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David Rosenberg On Perception Versus Reality

Tyler Durden's picture


We have already broadly discussed the recent euphoria in the market which especially in the Nasdaq has hit 5 year+ extremes. And as always in times of such irrational exuberance, the disconnect between perception and reality is truly astounding. David Rosenberg presents his views on the latest developments in the market's ongoing fight with manic-depressive disorder.


I have been a secular bond bull and am not yet changing my view of the fixed-income market, but the perception that the economy will grow vigorously is now extremely strong. The view that Europe will solve its problems is pervasive and that the emerging economies will propel global growth despite the need to tighten policy. I think that the U.S. economy will only grow about 2% next year and that core inflation will remain on a declining trend. I can see some European countries having to undergo a debt restructuring causing a rise in risk premia in general, but the reality is that this will likely take more time to play out than I had thought before. For the time being, I would expect upward revisions to Q4 and by extension Q1 2011 GDP and hence earnings; therefore, over the near-term, it may not be a bad idea, tactically, to lighten up on the bearishness.

As I mentioned above, I am not changing my view, but think of it as a company lifting the bottom end of its revenue forecast.
I continue to see these as primary downside risks, but again, likely not immediate threats:

  1. The U.S. Treasury market becomes unglued.
  2. Further sharp increases in energy prices.
  3. Renewed fiscal problems in Europe.
  4. Bad inflation news out of emerging markets.
  5. U.S. state & local cutbacks become more severe.
  6. Latest down-leg in home prices accelerates.

Let’s examine each one of these.

The U.S. Treasury market

The bond market has clearly overreacted to the so-called fiscal stimulus. This is a clear case of perception and reality going through a temporary separation. The market perceived this to be a stimulus, but all the government has done is to ensure that there is no federal withdrawal in 2011. Fine. This means that Treasury borrowings will be about the same next year as it was in 2010. As far as we can tell, the yield on the 10-year T-note ranged between 2.4% and 4.0% in 2010, so there is no reason to believe there will be a breakout from that range in the coming year.

That said, it is also true that every action has an equal and opposite reaction (thank you Sir Isaac Newton). The fact that Obama was so quick to ink a deal that included a hand in the Social Security cookie jar without even a sketch of a medium term fiscal plan to reduce the deficit has created a bit of a stir among some of the previously comatose bond vigilantes. There is some risk of added upward pressure in yields over the near-term, but it will not be sustained. And, as we saw last year, if the 10-year note yield approaches 4%, then we can expect the equity market to roll over. Recall that we have not seen the Tea Party in action yet — if you are long bonds, these folks are your friends. Stimulus is not on their vernacular. Moreover, wait until Ron Paul gets his hands on Bernanke (see the Sunday NYT business section for more) when he begins to lead the House panel’s domestic monetary policy subcommittee.

Economists are as busy raising their economic forecasts now with the stock market at a high as they were cutting them last July and August when the market was testing its lows for the year. There is a whiff of contrarianism in the air.

The fiscal package sounds pro-growth, but in fact it remains to be seen how much of the relief is going to be saved or spent — especially the payroll tax cut which, frankly, is very poor fiscal policy. It is no different than the attempt by President Bush to get the economy moving in the winter of 2008 with the massive tax rebates, which fell far short of ending the recession. There is tremendous econometric evidence, which strongly suggests that only tax cuts that are perceived to be permanent contribute to spending — people do not alter their behaviour based on changes to their income, wealth or job situation that are considered to be temporary. Temporary tax cuts, which the payroll reduction is, go into savings. This is where the economists who are aggressively boosting their forecasts — as they did in early 2008 — are likely to be wrong yet again.

So while the spending multiplier is likely to be as weak now as it was back in 2008, the impact of the jobless benefit extension will also be seen more in a further increase in the unemployment rate since these folks will be paid to be out of work at a time when the number of job openings has risen to a post-crisis high of 3.4 million. Moreover, providing stimulus to businesses in the form of accelerated depreciation allowances at a time when the nonfarm nonfinancial business sector is sitting on a $1.93 trillion cash hoard (7.4% of assets, the highest in 52 years) is a little nutty. At most, it is a waste of time and public resources. Go figure. The one thing that the market should realize is that this really is the last kick at the can at fiscal and monetary easing for at least the next two years.

Energy prices

The energy price run-up is no shock, but it is a drag on real growth. While oil prices would have to go back to their 2008 highs to offset the recent fiscal boost, the run-up towards $90/bbl has already done its damage. Gasoline prices at the pump are now over $3/gallon in 20 states and the surge has effectively drained $40 billion out of household cash flow. So, a good part of that Bush tax cut extension is going to be siphoned into the gas tank.

Renewed fiscal problems in Europe

The perception is that the U.S. economy will now grow strongly; that Europe will solve its problems and that emerging economies will continue to propel global growth. But the reality is that the U.S. economy is going nowhere without government life support. This remains an extremely fragile recovery with few organic underpinnings.

