Rosenberg Points Out That The Stock Market Is Now A Lagging Indicator; Discusses Byron Wien's Beliefs In The Tooth Fairy

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Tue, 01/05/2010 - 11:52 | 182996 Rainman
Rainman's picture

Getting the SPX back in line with EPS projection is a simple math problem.

The Banksters will just mark their worst junk to 150 % of par. Profits appear, losses disappear.

Problem solved.

Tue, 01/05/2010 - 13:27 | 183114 TraderMark
TraderMark's picture

Throw another $2 T in unfunded pension liabilities at the states in the category of "who cares, the stock market is up!"


Tue, 01/05/2010 - 20:25 | 183641 Anonymous
Anonymous's picture

By Schlumpf
Hmm Trader Mark nobody see something bad about this.
Bad news are good news. Always in the top of a bull run, bad news are good news. They believe the plunge protection team will fix it. Mr market think..... dont fight
the FED. The same Mr market see, 95 % bullish is
good for stocks. Its hard to be now short or in the sidelines.
I fight the FED, I m short. I bought bac for
3.60 and lvs for 2.84 when Mr market was short.
I sold in sept. and in nov. until dec I m in the
Now Mr market is long. When I loose, OK, but I feel very strong its too bullish now. And see Japan 1989 - 1990,
they had also a big stock run and then...............
Maybe only I`m short now :) sorry my english :)
I know you from Seeking Alpha and I like your comments.

Tue, 01/05/2010 - 20:40 | 183665 Anonymous
Anonymous's picture

Hmm Trader Mark nobody see something bad about this.
Bad news are good news. Always in the top of a bull run, bad news are good news. They believe the plunge protection team will fix it. Mr market think..... dont fight
the FED. The same Mr market see, 95 % bullish is
good for stocks. Its hard to be now short or in the sidelines.
I fight the FED, I m short. I bought bac for
3.60 and lvs for 2.84 when Mr market was short.
I sold in sept. and in nov. until dec I m in the
Now Mr market is long. When I loose, OK, but I feel very strong its too bullish now. And see Japan 1989 - 1990,
they had also a big stock run and then...............
Maybe only I`m short now :) sorry my english :)
I know you from Seeking Alpha and I like your comments.

Tue, 01/05/2010 - 11:53 | 182998 Steak
Steak's picture

I was hoping that ZH would re-post Wein's predictions as some good humorous reading...some of the highlights include:

<Heavy borrowing by the U.S. Treasury and some reluctance by foreign central banks to keep buying notes and bonds drives the yield on the 10-year Treasury above 5.5%. Banks loan more to corporations and individuals and pull away from the carry trade, thereby reducing demand for Treasuries. Obama says, “The suits are finally listening”>


<Civil unrest in Iran reaches a crescendo. Ayatollah Khameini pushes out Mahmoud Ahmadinejad in favor of a more public relations adept leader. Economic improvement becomes the key issue and anti-Israel rhetoric subsides.>

HA i say, HA...Byron Wein is the counterpoint to anyone who would claim that the US is anything resembling a meritocracy. 

Tue, 01/05/2010 - 12:03 | 183005 ShankyS
ShankyS's picture

Just friggin insane and the price to pay will be dramatic. Hey, that trip to fantasy land was free - no it really wasn't free now was it. This is gonna be expensive and the dollar at $40 in a year or two should be about right.

Tue, 01/05/2010 - 12:06 | 183010 Anonymous
Anonymous's picture

So, what's a girl to do with her 401k? Sell it down the river for cash and buy some gold... or TP???

Tue, 01/05/2010 - 16:24 | 183278 Anonymous
Anonymous's picture


Tue, 01/05/2010 - 19:15 | 183545 Carl Marks
Carl Marks's picture

Cash and Gold. You can use the cash for TP.

Tue, 01/05/2010 - 12:09 | 183014 Cognitive Dissonance
Cognitive Dissonance's picture

The original article is what we call "old school" Zero Hedge. I remember lurking around ZH at the time this article was first written, within an ID or Avatar.

