David Rosenberg: "What A Joke" - A Realistic Thanksgiving Postmortem

Tyler Durden's picture

David Rosenberg is not amused. Or maybe he is. In a world in which supreme absurdity is an everyday occurence, who knows, or cares, any more.

From Gluskin Sheff

What A Joke

The Saturday Globe and Mail (page 811 ran with this special feature:

Ready to Spend: An American Comeback Story

Once again, I have to stress that the true measure of a country's standard of living is national income, not narcissistic spending. And the critical driver of income, beyond working-age population growth, is productivity. Not just labour, but multi-factor productivity. All the talk is about the revival of the consumer, but as we see in this post-Thanksgiving period, retailers are stepping over themselves to lure in shoppers by opening earlier than ever and discounting like they never have before. Call it deflationary growth. But what the article fails to notice is the downtrend in business capital spending. The article doesn't mention that there has been no capital deepening in the USA. in well over a decade.

And what the article does seem to heed is the message that was so clearly delivered by Ben Bernanke last week, which is that the U.S. economy's non-inflationary speed limit is in secular decline. And with that, as I put my market strategist hat on. I would say the fair-value P/E multiple is really only being supported now by the artificial manipulation by the Fed to drive real interest rates into record negative terrain.

* * *

And some other thoughts from Rosie:

Beware of all the talk of how great the post-Thanksgiving sales have been. All the comparisons are with year-ago levels, and a year ago, sales were not being pulled into Thanksgiving day as they were this time around, so these are not apple-to-apples benchmarks (the sort of person that leaves the family dinner on Thursday to head to Best Buy, Toys R Us, Target and Wal mart so as to be the first to line up for the 8 PM door-opening blockbuster deserves some social commentary — I'm not sure that is what the pilgrims had in mind when it came down to giving thanks). We heard the same blow-out Black Friday and Cyber Monday data this time in 2011 and the rest of the shopping season was a bit of a dud (see Early Push for Sales Undercuts Black Friday on page B1 of today's NYT).

Meanwhile, the spending culture is alive and well in America, nonetheless, with ShopperTrak data showing 300 million store visits on Black Friday alone (that's almost the entire population — didn't anyone make it to work?). It's not "Black Friday" any more but it has now become a four-day "Black Weekend" and as such, year-over-year data are very misleading (nobody can accuse the retailing lobby from not being creative — it is trying to make it a five-day weekend now with the extension to Mobile Tuesday  I kid you not — see page 32 of the NYT).
There was a pundit on CNBC early this morning stating that the American consumer is "on fire". Yet ShopperTrak also noted that while traffic was UP 3.5% year-on-year on Black Friday, actual dollar sales fell 1.8% (which goes to show how intense the "doorbuster promotions" were in cannibalizing retailer margins). Today's WSJ cites an IBM survey, based on data from 500 retailers, that the average order per customer shrank 4.7% from a year ago. And an analysis by Chase Paymentech (a sub of JPMergan Chase) concluded that in-store sales tumbled 7% YoY on Saturday. The National Retail Federation was predicting, based on its survey, 147 million shoppers hitting the malls, but the actual, 137 million that it tracks fell short.

While Cyber Monday could provide a lift (after all, for the first time, over half of consumers said they shopped on-line over the weekend), this does not detract from the view that what the retailing community has done is condition the consumer to conduct as much of the holiday shopping as possible over one weekend. Again, remember last year's pattern... if you loaded up on the S&P retailing group in mid-November of 2011, you ended up losing money by the end of the year... despite the initial "bullish" holiday spending data.

So the one conclusion to make right is it is too early to tell how the holiday shopping season will unfold, but we came off a Q3 where both the quarterly rate and YoY pace was 2% in real terms which is actually close to half the long-term trend. Retail sales slipped 0.3% in October if memory doesn't escape me. And real personal incomes excluding government handouts peaked and began to roll over in July. Retailers have a declining personal savings rate to thank because the sort of low-paying jobs that are being created are hardly generating anything close to an enthusiastic trend on household incomes. I realize that the latest "bullish" University of Michigan consumer sentiment data captured everyone's attention, but the weekly tracking by Rasmussen is actually showing that the influence from lower gas prices and higher equity/home values may be waning — this index slipped to 89.1 as of November 23rd from 95.2 on November 9th to stand at a six-week low.

