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