We believe that the U.S. economy will barely expand 2% next year and that deflation will remain the primary risk. Some European countries will default causing a sharp rise in risk premia — witness the sharp erosion in the Spanish bond market last week. Moody’s just said it is putting 10 Portuguese banks under review for possible downgrade. In the wake of the Fitch downgrade, Ireland’s CDS spreads (550bps) now trade above the Ukraine! And the Ukraine has a B rating, not BBB as Ireland still clings to, but not for long.
Meanwhile, the typical investor has totally taken his/her eye off the ball as it pertains to the prospect of a deflationary shock coming from the other side of the Atlantic. There is apparently a very heavy debt refinancing calendar in Europe in the first quarter of the new year and of course there is also the Irish election (have a look at Debt Refinancing Sparks Fears of Deeper Euro Crisis on page 3 of today’s FT). The eurozone has to refinance a record $750bln of debt in 2011, and this pressure is likely to force Portugal into the unenviable position in following Ireland and Greece on the road towards emergency funding. Headline risk from that part of the world promises to usher in a heightened period of volatility and safe-haven movements in various asset markets and currencies, which is why now is the time to buy insurance against a possible market correction, to expect a reversal in the bond yield run-up and flows into currencies like the U.S. dollar and the Swiss franc during the first quarter. But start planning now. There is no better signpost of what is to come than the litany of growth upgrades from the economics community, which is the hallmark of a market top.

The good news for the bond market actually comes from a survey cited on page 15 of the weekend FT — conducted by Knight Capital — which found that 54% of respondents believed the backup in yields was due to U.S. fiscal fears. These fears are unwarranted as far as what they mean for providing anything more than a brief lift to growth, and remember, this new Congress is going to be chock full of folks who are fiscal hawks and who also want to rein in a Federal Reserve that has likely gone way too far in pursuing its multiple mandates. Only 29% of the respondents see the increase in yields as having anything to do with inflation, and it was equally encouraging to see consumer inflation expectations recede a notch in last Friday’s University of Michigan Consumer Sentiment survey for December. Without inflation, any bond selloff will prove to be temporary, not to mention a great opportunity to add some more income to the portfolio.

As an aside, and we have mentioned this repeatedly, our long-standing SIRP theme is not exclusive to bonds, but also hybrids, royalties, MLPs, trusts, REITS and income-equity. After all, 299 U.S. companies in Q3 boosted their dividend payouts, up 56% from a year ago (just 35 companies cut, a 74% slide).
Bad inflation news out of emerging markets

Meanwhile, inflation is becoming more entrenched in the emerging market world — China’s CPI jumped 1.1% MOM in November, which was well above expected and pushed the headline YoY rate to a 48-month high of 5.1% (consensus was at 4.7%). The YoY trend in producer prices just spiked to 6.1% from 5.0% in October, and is nearly 2% now even after stripping food out. This comes right after the government raised banking sector reserve requirements for the third time in the past month; however, it is increasingly becoming obvious that more aggressive action is going to be required such as interest rate hikes and currency appreciation. The concerns that the PBOC is behind the inflation curve, and will have to clamp down that much more on growth, is singularly the most pronounced risk for the commodity price outlook for the coming year.

U.S. state & local government

With regard to state and local governments, the pressure is going to be more intense with respect to funding as the “Build America Bond” program draws to a close. Much of last year’s fiscal stimulus went into state government coffers and that source of assistance is now gone. The sector has laid off 250,000 people in the past year and more is to come as this crucial 13% chunk of the economy moves further into downside mode.

Latest down-leg in home prices accelerates

It’s perplexing that the latest down-leg in U.S. home prices has gone virtually unnoticed by the media and the markets. The Case-Shiller index is down in each of the past three months and there is still roughly two years’ of unsold inventory overhanging the market once the “shadow” foreclosure backlog is included.

Meanwhile, as we saw in the latest UofM consumer sentiment survey, demand is dormant as homebuying intentions slipped in December to a level that can only be described as anaemic. Mortgage applications remain near decade-low levels and part of this reflects lingering caution among private lenders who are still maintaining fairly stringent credit guidelines — have a look at Housing Shaky as Lenders Tighten on page A4 of the WSJ. Interesting enough, the banks are once again sending out credit cards en masse — perhaps because borrowers this cycle have ensured that they stay current on their plastic even as they fall behind on their mortgage payments — see Lenders Return to Big Mails on Credit Cards on the front page of today’s NYT.



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Mon, 12/13/2010 - 12:19 | 801615 gloomboomdoom
gloomboomdoom's picture

Fundamentals are near perfect in this market. Equities are as cheap as I have ever seen them. I had a great year. Currently hard and long the dollar.

Ben is = alpha. Owned all the doomers and DEAD-wrong bears. I want to kiss him on the lips . Jams another 600 billion up your hindenburg asshats.

How does it feel folks? No Recession where I live. Parking lots were jammed. Busiest season in years. It's great! (I am on team America). Middle class familes walking out with happy kids. Cheap consumer goods is an America tradition. BETTER GET USED TO IT!

America is great folks. You would be suprised how easy and managable it is to live off 20 grand a year. (I make $10 a hour).

I proud to be in American where at least I won't have to live through a Great Depression!

Mon, 12/13/2010 - 12:24 | 801624 SheepDog-One
SheepDog-One's picture

LOL, funniest post ever. Tyler should 'contributor' you!

