Rosenberg

Much has been said about the parallels and differences between the Japanese and US experience. Today David Rosenberg chimes in in an original fashion, and instead of providing the latest rambling discussion, shares ten simple pictures. Quote Rosie: "Consider the charts below the equivalent of 10,000 words explaining why the U.S. post-bubble economic and financial backdrop is looking more and more like the Japanese experience of the past two-decades."

David Rosenberg appeared in the Globe and Mail's Market View segment with a bite-sized, 2 minute segment explaining why he is bullish on the USD (not a big fan of the EUR, and with good reason), and why he continues to be bullish on bonds (although admits that at 2.3% the 10 Year was expensive). A great bullet-point presentation for new to Rosenberg (later today, we will present Jim Caron's latest attempt at redemption, explaining why he sees bond fund flows as indicative of a selloff in bonds. He better get the direction right this year.)

David Rosenberg, who has very patiently taken the peanut gallery's swipes at him for the past month during the latest bear market rally bout (of which Japan had roughly 25 as the broader secular one took its market about 75% lower over two decades), finally lashes out at all those who still fail to see that there is nothing organic about the US economic recovery, and the only reason the numbers are "better" is due to the $4+ trillion in fiscal and monetary stimuli: "What we have on our hands has been an economic revival and market bounce back premised on unprecedented monetary and fiscal stimulus. How the Fed and the federal government in the future manage to redress their pregnant balance sheets without creating a major disturbance for the overall economy is a legitimate question and, sorry, does not deserve a double-digit market multiple, in our view." That is about all that needs to be said on the matter of the economic recovery. But we will immediately grant that there is an organic economic boom if the Fed removes QE right now, and the economic data points over the next quarter continue trending higher. Somehow we don't think this will (ever) happen...

David Rosenberg closes the 2010 books with his top ten reasons to be cautious for 2011. We are fairly confident that none of these will come as a surprise to regular readers of Zero Hedge. The only real risk to the now endless melt up, in our view, is that actual news actually start having an impact on stocks. If that ever happens, look out below.

Confused by how what's left of the stock market is levitating with the reckless abandon of a manic-depressive teenager high on ecstasy and shrooms, even as it hits a fresh record bullish sentiment levels? Don't be: after all it happened, virtually tick by tick, at precisely the same time last year. David Rosenberg reminds us of everything that happened, together with the end of 2009 resurgent economic optimism, which proved being hollow and a re-recession (now that the ECRI made the word double dip no longer fashionable) was certain, only to be prevented by the last course monetary stimulus intervention in the form of QE Lite and QE 2. He also goes on to show what the key challenges for Brian Sack's trading desk will be in the coming year.

As usual, trust Rosie to cut through the chaff regarding the $858 billion tax package, which he views not as stimulative, contrary to what the suddenly bullish sell-side crew claims, but merely as preventing the government becoming a "contractionary economic force" - "How much
of the tax cuts will go into saving and imports remains to be seen. We think the “stimulative” effects are over exaggerated." Specifically, his trade recommendation based on a paralyzed congress and a debt ceiling hike is as follows: "by the time the second quarter rolls around, it will be time to buy volatility, S&P 500 puts, and gold." And in further debunking the perpetually wrong sellside groupthink, Rosenberg looks at bond forecasts from late 2009 and finds that virtually everyone who is now once again calling for a drop in yields was doing the same a year ago...and was wrong. The tangent is that if Morgan Stanley's Jim Caron is completely wrong for the second year in a row, we fail to see how the rates strategist can possibly claim to have credibility should he get this most important call wrong in two consecutive years. Lastly, for those who care about market fair values, Rosie shares his fair value model updates on the S&P, the TSX, Corporate bonds and the CAD.

We have already broadly discussed the recent euphoria in the market which especially in the Nasdaq has hit 5 year+ extremes. And as always in times of such irrational exuberance, the disconnect between perception and reality is truly astounding. David Rosenberg presents his views on the latest developments in the market's ongoing fight with manic-depressive disorder.

