:31 | 167633 pooplagrande
pooplagrande's picture

Why I reply to someone that is an ANON...I have no idea...except to say: There is a big difference between paying attention/making educated guesses and driving blind (if I am reading and commenting on this blog, then I am probably not the latter)...but please do not tell me that there is any possible way for someone...even you accurately predict the future with any degree of righteousness.

History doesn't repeat itself...if it did, life would be excruciatingly boring...but as they say, it does rhyme. Now guess: Which word am I thinking of that rhymes with rhyme? If you answer correctly, then indeed, you do have some time-worn, trusty tools.

Wed, 12/16/2009 - 23:35 | 167024 delacroix
delacroix's picture

if I lose control of my car on an icy road, going too fast, it's not that hard to project the outcome. in the ditch, or collision with obstacle, with, or without serious injury

Thu, 12/17/2009 - 00:54 | 167084 Edna R. Rider
Edna R. Rider's picture

I hate this time of year and I hate predictions.  But since everyone is piling on:

1) yields will increase.  This is bad for governments and businesses.  This is good for the pensioners (Obama's main constituent).

2) the dollar will go up.  It is politically impossible for the money printing to continue.

3) commodities will flat line.  I know oil & gas: the profit is back to where it was for 20 years.

4) stocks will flat line.  There's no reason to sell.  There's no reason to buy.

5) the economy in the US (and most developed countries) will worsen.  It is impossible to keep spending to prop it up and this will surely be felt by everyone.  It will go from feeling like a malaise to feeling like a swamp where it is difficult for anything to move (financial assets).

6) As an employer I dread hiring anyone.  I can afford it, I need to, but I dread it.  So I won't.  If anything I would like to shed more.

7) borrowing money for anything not essential will seem idiotic to any intelligent person you know.

8) no credible candidate will run again Obama.  No serious talent is naive enough to think they could make any improvement on what happens in the DC and the financial world.

9) with oil prices low terrorism will increase.

10) financial asset holders will continue to do extremely well, relatively speaking, as the short selling business has become one of cranks and tin foil hatters, and the only direction for stocks will be a "leaking up" for years.  Picture yourself missing the rally:  sad, but forgiveable, and entirely contrived by the government.  Now picture yourself an avoid short seller.  Your life and career is over.  The government has taken control of the markets and won't let them go in our life time.  Any sign of a "correction" will be swiftly defeated.

Thu, 12/17/2009 - 05:21 | 167210 agrotera
agrotera's picture

Nice work Edna R. Rider!

Thu, 12/17/2009 - 10:04 | 167321 moneymutt
moneymutt's picture

I don't deny there maybe massive govt intervention or shadow private intervention in markets, but to call a non-fundamentally based rally proof positive of intervention seems a reach. Such bear market rallies seem to happen all the time. Were all the bear market rallies in the 30s, and in Japan in last 20 years govt done..and if so, they didn't last.

Thu, 12/17/2009 - 22:46 | 168347 Edna R. Rider
Edna R. Rider's picture

moneymutt (good name), I beg to differ.  I am not a conspiracy theorist.  The government intervened.  They changed mark-to-market rules, they bought toxic assets from banks, they continued to provide tremendous lending facilities.  This is government intervention.  It happened in the 30s and it happened recently.  Obama knows so little economics he is just repeating Roosevelt.  Yes, there are bear market rallies all the time.  But there has to be a bonafide catalyst.  It doesn't rally for the hell of it.  And it nearly always rallies because of government intervention.

Thu, 12/17/2009 - 01:13 | 167100 Anonymous
Anonymous's picture

With all the confusing articles and opinions out there right now, I’ll list a few things about which I am confident.
• Good jobs are hard to find and unemployment (U3) will continue to be 10% for a couple of years.
• Unemployment puts pressure on wages, benefits, and bonuses. All three will continue getting cut by various organizations at various times.
• Lower wages means that consumer demand will remain slack, except for fortunate investors, people with job security, and people in key industries.
• Prices will not be able to rise much in this economy.
• Company earnings will be under pressure and the stock market may correct.
• A flight to safety will strengthen the dollar and commodities may correct.
• Consumer, corporate and municipal defaults will continue, maybe accelerate.
• Credit will remain tight.
• Consumers and corporations will reduce debt and postpone capital expenditures or durable goods orders.
• Imports, durable good orders, and shipping will not improve much.
• The government will increase stimulus and continue bail-outs (of banks, the states, etc.) and make record deficits.
• The banks will be made to appear healthy by hook or by crook, and will lend conservatively. Except Wall St. banks will continue to gamble by using leverage to get higher returns. If they fail again, they will be bailed out.
• Those with cash will scoop up bargains.

Thu, 12/17/2009 - 09:57 | 167314 moneymutt
moneymutt's picture

Great summary, agreed. I'd add this, since consumer demand will remain slack and government will make banks look healthy by hook or crook, debts will not default even when they are in default, so we will not find bottom quickly, but also, we will not turn this aroun quickly either. There maybe great stock market rallies in next few years, but the best regular working folks will get is a long, hard slog, with the lucky ones stuck in jobs, positions they happened to have with when the music stopped, and the unlucky ones sitting on the floor outside the circle of chairs.

Maybe we will avoid it, but if states and locals have to start really laying-off cops, firemen, teachers, deu to drastic drops in tax revenues, than things will get much worse. Those jobs and their retirment benefits are like the last of guaranteed middle-class life that used to also come to manufacturing employees. Most private sector employees have taken it on the chin already, already at their new normal.

Thu, 12/17/2009 - 02:59 | 167170 Anonymous
Anonymous's picture

According to this source, "When all forecasts and experts agree, something else is going to happen." is rule 9:

Thu, 12/17/2009 - 08:56 | 167257 Anonymous
Anonymous's picture

Unfortunately the market gloom will come back. It's not hard to spot with cracks appearing all over europe and sovereign debt ready to burst.

People just have a short-term mentality and inability to take pain or ride out uncertainty. You have to 'know' today.

Thu, 12/17/2009 - 09:29 | 167268 heatbarrier
heatbarrier's picture

You have to think global. 2010 will be dominated by events in the EU, currency crises and banking crises, IMO. The second leg of the Great Depression started with a banking crisis in Austria, oddly enough the weakest point in the global system is again Europe.

Remember the EU position at the start of the crisis?  This is an Anglo-Saxon crisis. Right. Look at the EU now.  Everything is too connected.  All major blocks are in trouble but the EU will break first IMO.

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