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David Rosenberg's 2010 Outlook "The Recession Is Really A Depression"

Tyler Durden's picture


With December almost done, and all the banks having already issued their rosy outlooks for 2010 (don't ask us how the trading desks are axed, but you be sure a certain sense of "contrarianism" permeates Goldman's traders), the objective third pary strategists begin chiming in. We present Rosie's 2010 outlook from Today's Breakfast with Dave piece, courtesy of Gluskin Sheff.

The credit collapse and the accompanying deflation and overcapacity are going to drive the economy and financial markets in 2010. We have said repeatedly that this recession is really a depression because the recessions of the post-WWII experience were merely small backward steps in an inventory cycle but in the context of expanding credit. Whereas now, we are in a prolonged period of credit contraction, especially as it relates to households and small businesses (as we highlighted in our small business sentiment write-up yesterday).

In addition, we have characterized the rally in the economy and global equity markets appropriately as a bear market rally from the March lows, influenced by the heavy hand of government intervention and stimulus. But in classic Bob Farrell form, 2010 may well be seen as the year in which we witness the inevitable drawn out decline that is typical of secular bear markets. There may be some risk in industrial commodities if global growth underperforms, but the soft commodities, such as agriculture, may outperform in the same way that consumer staple equities should outperform cyclicals in an environment where economic growth disappoints the consensus view. Gold is operating on its own particular set of global supply and demand curves and should be an outperformer as well, especially when the next down-leg in the U.S. dollar occurs. We are not alone in espousing this view — have a look at Why Consumes Are Likely to Keep on Saving on page C1 of today’s WSJ.

The defining characteristic of this asset deflation and credit contraction has been the implosion of the largest balance sheet in the world — the U.S. household sector. Even with the bear market rally in equities and the tenuous recovery in housing in 2009, the reality is that household net worth has contracted nearly 20% over the past year-and-a-half, or an epic $12 trillion of lost net worth, a degree of trauma we have never seen before.

As households begin to assess the shock and what it means for their retirement needs, the impact of this shocking loss of wealth on consumer spending patterns in the future is likely going to be very significant. Frugality is the new fashion and likely to stay that way for years as attitudes toward discretionary spending, homeownership and credit undergo a secular shift towards prudence and conservatism.

While hedge funds and short-coverings have been the major sources of buying power for the equity market this year, what has really impressed me is what the general public has been doing with their savings, which is to allocate more towards fixed-income strategies. Looking at the U.S. household balance sheet, what I see on the asset side is a 25% weighting towards equities, a 30% weighting towards real estate and there is obviously a lot in cash and deposits, life insurance reserves and consumer durables, but the weighting in fixed-income securities is less than 7%. So my contention is that this is the part of the asset mix that will expand the most in the next five to 10 years and I am constructive on income strategies.

What also makes this cycle entirely different from all the other ones experienced in the post-WWII era is that this is the first consumer recession we have witnessed where the median age of the baby boom population is 52 going on 53. The last time we had a consumer recession in the early 1990s, the boomer population was in their early 30s and they were still expanding their balance sheets. The last time we had a bubble burst in 2001 they were in their early 40s. Now they are in their early 50s, the first of the boomers are in their early 60s, and we are talking about a critical mass of 78 million people who have driven everything in the economy and capital markets over the last five decades. This cohort realize that they may never fully recoup their lost net worth, and yet they will probably live another 20 or 30 years.

So, what is happening, which is at the same time fascinating and disturbing, is that the only part of the population actually seeing any job growth in this recession are people over the age of 55. Everyone else can’t get a job or are losing jobs — there is a youth unemployment crisis in the United States of epic proportions and a record number of Americans have been out of work for longer than six months in part because the “aging but not aged” crowd is not retiring as early as they used to. My contention is that many retirees who took themselves out of the workforce because they believed that their net worth would provide for them sufficiently in their golden years are redoing their calculations and coming back to the workforce to make up for their lost wealth. They are seeking income in the labour market, not because they want to but because they have to in order to satisfy their retirement lifestyles.

So, instead of being tempted into capital appreciation equity strategies, for every dollar that the household sector has allocated to these funds since the March lows, over $10 dollars has flowed into income funds — bonds, hybrids, dividends and the like; the areas of the investment sphere that we have been recommending this year. We can understand that there are concerns over inflation, but the history of post-bubble credit collapses is that even with massive policy reflation, deflation pressures can dominate for years — this was certainly the case in the U.S.A. and Canada in the 1930s, and again in Japan from the 1990s until today. Income strategies in both cases worked well with minimal volatility.

Of course, all the talk right now is about reflation and all the efforts from the central banks to create inflation, but the facts on the ground show that the inflation rate for both consumers and producers has turned negative for the first time in six decades. 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. So, to protect the portfolio in this deflationary landscape, a pervasive focus on capital preservation and income orientation, whether that be in bonds, hybrids, or a focus on consistent dividend growth and dividend yield would seem to be in order.

Be that as it may, what has also become crystal clear is the attitude that the U.S. government has taken over the beleaguered U.S. dollar, which can only be described as benign neglect. After all, 2010 is a mid-term election year in the U.S. and the Administration will do everything it can to squeeze every last possible basis point out of GDP growth and to prevent the unemployment rate, the most emotionally-charged statistic of them all, from reaching new highs.

The decisions to give 57 million social security recipients another $250 and to not only extend the first-time homebuyer tax credit but to expand the subsidy to higher-income trade-up buyers smacks of populist economic policies that will stop at nothing to generate growth, even with the budget deficit-to-GDP ratio is already at a record of over 10%. While I still believe that a sustainable return to inflation is a long ways away, there is little doubt that we will see continuous efforts at policy reflation, which means that the U.S. money supply is going to continue to expand rapidly, which in turn is positive for commodities, which are after all priced in U.S. dollars.

On top of all that, it does appear from a volume demand perspective, that the secular growth dynamics in Asia, China and India in particular, have reasserted themselves and this part of the world is the marginal buyer of commodities. This is the key reason why the Canadian stock market, given its resource exposure, has continued to do very well in comparison to the United States, especially when the positive trend in the Canadian dollar enters the equation, and I expect this outperformance to continue.

