David Rosenberg

Still Think The Housing Recovery Is Sustainable?

While hope springs eternal that the US housing sector 'record-inventory-compression and foreclosure-stuffed' 'recovery' will become self-sustaining, there are two rather disappointing 'facts' to ruin the 'fiction' that all is well. As Gluskin Sheff's David Rosenberg notes, not only are mortgage applications for new purchases stalling rather notably from a 'red-hot' +16% YoY in January to a mere +3% in the last week; but an even more critical indicator of housing's health just turned negative after providing hope for the last 14 months. The year-over-year growth in bank-wide real estate credit has turned down again - after first turning positive in February of 2012. So the first (and second) derivative of real-estate credit is now on the down-swing - not the stuff of sustainable housing recoveries.

Sam Zell: "The Stock Market Feels Like The Housing Market Of 2006"

Sam Zell: "This is a very treacherous market," thanks to the giant tsunami of liquidity, "the problems of 2007 haven't been dealt with," and given the poor macro data and earnings, "we are suffering through another irrational exuberance," leaving the entire CNBC audience speechless when he concludes, "the stock market feels like the housing market of 2006." 

When A Great Deflationary Bear Starts Turning Inflationary

Over the past four years one of the dominant "deflationists" has been Gluskin Sheff's David Rosenberg. And, for the most part, his corresponding thesis - long bonds - has been a correct and lucrative one, if not so much for any inherent deflation in the system but because of the Fed's actual control of the entire bond curve and Bernanke's monetization of the primary deflationary signal the 10 and certainly the 30 Year bond. The endless purchases of these two security classes, coupled with periodic flights to safety into the bond complex have validated his call. Until now.

David Rosenberg Goes In Search Of A Positive Exogenous Shock

... And can't find it: "The reason why the past four years has been so dismal, over and beyond the failure of the labour market to fully recover among other things, is that we have gone through the weakest period in the post-WWII era in terms of growth in the private sector capital stock. We invented the Internet and spent years after spreading its applications and co-mingling the technology with labour so as to bolster multi-factor productivity. But that golden age was 10-15 years ago. Despite some really impressive stuff going on in the biomedical field to be sure,  and what Apple has done in terms of introducing its array of impressive consumer gadgets, growth in the private sector capital stock since 2009 has been the softest on record."

Guest Post: In Search Of The Economic Recovery

The ongoing message from the mainstream media, analysts and most economists is that the economy has turned the corner and we are set for substantially stronger growth in the coming year.  While that sounds great on the surface the economic data has yet to hint at such a robust recovery.  What is worrisome is that CNBC has started using the term "Goldilocks economy" again which is what we were hearing as we approached the peak of the market in early 2008.  As David Rosenberg pointed out in his morning missive: "Maybe, it's just this:  so long as there is a positive sign in front of any economic metric, no matter how microscopic, all is good.  After all, you can't be 'sort of in recession' - it's like being pregnant... either you are or you are not." The bottom line is that ex-artificial stimulus, and other fiscal supports, there is little in the way of an economic recovery currently going on.  In order for the economy to reach "escape velocity" it will be on the back of sharply rising employment and wages which are needed to prime consumer spending.  This is not happening as the the gap between wages and rising cost of living continues to drive the consumer to shore up that shortfall with more debt.  

Where The Consensus Is... Wrong

The equity markets, despite a verey modest drop so far today, continue to hang in despite slowing profits growth. David Rosenberg notes that while many tout the +6% YoY earnings growth, once adjusted for special factors, the growth rate in earnings is a meager 40bps! So, he notes, it appears not to be about earnings but about what investors are willing to pay for the earnings stream and lays out four reasons for the market's 'comfort'. However, while Mr. Market is catching on to the Fed's overt attempt to reflate the economy by reflating asset values, he warns, we have seen in the past how these cycles turn out - and whether you are a trend-follower or contrarian, take note of the overwhelming consensus across almost every asset class right now. Dow Theory advocates have been doing high-fives all year long as the S&P Industrials and Dow Transports make new highs, reinforcing the notion (mirage is more like it) of economic escape velocity, but Rosenberg has more than a few (EIGHT)  'anomalies' that show things are actually stagnating (or contracting) and don't pass his smell test.

