Rosenberg

David Rosenberg And Goldman Sachs Refuse To Pay $250,000 To Listen To A "Fee-Deflating" Bernanke

The days of Bernanke's "non-Giffen good" speech circuit may come to an end far sooner than the ex-Chairsatan wishes: "UBS and Goldman Sachs considered his fees too high." Others were quick to point out the obvious:"You can spend $250,000 for Bernanke’s time at a private dinner, or you could just sit down and read what people like Janet Yellen and Mark Carney have to say," David Rosenberg said"... Indeed, this is one deflation which we are confident the Fed Chairman wishes he was 100% certain he could stop in 15 minutes. Sadly, like in the case of everything else relating to Bernanke, when paying for smoke and mirrors it is only a matter of time before everyone, even the uber-richer poseurs, realize that the product they are buying is nothing but a cheap commodity.

Schadenfreude: Economists "Stunned" By Housing Fade

Since 2012, almost every economist has predicted that the housing recovery would continue into each coming year and would be a key driver of economic growth. That was again the plan for 2014, but with the housing recovery now on the ropes those same economists are perplexed as to why. Yet, "hope" remains that the recent slowdown is just a "weather related" casualty. The slowdown in housing is not due to the "weather." It began prior to the onset of the recent winter blasts. Nor will reduced distressed sales, delinquencies, negative equity or rising inventories salvage the predictions. These are all indicators "OF" the housing market, but not what "DRIVES" the housing market. The real answer to the slowdown in housing is not so difficult to comprehend...

FOMC Asset Purchases And The S&P 500

If the current pace of reductions continues it is reasonable to assume that the Fed will terminate the current QE program by the October meeting. If we assume the current correlation remains intact, it projects an advance of the S&P 500 to roughly 2000 by the end of the year. But... the question is, can the US economy can stand on its own when QE completely winds down, not to mention when the Fed actually hikes rates? Amid such weak levels of economic growth does not leave much wiggle room to absorb an exogenous event, or even just a normal downturn, in an economic cycle. If the Fed is indeed caught in a liquidity trap, then the current withdrawal of support will quickly show the cracks in the economy pushing the Fed back into action. It is at the point of "monetary impotence" where the word "risk" takes on a whole new meaning.

Poll Shows Why QE Has Been Ineffective

While the Fed's interventions have certainly bolstered asset prices by driving a "carry trade," these programs do not address the central issue necessary in a consumer driven economy which is "employment." In an economy that is nearly 70% driven by consumption, production comes first in the economic order. Without a job, through which an individual produces a good or service in exchange for payment, there is no income to consume with. With the Federal Reserve now effectively removing the "patient" from life support, we will see if the economy can sustain itself.  If this recent Bloomberg poll is correct, then we are likely to get an answer very shortly, and it may very well be disappointment.

Frontrunning: March 4

  • No need to use military force in Ukraine for now: Putin (Reuters)
  • Russia Orders Drill Troops Back to Bases (WSJ)
  • Ukraine premier agrees to reforms for aid package (FT)
  • Japan Base Wages Rise for First Time in Nearly Two Years (WSJ)
  • Only the algos are trading: Citigroup Joins JPMorgan in Seeing Trading-Revenue Drop  (BBG)
  • Vietnam sends blogger to prison for critical posts (AP)
  • At White House, Israel's Netanyahu pushes back against Obama diplomacy (Reuters)
  • Obama to offer new tax breaks for workers in election year budget pitch (Reuters)
  • China Banks Show Too-Connected-to-Fail Link to Shadow Loans (BBG)
  • Ex-BOK Deputy Lee Named to Head South Korea Central Bank (BBG)
  • No mortgage origination problem in the UK: Mortgage approvals climb to six year high (Telegraph)

Do No Evil Google - Censor & Snitch For The State

"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of..." - 1928

As a society we have fallen asleep at the wheel. We’ve allowed ourselves to be lulled into complacency, distracted by minutia, mesmerized by technology, turned into consumers by corporations, pacified by financial gurus and Ivy League economists, and fearful of our own shadows. Surveillance, censorship and propaganda are the tools of the oppressive state. Free speech and truthful revelations about the Deep State are a danger in the eyes of our oppressors.