Typical of a post-bubble credit collapse, I see the range of outcomes in the financial markets and the economy to be extremely wide. But one conclusion I think we can agree on in this light 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, under the proviso that the “experts” are correct on this particular forecast — that China and India remain the global growth leaders.

With that in mind, we were encouraged to see this on page B1 of today’s NYT — Cutting Back? Not in China: Rising Incomes Make it Easier to Splurge. As Dennis Gartman pointed out yesterday, there was a time (1820) when the U.S.A. was 2% of global GDP and Asia was 33%. That is tough for a lot of folks to swallow but maybe we will see in our lifetime a period when the Chinese economy does surpass the size of the U.S.A. (with 1.3 billion people, four times the U.S. population that actually seems quite likely).

After all, for the first time ever, China is going to be buying more vehicles than Americans will this year (then again, 20% of the Chinese aren’t exactly three-car families either) — 12.8 million units in China compared to 10.3 million in the U.S. And it’s not even fair to compare appliances any more either with consumption in China now up to 185 million (we are talking about washers, dryers, refrigerators, etc) versus an expected 137 million in the American market.

In Q3, Chinese consumers bought more computers (7.2 million) than the U.S.A. too (6.6 million). So while China is indeed still export-dependant and relies heavily on government infrastructure projects, there may be something to be said, at the margin, that consumer demand is also becoming an important contributor to its economic growth. Now keep in mind that most of this stuff is made in China and not in the U.S.A., so this is more of a commodity-input story than it is a U.S. export story.

China’s strategy of deploying its surpluses in assets around the world is quite a bit different than what Japan did with its surpluses in the 1980s. China is not into golf courses or movie studios as much as in gaining ownership of global resources in the ground. At last count, the country has signed trade deals with Africa to the tune of $60 billion (heck, that’s only 8% of the size of TARP, which is now going to be diverted towards a government-led job creation program in the U.S.A.). Have a look at the nifty article on the topic on page 11 of the FT —Africa Builds as Beijing Scrambles to Invest.


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Thu, 12/10/2009 - 11:45 | 158945 AN0NYM0US
AN0NYM0US's picture

Rosenberg blah blah blah

I'm sorry but he has been crying wolf since March - he may be correct but his credibility just ain't there.


Meanwhile in the TARP hearing going on now - Damon Silvers deputy chair of the panel (and Associate General Counsel of the AFL-CIO) is lobbing softballs at Timmay and coming up Pelosi's choice for the oversight panel Richard H. Neiman, superintendent of Banks in New York. 

Thu, 12/10/2009 - 11:56 | 158969 Eduardo
Eduardo's picture

Yes, you are my men ! Rosie and all that blah blah blah when Cramer was right all the way up and his talk is so much closer to us with all those boooyahhh

Never mind he is the best second to none in putting some clarity to this economic mess. He did not time you the market up to the second for ya like Cramer did (go buy CIT)



Thu, 12/10/2009 - 12:00 | 158974 Howard_Beale
Howard_Beale's picture

You obviously believe that bear markets go down in a straight line. Look at a chart of 1929-1933. Don't shoot the messenger or act as though you should have traded his points--understand his basic thesis and store it on your cranial hard drive for future use.

Thu, 12/10/2009 - 12:14 | 158996 AN0NYM0US
AN0NYM0US's picture

I believe that Rosie has been on the wrong side of this market (equities), on which he has opined extensively,  since March, notwithstanding the usual caveats. 

Thu, 12/10/2009 - 12:50 | 159043 deadhead
deadhead's picture

3're flat out wrong.

Rosie has said since March that he thought the spx could retrace as high as 1200 and he said it on several occasions.  that is a fact.

Thu, 12/10/2009 - 12:55 | 159053 curbyourrisk
curbyourrisk's picture

Why do you guys keep responding to people named ANONYMOUS???


I find it a complete waste of time.

Thu, 12/10/2009 - 13:20 | 159078 Ripped Chunk
Ripped Chunk's picture

Anonymous is ok for Craigslist "Rants & Raves"

Otherwise a total waste of time because what is coming will have no place for cowards.

Thu, 12/10/2009 - 14:55 | 159242 carbonmutant
carbonmutant's picture


Thu, 12/10/2009 - 13:35 | 159101 AN0NYM0US
AN0NYM0US's picture

curby, if I may call you by your first name - I could not agree more - much better to interact when you know the identity of the person with whom you are interacting


Thu, 12/10/2009 - 16:52 | 159393 bbbilly1326
bbbilly1326's picture

u mean like the writers on ZH ?  haha...........

Thu, 12/10/2009 - 14:21 | 159169 Anonymous
Anonymous's picture

curbyourrisk, to think about it, your name is basically
same as ANONYMOUS.

Thu, 12/10/2009 - 15:05 | 159261 MsCreant
MsCreant's picture

Curb and others,

You are being played.

Notice ANONYMOUS is in all caps? Notice Anon's bag has three eyes? Anon is as much of a consistent identity as you are as a Bernanke clown and I am as a chick with a gun and cigarette. I think it is very clever. He has further played with the bag image doing a strip tease with a bearded guy underneath. I don't always agree with this person, but they are smart, creative, and playful as all getout.

It just took slowing down and noticing. We also have a poster who is Mr. Anon, and others who play with the bag image (burning, narcoleptic) great stuff.

Thu, 12/10/2009 - 15:11 | 159269 WaterWings
WaterWings's picture

Woah. You are armed. Coole.

Thu, 12/10/2009 - 13:41 | 159064 AN0NYM0US
AN0NYM0US's picture

From the Zero Hedge Archives

 Groty   6 months ago
About two weeks ago he declared the bear market rally was over and the next leg down had begun. The onus was ont the bulls. Now he's saying the onus is on the bears for the next few months, and that 1200 can't be ruled out.