Moreover, it will be interesting to see the extent to which the 40% of the five million Americans that received unemployment insurance react ahead of the possible expiry of their emergency benefits (see page A4 of today's WSJ — Deadline Looms for Long-Term Unemployed) The spending impact could be as much as a $60 billion annual rate.

And business sentiment is certainly moribund, underscored not only by the survey data but also by the IPO calendar, which is devoid of any new deals in the pipeline both this week and next (see A Cold December for IPOs on page C3 of today's WSJ).


We remain in the throes of a secular era of disinflation. We also are in a long-term period of sub-par economic growth and below-average returns. This has become so well entrenched that U.S. pension plans now have more exposure to bonds than to stocks, as we highlighted two weeks ago. Look, this is not about being bearish, bullish or agnostic. It's about being realistic and understanding that in our role as market economists, it is necessary to provide our clients with information and analysis that will help them to navigate the portfolio through these stressful times. Our crystal ball says to stick with what works in an uncertain financial and economic climate — in other words, maintain a defensive and income-oriented investment strategy.

It is our contention that in this post-bubble, mean-reverting process, the ability for policymakers to re-create the credit cycle, reflate asset values and ignite a consumer-led recovery is going to be thwarted by secular changes in attitudes towards borrowing, saving, discretionary spending and homeownership. In other words, even after enough debt is paid off, the baby boomers' spending years will be focused on putting their money in the coffee can. The first of the boomers are now turning 65 and the median boomer is now 55, going on 56. At the margin, they will now be forced to plan for retirement by setting aside an ever-greater part of their paycheques as opposed to relying on the perceived level of their future net worth, which had become the norm over the past two decades as inflated asset values, first in equities and then in residential real estate, triggered unrealistic expectations of the intrinsic value and capital gains potential of their asset base — an asset base concentrated in inherently unproductive items such as the house.

The missing piece in most analysis regarding the efficacy of government policy in terms of rejuvenating a new cycle of borrowing and spending is the extent of trauma that has taken place on the household balance sheet since the housing bubble popped in 2006 and the equity bull market reversed course in 2007. We estimate that the cumulative loss of household net worth, even with the recovery in recent years. is $4.7 trillion. In other words, a 7% hole has been driven into the household balance sheet over a five year span, which has not happened since the 1930s. Household wealth is no higher today than it was in 2006, and this realization is really only now setting in.

The process of a secular rise in the U.S. personal savings rate and the dampening effect this will have on aggregate demand will be incredibly disinflationary for some time. While fiscal stimulus indeed cushioned the blow, the current reality is one of restraint, at a time when the output gap is closer to 6% — where it normally is in periods of deep recessions, not year-four of an expansion.

From a top-down perspective, what drives inflation is the shape and interaction of two different curves — the economy's aggregate supply curve and the aggregate demand curve. The movements in these curves tell us where the "output gap" is at any moment in time—the "gap" between where the economy is actually operating and the level it would be operating at if it were running flat out at full employment. In other words, the "gap" measures the degree of slack in the labour and product markets, and this "gap" at 6% currently augurs for 'fair-value' or 'equilibrium' policy rates to be -2.4% according to our research, which is why at the zero bound. the Fed has been and will continue to focus on non-conventional measures aimed at lowering the cost of capital.

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vinayjha's picture

WSJ reported 247 million thru NRF survey. that was the biggest BS with  US population of 311 million 80% were shopping.


vast-dom's picture

everyone STFU and eat your turkey leftovers!

tsx500's picture

'we remain in the throes of disinflation...'

the price i paid today  for a gallon of milk didn't exactly seem like disinflation to me !

