Although David Rosenberg has been incorrect for the entire move up in equities, I firmly believe that his message has been largely correct. This recovery has not been built on sound fundamentals and organic growth. It has been built on the back of government stimulus and the greatest mean reversion in modern economic times. Whether it sprouts into an actual organic and healthy growing economy is still very much in doubt.
I spent more than my fair share of time reading Rosey’s research in my days at Merrill Lynch and his interpretation of the 2003 bull market was not all that dissimilar from his current outlook. He proved to be quite prescient in his calls back then though he is certainly not much of a market timer (something he does not get paid to do). His macro calls are almost always based on sound research and strong secular trends. Ignoring the short-term noise is vital when reading his work.
After all, if Mr. Rosenberg were wrong all the time he wouldn’t be one of the most highly respected analysts off Wall Street. His latest missive was particularly eye opening. If this rally unravels and the economy dips back into recession in the coming 12 months Mr. Rosenberg will be splashed on the cover of every investment magazine known to man. This is a must read regardless of Mr. Rosenberg’s near-term opinion on stocks.
FRAUD –
Difficult to beleive in a real recovery when looking at : Industrial production improvement by country: http://research.stlouisfed.org/recession/indicators/IndustrialProduction_1P.pdf
Trade services and products by country: http://research.stlouisfed.org/recession/indicators/RealExports_1P.pdf
Nothing is moving besides food and equities stocks: http://railfax.transmatch.com/
[Reply]
TPC, I think you were the one who posted the track record of economists over the years. They are like rolling the dice. The predictions of economists are somewhere in the middle. You can’t be making money that way. Yes there are economists, there are investors and there are traders. And there are those manipulative analysts. Mr. Rosenberg may be right coming down the road but what do we do in the mean time. If we had listen to his bearish call, you ‘d have miss the whole run up of 60%.
[Reply]
TPC Reply:October 22nd, 2009 at 11:58 AM
Don’t get me wrong. I don’t think you can trade off of Rosenberg’s advice. Take me as good example. I still maintain that we are in a bear market rally. I still think the economy is VERY weak, but I have made a lot of money trading the micro picture and understanding the impacts of events and specific opportunities over the last 6 months. If you were investing solely based on my macro picture you would have missed the whole rally. But that macro view only forms a base for my actual strategies. It doesn’t DRIVE them….
That’s why it’s important to make the distinction between a secular macro view and short-term trading views. Rosenberg is not a trader and clearly doesn’t have a good sense for it. He is a secular macro guy. That’s his thing. It should be noted when reading his stuff.
[Reply]
What percent of investors are ahead of where they were in October 2007? Those who lost the most are most excited about the opportunity to make up their losses and will be bullish right through the next downturn, whenever that comes. If one went defensive at the beginning of the crisis (say July 2007), you lost little. The whole rally since March (or the part of it in which you participated) is gravy.
If you were up just 5% from 2007 until March 2009, then even sitting out the entire rally you are still 50% ahead of the S&P500. If you participated in just half the rally (say from 720 on March 10 to 940 in mid-May), then you are about 95% ahead of the market. So you really didn’t need to catch the whole rally to do well, preventing major losses is just as effective.
I have read David since the spring and he predicted that the rally might go to 1,100 by the end of the summer before it rolled over. He has said the market has been overvalued since about S&P500 850 (which would be true if interest rates climb toward 7%). So long as everyone assumes interest rates will remain extraordinarily low, the market can easily reach a P/E10 of well over 20.
Back in October 2007 it was easy to see that the market would have trouble and be dragged down by the financials. It was easy to see the the crisis was worsening in July 2008 with Fannie and Freddie. It was not so easy for those on the outside to see a debacle like Lehman or AIG coming. Avoiding the decline from 1550 to 1250 was common sense (avoid a typical bear market and you are 25% ahead of the market), avoiding the collapse for many was luck from having reduced exposure due to the general problems. Provided we just have a deep recession and no more crisis shoes to drop I don’t see why the S&P500 wouldn’t reach 1,200.
