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Rosenberg Summarizes This Weekend's Uberbearish Barron's Roundtable
David Rosenberg summarizes the key points from this weekend's Barron's roundtable. Pay attention to what Fred Hickey has to say. He pretty mich covers it all...
SQUARING THE ROUND TABLE
The Barron’s Roundtable was even more raucous than usual and there were some truly remarkable comments that need reprinting:
Felix Zulauf: “You also have a tremendous social division. In the U.S., the top 20% of the population owns 93% of the financial assets. That tells you the average guy is in bad shape. He spends what he makes, and at the end of the month he’s even."
Fred Hickey added to that sentiment: “Last August, things weren’t looking so well. Then Ben Bernanke gave a speech in Jackson Hole that implied the Fed would engage in quantitative easing, and from that point forward, the Dow added 1,400 points. Gasoline prices went from $2.65 a gallon to well over $3.00 ? a $50 billion hit to consumers. Food prices rose to record levels. It caused a major imbalance in the economy. If you own financial assets, you’re doing quite well. If you don’t, you’re getting hit by higher food prices, higher insurance costs, higher everything, and you’re not getting any interest on your savings ... The economy has structural problems and we aren’t dealing with them. Money-printing won’t work, yet that’s the prescription we continue to give the patient. If the Fed keeps printing after June we’ll have higher gasoline and food prices and more imbalances until this ends. And at some point, it will end, because the dollar will fall apart. What we are doing now makes everything appear rosy. But it is devastatingly terrible policy for the long-term.”
Geez, where have you heard that before. Hope Fred isn’t getting any hate mail.
Marc Faber: “If you measure the stock market not in dollars but gold, it is down 80% since 1999. I no longer regard the U.S. dollar as a valid unit of account. People shouldn’t value their wealth in dollars because one day, in dollars, everyone will be a billionaire."
That zinger is too good.
Bill Gross one-upped that one: “We are looking at a currency that almost certainly will depreciate relative to other, stronger currencies in developing countries that have lower levels of debt and higher growth potential. And, on the short end of the yield curve, we are looking at creditors receiving negative real interest rates for a long, long time. That, in effect, is a default. Ultimately, creditors and investors are at the behest of a central bank and policymakers that will rob them of their money.”
As for the market action for 2011, we have two giants in our camp.
Zulauf: “The market will range between 10% up and 10% down.”
Faber: “I expect to see the market move up and down at least 20% this year, as it did in 2010.”
The case for classic long-short hedge fund strategies is compelling if these two pundits are anywhere close to being right.
Jimmy Rogers wasn’t on the roundtable but in a separate interview with Bloomberg, he may well have had the best quote of the past decade:
“Paper money is made of cotton, and I’m long cotton, by the way. One reason I’m long cotton is because Dr. Bernanke is out there running the printing presses as fast as he can.”
How great is that ? short the U.S. dollar and go long cotton.
Another non-roundtable member that had a quote worth mentioning over the weekend was Christina Romer in her Economic View piece on page 5 of the Sunday NYT biz section (titled What Obama Should Say About the Deficit). Talk about brutal honesty:
“President Obama needs to explain that while these cuts will be painful, there is no way to solve our problems without shared sacrifice.”
“Shared sacrifice”. Wow. For a nation that sent kids overseas to fight wars against terror states while cutting taxes here at home to stimulate consumption of iPads and diamond necklaces. A nation so fearful of a “double dip’ that it raided Social Security to keep the retailer cash registers ringing for the New Year.
So what Ms. Romer had to say about the need to stop the excessive borrowing madness ? the U.S. government now spends 1.6 for every one dollar it brings in with respect to revenues ? was telling: “Even with bold spending cuts, there will still be a large deficit. The only realistic way to close the gap is by raising revenues. Some of it can and should come from higher taxes on the rich. But because there are far more middle-class families than wealthy ones, much of the additional money will have to come from ordinary people.”
The era of spending-beyond-our means denial is on its last legs.
From Gluskin Sheff
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Rosenberg guest on Berman's Call this a.m.
http://watch.bnn.ca/#clip402710
great link, thanks!
rally monkeys, DOW goin' over 12,000 next week.
Probably. Data out of China tonight has brought the futures higher and Shanghai back to life. Looks like Apple might be long forgotten by the time the market opens.
Q: What do you get when you have a full house at Lambeau Field?
A: A full set of teeth.
Q: What do you call a beautiful girl in Green Bay?
A: A tourist.
