This page has been archived and commenting is disabled.
David Rosenberg's Special Report
While we disagree that Rosenberg has anything to defend against, be it strategy critics or vapid iconoclasts who mimic whatever they overhear during dinner conversations, the report below is a must read for those unacquainted with David Rosenberg's work, who would like to catch up to the key issues that one of the best economists discusses on a day to day basis.
From Gluskin-Sheff
»
- 16192 reads
- Printer-friendly version
- Send to friend
- advertisements -
Rosenberg has got to be in a tough position... new job... and a well articulated bearish position on the economy and the recovery... I would assume that at least once a day doubt has got to seep into his brain... I for one agree with his thoughts on the economy and the markets... and I continue to hold a short position because I am to stubborn to give it up... but I am anonymous and he is not.
Correction: I am Anonymous and you are MinnesotaNice
A comedian... lol...
a/k/a the Unknown comic!! [sorry, the devil made me do it!]
and I continue to hold a short position because I am to stubborn to give it up
according to my HP41CX..its time to cover my 'short' and go 'long' again.
good luck
It's a small short... and I have myself convinced that the minute I cover it down will go the markets in a dramatic fashion... but thanks for the feedback...
let me know when you cover....i'll keep riding mine further lol!!
So its been you all along propping up these markets! Don't let Ben know, you will be in "protective custody" in no time.
So tell me, if you had the power to prop the markets, and the government asked you to do so, showed you Armageddon if you did not, would you?
Armageddon hands down... you can build nothing real from a foundation that is primarily composed of an illusion... I like real even if it is painful and tragic... I don't like living in an illusion that can implode because of the movement of a butterfly's wings half way around the world...
And they keep killing the butterflies...
you can build nothing real from a foundation that is primarily composed of an illusion... Most definitely!
A prime example of why things like Shakespeare are still as valid today as ever. The quest to overcome denial when confronted with an irrational construct is a key component of the human drive to survive. And to live rather than simply exist even when doing so leads to the natural confrontation with the irrational.
Rosie joins the pantheon of former Merrill All American Luminaries such as A Gary Shilling, Bob Farrell and
the late Stan Salvigsen.
Some were more accurately bearish than the once big
bull could long tolerate.
Bob Farrell was bullish with the 1981 Dawn of a New Bull Market ad campaign a year early, while skeptical of the August 1982 777 Dow bottom.
It is certainly true zero coupon bonds like the special tax-exempt 13% XOM outperformed equities much of the time since 1981.
We are all humans having a divine experience.
Having acknowledged that, we respectfully disagree
with Dr Rosenberg re Commodities, Canucks and Loonies.
We note the Big4 are 71.1% long the dollar, 27.3% short boinds, 64.1% short the EAFE and 96.2% short the GSCI.
Maybe this time they will be long wrong?...
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493
agreed - Dave has nothing to prove to anyone. His research is outstanding.
The NYT must be channeling Canad..."U.S. Job Seekers Exceed Openings by Record Ratio"
http://www.nytimes.com/2009/09/27/business/economy/27jobs.html?_r=1&hp
an excerpt from Dave's May 19, 2009 inaugural letter from his new digs at Gluskin:
For the bears out there perhaps this apologetic he has just penned is a sign of an interim top. Certainly some of the bear blogs (SlopeofHope, Evil.Speculator), while maintaining their bearish outlook have shown some signs of capitulating. To Dave's credit he has maintained his focus on the "real" economy, which is probably why he missed the bull run (based on a fake/propped up economy) from the March lows.
Let's hope Dave doesn't lose his nerve with respect to his forecasts (it must be devasating to have the likes of Doug Kass and his ilk being hearlded as having made the right call on this market), though as I read through the special report I cannot help but notice this caveat in Dave's conclusion on page 22:
Dave will soon have a new boss as founder Ira Gluskin is planning to step back from the day to day. The way I read his special report it would seem that he took a real bad beating and given a reminder of where most of his firms clientele reside.
I agree... I think the powers that be at Gluskin had some 'influence' over the tone of this missive... I have read everything Rosenberg has sent out since he started at Gluskin... and the tenor of this special report is markedly different...
also our conservative government is at danger of having a no-confidence vote and be forced into an election. Me thinks he got his chain yanked to get be hind the appropriate shovel.