Big Slick's picture

I like to give my own posts an 'up arrow', you know, to get 'em off on a good start

EnslavethechildrenforBen's picture

Egypt's Morsi grabbing power. Obama didn't do that.


tbone654's picture

Obama's fools and Stalin's fools share the same drink of illusion.   Vlad Putin a true conservative

praxis's picture

I read that in Pravda. 

Amazing the mouthpiece of the former Soviet Union now calling out Obama for being a Commie!

tbone654's picture

Well, any normal individual understands that as true but liberalism is a psychosis . O'bomber even keeps the war going along the Mexican border with projects like "fast and furious" and there is still no sign of ending it.  He is a Communist without question promoting the Communist Manifesto without calling it so. How shrewd he is in America. His cult of personality mesmerizes those who cannot go beyond their ignorance. They will continue to follow him like those fools who still praise Lenin and Stalin in Russia.  Obama's fools and Stalin's fools share the same drink of illusion.

Reading Putin's speech without knowing the author, one would think it was written by Reagan or another conservative in America. The speech promotes smaller government and less taxes. It comes as no surprise to those who know Putin as a conservative. Vladimir Putin went on to say:

"...we are reducing taxes on production, investing money in the economy. We are optimizing state expenses.

tbone654's picture

"The Liberal Mind: The Psychological Causes of Political Madness."

"Psychopathology of the Liberal Mind: The adult drive toward omnipotent control of others, in any arena whatever, is rooted in fears of separation, abandonment loss or abuse--the residual effects of early attachment gone wrong. The need to dominate others arises from the tyrant's need for absolute assurance that the catastrophic loss of dependency or the pain of abuse so devastating to him in his earliest years will not be repeated."

"Like spoiled, angry children, they rebel against the normal responsibilities of adulthood and demand that a parental government meet their needs from cradle to grave."

Socialism, Communism, Marxist... all the same...  good people will look away with reasonable excuses...

W74's picture

Sounds like the average Boomer. 

My appologies to those you conservatives in your 50s-early 60s, but your generation had by far the most potential (being children of the greatest generation) of any generation this country saw, and y'all still chose to squander it by being unhappy, spendthrift little babies.

And now look, ye Boomers, at what you have wrought: your children live at home with worthless liberal college degrees who've never worked a day in their lives, living in homes which by and large are still not paid off.  Boy did the banks make a pretty penny off of you. 

Look what you Boomers have done to my generation: you hopped us up on adderoll and ritalin to control what were quite normal childhoods, and coddled us so that we would build "self-esteem" over work-ethic.  Well ask one of your children who still lives at home how their self-esteem is.  It probably very low, and it has everything to do with their work-ethic not being very high.

lasvegaspersona's picture


please complain to your own parents. I have issues with my kids, I'll bet once  you have a few  you will understand. I nor anyone on this board is responsible for the actions of others, neither those in our cohort nor offspring. The idea of blaming an entire generation is a bit desperate.

blunderdog's picture

Complain all you like, but it was liberals during their "rebellious" phase who created the good'ol USA.

Kiss My Icelandic Ass's picture

Funny. No one seemed to complain when Mubarak grabbed power....

jeff montanye's picture

indeed.  while the republicans never seemed to think giving bush the power to wiretap without warrant, imprison without charge or torture without appeal might bite them when a democrat wielded those powers, apparently when execute without trial was added it caused some symmetric doubts in the current administration:


MyBrothersKeeper's picture

I paid 3.60 for a gallon of milk last weekend.  Gas was $3.53

fightthepower's picture

I buy organic milk. It's more like $8.00.

akak's picture

Inorganic milk is MUCH cheaper, but all the chunks of silica and feldspar are admittedly rather hard to swallow.

Zer0head's picture

First off what the F is Organic milk -- seriously with the USDA watering down of regs and a deluge of ChinaMex shit on the market, the only thing organic might be Farmer Browns glad tidings.  Secondly from Pubix to Piggly Wiggly you can buy the shit for 4 bucks or less on sale and that should tell you something.  