Jay Cutler and Clay Matthews III are standing on the fifty-yard line in Soldier Field. A genie appears and says, "you each get one wish from me." Clay goes, "me first, me first! I want a huge 90 foot wall around Wisconsin so I don' have to look at any Bear fans." The genie says, "It is granted." He turns to Cutler and says, "What is your wish?" Cutler says, "Fill it with water."
What part of 'The US stock market is down 80% since 1999 measured in gold." do you not under... Aw fuckit.
You're a perfect fucking douchebag, you know that, right? Well, now you do.
""The era of spending-beyond-our means denial is on its last legs.""
ssshhh, don't tell Turbo Timmay
Romer's piece was trash. shared sacrifice? bitch please..political cohorts are some of the most well off..same ones who will not allow the rich to be taxed because they are one in the same...the same ones who, after much kabuki will raise the debt ceiling...
Exactly. Bitch, please. The plan is to raise taxes on the 19% below the top 1%. That is to say any middle class left with savings.
The US is slowly reaching the existential moment: Was Reagan right or wrong when he 'proved' that deficits don't matter? Was the whole experiment an exercise in futility? Will the punchline for a time traveling astronaut from 1980 still be:
George Taylor: Oh my God. I'm back. I'm home. All the time, it was... We finally really did it.
[screaming]
George Taylor: You Maniacs! You blew it up! Ah, damn you! God damn you all to hell!
as Ben and Lloyd look on
http://www.youtube.com/watch?v=31QUOUxqz2M
Fucking priceless. Long cotton. Pretty soon I'll be picking it.
This sounds like a meeting of the bears. Hardly a balanced view or did he just leave out the perma(frost) bulls?
Clearly the trader's view though. Too many other instabilities to make it just a 10 or 20% moving market.
I think we'll see a complete lock-step correlation between the DOW and CRB Index.
Up Up and Awaaay!
ORI
http://aadivaahan.wordpress.com
ORI,
What do you think of tata ? What the general consensus ? They own rover and jag but wanted to know about quality .... long term outlook, the stock looks really cheap because of nano- wire/fire issues ...
Thanks.
Spalding, TATA is firmly enmeshed in the Kleptocratic fabric that is Indian Industry today. As long as the sham continues, they will do well.
As a group, they get the choice partners (Think DoCoMo or Sikorsky/UTC etc.). Also, they are able to raise huge money (like heady PE days billions for Jag/LR). They are the steel story in India and are massively increasing their retail footprint. Add to it their Insurance and Television broadcast pipe, they are everywhere.
They are definitely an Indian TBTF and in a falling dominoes scenario, they will be the last or amongst the last to fall.
Hope that helps.
ORI
Awesome stuff. Cool blog-
It would be great for more insight/trends/ideas from you on India also. I have been reading they are getting ready for a nice run. Do you see infrastructure spending yet, are the people happy with the pace of things ?
Spalding, if a relentlessly truthy view is of any help, glad to provide it.
India is spending hugely on infrastructure. Roads and Power are the big ones. 'civil" works.
But of course they are happening with huge Capital In-efficiency, kind of baked into the India way, graft and all.
huge swathes of roadway development is being doled out to foreign sub-contractors, tolled out if you will. Nice if you have the money, sucks if you don't.
Keeping it short, the development is very haphazard.
The next five years, if no six sigma event changes things (as i believe it will), will be telling.
Most likely a lot of rich enclaves, walled off and surrounded by terrible poverty is what I see developing. Cities are struggling for water and power. How that shortage is managed will tell a lot about how India will gorw or fall on the de-velopment sword.
ORI
I read only a few publications anymore because most are BS propaganda. IBD is still good and I might glance at Barrons though Alan Abelson is an arsehole. Felix Zalauf and Marc Faber always have the best records a year later followed by Fred Hickey. These guys are right on the mark. Bill Gross is tolerable. The rest are largely shills for Wall Street.
ORI, oh there are some permabulls at the Roundtable... I don't get to read the rest until Saturday and next Saturday.
Silly me! I actually buy Barrons...
DCRB, since you are a ZH regular, I'm sure you just do it for the laughs, right?
Barroffs. ;-)
ORI
Romer as the solvency statement....guh!
Sorry but the USeless Government can't tax it's way out of this. The necessary reduction in spending will likely kill the parasite. Pitty...
They'll tax anyway. Fairness, you know.
Rosenberg is a must read every day - regardless of what some here post. Daily economic and market commentary with sound arguments, historical references and different perspectives.