Ah, the good old days.

Tue, 01/05/2010 - 13:00 | 183081 Scooby Dooby Doo
Scooby Dooby Doo's picture

Yes `faustroll`, those were the days...

Tue, 01/05/2010 - 12:28 | 183033 Anonymous
Anonymous's picture

Rosenberg's logic is not there at all.

How much of last year's EPS was the effect of credit markets, writedowns, and business climate from credit crisis? Clearly the SPX gets ALL this back. And then gets any normal GDP growth induced earnings.

I think as Q1 and Q2 roll off, you will see that multiples are not what they appear to be. Most of my companies are ~15x 2010 estimates and those are ultra-conservative. Mgmts have been sand-bagging throughout 2009.

Estimates get beat in the up-swing and followed by guidance increases (just the opposite of the misses and guidance lowering the down move).

Tue, 01/05/2010 - 12:37 | 183043 Anonymous
Anonymous's picture

Rosenberg QUOTE:

Keep that last point in the back of your mind. At the end of 2008, the consensus was at $77 for S&P 500 operating EPS for 2009.

This is JUST NOT TRUE. Its WRONG (and kinda a lie).

Goldman estimates were cut from $65 to $55 on Nov 24th, 2008. Citibank also cut on the same day to ~$50/shr. Here is the link:

Goldman further cuts estimates to $40/shr on Feb 9th, 2009. Other banks estimates were similar. Of course, the Lehamn crisis lowered all estimates and massively slowed business activity. But since the dramatic downturn, EPS #s continue to get beat to the upside. And that looks likely to continue.

Tue, 01/05/2010 - 12:50 | 183061 zenon
zenon's picture

Although I agree with most, if not all, of what Rosie has to say, I still can't figure out why he insists on using pro-forma or "headline" earnings. The disconnect between earnings-without-trash and real earnings is profound and getting bigger. See:

Tue, 01/05/2010 - 16:57 | 183315 Anonymous
Anonymous's picture

Nice chart. what are 'earnings without turds?'

Tue, 01/05/2010 - 12:53 | 183069 Anonymous
Anonymous's picture

"It almost wants to make you believe in the tooth fairy."

tooth fairy, magic printing press, whats the difference?

Tue, 01/05/2010 - 12:56 | 183076 Anonymous
Anonymous's picture

Rosie's daily newsletter is always good. Even better, and I'm not sure if you posted it yet, is Hussman's 1/4/10 screed. Must read.

Tue, 01/05/2010 - 12:59 | 183078 Leo Kolivakis
Leo Kolivakis's picture

Rosenberg is an excellent economist but he wouldn't be able to manage money if his life depended upon it. Still works with the old paradigm and refuses to see that liquidity precedes fundamentals. Wait till Friday's employment report. You ain't seen nothing yet.

Tue, 01/05/2010 - 14:26 | 183176 BS Inc.
BS Inc.'s picture

My understanding is that he did quite well with corporate bonds after the March lows. There's more than one way to skin a cat and the same goes for managing money.

Tue, 01/05/2010 - 15:58 | 183253 Cursive
Cursive's picture


What are your expectations for the jobs number?  And how do you expect the "market" to react?  Curious.

Tue, 01/05/2010 - 16:58 | 183318 Leo Kolivakis
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I already stated it in my Outlook 2010 that the next few jobs reports will suprise to the upside with significant upward revisions to previous reports. So even if we have a negative surprise, which I strongly doubt, I will continue to buy the dips.

Tue, 01/05/2010 - 17:08 | 183331 Cursive
Cursive's picture

OK, I didn't know if you had numbers to share.  By the looks of it, nothing could stop this "market" now.  Not bad jobs numbers, nothing.  Are you accounting for the February revision for the birth/death adjustment?

Tue, 01/05/2010 - 16:29 | 183284 Anonymous
Anonymous's picture

Always nice to know that fundamentals are secondary....