Sounds like the last bear standing is quasi-capitulating.

 deadhead   6 months ago
not quite true.....he indicated that if the rally was over, history shows us that the market will consolidate for 53 days (38 b'ness days). i remember the article well. he has repeatedly called this a "sucker's rally"



and this from the ZH archives:

Rosenberg ... Reaches For The Stratosphere, Sees 1,200 S&P On "Strong Earnings Growth"

Thu, 12/10/2009 - 14:17 | 159158 AR
AR's picture

DH / Hope you are well. If you got long NatGas last week as mentioned under 4.60ish, we'd take profits into today's rally and step aside in this instrument. Good luck our friend...

Thu, 12/10/2009 - 12:07 | 158982 Dixie Normous
Dixie Normous's picture

Crying wolf? 

Thu, 12/10/2009 - 13:21 | 159081 estaog
estaog's picture

is his analysis even remotely tradable? following this guy's advice will lose you a lot fo money.

Thu, 12/10/2009 - 14:20 | 159164 Dixie Normous
Dixie Normous's picture

Nobody's analysis is tradable other than your own.

Reading someone else's stuff and trading off it is like breaking news: it can't be trusted because you don't know who got it before you.


Thu, 12/10/2009 - 19:46 | 159603 Missing_Link
Missing_Link's picture

Ding ding ding!  We have a winner!

Thu, 12/10/2009 - 12:07 | 158983 Anonymous
Anonymous's picture

Rosie knows something. His ear is on the rail and he hears it coming. When .gov manipulates the game like never before it can make a good call go bad in a heartbeat.

Let's get back to trusting our sense of reality.

Thu, 12/10/2009 - 13:47 | 159113 jd2iv987
jd2iv987's picture

agreed...the analysis of the fixed income markets vs the equity markets is absolutely incorrect.


exactly wrong...


Thu, 12/10/2009 - 11:44 | 158953 SDRII
SDRII's picture

No worries, Politico reports Dems to increase ceiling by $1.8T - nothing a littel credit cant take care of

Thu, 12/10/2009 - 11:57 | 158961 aint no fortuna...
aint no fortunate son's picture

While I appreciate Mr. Rosenberg's, and the other several thousand negative commentaries from similarly inclined economists and pundits, if I had shorted this market every time that I agreed with their conclusions over the past 9 months, I would be scrubbing toilets in a Taco Bell for a profession, if I was lucky enough to be employed at all.

Fact of the matter is, yeah, things are bad and no doubt getting worse. Fact of the matter II is that it doesn't matter squat, because the US government owns this market and is going to keep it on an upward trajectory for as long as it feels like it, which will be as long as Lloyd and Jamie spin buy programs at will with Ben's money.

I do find it interesting that GS is back down today and perhaps reestablishing its downtrend, so perhaps yesterday's strength was pre-bonus share buying for distribution to the troops.. but they are rapidly approaching their 200 day EMA, and I would suspect there will be a lot of hedge funds buying that support just about the time the markets open up for the new year.. a perfect spot for a 20% correction in the market leader to end and the markets to get their New Year's jazz on compliments of the United States of America's printing presses. 

No doubt U-3 will be 12%+ by then with an ultimate altitude of 15% likely, and no doubt that will be the occasion for many celebratory buy programs to start the year off right as we take our next big "technical" move to the heavens.

Thu, 12/10/2009 - 12:13 | 158995 Dixie Normous
Dixie Normous's picture

Yes if you read Rosenberg and your finger is near a buy or sell button, you will sell probably everytime.

However, I like to read these types of writings because they are reality.

The key, if you trade these markets, is never to let anyone influence when you push the button.  A difficult challenge indeed.

Thu, 12/10/2009 - 12:49 | 159041 aint no fortuna...
aint no fortunate son's picture

I agree. I read voraciously, and when I put on my "big picture" hat the Rosenbergs of the world win hands down, every time... its the noise being put up from the peanut gallery in Washington and DC that is trying so hard to distract us from the truth of our situation that is the problem... namely, that like all previous "great" empires we have outlived our time in a final orgy of excess, arrogance and greed. Rosenberg is spot on when he talks about the secular changes that are and will be increasingly hitting this economy over the next several decades like a freight train... I'm 59... I know exactly what he's talking about.

So I try to keep my finger poised over the sell trigger, because I suspect that when it happens it will be faster than many think... until then I just shake my head in amazement at the spin machines spreading their manure.

Thu, 12/10/2009 - 11:56 | 158968 whydtinogo
whydtinogo's picture

There seems to be endless references to fridge and car sales in China versus the US and other western countries, which in someway suggests that domestic consumption will be leading Chinese growth and that China can decouple from its weak export markets. Consider the following from Michael Pettis:

"Just growth in Chinese consumption alone does not help if it grows in line with GDP, and less so if it grows slower than GDP.  In that case the imbalances will get worse, and while the impact on the trade account can be temporarily disguised if investment continues to surge, ultimately it just postpones the needed adjustment (and increases the cost if the investment surge is misallocated).

What kind of consumption growth will we need for the country to rebalance?  The numbers are a little worrying.  If China grows by 8% a year, consumption would have to grow by a little over 11% to raise the consumption share of GDP from 35% to 36% in one year.  It would have to grow by a little over 9 1/2% annually to do it in two years.  Consumption, in other words, must grow substantially faster than GDP for the rebalancing even to begin to take place.  This is arithmetically true because China begins the process with such a low consumption ratio.

Look at it over the longer term.  Just to return consumption to 40% of GDP over the next five years (and even that level is widely considered to be way too low, and probably unprecedented in the world excluding recent Chinese history), 8% average annual growth rates in GDP would require a tad under 11% annual growth in consumption.  Similarly, 7% average annual GDP growth rates would require that consumption grow annually over the next five years by nearly 10%."

Thu, 12/10/2009 - 12:26 | 159010 Anonymous
Anonymous's picture

Honestly...most of you guys are complete morons. Equities are only ONE asset class. Do you really think Rosenberg is a equities only guy? Since the March lows, while he's been negative on equities, he's been long high quality corporates, commodities [gold especially] and the CAD over the USD. To put it bluntly, had you converted your USD to CAD and bought corporates and would have made a fortune.

Thu, 12/10/2009 - 12:50 | 159044 Anonymous
Anonymous's picture

That would have been a good post if you left out

Honestly...most of you guys are complete morons.