Those Faber and Rogers quotes are instant classics.
All the stuff he complains about is really good stuff because all the shenanigans give me confidence to go spend all my money. Good stuff, really.
Rosie, did you notice that Fred (at least in the above excerpt) didn't go on to make a call on where the S&P will close next week, I suspect most of your nasty mail comes from folks who took your chronically failed market calls to heart.
And the number of times DR said the market will close at xxxx next week? Exactly ZERO. Do you have examples to show otherwise?
http://zerohedge.blogspot.com/2009/05/nine-and-half-weeks-later.html
But more to the point, Rosie seems to think his less than favorable emails are related to his negative outlook on the economy as opposed to his consistently and totally wrong calls on the equity markets.
Rosenberg is an idiot, completely clueless. SPX will get to 1350 by end of march, probably sooner.
"What we are doing now makes everything appear rosy"...that's how it looks from my porch...provided one's boat is loaded with PM's....
I remember remarking to friends of mine when Ben came back from JH that things were about to really change....POMO was put on a steroid only diet....it is a wonder that anyone with a few $$ in the market cannot see what has been going on and question how long it can continue.
http://www.abovetopsecret.com/forum/thread483080/pg1
Its a melt up, or melt down depending on what one considers "money".
Highly leveraged risk, capital gains to pm.
btw, thank you Tyler for the heads up on Cardinal health $35 call options, that padded the pm's nicely.
Abby Jo is bullish
Has she ever been bearish?
It's been game over since 1971. Price inflation has doubled three times since then, and is in the throes of doubling once again. 16x prices will have increased from the baseline the country has known since the 60s and early 70s. It's been a fool's game for quite some time. There will be MAD, and that right soon.
My parents bought their house for 26k in 1972 (in a CA suburb). The same house was 275k in the 1980's. Now it is over 1.5mm. It's the same house. I wonder what it's price looks like valued in Gold.
The one thing the bears are missing from their analysis of equities... Lower wages, less benefits for employees and higher prices for products makes for a very profitable corporation. And, the government is backstopping all TBTF institutions and is converting corporate debt into public debt. Sucks for taxpayers and the middle class as they are in a vise grip and the value of the dollar erodes. But it's great for big corporations.
Everyone loves a bubble when we're in it and wants it to continue. So, Bennie and the Inkjets keep doing their thing and blowing up any bubble they can. And, they will keep doing it until forced otherwise, regardless of the long term implications.
The bears realize Bennie and the Inkjets can't carry on the Ponzi scheme forever, and are positioning themselves in advance. But you should wait until it is much more clear on the timing of the shut down of POMO and QEn. That is not in the periscope's view yet.
BTFD, buy whenever the first derivative is negative.
that is all.
and for your 10 - 20 % up and down rides you bare the risk
of losing 40 - 50 % or more of your "investment" at any time.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/1/15_Ben_Davies.html
Money printing isn't the problem. It's who we're giving it to that's the problem.
Not me. Anyone reading ZeroHedge getting any of this money?
We're all Chinese now. Our FR notes are getting smaller too. That's where the money is coming from.
Before you guys declare this as bearish, note that NOT ONE SINGLE short idea was offered.
All said the market would be up between 5-10% this year. All said that a 10% correction would occur at some point this year All were bullish on the long term outlook for gold.
All think our only hope is more government intervetion. Except Mark Faber. He said the goverment intervention is dragging out the correction.
Actually, on the whole, they didn't seem that bearish. Not necessarily positive either. But how do you call them bears when they say the market will be up 10% ?
Good point. Concerns about dollar devaluation are totally bullish. If the dollar declines by 10% over the next 12 months, it's a good year, but if it declines by 30%, it's the best year in decades.
depends if you're talking in real terms or nominal terms.
You can move to Zimbabwe their stock market went up astronomically in nominal terms.
It doesn't even matter if they stop printing. It is too late.
Wow, they all sound like Tea Partiers now.
Except for Romer, whose Keynesian Multiplier turned out to be negative. She'll spend the next 20 bitter years back at Berkeley being Krugman.
+1
Beatscape nailed it. Our country is not in a good place, but corporations ARE doing just fine. Eventually the corporations will succumb to our ecnomomic problems, but that could be a few years from now. Until then, the money flows and returns are skewed toward equities and hard assets.
Bestbuy, Sears, Walmart...they may disagree with you about the time frame.
Funny to see Gross throwing the Fed under the bus.