Mon, 12/13/2010 - 12:36 | 801654 gloomboomdoom
gloomboomdoom's picture

I am a BULL. ZH is a great site because it allows freespeech. (I would love to be a contributor, btw) (would take the job very seriously)

Count me on to the "Anti-Doomer" crowd. This is a bull market if I ever saw one.

I own Gold, but have been getting very nervous about a bubble.

I can tell you safetly. US Treasuries are not a bubble and will remain a virtual risk-free investment for the forseablee future

Mon, 12/13/2010 - 15:47 | 802293 akak
akak's picture

Allow me to correct your grammatical mistakes for you:

Count me on to the "Anti-Reality" crowd. This is a bullshit market if I ever saw one. 

I can tell you safely. US Treasuries are a bubble and will remain a virtual risk-certain investment for the forseablee future (until they collapse altogether).


There, all fixed.

You're welcome.

Mon, 12/13/2010 - 12:52 | 801704 bankrupt JPM bu...
bankrupt JPM buy silver's picture

Ah yes.  The typical sheeple post.  THis person has been watching CNBC, CNN and FOX.  All is great in AMerica theme.  Recession is over touted on every station.  Or maybe he drunk half a gallon of eggnog prior to this post.  Not sure what to make of it other than sheer sheepleism.  Yup, I just coined the term 'sheepleism'

Mon, 12/13/2010 - 13:12 | 801778 gloomboomdoom
gloomboomdoom's picture

Did you say the same thing in 2009? THEY WERE RIGHT!

Those that refuse to wake-up and listen will continue to lose money as the greatest bull market in our lifetime advances to the upside

Mon, 12/13/2010 - 12:27 | 801631 Internet Tough Guy
Internet Tough Guy's picture

You are right; you probably won't survive the Depression. A lot of people who fail to plan won't make it through. I hope you don't take your family down with you.

Mon, 12/13/2010 - 12:26 | 801632 TradingJoe
TradingJoe's picture

Please comment when you get your first, "Increased" tax bill(income, property, etc) and your 20K cant buy shit because inflation is near 1500-2000%, allighty?!?!

Mon, 12/13/2010 - 12:33 | 801648 gloomboomdoom
gloomboomdoom's picture

Inflation is low, low, low. Got it?

Run-Away inflation is not in our future at all. I promise you on this day.

667 on S&P= Once in a lifetime "event". Nothing else is coming. 2008 we had a "Crash" but that is behind us now.

Mon, 12/13/2010 - 12:38 | 801661 SheepDog-One
SheepDog-One's picture

Right, all trouble is BEHIND us now as we discovered this new thing called 'print and pump and monetize the debt''s truly magical, and whenever its been done in the past its always lead to outcomes of rainbow unicorns that shit skittles and piss pink lemonade!

Mon, 12/13/2010 - 12:46 | 801685 Nucking Futs
Nucking Futs's picture

Thanks gloom, you have just confirmed to me what 99% of the sheeple in the US think.  I was starting to get worried the PM market was getting too crowded.

Mon, 12/13/2010 - 14:42 | 802098 bonddude
bonddude's picture


Mon, 12/13/2010 - 19:36 | 802983 xanax
xanax's picture

Sheep-Dog One made me spit coke on my keyboard.  Nonetheless, ramping up the printing presses to reinflate our bubble-driven economy worked just fine after the dotcom implosion.  I missed out on major gains staring at the Dow as it hit 14k in disbelief.  If you want to make money, time to follow the bubble back up.  Put some stop-losses behind you for safety.

Don't obsess over fundamentals.  There have been no sound fundamentals in our entire economy for at least 20 years.  Nobody cares.

Mon, 12/13/2010 - 12:35 | 801651 Rogerwilco
Rogerwilco's picture


Dude, you need to splurge and celebrate these victories. Get some new curtains for your ‘73 conversion van, they're on sale at W-M.

Mon, 12/13/2010 - 12:36 | 801655 Threeggg
Threeggg's picture

If you want to be a winner. !

Click the sarcasm key.

Mon, 12/13/2010 - 12:37 | 801656 subqtaneous
subqtaneous's picture

See: Disorganised Schizophrenia


Mon, 12/13/2010 - 12:41 | 801672 SheepDog-One
SheepDog-One's picture

This is turning psychotic, whole country/world has lost its fucking mind.

Mon, 12/13/2010 - 13:19 | 801811 knukles
knukles's picture

Vacillation between manic depression and homicidal rage.

Mon, 12/13/2010 - 12:41 | 801671 Ricky Bobby
Ricky Bobby's picture

The Trolls they come and the Trolls they go. I wonder who pays them. Is it under the table so they can collect their unemployment too?

Mon, 12/13/2010 - 14:43 | 802108 Raging Debate
Raging Debate's picture

I built a Social News network, at least the research phase is complete. I found in my research I could hire bloggers for ten dollas an hour to post several comments a day each. Since commentary activity is viral it does two things:

1) Increases aggregate site traffic

2) Encourages registered membership

 ZH trolls are indirectly attributing to the success of the site. In a screwed up way ZH should wish for their continued participation despite the poor taste of the disinformation thrown into the mix.

Mon, 12/13/2010 - 14:58 | 802156 gloomboomdoom
gloomboomdoom's picture

me 2.

