While we fully understand that when selling institutionally-priced newsletters to institutions (not retail for one simple reason: lack of "other people's money" to spend) one will have a far more lucrative career as a bull than as a bear simply because insecure (that would be most of them) institutional "strategists" prefer to surround themselves in cognitive bias-reinforcing groupthink just to convince themselves they are right, as the rating-agency era confirmed, one thing we are very confused by is whether David Rosenberg, who famously flipped from bear to bull a little over a year ago (recall David Rosenberg: Here’s why I’m bullish on the US economy [8]), preaching a "wage-inflation" driven bout of economic growth which has not only not materialized, but the 10 Year recently hit 2014 lows, is now back to being a bear.
The reason? Statements like this from September 8 letter to clients:
While I have been labeled a bull on equities, it is only because the alternatives are so far worse, including zero-yielding cash. The central bankers are so consumed with riding the rescue for wages, income inequality and labour market slack, that they have either forgotten or dismissed the huge distortions their actions are having on financial market activity.
To be sure, in this world of relativity, equities stand out. But rest assured that relative valuations have been influenced — dare, I say, distorted — by central bank interventions that have gone global.
But as a standalone, not as a relative comment, let it be known that these central banks have turned a blind eye to the excesses in the financial markets. The price-to-sales ratio for the S&P 500 has soared to 1.77x — actually taking out the 2000 bubble high to register the highest reading on sixty years. Hey, maybe it is totally justified across a broad array of measures. Frankly, I don’t care. Price-sales ratios are at sixdecade highs. Use that information any way you like.
These valuations only make sense in the environment we are in — the environment of central banks suppressing the cost of loanable funds at or near zero. It won’t last forever, but let’s all try to understand that valuations are where they are because we have academics at the helm of central banks who largely have no experience in the real world of finance but have instead lived their lives in a theoretical bubble and have amazingly still not learned from the lesson of their past misadventures of creating financial excesses because they feel the need to deal with structural issues that actually lies at the door of the Congress and White House.
The party continues but down the road, understand … this will likely not end very well.
Or perhaps the latest thing among commentators is to be bullish on the economy, calling a recovery for all the wrong reasons, while hedging that a crash is coming and admitting that there is no recovery either in the economy and the stock market, if one pulls the magic rug of endless central banking intervention, and all this while saying that the best trade is to short bonds... short bonds... short bonds...
Somebody smarter can probably get to the bottom of it all.
Source: Gluskin Sheff [9] [9]