Let's keep it emotion neutral.

Thu, 12/10/2009 - 16:52 | 159398 Ripped Chunk
Ripped Chunk's picture

That's why it posts as "anonymous" but I do agree with you anyway.

Thu, 12/10/2009 - 17:19 | 159439 Anonymous
Anonymous's picture

You would have MADE A FORTUNE in US dollars!

I bought gold in April with CDN dollars, (living in Canada that made sense) although I now have more USD than before, I have taken a bit of a shit kicking.

Sure, my profits look good in USD, but who wants to hold those???

Thu, 12/10/2009 - 12:35 | 159018 TraderVix
TraderVix's picture

I agree with Rosenberg to the extent that the deleveraging of the U.S. consumer will continue for years. The idealist in me would like to believe that there will be a decent percentage of teens and tweens watching (and hopefully learning from) their parent's mistakes as the reduce spending and pay down debt over the next few years.

Thu, 12/10/2009 - 12:37 | 159021 SayTabserb
SayTabserb's picture

At the macroeconomic level, as Carly would have sung, nobody does it better. Rosie's essays sound like the reality you can see outside the window. A gimmicked market can't hide 20% unemployment and a $12 trillion hit to household balance sheets. We're stuck where we are.

Thu, 12/10/2009 - 12:45 | 159033 ATG
ATG's picture

Rosie one of the few Wall Street Lions correctly

describing a YOY -15.3% decline in GDP before

Q3 a depression rather than recession.

No wonder he had to leave Stan ONeal and the

BAC/MER slumbering herd. Also one of the few,

along with Guarino, Prechter, Shilling,

another MER alum, correctly identifying deflation

as the primary trend. Trading against the trend

is for those who love moral hazard and wish to

rely on government bailpouts and agency


Meanwhile, John Williams has the data, if not

the big picture:


Thu, 12/10/2009 - 12:50 | 159046 George Orwell
George Orwell's picture

Rosenberg didn't tell you to short.  He is bearish and equities and bullish on corporate bonds.  If you stick to his advice and bought corporate bonds like LQD or individual bonds from companies like CSCO or IBM you would be doing quite well today.

George Orwell

Thu, 12/10/2009 - 15:55 | 159300 Anonymous
Anonymous's picture

yep - there is a distinction between one's beliefs
about fundamentals and one's behavior when
investing....they need not converge at all points...

Thu, 12/10/2009 - 13:02 | 159063 Assetman
Assetman's picture

The biggest error in judgement Rosenberg has made regarding is equity markets is the degree to which the Fed and others have engaged in market manipulation activities during this period of reflation.

Perhaps we all should have known better, but if someone told me last February that the Fed would start a campaign to purchase over $1 trillion in MBS near par while covertly squeezing the life out of fundamental equity short sellers-- well, I would have thought you were off your rocker.

Problem is, Rosenberg didn't recognize and accept it as such when it became apparent.

Now that we are at 50% retracement levels on the S&P and sovereign debt becoming a weightier issue, why stick you neck out at all on equities when the public really isn't buying them?

Thu, 12/10/2009 - 14:24 | 159179 MsCreant
MsCreant's picture

Hey Assetman!

None of us could have anticipated the level of fraud. I am amazed myself at what I am accepting as normal. I used to be "responsible" paid my taxes early to be a "good citizen" got angry at my husband for waiting until the last minute (even then he did not want them having his money any sooner than necessary).

I am waiting until the last minute now, on every tax front. I was never this cynical about the system. And with what I now know, I still read more daily that shocks me. I think I get the level of depravity, finally, and then I fall down another rabbit hole.

I left a comment on another thread about Simon buying more malls. You argued TARP would be the delivery vehichle for the bailout. I think it is funny, in a sick way, you and I could even be in a position to have this debate. The fundamental core issue is that big richtard bastards are buying up ugly assets EXPECTING the government to buy them out at inflated/original prices. I am now seeing the template everywhere.

On a thread this morning, is PIMCO buying those Dubai bonds? WTF???? We will see if it is just a rumor. But I gotta tell you, I am falling down another rabbit hole with this. The enormity of it is more than I can handle, just this second.

Things have always been bad, I get it that I am only catching up with the curve because I am not a business type, but until these bailout "innovations" this kind of depravity was not possible.

I crave honesty. I will not have it. If I stay honest, will I keep getting screwed? If I start trying to screw the system, do I screw my neighbors who I do not see myself as being at war with?

I uesd to be idealistic. I used to be good. I am now a MsCreant. I love this site, but hate the world the way it is.

Thu, 12/10/2009 - 15:53 | 159296 faustian bargain
faustian bargain's picture

You're still good, just not the normative good. Being a MsCreant is better than being a MsDirected.

Yours is sortof the line of thinking I'm also on, and it is leading me to be more curious about the homesteading movement, being off-grid & self-reliant as much as possible, etc.

As my resources are very modest, I think my energies might be better spent detaching from the system, than trying to screw it. I mean, I guess starving the beast is a type of screwage, but not the Quixotic type that ends up hurting me more than it.

Holding out the red pill for others to take, and leading by example, are things within my power to do.

Thu, 12/10/2009 - 17:01 | 159417 Gordon_Gekko
Gordon_Gekko's picture

Or MsSheeple who stand ready to be skinned by the benevolent government 24/7.

Thu, 12/10/2009 - 17:33 | 159456 MsCreant
MsCreant's picture


I like your posts. That is a good point you make, "just not normative good." I know where my heart is.

I am, I think, "lucky" enough to have a house. The problem/qualifier is that having the house keeps me tied to an area which may not be good to be tied to. It is paid for, so I have ripped up the front and some of the back and I dabble with gardening. I'm not sure if my stand gets made here, but since I own it outright, it would be nice. But I am in a big city. I spent this morning on a site about being a bottom feeder. Some of the information is good, and some of it is unethical, advice on how to live at the expense of others. Don't like that at all. What I keep being shocked at is how much these so called wealthy people are willing to do this. It is one thing if you have been poor all your life and have not had anyone tell you that things could (or even should) be different, it is another is you are wealthy and willing to steal from others who will most definitely suffer, while you have more than you can use.