Give me your link, I will click your ads

Mon, 12/13/2010 - 12:48 | 801674 jus_lite_reading
jus_lite_reading's picture

Another delusional know-it-all "investor" (who makes $10/hr at Walmart) in the same vain as Hairy Wanker (the now defunct troll).

It is because of people like you the system is broke.

Mon, 12/13/2010 - 13:19 | 801813 knukles
knukles's picture

Why's Harry defunct?

Mon, 12/13/2010 - 15:20 | 802215 Rasna
Rasna's picture

But he owns GOLD... On $20K per...

Is this Harry?

C'mon dude...

Mon, 12/13/2010 - 12:48 | 801692 Raynja
Raynja's picture

Sounds like someone I'd walking around san fransisco circa 1905

Mon, 12/13/2010 - 12:54 | 801705 Nucking Futs
Nucking Futs's picture


I just wasted 20 seconds of my life reading your post.  I'd like it back.  FYI, you probably shouldn't have disclosed you make $10/hr.  Whatever credibility you could have amassed on ZH is now forever gone.  I suggest you give up this user name and start over.

Mon, 12/13/2010 - 12:24 | 801625 TradingJoe
TradingJoe's picture

When Rosie becomes (somewhat) bullish its time to SELL!

Mon, 12/13/2010 - 12:32 | 801636 SheepDog-One
SheepDog-One's picture

Thats what Im talkin about man...when all the bears have decided to throw in the towel and jump in the muck and play with the pigmen, the end draws neigh.

Mon, 12/13/2010 - 12:37 | 801658 dnarby
dnarby's picture

Bullish on what, exactly?  I think he's bullish on commodities.  Top is in? (sarc/off)

Mon, 12/13/2010 - 13:19 | 801807 Hook Line and S...
Hook Line and Sphincter's picture

I'm seeing the few, who had emancipated themselves from the propaganda, engaging in a recent 'whipsaw' of attitude. At the core their knowledge hasn't evaporated, but a compartmentalized area has appeared. A choice few (who haven't left the phys beast yet) now are busy fortifying their perception that the economy is getting better. Others are entertaining the 'join them' option, ie, a couple who is actually enrolling their children in military school as a life/death hedge (purposely heading into darkness in a unique and twisted effort to save their offspring), and one who actually is trying to get a job at TrannySA to avoid future detention!

Shave your head and eat locust for the end is near!

Mon, 12/13/2010 - 23:16 | 803582 Magat Guru
Magat Guru's picture

One single metric will get me to believe the economy is improving -- my ability to get a job in my field in 2011.

Mon, 12/13/2010 - 12:24 | 801626 gerd
gerd's picture

your logic is reflected in your paygrade.

Mon, 12/13/2010 - 12:50 | 801702 Raynja
Raynja's picture

+ 7

Mon, 12/13/2010 - 13:39 | 801886 Commander Cody
Commander Cody's picture

Sorry about your problem.

Tue, 12/14/2010 - 00:56 | 803792 bingocat
bingocat's picture

thasss why i like bankershh... their pay grade is very high so they must be most logikul.


Mon, 12/13/2010 - 12:25 | 801630 SheepDog-One
SheepDog-One's picture

Watching and shaking my head as once tellers of truth and reality turn to Nazi camp guards....'hey if ya cant beat em join em, its a good job, I was only following orders' is the new mantra? Pretty sad.

Mon, 12/13/2010 - 12:30 | 801641 Oh regional Indian
Oh regional Indian's picture

"The fact that Obama was so quick to ink a deal that included a hand in the Social Security cookie jar without even a sketch of a medium term fiscal plan to reduce the deficit has created a bit of a stir among some of the previously comatose bond vigilantes"

That is a classic.

Temporary separation from reality? I think not.

Severence is the word that comes to my mind.

Reality, raw but real.

Poor America, so deluded, poor rest of us, hooked like a freight train to THE GREAT LEADER, THE BEACON OF THE FREE WORLD.


Mon, 12/13/2010 - 12:32 | 801644 Grand Supercycle
Grand Supercycle's picture

Updated DOW chart with the megaphone wedge ...



Mon, 12/13/2010 - 12:35 | 801652 SheepDog-One
SheepDog-One's picture

Its a weak confirmation though, only 2 contact points top and bottom? I dont even look at anything unless it has 4 definite touches, not fudged ones either.

Mon, 12/13/2010 - 12:37 | 801659 gloomboomdoom
gloomboomdoom's picture


"By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so"- Ben S Bernanke 2002

Mon, 12/13/2010 - 12:40 | 801667 SheepDog-One
SheepDog-One's picture


Mon, 12/13/2010 - 12:45 | 801686 jus_lite_reading
jus_lite_reading's picture

SD1- Ignore the troll. He is baiting. Perhaps he is doing an "experiment"





Mon, 12/13/2010 - 12:40 | 801666 inkt2002
inkt2002's picture

Give it a rest Rosey.  You are embarrassing yourself.

Mon, 12/13/2010 - 12:44 | 801676 gloomboomdoom
gloomboomdoom's picture

gonna have to do better than that... where is the "doom"? Where is this impending economic heart-attack going to come from?