I believe that Doug Kass has been short the market since about 1000 on the S&P - saw him on Tech Ticker and he was calling for the top of the market around then.
I think we all know what is going on - the Fed is executing trades through JPM to prop up the S&P. Tyler has done an excellent job showing how the market ramps are the result of big block trades from JPM. Furthermore, the Fed General Council (Grayson interview) doesn't deny that they are placing trades through PD's like JPM.
Whether it continues or not I'm not sure - the market can't keep soaring without dire consequences for the dollar.
The BoJ openly admits to buying Nikkei, anyone denying the Fed buys S&P (either directly or though agents) is being silly.
"Certainly some of the bear blogs (SlopeofHope, Evil.Speculator), while maintaining their bearish outlook have shown some signs of capitulating."
That is certainly not quite correct
"Bearish AKA realistic blogs"
EvilSpeculator.com had DOW 9000 target by the end of this year and advised not to fight the trend for a very long time and just about now instead of you call "capitulation" is entering massive short positions.
Trading-to-win.com had SPX 1120 1st target since th beginning of July and advised to go massively short on Sep22/23. (after going all in long on March 3rd)
Slopeofhope.com, xTrends ...well - no comments.
Bottom line is - being bearish does not prevent good traders from making profits in any direction and , I agree that bias (in any direction) is lethal for trader's account.
I agree that the bears have been really good at trading this and also agree that Mole and Tim Knight called for significant runs back in March - what I was indicating was that as this thing has extended and resistance levels broken a less bearish tone has emerged (much like Rosies' missive)
That I agree with
It is so in human nature to stay with the trend - if trader is wrong there is always an excuse that he/she was not alone - majority of traders were wrong as well.
But it is double difficult to be bullish (for the trade purposes) at the very bottom when crowd shouts "there is NO bottom" and be bearish at the very top when every poorly timed bear (majority of bad timing comes from attempts to fade markets based on fundamental variant perception) is giving up.
Common adage "don't try to catch a falling knife" is true only for traders who does not have proven methodology and vigilant risk management needed to be able to "catch the knife by the handle" and profit greatly before anyone recognizes change of trend.
Rosenbergs' of this world posses great common sense, but market just cannot be successfully traded based on what we think is "right"
Cheers
DavidDT
here's a current example of what I mean (sort of)
from Slope an excerpt from his latest post:
http://slopeofhope.com/2009/09/the-final-push-medium-or-large.html
PS it is amazing how correct this fellow is (along with some of his followers -- same for evil.speculator)
ANONYMOUS,
Did you ever tear the rest of your other bag off? We had some good jawline action going, but I may have missed the rest of the strip tease.
anony the teaser...
ANONYMOUS
You are a skilled stripper. I tip my bag to you.
Are you actively promoting the adoption of paper bag sex fetishism? LOL
Apparently so! Our bagger strips and covers different things at different times, but only when you pay attention. Pure strip tease artist. Ask MinnesotaNice. She is my witness.
Yep, I've been keeping an eye on him... and he has been fully covered for a while now...
It appears from my perspective that Anon is an eye to eye kinda person... To see who actually pays attention to the details. Good job of active observation MsCreant & MnNice. I see what happens when folks get used to easy cast and reel action though...
i specifically recall rosie mentioning on a few occassions that the rally could go as high as spx 1200.....
i have been patiently waiting( and trading around) for the look on doug kass's face when we obliterate his "generational low" call in the s&p 500. we will see that mark shattered.
Agree, when people and markets realize there is no more free lunch bought by funny borrowed money...
Dollar devaluation seems a given at this point. But Has anyone considered that the USD and equity price reverse correlation phenomenon may end?? Crashing dollar and another crash in equities simultaniously. Is such a thing possible?
TD, all of that makes perfect sense to me. And Rosenberg is easy to read. Thank you very much.
He has nothing to apology for. Reading his reports is always a privilege.