PS I have a great deal on Organic Salmon - ya they're farm raised swimming in near shore mercury saturated waters but they're fed authentic Organic Monsanto Fish Pellets.   Dutti for Organic Chicken  cage raised never set foot in the barnyard (actually never have been able to stand up) but like their Salmon friends they too are raised on Monsanto Organic Chicken Pellets.


just ask yourself this question

Can Roundup Ready Alfalfa Coexist with Organic and Conventional Alfalfa?


Monsanto answers it here http://www.monsanto.com/newsviews/Pages/roundup-ready-alfalfa-supreme-co...

old naughty's picture

Ever wondered when do cows have milk?

They are being squeezed NOT during that time, so what HELPED them to make milk?


CPL's picture

You keep a hefer in rotation (knocked up) and she'll milk indefinately until she is too old, the major challenge is making sure they don't end up with teet rot and stay healthy.  Cows milking isn't a mystery.  To do that you buy a bull and stud him.   Then you measure herd size and determine if a good female calf now is worth keeping, auction or veal.

lemonobrien's picture

i drink raw goat/cow milk; probably $35 a gallon; if you can get it; only delivered twice a week; small batch. i don't drink so much, but my kid does.

vast-dom's picture

i buy everything organic, bc i like to vote for real. but you'd be nuts to fuck with dairy at this stage of the game. and flesh. 

Zer0head's picture

I'm Joe Dickson, Organic Certification Coordinator for Whole Foods Market. ... Organic products from China can absolutely be certified organic to the exact same...



Dear Joe:

Are we to believe that the farm workers who are paid a fraction of what Chinese factory workers make even know what organic is? And for the Chinese entrepreneurs  who employ those farm workers,  we should have complete confidence that when you return to Austin they continue to tend their crops adhering to even the USDAs watered down Organic standards? Oh yes of course they do, I can imagine even as I write this how chinese worker 3884472 and his fellow slaves carefully tend to their corps watering them as it were with the morning dew and carefully enriching the soil with only natural compounds. 

I guess if you consider the piss and diarrhea of slave laborers to be organic then you are spot on, notwithstanding the additives sourced from the outflow of nearby chemical factories. 

vast-dom's picture

yeah i stay away from chinese and generally mexican organics. and there's a huge scandal brewing re: whole foods and their mislabelling of GMO and other bs tactics. 

IllusionOfChoice's picture

It's sounding like people need to forget the labels and get out to their local farmer's market.

Mine has high quality bread and eggs for cheaper than you'd find at the supermarket, and past that the produce is amazing.

ShorTed's picture

Jeez, for that pice you can get a reasonably decent 6 pack!

Stop supporting those over-subsidized farming leeches, organic or otherwise!

BlueCollaredOne's picture

But what was the cost of printer ink?

The future will be a future where no one but treasury secretary can print. No one will be able to afford printing books they download. No web articles will be able to be printed. Not that it matters, once the cloud is the new internet protocol sites like ZH will simply be forgotten.

This was meant to be tongue in cheek, but its pretty fucking scary that one could probably debate that this random thought that vodka has struck me with could maybe be debated.

Or maybe I really am drunk.

stocktivity's picture

"retailers are stepping over themselves to lure in shoppers by opening earlier than ever and discounting like they never have before. Call it deflationary growth."

Call it anything you like...It's still all Bullshit!

lincolnsteffens's picture

Where have you been. We have bi-flation. Everything you need goes up in price and anything you have goes down in value.

HaroldWang's picture

I noticed that same NRF survey and though how in the world did 80% of the population go shopping?? Did toddlers go? Did prisons open up and let them go? Did people in hospitals/nursing homes, etc. all go??

That number is impossible.

seek's picture

My guess is -- if they're trying to legitimately lie, ha ha -- they're double and triple-counting, e.g. adding all store visits by a single person up, rather than counting it as one shopper. Store visits can go up is a shopper visits more stores without buying anything, which is common when bargain hunting.

The reality is as things continue to get worse, more and more producers of research data products are incentivised to lie, since they depend on sales to the companies they cover for revenue and while bad news sells ok, real bad news does not.This is why the press releases are so selective about what's reported (volume v. revenue, on-quarter v. on-year, etc.)