Dollar Index day of Lehman bankruptcy 78.49
Dollar Index day of QE2 announcement 76.40
Dollar Index today 80.02

Mon, 12/13/2010 - 14:30 | 802068 Max Hunter
Max Hunter's picture

OK.. Dollar Index at 80... but

-PM's at all time high

-Agriculture through the roof, food prices up 30% over past couple years.

-Commodities very high

-Unemployment at 17%

The fact that you state you earn $10/hour and you are happy with your life is quite suspect to say the least.. Anyone with an 8th grade math level can quickly determine that life would be quite a struggle unless you own your house outright and have no other loans whatsoever to pay on.. Troll..

At least make your shit believable.



Mon, 12/13/2010 - 15:50 | 802318 akak
akak's picture

Hey Harry, just because you change your name and avatar does not mean that we cannot immediately see through your bullshit and instantly fail to recognize who you really are.

Mon, 12/13/2010 - 12:44 | 801679 TexDenim
TexDenim's picture

The bad inflation news out of emerging markets, which is #4 on his list, is a certainty and is already happening. Why have central banks in PRC, Brazil, and other hot equity markets already raised interest rates? Because inflation is a reality in those markets and will be getting worse.

Mon, 12/13/2010 - 12:44 | 801680 Drag Racer
Drag Racer's picture

... core inflation will remain on a declining trend.


Yea, its jusy normal for cotton to be limit up and copper is always over 4.00...

Mon, 12/13/2010 - 13:27 | 801844 knukles
knukles's picture

Core Inflation, Goddamn-it. 
Core Inflation.
The price of Cores has not changed in months.  Months, I tell you.  There is No Core Inflation. 
Quit Bitching About It.

America is Fine.
Fucked Up, Insecure, Neuriotic and Estatic about tomorrow's Bright Prospects.

Let them eat Green Shoots

Mon, 12/13/2010 - 14:23 | 802035 sharonsj
sharonsj's picture

What planet are you on?  We've had core inflation over the last two years but the mainstream media has ignored it.  Perhaps your definition of "core" doesn't include food and energy?

Mon, 12/13/2010 - 12:48 | 801695 jus_lite_reading
jus_lite_reading's picture

What I see occurring on the regional building arena is a dramatic slowdown in construction, especially new homes.


Many plumbers in the tristate area are now out of business and went from easy money new installation to the dreaded service work (fixing broken toilets)

Game over. Another cog in the rung is off the track.

Mon, 12/13/2010 - 12:50 | 801701 Ferg .
Ferg .'s picture

The current climate is a contrarian's dream :


1) Sentiment indicators at bullish extremes .

2) A flurry of economists raising growth prospects

3) Underlying fundamentals which in no way can be construed as positive but which continue to be ignored .

4) A ridiculously overbought equities market .

Mon, 12/13/2010 - 12:55 | 801712 inkt2002
inkt2002's picture


1) Sentiment indicators at bullish extremes .

2) A flurry of economists raising growth prospects

3) Underlying fundamentals which in no way can be construed as positive but which continue to be ignored .

4) A ridiculously overbought equities market .

Mon, 12/13/2010 - 13:17 | 801805 Ferg .
Ferg .'s picture

Even the all powerful bearded one has his limits . Market may still trend higher over the next few months , but the threat of an imminent correction would appear to be substantial .

Mon, 12/13/2010 - 13:06 | 801750 jus_lite_reading
jus_lite_reading's picture

After 30+ years of equity research, I've never seen a market more bipolar than this one. The sentiment is very reminiscent of 1987. Unfortunately, this will not end well as only a few are prepared.

Mon, 12/13/2010 - 13:26 | 801838 Ferg .
Ferg .'s picture

Bipolar is really the only word for it . I can't for the life of me understand how such euphoria can exist in an environment of high unemployment , limp growth prospects , obscene national debt , serious macroeconomic concerns and intense dollar devaluation .  Shortsighted in the extreme .

Mon, 12/13/2010 - 12:53 | 801706 centerline
centerline's picture

Kick the can has turned now into kick the grenade.  And everyone parties at each kick when the thing does not explode as a result.  This is not a fight against manic-depression.  This is fight to remain sane and not be blinded by the manusia of the daily economic spin.  Bullishness here is for traders.  For those of us living in reality, who do not make an income trading, it is more time to get out of harm's way.    

Mon, 12/13/2010 - 12:59 | 801724 MountainHawk
MountainHawk's picture

It's foolish not have some of ur money working for you when Bernanke is giving it away. Stay liquid, buy the dips, don't fight the tape, hopefully you'll make more than u have lost with a conservative approach. I'll admit I listened to Rosie / Karl Denninger a little too often earlier and got out of the market when the going got really good. I stopped attempting to short, just buying dips and letting em run w/ stops.

Mon, 12/13/2010 - 13:05 | 801742 inkt2002
inkt2002's picture

I can't wait for Karl's yearly recap on his 2010 predictions.  I highly doubt he is looking forward to it.

Mon, 12/13/2010 - 13:07 | 801756 MountainHawk
MountainHawk's picture

Denninger and Rosie are both correct, but their reality ain't going to make any cheddar. For one to profit, you must disconnect yourself from reality, become a momentum chaser, and if you can't, well we all know happed to dinosaurs.