16 Reasons Why David Rosenberg's Not Buying Employment Report

"I went through the January data one last time with a fine tooth comb. I fail to see what got everyone so excited, beyond the upward revisions to the back data. That only proves that productivity has been weaker than initially thought. And the income from those upward job revisions has probably already been spent. But as I highlighted yesterday, the broad-term trends are slowing down and doing so discernibly."

Guest Post: The Visible Hand Of The Fed

There has been an burst of exuberance as of late as the market, after four arduous years, got back to its pre-crisis levels.  Much has been attributed to the recent burst of optimism in the financial markets from: better than expected earnings, stronger economic growth ahead, the end of the bond bubble is near, the long term outlook is getting better, valuations are cheap, and the great rotation is here - all of which have egregious holes. However, with the markets fully inflated, we have reached the point that where even a small exogenous shock will likely have an exaggerated effect on the markets.  There are times that investors can safely "buy and hold" investments - this likely isn't one of them.

David Rosenberg On "Fascinating Markets", Or 2011 vs 2012 vs 2013

Unsure what the current blistering start for the S&P 500 means in the new year? Here is David Rosenberg putting the last two years in perspective to the last two weeks. Alas, with fat tails now solely emanating from politicians (as the Fed has guaranteed nothing wrong can ever happen again on the monetary side, until everything goes wrong of course), and politicians being inherently irrational and unpredictable, it is not exactly clear how anyone can factor for what in just one month is sure to be the biggest clash in history between two sides of a Congress that has never been more polarized.

From Myth To Reality With David Rosenberg

  • After the worst post-Christmas market performance since 1937, we had the largest surge to kick off any year in recorded history
  • The myth is that we are now seeing the clouds part to the extent that cash will be put to work. Not so fast It is very likely that much of the market advance has been short-covering and some abatement in selling activity
  • As equities now retest the cycle highs, it would be folly to believe that we will not experience recurring setbacks and heightened volatility along the way
  • The reality is that the tough choices and the tough bargaining have been left to the next Congress and are about to be sworn in
  • The myth is that the economy escaped a bullet here. The reality is that even with the proverbial "cliff" having been avoided, the impact of the legislation is going to extract at least a 11/2 percentage point bite out of GDP growth


2012 Year In Review - Free Markets, Rule of Law, And Other Urban Legends

Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).

David Rosenberg's 35 Charts For 2013

How does one of the best strategists view the world as we close the page on 2012, and look toward 2013? Find out with the help of these 35 charts.

The Federal Reserve's Seven Point Plan

Ever wondered whether the Fed actually has/had a plan? Gluskin-Sheff's David Rosenberg attempts to overlay some intelligence to the last seven years to get a grasp for what the venerable institution is actually up to. To wit, the seven stages of Federal Reserve jiggery-pokery... Will the seven become twelve as the addicts take over the asylum? Seven-point plan or seven-year dud?

The Year 2012 In Perspective

As in any other Ponzi scheme, when the weakest link breaks, the chain breaks. The risk of such a break-up, applied to economics, is known as systemic risk or “correlation going to 1”. As the weakest link (i.e. the Euro zone) was coupled to the chain of the Fed, global systemic risk (or correlation) dropped. Apparently, those managing a correlation trade in IG9 (i.e. investment grade credit index series 9) for a well-known global bank did not understand this. But it would be misguided to conclude that the concept has now been understood, because there are too many analysts and fund managers who still interpret this coupling as a success at eliminating or decreasing tail risk. No such thing could be farther from the truth. What they call tail risk, namely the break-up of the Euro zone is not a “tail” risk. It is the logical consequence of the institutional structure of the European Monetary Union, which lacks fiscal union and a common balance sheet.... And to think that because corporations and banks in the Euro zone now have access to cheap US dollar funding, the recession will not bring defaults, will be a very costly mistake. Those potential defaults are not a tail risk either: If you tax a nation to death, destroy its capital markets, nourish its unemployment, condemn it to an expensive currency and give its corporations liquidity at stupidly low costs you can only expect one outcome: Defaults. The fact that they shall be addressed with even more US dollars coming from the Fed in no way justifies complacency.