With everybody presenting their ideas and themes for 2011, most of which are replete with crayon drawing of rainbows, koolaid and unicorns, here is David Rosenberg's list of 10 thoughts for what to look for in 2011.

Today, David Rosenberg has some good commentary which proves that those who say to not fight the Fed, may be 100% wrong when it comes to fighting adjusted for inflation, or as the case may be - deflation (conveniently, few talk about what bothers even seasoned hedge fund managers such as David Einhorn - i.e., "corn and oil"). And Rosie is spot on: the deflation in all credit-intensive purchases is accelerating, and will accelerate because the only thing that matters, as we have claimed for over a year, is the shadow capital/credit contained in the shadow banking system. That is the number that is collapsing at a rate of more than half a trillion per quarter. No matter what Bernanke does to M2 will even remotely offset this deleveraging deluge. Which is why we have long claimed that the only trump card Bernanke has is to devalue the dollar (both relative to other currencies and absolutely - relative to gold) to the point that its fate as a reserve currency is imperiled, ostensibly leading to a monetary crisis. One is free to name the resulting chaos in dollar denominated prices as one sees fit. But the bottom line is that as long as the shadow banking system continues to contract, which it will for years as the bulk of the funding came from European and Japanese banks: both of which are now gripped in austerity, and not really flooded with leveraged depositor money, everything else is merely a short-term blip on a long-term decline in both economic output and market terms. Also known as noise.

David Rosenberg summarizes his latest views on Europe, the EURUSD, risk, volatility, bond curves, gold, geopolitics, oil, a subsidized shopping season courtesy of no mortgage payments, and two years of home inventories.

Rosie enters the "future of the euro" speculation race, and sees a "devastating deflationary shock" when Europe finally accepts the inevitable: "U.S. companies would likely confront a huge appreciation in the dollar, which would cut into their foreign-derived earnings base. Commodity prices would undoubtedly correct and safe-haven flows would certainly redress the loonie’s overvaluation gap. Treasuries would rally big-time." Stocks, of course, would plummet, and "Gold would remain bid — yesterday’s rally in the face of the USD rally is a case in point." On the other hand, the fact that we are starting to see traces of Krugman in Rosie's thinking is very. very worrisome.

Even as economics has taken to back seat a geopolitics and a market uncharacteristically lacking in euphoria, Rosie once again provides the daily dose of must read economic summary sans the Kool Aid.

Rosenberg looks for hints on how to navigate the market, and finds them in the CFTC COT report (which despite not reporting last week due to the Veterans' Day holiday, is regularly posted on Zero Hedge to glean precisely such clues). To wit: "The asset classes are merely unwinding the excess risk-on trades and pricing out the chances that QE3 will ever see the light of day. Yes, this is what the market was starting to think since Bernanke left the door open for more in the press statement, but we are finding out ex-post that the Fed chairman has less support around the table than was generally perceived. It may pay for the time being to avoid the areas of the market where net speculative long positions exist and is in the process of unwinding. Long covering is a critical source of selling pressure."

... to which the market has just one response: Brian Sack's POMO. Yet as reality and Fed perception are disconnected to record degrees, at some point even infinite money printing will have to be fully discounted. In the meantime, an $8 billion POMO prepares to lead off the latest QE2 AAPL, AMZN, NFLX pump in 20 minutes.

Rosie's latest letter looks at yesterday's events in the market and calls it the 'watershed' event. Alas, where Rosenberg sees a deflationary-driven event precipitating the move in gold lower, we see merely exchange intervention. Aside from that, Rosie's skepticism is of course justified. More importantly, the Gluskin Sheff strategist focuses on the topic we pointed out a few days ago, namely that Dick Fisher has now opened up the door to Bernanke's impeachment by confirming that the Fed is doing precisely what the Chairman swore under oath he would never do, i.e., monetize.