I'm glad you're handing out red pills and looking to get off the grid. I think we are on the same page. My place on the grid may become off the grid, not sure yet.

Good luck.

Thu, 12/10/2009 - 19:31 | 159586 geopol
geopol's picture

but since I own it outright...

Stop paying your property taxes and see how long you own it..

Home ownership is a fraud / illusion in Amerika......

Thu, 12/10/2009 - 19:37 | 159594 DoChenRollingBearing
DoChenRollingBearing's picture

Like many of you, I am moving in the direction of going off the grid, not quickly nor all the way.  I think simple prudence dictates that we have alternative assets.  I do not want to attack the system either.  If you attack the Big Rhino, you will lose.  If we move to (or even partly to) John Galt's valley, then we should be OK.


I love zerohedge.  This place has the best mix of fast breaking news, knowledgable contributors and breadth of financial topics.  Bravo!  I also like and

Thu, 12/10/2009 - 16:02 | 159316 Rick64
Rick64's picture

I can totally relate to that, I wasn't naive before but am more cynical, the more I research how the government works and the corrupt practices that go on at the taxpayers expense.

Thu, 12/10/2009 - 17:41 | 159469 MsCreant
MsCreant's picture

I just keep coming back here and surf other sites (and wiki and the urban dictionary [LOL]) and just keep learning. There is a theorist named Georg Simmel who talks about something called the Tragedy of Culture. He argues that our objective culture (all the stuff we have created or can know) outpaces our subjective culture (an individual's particular mastery of cultural products) so that objective culture grows faster than subjective culture (there is simply too much to know) and the objective culture overwhelms and subordinates us to it. Finance is an example of the tragedy of culture at work. It is so big, it overwhelms us, even as it determines our livelihood.

Thu, 12/10/2009 - 16:15 | 159331 Assetman
Assetman's picture

Hey MsCreant... I had a nice essay all typed out for you... and it didn't succeed in posting.  I wholeheartedly agree with your thoughts.

So now I'll really need to get to the point.

The mere fact we are discussing who TARP money will payoff next is both surreal and a little disgusting.  It's shameful that entites like Simon and PIMPCO are trying to crowd themselves to be the next in line for a corrupt bailout by buying highly questionable assets... but they too see the system for what it has become.

Being honest and a creditor has not paid very well over the last couple of years-- and will not provide much of a payoff in the future.  The operative word as we go forward is "survival".  Unfortunately, to guarantee "survival", one either games the system at the expense of others-- or you find another system that is more honest and fair.

I'm encouraging my children to explore finding another system, that perhaps, isn't as inherently corrupt.  I, on the other hand, have a vested interest to do what I can to reverse this crap.  I'm still idealistic, but the battle lines have certainly changed.  And it's gotten more difficult.  I'm pretty much with Faustian Bargain's comments, as for what is on my "to do/done" list.  For some odd reason, I don't think it's a lost cause... yet.

Thu, 12/10/2009 - 17:49 | 159478 MsCreant
MsCreant's picture

"I'm encouraging my children to explore finding another system, that perhaps, isn't as inherently corrupt."

Me, the academic, I am actually challenging my son to reconsider college. I want whatever he chooses to be his, not mine, not a mindless path he takes because it is what everyone does. I am not sure how useful college is for the future, we shall see. I feel like I am part of a Ponzi scam and have made the error of expressing this opinion out loud!

Right now enrollments are up. Many are hiding from the "Recession." I predict that what we deliver is not going to get folks jobs, and they are going to start seeing it as a waste of their time and then we are going to see a mass exodus and legitimation crisis in education. Until we get honest about what is happening and start gearing things for that world, I feel the academy is in danger of becoming irrelevant, and thus broke.

Thu, 12/10/2009 - 19:12 | 159571 faustian bargain
faustian bargain's picture

Sortof relevant to this, I just received an email from my alumni office (MIT) that reminded me that typically about half of MIT's student tuition costs are paid by alumni donations. I'm getting a lot more emails asking for money this year than I have in the past. I hope they're teaching kids useful things.

Other issue is - a really high percentage of students there are foreigners that go back to their home country after graduation.

And the last issue I just thought of, is that Bernanke went to MIT. On behalf of all MIT alums, I deeply apologize.

Fri, 12/11/2009 - 02:04 | 159848 Assetman
Assetman's picture

I have a daughter, still in high school mind you, who understands all this stuff.  Extremely smart.  Intensely idealistic.  She thinks she can change the world.  I hope she does.

The debate there is ongoing, though she wants to go to school somewhere overseas.  And perhaps that experience will be the eye opener.

My younger son wants to be a major league baseball player.  He's just a big goofball.  I've guided his interest in meterology to be his "Plan B".  There's still more work to do there, but he understands there is a need for such expertise in most corners of the world.

I agree with the jobs/education paradox.  My sense is that those that have a good education will find good employment-- but it may be a half world away.  Like those who have immigated to this country through the decades, we may see "brain flight" to areas of the world that are better suited to those talents.  But many will stay and either remain unemployed or underemployed.

My hope is that my kids won't let borders be a barrier.

Fri, 12/11/2009 - 09:55 | 159975 Anonymous
Anonymous's picture

Or...maybe the academy becomes broke and thus irrelevant!


Fri, 12/11/2009 - 02:26 | 159859 Anonymous
Anonymous's picture

I admire people who sincerely care about and work to preserve a country we can be proud of. I submit that a part of any solution to our crisis of community--a skinned and gutted economy being one very important manifestation of the larger problem of our failure to self-govern responsibly--is a transformational "we the people" social/political action. In this respect, despite our collective best efforts--for over thirty years in my case--while the cause may not lost, "we" are failing miserably. This is a confession, not a critique. It is not said to discourage but encourage greater boldness in personal and community action fortified by truth, motivated by love, and with a profound regard for the fact that our miraculous lives and the time remaining to act with impact are all too brief.