Mon, 12/13/2010 - 13:14 | 801787 gloomboomdoom
gloomboomdoom's picture

Karl is great, don't hate.

Why exactly will he dread writing predictions for 2011?

Mon, 12/13/2010 - 13:30 | 801847 inkt2002
inkt2002's picture

He won't dread making 2011 predictions.  He has a knack for thinking he can discount information better than the markets.  He will dread recaping his 2010, which happens on the same post as his 2011 predictions. His real knack is having the markets constantly tell him to GFYS.

Mon, 12/13/2010 - 13:10 | 801767 dlsamg
dlsamg's picture

I'm as bearish as anyone on this market but it's still gonna go up. The problem for all the bears is they assume we are still playing by the rules. We are not. Ben must make the market rise to new highs to literally keep peace. If the market drops whole countries and economies fail with resulting civil unrest and eventually war. He thinks he can avoid this by running the market up and recreating animal spirits and the wealth effect thus kick starting world economies. Right or wrong he will not let this market fall. Fundamentals are worthless. Technicals are worthless. Past extremes are worthless. The game is rigged and the market is going up. Be long or on the sidelines. Ben wants you short so he can squeeze you even more.

Mon, 12/13/2010 - 13:13 | 801782 MountainHawk
MountainHawk's picture


Mon, 12/13/2010 - 13:20 | 801820 centerline
centerline's picture

Yup. Step one is recognize that the markets are not reality any more.  Haven't been in a long, long time.  Just now it is out in the open and plain to see.  Step two is to recognize that "buy and hold" investing died along time ago too.  Step three is to realize that the game is rigged against you.  It's a casino.  The door will only he held open for so long - and there will be no warning when it slams shut.  All said, I know alot of people who are loving this market from a trading perspective.  Nothing wrong with that.

Mon, 12/13/2010 - 14:23 | 802041 Key_2_The_Castle
Key_2_The_Castle's picture

I'm from the bear camp as well but the troublesome thing to me about being bearish right now is that the bus seems to be getting a bit crowded here on ZH.  I realize that those in attendance here might not be representative of a normal slice of investor sentiment but still....I'd rather not have so much company.

Mon, 12/13/2010 - 13:13 | 801781 AnAnonymous
AnAnonymous's picture

Too gloomy.

Default in Europe? Not going to happen. A European country defaulting would open the floodgates of default by third world countries, which are at the bottom of the Ponzi. You cant afford losing your base in a Ponzi or it collapses. Every single European country knows that.

Expect the same theater of illusion as previously: big european countries dragging feet to provide bail out money while soon to be bailed out countries threatening to default in order to get the best deal. Ending game: same as previously.


High value US market: never forget that the US want to keep intact its monopoly on world commodities. A few months after the crisis start, China   and a few others showed willingness to cut in US business by increasing their commodities contracts (Clinton went to Beijing to threaten them not to) 

High value US markets force them to go and fish for values on these markets and not elsewhere. Bernanke is pumping up the markets and if you want your share of fancy money, you need to be in the markets.

That's the way it is.

Mon, 12/13/2010 - 13:14 | 801788 OutLookingIn
OutLookingIn's picture


 The crowd is crowded around the punch bowl as Benny keeps right on pouring in more 'hopium'! I think "Doom" has had a little too much! As a matter of fact the markets have almost had too much. Very top heavy.

The 'hopium' will be kept right on pouring, keeping the punch bowl topped up for those that have their 'rosey' tinted glasses on! They don't see the train wreck coming, as they dream of sugar plums and top of the season bonuses about to be showered down!

Bread and circuses! Cheap, plentiful fast food, beer and all the entertainment one could want in 52 inch flat screen HD TV! Okay. The masses are obese and placated. Let the financial raping continue! Yippee!

Mon, 12/13/2010 - 13:21 | 801821 TradingJoe
TradingJoe's picture

Has anyone thought, the punchbowl, while Benjie keeps pouring, could run over and thus fuck up everything that already is fucked up?? Been trying to rap my head around this shit and get to no "reasonable" outcome rather then what ZH is all about! Sometimes too much is just that, TOO MUCH!

Mon, 12/13/2010 - 13:22 | 801800 MountainHawk
MountainHawk's picture

All else being equal, I wouldn't be surprised to see a bit off a sell of before year end.

Mon, 12/13/2010 - 13:33 | 801864 johngerard
johngerard's picture

part of the title says it all: perception versus reality.  if i traded what i think should be happening, i'd be bankrupt by now...

my guess is (and that's all anyone can ever do) is that this current bout of mania can't last too much longer - end of this year, beginning of next year

then we'll see a reasonable move to the downside - then the beginning of a new multi-year bull market* 

it's counter-intuitive, and it sounds bullshit.  But i'm only interested in what will probably happen, not what i'd like to happen in an ideal world to satisfy my ego and for the intellectual frisson of being able to say "I told you so"...

*no technical or fundamental analysis was harmed during this guess.

Mon, 12/13/2010 - 13:35 | 801873 HarryWanger
HarryWanger's picture

Wow, I can't believe what I'm reading today! Most of the posts are spot on waking up to the realization that this market will continue higher. If only you would have taken a step back earlier and ignored the gloom spread by Rosie et. al. you would have done really well.