Tue, 01/05/2010 - 16:31 | 183287 Scooby Dooby Doo
Scooby Dooby Doo's picture

Leo is entitled to his opinion, flag people.

I think Mr.Rosenberg should create a visual representation of his work regarding equities. The Rosenberg Detachment Index. It would encompass various calculations that measure how far detached the S&P 500 is from `reality`(plus or minus).

A little widget that would plug into websites.

ZH could put his widget in that wasted piece of real estate under the search box:

Tue, 01/05/2010 - 17:25 | 183356 RowdyRoddyPiper
RowdyRoddyPiper's picture

If I am a shareholder of Gluskin (not), I hope you are wrong Leo what with Ira taking some of his money off the table at GS.

Tue, 01/05/2010 - 13:18 | 183106 Anonymous
Anonymous's picture

Why don't we ever get a direct link to Rosie's stuff?

Tue, 01/05/2010 - 13:36 | 183123 MiningJunkie
MiningJunkie's picture

Never underestimate the replacement power of equities within an inflationary spiral...

Tue, 01/05/2010 - 14:17 | 183165 BS Inc.
BS Inc.'s picture

I think that is the one real fly in the bearish ointment. It doesn't mean any value would be created by moving the market from 1100 to 2000 SPX, but it could happen with today's short-sighted policies.

But, if that is what the market is discounting, that means it is vulnerable to any signs that a hyperinflationary scenario won't come to pass.

Tue, 01/05/2010 - 13:45 | 183130 Anonymous
Anonymous's picture

I'm sorry, but selling 16 million autos per year was never "normal" was an abnormal peak created by unrealistic incentives and degenerate lending standards that artificially distorted demand during the bubble years of the last decade.

Tue, 01/05/2010 - 13:51 | 183140 Gwynplaine (not verified)
Gwynplaine's picture

"Yet none of this matters as buy programs take equities ever higher, with moral hazard the ultimate backstop until such time as the ability to finance an infinite stock market rally courtesy of trillions in new bond issuance comes to an end: that is the only "fundamental" that is relevant now and for the foreseeable future."

Tyler's last sentence sums it best.  But, what comes next?  Nobody has even a good guess.

Tue, 01/05/2010 - 14:45 | 183201 Anonymous
Anonymous's picture

all this back and forth trying to figure out what comes next. What comes next is...............same as before...............the banks and government are going to try and extend and pretend this economy into health until something happens to cause it not to. Whether that's an exogenous event like Iran or Greece failing, who knows.....whatever it is, it will cause people to run for the exits (the banks, I mean). then, we'll have an event although the only thing I'm sure of is the average taxpayer is going to get screwed and screwed.

Here's how you start down the path to fix the problem: sever the tie between washington and Wall Street forever, re-instate Glass-Steagall (not a watered down version thereof), Stop the bailouts of everyone, let the chips fall where they may. That's just a start, of course. Then, we have to have a million man march on WDC and at the same time remove all our money from GS, JPM, BAC, WFC, Citi, and place in regional banks.

Tue, 01/05/2010 - 17:44 | 183396 Anonymous
Anonymous's picture

Of the 140+ bank failures... over 100 were sub 1B$ "small regional banks".

Those guys are even more corrupt and useless.

Tue, 01/05/2010 - 15:22 | 183223 crzyhun
crzyhun's picture

BW or Rosie? Up to you and it all depends on where you sit- in the class, will tell where you stand.

All I can say is that when this goes, it may mirror what we saw in 08-early 09, big down days. For me when we go through 10K with conviction, well shorts are up and off we go-down. The ground is saturated and the basement leaks.

Tue, 01/05/2010 - 17:29 | 183365 Anonymous
Anonymous's picture

I think I understand. Rosenberg has been 100% wrong with his market calls since March so now he just says "I'm not wrong the index is wrong/lagging"

Also I'm not sure how you can say "price deserves to be lower". The only price anything ever deserves is the one the market sets (regardless of its participants) which is also the one you see on the screen. It's pretty clear the price on the screen is making him upset as evident by blaming the price instead of himself for his totally incorrect predictions thus far.