My own business provides research (among other things) for a very narrow market segment, and while past history is pretty immune due to honestly reported financial results, I've definitely been lobbied to raise a forecast. The irony is that if I printed what I thought the real numbers would be, I'd lose half my clients. I've shared this view with a couple of fortune 500 clients of mine, and they agreed with both the reality being worse and that saying so has negative consequences. In the end I maintain two sets of numbers -- one depressing set, and one reality-based set -- the depressing set being the "happy" version. Clued clients know to call and ask for the bad news by phone.

SIOP's picture

That peaks volumes, thank you for posting that.

stocktivity's picture

SSHHHH.....or Maria and Pisani will have to put their pom poms away.

MillionDollarBogus_'s picture

Retail spending is up 12% over last year.

The higher that number, the more Rosenberg would bitch and complain.


max2205's picture

Stfu... After 4 years of bullshit, if you can't beat 'em, go long and join'em

fonzannoon's picture

"Stfu... After 4 years of bullshit, if you can't beat 'em, go long and join'em"



4 years of bullshit? Where was the the S&P in 1999 slappy? higher or lower than where it is today? Try 12 years and counting of going nowhere and losing your ass twice in between. Anyway good luck to you. Get in there and join em.

kito's picture

It's about being realistic and understanding that in our role as market economists, it is necessary to provide our clients with information and analysis that will help them to navigate the portfolio through these stressful times................

hey fonz, rosie uses "realistic" and "market economists" in the same sentence.........bwahahahahaha..........

fonzannoon's picture

my train went off the tracks tonight Kito.Ben inkjet recommends cash. Wally Goldman recommends precious metals and Joey Stockbondman adheres to a balances approach of equities and fixed income.

willwork4food's picture

Cash, yea. I am self employed with employees and we are competing with wages that I personally earned 25 years ago, and in a few words this sucks.


 I am so glad gasoline has droped to $.75/gal, a nice dinner at a mexican restaurant is only $10 and supplies have dropped at least 50%.      Yea baby, GANGNAM style....

Not to be risque, but doesn't  Congress & Senate get a COL raise + benefits raise? Just curious.

otto skorzeny's picture

go for it-dumb $ always gets in at the top

blunderdog's picture

     We remain in the throes of a secular era of disinflation.

Everything'll turn out just fine as long as we never call worry about "deflation."

Just to name the disease is to suffer from it...

otto skorzeny's picture

I think the correct term is biflation

Kiss My Icelandic Ass's picture

Actually, it's antidisestablishmentarianflation .

DavidC's picture

My thoughts exactly.

The two 'd' words - we must avoid, at all costs, uttering them. (/SARC)


TheFulishBastid's picture

a sub of JPMergan Chase

Thank you Tyler, I now have a new screen name to use. Awesome sauce!

akak's picture


From a top-down perspective, what drives inflation is the shape and interaction of two different curves — the economy's aggregate supply curve and the aggregate demand curve.

Forgive me, but isn't this "analysis" just rehashed Keynesianism 101?

Uh, I think that Rosie is neglecting the supply of money here, the manner in which that money supply is (dishonestly) continually increased, and the degree to which falling confidence in the monetary issuing authority can translate into higher monetary velocity as well as into malinvestments and "malspending" which would not take place absent the profligacy of said monetary issuing authority.

EARLPEARL's picture

my 2 best friends and i watched tv all day friday and drank beer...we did have to go buy beer, did we shop or not?

Insideher Trading's picture

In a world in which supreme absurdity is an everyday occurrence, who knows, or cares, any more.

What comes after apathy in this sequence again?

...dependency; and after dependency...

It's such a fascinating sociological phenomena that this cycle repeats with such precision over the course of time.

  • From bondage to spiritual faith;
  • From spiritual faith to great courage;
  • From courage to liberty;
  • From liberty to abundance;
  • From abundance to complacency;
  • From complacency to apathy;
  • From apathy to dependence;
  • From dependence back into bondage.