Thu, 12/10/2009 - 16:27 | 159346 DaveyJones
DaveyJones's picture

MsCreant, as usual, you captured the ugliness beautifully

what is going down is faith shaking change

Thu, 12/10/2009 - 17:52 | 159483 MsCreant
MsCreant's picture

Faith shaking change, indeed! Thanks.

Thu, 12/10/2009 - 16:59 | 159414 Gordon_Gekko
Gordon_Gekko's picture

We're all John Galt now.

Thu, 12/10/2009 - 17:54 | 159486 MsCreant
MsCreant's picture

Guess I need some time with Rand!

Thu, 12/10/2009 - 19:14 | 159576 faustian bargain
faustian bargain's picture

Apparently John Stossel's new show on Fox Business is going to have an early episode dedicated to Atlas Shrugged. Either the first or second show...I don't think he's decided. (The other one will be about the 'climategate' issue.)

Thu, 12/10/2009 - 19:41 | 159598 DoChenRollingBearing
DoChenRollingBearing's picture

+1 GG and MsC

Thu, 12/10/2009 - 22:41 | 159739 Sqworl
Sqworl's picture

My life is a better place because of all of you!  Thank you for the insight and making me laugh...;-)

Thu, 12/10/2009 - 23:08 | 159749 MsCreant
MsCreant's picture

Thanks Sqworl.

Have the file open now, look forward to reading it.

Thu, 12/10/2009 - 23:16 | 159757 Sqworl
Sqworl's picture

Your welcome, it will blow your mind..the seduction of POTUS...It basically exposes everything we rant about day after day!!!..;-)

Fri, 12/11/2009 - 16:44 | 160438 faustian bargain
faustian bargain's picture

The problem I have with Taibbi is that he seems to conflate 'corporatism' and 'capitalism'; he commits the all-to-common error of blaming so-called "laissez-faire" policy for problems that would simply not be there were it not for intimate government involvement.

Regulatory capture, backstopping, and bailouts are not congruent with free markets. They are corruptions enabled by a government that doesn't care about liberty, only about power.

Thu, 12/10/2009 - 13:14 | 159073 sethstorm
sethstorm's picture

...and the first thing Rosenberg wants to do is show his fealty for China and India?

No thanks.



Fri, 12/11/2009 - 02:53 | 159863 GS is short Gold
GS is short Gold's picture

+1. Peter Schiff is the same way. I thought the de-coupling theory has been proven as bunk.

Thu, 12/10/2009 - 13:54 | 159121 AnonymousMonetarist
AnonymousMonetarist's picture

'In ancient rome
There was a poem
About a dog
Who found two bones
He picked at one
He licked the other
He went in circles
He dropped dead

Then if you got it you don’t want it
Seems to be the rule of thumb
Don’t be tricked by what you see
You got two ways to go

Freedom of choice
Is what you got
Freedom from choice
Is what you want'

'There is no fate but what we make for ourselves.'
-Kyle Reese

'Progress is impossible without change; and those who cannot change their minds cannot change anything. It's your place in the world, it's your life. Go on and do all you can with it, and make it the life you want to live.' 
-George Bernard Shaw

'Failure is success turned inside out.'

'When the student is ready the teacher will arrive.'
-Zen proverb

'To be mindful is a discontinuous process, our senses allow us a glimpse at the perfect form (truth) but that view can often be distorted by the flickering fire of perception that illuminates the shapes we perceive to believe.'
-Anonymous Monetarist

Have learned nothing from my successes for success has nothing to teach.

Failure though has schooled me well. Embracing, accepting and ultimately searching for failure has allowed me to be and accept that I am the luckiest of fools.

Not diminished by failure but rather, shall we say, contained, I am a Black Swan, mindful of my nature to go to extremes, thankful in the wisdom that, while most certainly still under development,keeps me balanced.

Back in the day at the University of Illinois had a classical civ teacher who used to dress up as the Oracle at Delphi every Friday and predict the winner of the upcoming Fighting Illini football game.

The class was huge, about 800 or so students, but this instructor was marvelous, able to connect with you even though he was but a speck on the stage. 

One day he said something that I really did not 'hear' until many years later.

He told a story of a Victorious General that was returning to Rome. To honor the General, the Emperor held a gala where throngs of adoring citizens regaled the champion as he was paraded through the city centre with all the pomp and pageantry that could be afforded. The General stood alone in the chariot receiving the adulation of his countryman, alone save for one individual that was placed next to the General. This individual had been assigned a task by the Emperor. His job was to as, the General basked in his glory, whisper into the General's ear every secret, every failing, every unknown known - or in the words of a famous Louisiana politician, every dead girl and live boy - every bit of dirt the Emperor had on the war hero.

The purpose was to make sure that the General's perspective remained, shall we say, balanced.

That is why whenever I feel good about myself I tell myself to go f@&# myself.

There are a lot of folks that we read about nowadays that very much need to get a memo like that.

For as we collectively double down on a lost decade to avoid a lost generation our inability to allow folks to be schooled by failure will ultimately ensure that success will only be achieved ideologically and not literally. 

Failure to liquidate the insolvent banksters, failure to implement real insurance, and more importantly entitlement, reform, failure to end the madness of foreign adventurism, is a failure of the tough over the easy and the truth over the specious.

Notwithstanding the claim of that silly television show, most folks do not lie. They are good, reasonable and honest. That is why the Big Lie works. It is so very difficult for them to process that the truths that they hold to be most dear are lies told to them by liars. They just can't grasp the delusion that those in a place of power and privilege have been captured by, a mindset that feeds them the pablum narrative that the ends justify the means. 

The cold hard fact of our age is that the bankrupt ideology of the rich that had greatly succeeded in drafting the inner monologue of regular folks so that they would vote against their self-interests is colliding head-on with a Mr. Market that is a bit pissed off that we've inflated it out of the business cycle for the last quarter century.

Reality is the tail risk and payback is a bitch.

I am a fierce social liberal (and fiscal conservative.)

Mr. President you are losing my faith and you are losing my vote.

And Barry, if you're losin' me, you are down deep in the hole my friend. 

The time will come when you will have to make a choice Mr. Dunham, will you be schooled and do the right thing or will you just ask for a bigger shovel?