His US devaulation analysis ignores the elephant in the room, namely China & its 2 Trillion (with a "T") $US reserve.
surely, that might be the reason the dollar hasn't dropped more than it has, particularly since as Brad Setser, now Director of International Economics for the Obama administration, pointed out about the world's largest creditor
"China is still a very poor country. It isn’t obvious why it makes sense for China to be financing other countries’ development rather than its own. That I suspect is part of the reason why China’s government seems so concerned about the risk of losses on its foreign assets."
Devaluing the dollar against the wishes of the Chinese is going to risk starting a trade war of immense proportions, particularly over scarce commodities like oil, while essentially creating devastating inflation if not hyperinflation for a country that is the largest importer in the world.
The other option is to maintain a stable dollar (or at least keep its decline reasonable) to permit orderly Chinese diversification of their excessive reserves, have deflation wring out the excesses in the domestic economy (i.e., failed banks & other businesses) and keep foreign credit flowing in to fund growing deficits & debt.
ignoring that the US is now indebted to & dependent on China in a massive way, when considering the devaluation of the dollar seems to me to be a huge blindspot on rosenberg's part.
as the yuan is pegged to the dollar, a weak dollar means a weak yuan. China is an export country which only bought 2 trillion dollar to weaken its currency. In my view, they'd love a weak dollar.
thanks for the response & it may very well be as simple as that.
exports (helped by a weak yuan pegged to the dollar) obviously have been responsible for creating employment & a higher standard of living for millions of Chinese, but what happens when the US consumer is tapped out on credit or worse is unemployed or the US government starts slapping tariffs on stuff like tires & stops buying?
if you are a central planner in China, you may give
the Fed an opportunity to print/devalue in order to jump start the US economy & crank up the Chinese export machine and get things back to "normal", but aren't you also wondering what plan B is, if/when the US no longer is going to drive your exports? (i.e. when do you shift focus to stimulating domestic spending since that market when fully developed, ultimately dwarfs the US?) in my view, that would also necessitate reviewing what to do with that $2T -
i.e., what is the Chinese "end game", when they decide that the money currently invested in the US can be better invested for a greater return elsehwere? as, if not more importantly, when does that end game start?
exports (helped by a weak yuan pegged to the dollar) obviously have been responsible for creating employment & a higher standard of living for millions of Chinese, but what happens when the US consumer is tapped out on credit or worse is unemployed or the US government starts slapping tariffs on stuff like tires & stops buying?
if you are a central planner in China, you may give
the Fed an opportunity to print/devalue in order to jump start the US economy & crank up the Chinese export machine and get things back to "normal", but aren't you also wondering what plan B is, if/when the US no longer is going to drive your exports? (i.e. when do you shift focus to stimulating domestic spending since that market when fully developed, ultimately dwarfs the US?) in my view, that would also necessitate reviewing what to do with that $2T -
i.e., what is the Chinese "end game", when they decide that the money currently invested in the US can be better invested for a greater return/less risk elsehwere? as, if not more importantly, when does that end game begin?
A weaker dollar means a weaker Yuan, which translate to higher commodities. High commodities is bad for China economy.
China has already discounted it's $USD reserves. Every asset China buys now->future is gravy, bought with western fiat that China has already marked to near-zero in value.
This notion that China needs or requires a strong dollar is misleading if not completely untrue. While China may prefer a stronger dollar, China's growth/future DOES NOT DEPEND on a stronger dollar. China holds many, many cards and they can play into strength regardless of what the dollar does. This idea that China must/will follow the US/western playbook is naive/arrogant/short-sighted.
In fact, China could take a shortcut to the top-of-the-hill by selling the dollar for a short-but-sustained period... yes, their reserves would lose value but China would find itself in the driver's seat by instigating hyperinflation & economic collapse in western fiat currencies. A very small price to pay to secure the crown and do it on their terms.
China is neither subservient nor dependent. Westerners who continue to frame China as 'poor' or 'underdeveloped' will watch their children work for Chinese managers at minimum wage.
The die is cast and the endgame is appraoching.
China has already discounted it's $USD reserves. Every asset China buys now->future is gravy, bought with western fiat that China has already marked to near-zero in value.