 

Sorry Permabulls: 2014 Capex Forecast To Grow At Slowest Pace In Four Years

Nearly two years ago, before the topic of (the great and constantly missing) Capex became a mainstream media mainstay, we said that as long as the Fed was actively engaged in manipulating the capital markets - and this was before the Fed launched its endless QEternity - the bulk of corporate cash would go not into investing for growth, i.e., capital spending and/or hiring, but dividends and (levered) stock buybacks. Nearly $1 trillion in stock buybacks later, and zero growth Capex, we were proven right, much to the chagrin of permabulls who said the capex spending spree is just around the corner again... and again... and. Of course, if this were to happen, it would promptly refute our fundamental thesis that the Fed's presence in the market results in the terminal misallocation of efficient corporate capital. We were not concerned. We are even less concerned now having just read an FT piece forecasting that "capital spending by US companies is expected to grow this year at its slowest pace for four years, in a sign of corporate caution over the outlook for global demand." And like that, dear permabuls, the key pillar beneath all "corporate growth" thesis was yanked. Again. Fear not. There is always 2015. Or 2016. You get it.

5 Things To Ponder: Markets, Valuations & Investing

This morning we showed several charts that "Market Bulls Should Consider", as the mainstream media, analysts and economists continue to become more ebullient as we enter the new year.  This weekend's "Things To Ponder" follows along with this contrarian thought process particularly as it appears that virtually all "bears" have now been forced into hibernation.

Will Corporate Spending Float The Economy in 2014?

We have been reading quite a few articles, as of late, regarding the resurgence of corporate fixed investment in 2014 that will provide a much needed boost to the economy.  However, is that really the case? Given the data, it is far more likely that we are closer to the next recession versus the middle of an economic cycle.  The fact that productivity growth is approaching zero is likely due to the reality that businesses have already extracted the majority of the benefits from their ongoing cost cutting and productivity measures. A resurgence of capital investment would certainly help stabilize the economy and potentially lift it to a level that would stimulate stronger employment and consumer demand.  However, when it comes to managing investment risk, "hope" is not an investment strategy that works long term.

The Construction Of Robert Capa

The notion that individual conviction and bravery is a #MassiveFail when compared to a machine gun nest seems obvious and trite to us today. Strangely enough, though, when it comes to prevalent notions of market behavior it feels like we’re still in 1936. What I mean is that there is still a dominant belief in individual decision-making as the most effective route to successful investing, that if we could just learn a little bit more about Company X or Sector Y we will win the day. Is your individual knowledge and conviction level in Company X important for investing success? Absolutely, in exactly the same way that physical and psychological bravery is important for war-fighting success. Still more important, though, is the strength and cohesion of the groups that share your investment philosophy. Not your specific investment opinions, any more than one soldier has the same amount and type of instantiated bravery as another soldier in his unit, but the coherence of investment goals and operational practices across your fellow market participants in a particular market segment.

Is The Deficit Reduction Just A Mirage?

There has been quite a bit of discussion lately over the rapid reduction in the government's budget deficit as it relates to economic growth going forward. There are 3 issues that will likely impede further progress on the deficit reduction in the months ahead; 1) lower rates of tax revenue, 2) weaker economic growth and 3) greater levels of spending. The good news for stock market bulls is that deepening budget deficits increase the amount of bonds that the Treasury will need to issue to cover the shortfall in spending.  This will give the Federal Reserve more room to continue their current monetary interventions which have inflated asset prices sharply over the last year. Creating financial instability to gain economic stability has been an elusive dream of the Federal Reserve since the turn of the century; yet someday it is hoped that they may just be able to "catch their own tail."

The World Is Upside Down: CIO Of Buffett's GenRe Issues Direst Warning Yet

A world, in which former permabears David Rosenberg, Jeremy Grantham and now Hugh Hendry have thrown in the towel and gone bull retard, and where none other than the Chief Investment Officer of General Re-New England Asset Management - a company wholly-owned by Warren Buffett's Berkshire Hathaway, has issued one of the direst proclamations about the future to date and blasts the Fed's role in creating the biggest mess in financial history, is truly upside down...