Choose wrong and a demagogue like the Manchurian Mountain Mama might just have a shot of taking you on and winning.

If Palin gets in even the most avowed liberal would award Incurious George the Nobel Prize in comparison.

Thu, 12/10/2009 - 14:55 | 159243 Anonymous
Anonymous's picture

what's with the bot posts?
seen this on 2 other threads too.
give it a rest.

Thu, 12/10/2009 - 16:24 | 159341 AnonymousMonetarist
AnonymousMonetarist's picture

One other thread buttercup ...accidentally

Thu, 12/10/2009 - 18:56 | 159553 Billy Bob
Billy Bob's picture

I love your stuff Mr. AM....I have come look for you in the comments even before I read the headline story.  You have the talent to write exactly what I feel.


How come it is so hard to be a "fierce social liberal" and at the same time be a "fiscal Conservative"?  While also recognizing that there is no one I can locate who is a "fierce social conservative" and at the same time a "fiscal liberal".


I suspect you and I are the only ones on the planet who are willing to state the truth of our beliefs.. all the rest want to be seen as "social conservatives" and also "fiscal convervatives" and to be accepted as "main stream".


where did the 5th Dimension and the age of Aquarius go?


Billy Bob

Thu, 12/10/2009 - 19:26 | 159584 AnonymousMonetarist
AnonymousMonetarist's picture

Thanks for the serotonin boost BB

You can check out older posts at

Dad asked how can you be a fierce social liberal and a fiscal conservative?

A: Duality of life, sir.

'Harmony and understanding 

Sympathy and trust abounding
No more falsehoods or derisions
Golden living dreams of visions
Mystic crystal revelation

And the mind's true liberation

Let the sun shine in '

Thu, 12/10/2009 - 19:37 | 159596 Hammer59
Hammer59's picture

Wow, that comment blew me away!  Well done. Keep up the good work, Brother!

Thu, 12/10/2009 - 14:22 | 159173 Anonymous
Anonymous's picture

good article except i disagree about inflation....the only way anyone can argue that there is no inflation is to use government statistics which are so burdened with fudge you could open a lemonade stand and sell fudge covered bls manure as a snack.....

shadow stats has the right inflation view in my opinion and it has not gone away by a long shot....

the other important observation he made is about chinese consumer growth made possible without imports due to the brilliant leadership of usa policy makers and business leaders who gave away the entire capital stock of industrial assets to the chicoms....the rockefeller / rothschild axis of evil planned it this way....americans are suckers....the world sees the american as a complete boob and this is just one piece of evidence in that case.

Thu, 12/10/2009 - 15:12 | 159271 Anonymous
Anonymous's picture

The U.S. was 2% of GDP in the time before mass immigration th the U.S....

Thu, 12/10/2009 - 15:47 | 159288 Anonymous
Anonymous's picture

This is really self-serving crap. This man has been saying this ever since he has been born - shouting and shouting - trying to make it come true.

Maybe it will work out like this - but even so it will do no credit to him. This kind of relentless pessimism really just turns my stomach. It is not analysis - it is an ideology.

Thu, 12/10/2009 - 18:02 | 159501 MsCreant
MsCreant's picture

Wow, since he was born. Holy shit, Rosenberg is like Damien or the Anti-Christ.  Think about it, S&P at 666. Whoa, Anon, are you like some priest dude who has come to warn us?

Guess that was a little hyperbolic, like your post.

Should he keep his observations to himself because being negative will do him and us no good?

Do you see things rosier than Rosenberg?

Defend your position. I'd love to be shown where I am looking at it too negatively. Right now, I'd like for you to be my white knight in shining armor and save me from my overly negative outlook.

Please? I mean this, as sarcastic as I sound. It would be great to have hope based on something solid.

Help a girl out. Come on.

Thu, 12/10/2009 - 15:51 | 159293 TJW
TJW's picture

This isn't my field of expertise, but it seems to me that the stock market and the economy in general have become somewhat detached from each other. Mom and pop are paying down debt. They've gotten out of the stock market and into some form of cash and have stashed that cash in bank accounts, money markets, the mattress, and holes in the back yard. The stock market, on the other hand, is being driven in low volumes by the carry trade. People with access are getting funds at 0% and gambling them in the stock market. If money stays available at about 0% for these folks, the stock market might continue to rise, even if the general malaise remains for a long time.

If there's another MAJOR downturn in the general economy, however...

Thu, 12/10/2009 - 15:57 | 159304 faustian bargain
faustian bargain's picture

You've got it...and some would say that Mom and Pop should consider carefully whether cash is the safest place to store their value.

Thu, 12/10/2009 - 16:06 | 159321 Anonymous
Anonymous's picture

of course they are disconnected but that is old
news. qe, direct treasury and fed intervention in
the stock market, stimulus money, the carry trade
and other influences have converged to maintain
high stock prices in the face of legendary p/e

i don't see a crash coming as long as
current reflationist policies some
point the money runs dry but no one knows when
that is....if japan is instructive it could be

however in real terms (gold) the stock market has
been deflating since c. the high prices
are only nominally high and losing ground....

Thu, 12/10/2009 - 17:02 | 159418 WaterWings
WaterWings's picture

Bank holiday? People are going to be so mad when their Fed Notes turn into fancy fire-starter overnight. Pain! 

Thu, 12/10/2009 - 15:58 | 159305 Anonymous
Anonymous's picture

Come on people, Rosie just sets the macro picture. Most of you are traders and macro just warns you of what is coming in the next 3-6 months ( and in some cases further out). Prechter does much the same, but he also gives tradeable advice such as the warning 3 weeks ago that gold was going to be heading down soon. That would have made any of you with the cojones a lot of money. Both Prechter and Denninger ( and I believe TPC also) have said that retail investors should stay the hell out of this market. Retail investors are in for normally at least a year to two or more; they were the ones that lost their retirement money in 2008. Making money is important, but if you are not aware of where this current administration is taking us and actively trying to stop it, then your devalued money will not be of much use. Le Cafe Americain is correct, we need to reform the financial system and clean out the insolvent banks for this economy to be sustainable.