This notion that China needs or requires a strong dollar is misleading if not completely untrue. While China may prefer a stronger dollar, China's growth/future DOES NOT DEPEND on a stronger dollar. China holds many, many cards and they can play into strength regardless of what the dollar does. This idea that China must/will follow the US/western playbook is naive/arrogant/short-sighted.
In fact, China could take a shortcut to the top-of-the-hill by selling the dollar for a short-but-sustained period... yes, their reserves would lose value but China would find itself in the driver's seat by instigating hyperinflation & economic collapse in western fiat currencies. A very small price to pay to secure the crown and do it on their terms.
China is neither subservient nor dependent. Westerners who continue to frame China as 'poor' or 'underdeveloped' will watch their children work for Chinese managers at minimum wage.
The die is cast and the endgame is appraoching.
I agree that by virtue of western capitalists utilizing cheap chinese labor to increase their own profits (and presumably help China develop a market economy which would then allow a transition to a more open society based on democratic values, rights & freedoms) has given the Chinese significant influence globally, both financially & politically.
That said, China still has a significant portion of the population that is agrarian & poor & underdeveloped and the portion of society that is "advanced" is still significantly dependent on exports (witness their massive domestic stimulus when the US tanked).
I doubt that China will dump the dollar without provocation which would endanger their export markets & create unemployment & instability at home. Now, if the US doesn't heed repeated warnings to stop devaluing the dollar, that might be a different story.
I think if they do decide to intervene in the market, they will do so more subtly, such as perhaps "creating" an "artificial" international crisis (like with north korean nukes) that will drive up the dollar & allow them to sell a good chunk of their dollar reserves into strength.
doc setser may be a phD in economics, but he has very little insight into the chinese psyche whatsoever.
and that will be his downfall.
This is about a woman but what the hell:
http://www.youtube.com/watch?v=cBXHZNSUtyg
i like rosenberg's analysis in general but i will take issue with a few points....
the commodities analysis suffered badly by not referring to real prices...sure oil bottomed at 10.80 in the 1970s but where was oil in real terms? nominal price analysis can be thrown out the window....
china is growing? because the official chinese numbers say so? that's another bit of analysis which can be shitcanned....
and what about debt....debt will require more money to service especially as interest rates rise....this should be a major topic....unemployment cannot shrink with 2% growth which is probably the median forecast...it will grow...though rosenberg acknowledges the conclusion i think he has underplayed the confluence of interest rates, debt service, and gdp as drivers of higher unemployment which in turn feed lower growth....
he is right to note the declining dollar....
nonetheless this newsletter is good reading...
oil bottomed in the 90's not the 70's. and in real terms oil in the 70's was very high. not as high as last summer, but high like $100/bbl high.
china is growing. it's not all happy free market growth, but it is growing b/c they fix prices lower, hoard the profits at the State, and rake in margins on all the exports. they can grow at whatever rate they want (sort of like what bernanke is doing here)...
and lastly, unemployment can shrink at the hand of hugely inefficient productivity losses produced by overregulation and gov't sector crowding out of private activity. the fed and obama will produce lower unemployment and higher GDP for the sake of being re-elected and at the expense of our system and global competitiveness long-term.
it will have to get a lot lot worse in this country before people are willing to rip down the foundations of this mess and build something worth building again.
Real Dow, Dollar, Oil peaks punctuated Bush/Saudi presidencies.
In real terms, Oil, Dollar and Dow declined 75-84%
since 1998 oil, 2000 stock and 2001 dollar peaks.
More to the point, Big4 short recently 54.8% of the
Loonie open interest, 64.1% short EAFE, 71.1% long
Dollar and 96.2% short GSCI as reported to asset
allocation subscribers.
China may be latest proof after Japan in 1989 and
Soviets in 1991 that central planning simply does not
work.
Will USA wake up in time, or is this a planned
disharmonic convergence to world wage and worth levels?
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493
Maybe this is better commentary regarding what is happening.
http://www.youtube.com/watch?v=PqwFfGgLPzM&feature=related
Now that's more like it :-)
http://www.youtube.com/watch?v=GGjkViiDbko&feature=channel
http://www.youtube.com/watch?v=vSWTgLvxPYc&feature=related
http://www.youtube.com/watch?v=yOgHBMujTCw
Hope the name is posting publicly on purpose. Not heard this one before. Glad a soldier posted it for us to hear.