Lesson learned for many ZH readers, listen to both sides of the story. Common sense should have told you this market was going higher and higher. Didn't take a genius to figure that out. But many insisted on listening to guys like Rosie and lost their asses.

Mon, 12/13/2010 - 13:43 | 801895 gloomboomdoom
gloomboomdoom's picture

Amen brother.

Ignore the doom.

Making millions riding the bucking bronco has never been easier!

Mon, 12/13/2010 - 13:59 | 801945 Bartanist
Bartanist's picture

Isn't capitulation a sign of a reversal.

a) Everyone should realize by now that the markets are manipulated crooked casino Ponzi schemes run by the Fed and big banks. To stay wealthy and in control the people dictating to the Fed and the primary dealers need to keep the scam going.

b) The Fed and primary dealers through their actions have shown that they believe that the stock market is the ultimate determining factor in the strength of the economy, and their ability to maintain control. (reminds me of execs who, for a while, thought that they should be paid a percentage of their company's increase in market cap as compensation ... until the market turned on them .. then they wanted other methods of getting free and unreasonable guaranteed money). The Fed and banks are relentless in the unwarranted increase in stock prices and the unwarranted inflation of commodities.

Hence, since the market is a fraud and those with the power to drive the fraud are relentless in driving it up, the market will ALWAYS go up and we should not fight the Fed ... c a p i t u l a t i o n !!

Mon, 12/13/2010 - 14:13 | 802004 Ferg .
Ferg .'s picture

Given the poor state of US fundamentals and the intermittent spasms from the Eurozone ( among other concerns for the global economy ) I think it was , and still is , natural to be bearish . What I , and from the looks of it many other posters on ZH , underestimated was the size and speed of the QE2 effect on the equity markets .

Now that we've all gauged its efficacy in ramping up stocks it's as equally natural to start to ease off on the bearish mentality on equities ( but not on macroeconomics ) .

I still think that there are far too many potential sell off catalysts to be in stocks for an extended period of time , unless you managed to buy when the S&P was trading in triple digits and thus have some serious air between current levels and entry levels .  

Mon, 12/13/2010 - 13:37 | 801881 Doctor Detroit
Doctor Detroit's picture

Please remember that FED managed to restart the economy after the bear market between 00-02 by increasing leverage (mainly through low interest rates) which spurred a bull market that lasted until 07. All I'm saying is that the current madness can go on for a long time (think +2 years) before we'll see a major correction - Thus we might as well do as we're told by Ben and make some money while we wait for a big one.  

Mon, 12/13/2010 - 13:44 | 801901 gloomboomdoom
gloomboomdoom's picture


Bernanke was correct. Time for people to wake up.

667 was/is a multi-generational low.

If another "Big Event' happens. We will not go below 9k... I promise.

The worst is behind us, folks!

Mon, 12/13/2010 - 13:56 | 801935 OutLookingIn
OutLookingIn's picture



Mon, 12/13/2010 - 14:03 | 801960 Bartanist
Bartanist's picture

Back then people were transitioned from manufacturing jobs to real estate and construction jobs.

Unless I am missing something, the Fed and big banks missed the second half of the equation this time and have nowhere to transition people except to unemployment insurance, food stamps, the military and other government roles (all pretty much equal in my mind).

Mon, 12/13/2010 - 14:45 | 802117 Max Hunter
Max Hunter's picture

This is a good point.. The last bubble occured when the house price shot up to give people fake wealth. All previous bubbles were saved by another bubble and we simply don't have another bubble to use..

I don't want to be a bear.. And I don't think it's 100% sure we will have a major catastrophe, but I do think it's at least 50/50.  Even so, many can prosper but all in all, we are looking at a solid 10 years of anemic growth at best and a serious reduction in our standard of living.. It's simply a balance that needs to be achieved..  It's been avoided and augmented for 40 years...  Chickens are coming home...

Mon, 12/13/2010 - 17:55 | 802774 Clockwork Orange
Clockwork Orange's picture

Bingo.  Well said.

Mon, 12/13/2010 - 23:33 | 803640 Magat Guru
Magat Guru's picture
Don't forget health care! As long as boomers have SOME $$ and Medicare is still paying there's lots of jobs emptying bedpans & wiping oldsters' bottoms. 

Mon, 12/13/2010 - 14:14 | 802010 erik
erik's picture

The Boy Who Cried Wolf applies here.  Each time he cried wolf, the effect was progressively weaker.  I expect the Fed's efforts will do the same in this cycle.  There won't be a 4-5 year bull market this time around, but another year is potentially possible.

The end is plain to see.  Once the Fed loses control of the markets, then all faith will be lost, and massive selling will ensue. 

Mon, 12/13/2010 - 14:05 | 801961 RunningMan
RunningMan's picture

I want to be bullish, I really do. And I've learned to believe in the spirit of true Americans to come back in the face of adversity. I believe in good sales people (perhaps like Harry, who's got the right attitude for it), and in pitching the things one believes in.