Thu, 12/10/2009 - 16:22 | 159338 arkady
arkady's picture

I pretty much agree with everything, except there appears to be a pretty glaring contradiction.  He keeps harping on contraction, frugality and people saving and yet expects a weakening dollar.  While an argument can be made for a weakning dollar in the long run, given people's saving and contraction the dollar should naturally rally.  *blink*

Thu, 12/10/2009 - 16:57 | 159409 Gordon_Gekko
Gordon_Gekko's picture

What else is new?

Thu, 12/10/2009 - 17:41 | 159468 Anonymous
Anonymous's picture

The bottom line to this whole mess is that American corporations have off-shored manufacturing and are in love with indentured servitude wages to crush the American middle clas. If they are so in love with off-shoring, they should be forced out of the USA. They are traitors and their CEOs should executed for treason.

Thu, 12/10/2009 - 19:19 | 159580 Hammer59
Hammer59's picture


Thu, 12/10/2009 - 19:29 | 159589 Hammer59
Hammer59's picture

Props to AnonymousMonetarist for one poignant, poetic post. Manchurian canidate "you betcha" Palin ever becoming a successful demagogue in the near future? Even an electorate woefully stupid enough to elect Bush twice must be wincing from the consequences, so hopefully not.

Thu, 12/10/2009 - 19:48 | 159605 AnonymousMonetarist
AnonymousMonetarist's picture

Those that fail to stand for something will fall for anything.

Carter's failings swung the pendulum from Nixon to Reagan. (It's morning in America!)

Clinton's failings swung the pendulum from Reagan to Bush. (Your taxes will go down. Check our website and calculate how much!)

If Barry Dunham fails...(Palin- we'll make America strong&employed again by stressing common sense and traditional values!)

Hey, tell me the majority of conservatives don't think that Obama won because their side wasn't conservative enough?

Move along nothing to see here....



Thu, 12/10/2009 - 22:33 | 159732 Anonymous
Anonymous's picture

An amazingly ignorant presumption: "They are seeking income in the labour market, not because they want to but because they have to in order to satisfy their retirement lifestyles." Therefore, nobody fifty-five and over is working because they have to in order to stay afloat. They're just doing it because they're too greedy to let go. Those of us who suffered from the recession of 2001 and find ourselves exposed now are just imagining that we don't have enough money to retire.

Thu, 12/10/2009 - 23:18 | 159760 Anonymous
Anonymous's picture

I too believe in the existence of the Plunge Protection Team (aka US Gov't buying S&P futures via Gov't sachs, etc.)
propping up the equity markets.

However, what is the reason then that the PPT could not preven the crash from Feb 2009 through 6 March 2009?

Is it because the PPT can prevent small downturns but not major avalanches of selling?

Thu, 12/10/2009 - 23:44 | 159785 Jim in MN
Jim in MN's picture

So let's talk about bonds.  I believe that bond funds, as sold to the Boomers and the truly cursed younger cohort of professionals, are generally still regarded as 'safer' but are in fact profoundly dangerous.  As a retail investor, it would be great to buy individual corporate bonds at 5-8% and hold them, paper and all, to maturity.  But that's not what a bond fund is.

A bond fund bears the risk of collapse in the event of a surge in interest rates--which is not only possible but virtually inevitable. 

So, all the 'flight to safety' into bonds is most likely just a disorderly sheparding of the fleece-bearing herd into the next slaughter chute.

Right?  Isn't money market fund still the place to be if you're stuck in a 401(k)...assuming they even let you into it?  A lot of MM funds are closed now. 

Can Joe Blow or Jane A. Verage just go buy a bond, a simple freakin' bond, and stuff it under the matress any more?  Because that's the smart play if you're not an active trader and want someting besides gold and FRNs.

Fri, 12/11/2009 - 14:59 | 160261 steve from virginia
steve from virginia's picture


I agree with Rosenberg's general observations and put specifics into context. There are too many specifics which cancel each other out after awhile. R. has his prejudices and has earned them.

Rosenberg's general tone is similar to Meredith Whitney's which is similar to mine which it turn is similar to Max Keiser's, Nassim Taleb's, Nouriel Roubini's, John Hussman's, Doug Noland's, Mike Shedlock's, Andy Xie's, etc. Trading off the various bits and pieces of analysis out of the flood of information is foolish. Paying attention to the general direction of economic activity is not.

There is one condition and one overarching trend in today's world.

The condition is that crude oil - the world's prime mover/primary source of power - has more value traded as a commodity than does the work that can be done with the oil. There is absolutely nothing that can be done about this except de- industrialize. This is why policy and the economy as a whole are stuck in neutral. The only way to fix the problem is to shut the problem down, which the problem will do to itself over time.

I disagree with analysts who treat oil as 'just another commodity' which includes Rosenberg.

The trend is the worldwide increase in credit - derivatives and other claims - against a worldwide decrease in currency. Those able to trade this spread have been wildly successful over the past interval. This would include the Goldmans and the other large establishment that 'rent' access to currency. Evidence of this trend is the repudiation of unpayable debt against a backdrop of cash hoarding: continuing residential/commercial US real estate defaults, China energy derivatives defaults, Saudi Arabia bond defaults and the unfolding Dubai World mess in Dubai. At bottom, all debt is a claim against the aggregate value of work that can be done with oil.

Part of the 'currency rental' regime is shorting dollars/long gold by central banks and pumping equities and real estate markets by agencies and central bank proxies.

Current credit discounts frame a paradox; they do not reflect real (deflated) returns nor can they properly price funding risk as the discounts suggest an expanding currency aggregate over time. With an massive spectrum of credit available to invest in against a market for credit that is over- saturated (meaning microscopic yields against unknown risk) cash starts to look more and more appealing. It isn't bond market vigilantes that matter as much as cash hoarding vigilantes.

To review; one condition and one trend. The condition renders credit claims against real output non- collectible. The trend is toward deflation and the loss of asset values across the board, relative to currency with the currency/oil relationship dominant.

I almost typed 'doominant' but that would be too much of a Freudian typo.

Sun, 06/05/2011 - 08:34 | 1340941 sun1
sun1's picture

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