Right is wrong now. Shut up the big lie! - Dave Matthews
When you get the opportunity view a copy of the movie, Hopscotch staring Walter Matthau and Glenda Jackson. It may assist you in more fully appreciating my focus here. Thanks for checking my link.
All The Best.
we think this one says it well too:
http://www.youtube.com/watch?v=OHcKkBWR4Mk
bon scott rocks
then there's always dog eat dog:
http://www.youtube.com/watch?v=DmI8ms5-tB8&feature=related
Angus is awesome. I wonder if you know why he wears the knickers? From his old academy uniform, where his teacher told him he would never amount to anything.
If anything, I have come to realize the correlation is between massive QE and a steadily declining dollar on the one hand, and rising equities (with the assistance of an ever-present PPT bid) as cash looks for risk assets - once the trend upwards was established, sensible people like Rosie, looking at fundamentals, were left behind as technical factors (plus the unseen hand) took over. Rosie is right, as are many of us here: since March, the fundamentals have never once said "buy." So, assuming this rally is technical (due to trend) and rigged (due to PPT, QE), once the dollar turns, and that trend reverses, equities will decline due to the technicals saying "sell" as "the party is over" sentiment picks up and no one wants to take a chance on how fast the sled may go down the reverse side of the slope. The announcement of the end of QE sent tremors post 9/22 meeting, and the question is only will the JPM ramp run the Dow past 10000 in time for quarter end. Also, looming is the uncertain effect of the end of QE in terms of actual dollars remaining in the overt Fed program for the purchase of Treasuries, and uncertainty over who will fill the gap in the absence of the Fed. I am sure the Fed already has that figured out. So we may ramp up, but there are some questions created by the end of "overt" (as opposed to covert) QE, IMHO. Headwinds from the fundamentals have been present all along this rally.
Frankly,nobody can predict any market,especially with what we hear now in different congressional hearings. Just listen to Alllan Greyson asking Alvarez about the FED interffering in the equity and the future markets(I don't think he would ask such questions without prior knowledge. A rule for attornies is don't ask questions if you don't know the answer to it). I THINK WHAT ROSENBERG STATEMENT SHOULD BE:I WASN'T PRIVY TO WHAT WENT ON IN THE MEETING BETWEEN GS AND 12 HEDGE FUNDS BACK IN JAN,AND THE PLAN THAT WAS PUT THEN,AND EXCUTED WITH THE HELP OF THE FED.
Granted David does his homework, however if the S/P is minimum 20+% overvalued then how undervalued is the dollar unless we start pricing the index in BRIC currencies?
"Different this time" hhhmmm last time I checked commodities have always been cyclical; I dont plan on selling my bunker full of P.M.'s or my M-60 anytime soon. This is one J6P that is not on board with current monetary and fiscal policy!
it seems highly implausible that we will get his combination of much weaker dollar, strong commodities and weak equities. He is suffering from "beaten up trader" syndrome - a few months on the losing side will do that. Particularly if you are being measured in public - fortunately folks investing their own money can avoid this syndrome. Manage risks but dont start chasing the market after a huge run is what I say.
Keep the faith, and reading his reports does just that. Thank you all who contributed to the conveyance and the posting.
I just want to point out all that analysis of the dollar and past history is very entertaining, however, it seems like an answer searching for a problem, FDR could devalue the dollar because the dollar actually have some asset value...even then the dollar was trading for 75 cent of face value in real value terms. The government is not in such a privileged state now. Additionally, the mechanisms for creating credit through the fractional reserve system were not nearly as expansive then. Today, every bank practicing fractional reserve lending is short the dollar...they also happen to be broke. Devaluing the dollar is not a realistic option when the failing institutions and regulators setup to support fractional reserve leverage and naked shorting of the dollar can not access enough debt based dollars to server their intended purposes...namely the face of the confidence game in the ponzi scheme. I really do not understand when economic hodge podges of theory looking for repeats of past events are used to predict future ones. Gold markets are free trading...there is no possible way a currency that has lost 97% of its value can be fixed against that market. When the dollar actually had some value it was possible because it was exchangeable on its face for silver.