That said, I've been doing my usual polling of the masses on sales this year, and retailers at the local mall (a higher end mall mind you), were a little despondent. Foot traffic ok and maybe down relative to last year, but fewer sales relative to same time last year. Perhaps all these sales have migrated online? When I asked a year ago, I got positive feedback from retailers indicating 09 would be better than 08 - that didn't seem too hard an ask given it felt like Armageddon in Dec2008. There's still time in the season, and maybe everyone is just late in shopping...

As for Rosie's post - a decided change in attitude, no? I still sense a deepening malaise, not a sense of recovery. And I'll believe it when this eerie spending lockdown clients are moving towards lets up. That can't be good for next year's numbers.

Mon, 12/13/2010 - 14:07 | 801969 BotanyBabe
BotanyBabe's picture

Rosenberg's flip-flop on corporate bonds over the past few weeks is just another reason to consider his prognostications as nothing more than cheap entertainment.

Mon, 12/13/2010 - 14:22 | 802032 CrashisOptimistic
CrashisOptimistic's picture

I have not seen Rosenberg be all that wrong.  His primary play was in bonds all year and until a week or two ago they outperformed stocks.  Gold certainly has.

Why is he wrong if he outperforms stocks?

His analysis is top notch and accurate.  He performs it without trying to predict what the Fed will do.  The Fed can undo any prediction and often does.  

Believing that you will win a game because your quarterback is so good, and then have him throw 4 interceptions, but you still win because the other quarterback threw five interceptions . . . does not make you right.

We are at this point all trying to front run the Fed.  No one is taking a position based on some belief in capitalism.  Oil is going to become scarce, and it will kill most of us, but until then it is hard to know if it will increase in price.  It could stay cheap and still be scarce because economic activity deteriorates and suppresses demand -- right up until it won't provide transport for food.


Mon, 12/13/2010 - 14:28 | 802061 erik
erik's picture

Oil is not scarce in the US.  Have you seen the oil inventory levels chart yet?

Supply and demand has been suspended in oil pricing.  Courtesy of China?  Speculators? 

CFTC meeting in January on position limits looms large for commodities.

Mon, 12/13/2010 - 14:23 | 802039 erik
erik's picture

Does anyone remember the first time we saw oil prices hit $90?

Nov 2007.  One month after the S&P topped, and two months before the recession.  This bull market is closer to its end point than its beginning.  That being said, the last stage is the euphoric one where everyone believes things like, "The Fed won't let the market drop".

Remember when treasury yields couldn't possibly increase when QE was taking place?

Mon, 12/13/2010 - 14:38 | 802091 onlooker
onlooker's picture

Perception: If you shop Wal-Mart, you see most food prices holding.


Reality: Check the weight or volume, it is less for the same price, unit cost is up--- up to

              15% to 20% over last year on many items.


Perception/Reality: Gas/fuel prices are up and expensive.


Perception/Reality: Unemployment is well, there are no jobs. Ask the recent University



Perception/Reality: Home prices are the pits and the pit is getting deeper. Big loss and

                                  Continuing to get worse.


Perception/Reality: Stock prices are up, Gold is UP, Silver is UP, Copper is Up, food

                                 Futures are UP, Energy is UP.


Perception: The Fed is dealing nicely with the economy and we are in a recovery.


Reality: The Fed is creating a dept structure that is a house of cards and doing an

              Excellent job of concealing and spinning the farce to the voters.


Reality: Our Banks are in real trouble. The bigger the worse it is.

Mon, 12/13/2010 - 14:51 | 802126 Quinvarius
Quinvarius's picture

Big dumb money (banks) is front running pomo for trades and chasing stock momentum.  Observant money has gone the anything but dollars investment route.  Smart money has gone all commodities and PMs.  Little money is liquidating 401ks and IRAs to survive.  Soon, observant money and big dumb money will realize that little money is not ever going to come and hold the bag for them.  Then it will play out like Gonzalo Lira was saying a few months ago.

Mon, 12/13/2010 - 15:03 | 802170 pat53
pat53's picture

 "This is where the economists who are aggressively boosting their forecasts — as they did in early 2008 — are likely to be wrong yet again."

Wow, talk about the pot calling the kettle black  !!! LOL   Is  there anyone who has been more WRONG about the economy and stock market than this idiot (Rosie) !!??  How can this moron come out literally day after day with his useless drivel and impending doom and still keep a job? I would have fired his sorry ass months ago, he is totally clueless !

Mon, 12/13/2010 - 15:23 | 802223 erik
erik's picture

Right on treasuries.  Right on corporate bonds back near the crash bottom.  Wrong on stock market.  Wrong on economy.  Right on crash of 2008 but early as most were.

Rosenberg massively underestimated the govt/Fed willingness to throw taxpayers under the bus.  I'm sure that it will all work out just fine though when the crutches are removed by the govt/Fed.

Mon, 12/13/2010 - 15:16 | 802201 Jerry Maguire
Jerry Maguire's picture

Meanwhile, CNN/Money Mag (rag?) is telling people that buying a home right now is a "no-brainer".


Mon, 12/13/2010 - 17:38 | 802729 thepigman
thepigman's picture

Huge number of cheerleading douchebags
popping up all over the place.
Even relatively obscure places.
They must need retail real bad for
some reason.

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