So far Rosenberg is continuing his 2009 achievement of being the worlds best counter indicator ever. He's becoming better than Crammer.

Tue, 01/05/2010 - 17:38 | 183380 Bruce Krasting
Bruce Krasting's picture

A question for some smart guy. Take an estimate for S&P profits for 2010. Then tell me what happens to that number if the dollar averages 10% higher for the year?

For what it is worth my guess is that a 10% rise in the dollar would cut profits by the same 10% (lagged). Foreign earnings (and some assets) would be translated into income at lower values.

Is 'one to one' in the ball park? Rosie?

I ask this because it seems to me that many of the folks who think a big dollar rally is in front of us also think that stocks are going higher because of a big Jump in earnings.

Can you have one and the other as well?

Tue, 01/05/2010 - 19:04 | 183529 Rainman
Rainman's picture

Hmmm.....these cake and eat it too questions are always head scratchers.

Need a researcher to see when/if this has occured in the past.

A good question. 

Tue, 01/05/2010 - 20:56 | 183684 Anonymous
Anonymous's picture

Yes the market can handle it here's how:

Step 1:
stock market surge as dollar rises as hot money flowa back to US assets from emerging markets (many of which surged 80% or even 100% in 2009) some of this backflow if not all will find happy home in stocks.

Step 2: Come April or May, as the Q2 earnings season approaches, analysts realises the negative impact of USD strength on earnings of Intel/Mac/Apple etc, proceeds to lower earnings citing "strong dollar" and companies guidance: "volume up strongly, we sold x% more chips/burgers/iphones thanks to overseas demand"; stocks surge on companies guidance, but does not pull back when actual sales come in flat. This is because the lowered earnings were met. And the earnings were lowered due to "external" factor of strong USD.

This game has been going on throughout the dot-com era of the 1990s, a new bunch of analysts will re-hash the old trick again. Bottom line - Leo will be right, but only because they are all in a groupthink which usually last at least 2 to 3 years. We are really in a cyclical bull people, and another 30-sigma event would be needed to change the course of the stock market.

Tue, 01/05/2010 - 17:40 | 183385 Anonymous
Anonymous's picture

This is hugely like academic history departments who utterly, absolutely HATE the reality that a temporary climate shift in the Med. brought malaria to Rome and eviscerated its military strength. See, that reality renders silly the PhD dissertation material of the whichness of what of slavery and economic pressures and court intrigue and all those many things grad students could write about. Once malaria entered the picture, nothing else mattered and they know it.

Well, folk, I direct your attention to oil depletion and encourage you to stop wasting your time on liquidity and rates and the PPT and Rosie and pretty much everything else. Nothing else matters. And you know it.

Tue, 01/05/2010 - 19:30 | 183567 Anonymous
Anonymous's picture

So Malaria causes oil depletion?

Wed, 01/06/2010 - 05:35 | 184065 Silver_Bullet
Silver_Bullet's picture

Don't ignore the Diocletian Reforms which locked in the technological state and prevented progress, and the damage of the barracks emperrors before that.  Perhaps the murders of the Brothers Gracchi were the real death of the republic and not the actions of Sula leading to the Triumvirate of Caesar, Pompey and Crassus.  Being vulnerable to a simple disease is itself only a symptom of political decay and economic disorganization.

Tue, 01/05/2010 - 19:19 | 183548 Anonymous
Anonymous's picture

I belive this is the top of this bull run. Everybody believes there is a 100 % insurance from the FED side.
The PPT will straightening then. But, what was last year??
And in march??
Greed take the money in and out.

Wed, 01/06/2010 - 03:36 | 184006 The Rock
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"Markets can remain criminal and manipulated longer than you can remain solvent."

Do NOT follow this link or you will be banned from the site!