I enjoyed reading your report..but I think you are falling into the same trap as most analysts who miss the real story...you over complicating the current one and looking for too many correlations...if you want to learn more about the dollar I suggest reading these articles...they are very good.
http://m3financialsense.blogspot.com/2009/08/more-dollar-discussion-and-...
http://m3financialsense.blogspot.com/2009/09/derivativeswhat-heck-were-t...
http://m3financialsense.blogspot.com/2009/09/all-we-need-now-is-big-hit-...
http://m3financialsense.blogspot.com/2009/08/warren-buffet-ultimate-bull...
http://m3financialsense.blogspot.com/2009/08/future-of-dollar-biggest-sh...
I just want to point out all that analysis of the dollar and past history is very entertaining, however, it seems like an answer searching for a problem, FDR could devalue the dollar because the dollar actually have some asset value...even then the dollar was trading for 75 cent of face value in real value terms. The government is not in such a privileged state now. Additionally, the mechanisms for creating credit through the fractional reserve system were not nearly as expansive then. Today, every bank practicing fractional reserve lending is short the dollar...they also happen to be broke. Devaluing the dollar is not a realistic option when the failing institutions and regulators setup to support fractional reserve leverage and naked shorting of the dollar can not access enough debt based dollars to server their intended purposes...namely the face of the confidence game in the ponzi scheme. I really do not understand when economic hodge podges of theory looking for repeats of past events are used to predict future ones. Gold markets are free trading...there is no possible way a currency that has lost 97% of its value can be fixed against that market. When the dollar actually had some value it was possible because it was exchangeable on its face for silver.
I enjoyed reading your report..but I think you are falling into the same trap as most analysts who miss the real story...you over complicating the current one and looking for too many correlations...if you want to learn more about the dollar I suggest reading these articles...they are very good.
http://m3financialsense.blogspot.com/2009/08/more-dollar-discussion-and-...
http://m3financialsense.blogspot.com/2009/09/derivativeswhat-heck-were-t...
http://m3financialsense.blogspot.com/2009/09/all-we-need-now-is-big-hit-...
http://m3financialsense.blogspot.com/2009/08/warren-buffet-ultimate-bull...
http://m3financialsense.blogspot.com/2009/08/future-of-dollar-biggest-sh...
also our conservative government is at danger of having a non-confidence vote and be forced into an election. Me thinks he got his chain yanked to get behind the appropriate shovel.
Not sure I agree with his dollar devaluation thesis at present. If a severe debt-deflation cycle kicks in, sure. But Rosenberg seems to imply this is emminent. Maybe I'm wrong.
Things would have to go so wrong that no amount of govt-corporate lies would be able to gloss it. Only then could such a radical step would be taken. Lots of senior citizen (wealthy and full of vendetta) voters now, as opposed to the 30s.
Don't think we will see a Treasury implosion, as it has seen much worse than this and still kept on going.
Thus I feel safe in cash for now. Am I missing something?
Agree with Rosie or not what I appreciate about his work is that it is always well reasoned, well written and actually represents his thinking on the subject at hand. Having these qualities present from a leading voice of the space consistently, especially given the proclivities of the great majority of those that write and consider these matters from a position of great amplitude is not only refreshing, it reminds me of what I should be expecting from others that lead in the space of public discourse only to find these very qualities lacking time and again.
TD - Thanks for bringing this paper to our attention and for your successful efforts to stand and fill this needed leadership vacuum in financial analysis, reporting and fostering open discussion on the issues of the day.
more USD strength
VIX index continues to give bullish signals too
MORE:
http://www.zerohedge.com/forum/market-outlook-0
Merrill's Rosenberg: A New Bull Market? Are You Out Of Your Mind?
Henry Blodget
Apr. 2, 2009, 6:27 AM
Merrill's departing economist thinks the S&P will trade between 475 and 650 "for an extended period of time." That's 20%-40% below today's level.
http://www.businessinsider.com/henry-blodget-merrills-rosenberg-a-new-bu...