At the same time, if we only have a recession to deal with why does the Fed deem it necessary to keep interest rates at zero? Why not 1% or 2%? Are things really that bad?
[Reply]
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Although David Rosenberg has been incorrect for the entire move up in equities, I firmly believe that his message has been largely correct. This recovery has not been built on sound fundamentals and organic growth. It has been built on the back of government stimulus and the greatest mean reversion in modern economic times. Whether it sprouts into an actual organic and healthy growing economy is still very much in doubt.
I spent more than my fair share of time reading Rosey’s research in my days at Merrill Lynch and his interpretation of the 2003 bull market was not all that dissimilar from his current outlook. He proved to be quite prescient in his calls back then though he is certainly not much of a market timer (something he does not get paid to do). His macro calls are almost always based on sound research and strong secular trends. Ignoring the short-term noise is vital when reading his work.
After all, if Mr. Rosenberg were wrong all the time he wouldn’t be one of the most highly respected analysts off Wall Street. His latest missive was particularly eye opening. If this rally unravels and the economy dips back into recession in the coming 12 months Mr. Rosenberg will be splashed on the cover of every investment magazine known to man. This is a must read regardless of Mr. Rosenberg’s near-term opinion on stocks.
FRAUD –
Difficult to beleive in a real recovery when looking at : Industrial production improvement by country: http://research.stlouisfed.org/recession/indicators/IndustrialProduction_1P.pdf
Trade services and products by country: http://research.stlouisfed.org/recession/indicators/RealExports_1P.pdf
Nothing is moving besides food and equities stocks: http://railfax.transmatch.com/
[Reply]
TPC, I think you were the one who posted the track record of economists over the years. They are like rolling the dice. The predictions of economists are somewhere in the middle. You can’t be making money that way. Yes there are economists, there are investors and there are traders. And there are those manipulative analysts. Mr. Rosenberg may be right coming down the road but what do we do in the mean time. If we had listen to his bearish call, you ‘d have miss the whole run up of 60%.
[Reply]
TPC Reply:October 22nd, 2009 at 11:58 AM
Don’t get me wrong. I don’t think you can trade off of Rosenberg’s advice. Take me as good example. I still maintain that we are in a bear market rally. I still think the economy is VERY weak, but I have made a lot of money trading the micro picture and understanding the impacts of events and specific opportunities over the last 6 months. If you were investing solely based on my macro picture you would have missed the whole rally. But that macro view only forms a base for my actual strategies. It doesn’t DRIVE them….
That’s why it’s important to make the distinction between a secular macro view and short-term trading views. Rosenberg is not a trader and clearly doesn’t have a good sense for it. He is a secular macro guy. That’s his thing. It should be noted when reading his stuff.
[Reply]
What percent of investors are ahead of where they were in October 2007? Those who lost the most are most excited about the opportunity to make up their losses and will be bullish right through the next downturn, whenever that comes. If one went defensive at the beginning of the crisis (say July 2007), you lost little. The whole rally since March (or the part of it in which you participated) is gravy.
If you were up just 5% from 2007 until March 2009, then even sitting out the entire rally you are still 50% ahead of the S&P500. If you participated in just half the rally (say from 720 on March 10 to 940 in mid-May), then you are about 95% ahead of the market. So you really didn’t need to catch the whole rally to do well, preventing major losses is just as effective.
I have read David since the spring and he predicted that the rally might go to 1,100 by the end of the summer before it rolled over. He has said the market has been overvalued since about S&P500 850 (which would be true if interest rates climb toward 7%). So long as everyone assumes interest rates will remain extraordinarily low, the market can easily reach a P/E10 of well over 20.
Back in October 2007 it was easy to see that the market would have trouble and be dragged down by the financials. It was easy to see the the crisis was worsening in July 2008 with Fannie and Freddie. It was not so easy for those on the outside to see a debacle like Lehman or AIG coming. Avoiding the decline from 1550 to 1250 was common sense (avoid a typical bear market and you are 25% ahead of the market), avoiding the collapse for many was luck from having reduced exposure due to the general problems. Provided we just have a deep recession and no more crisis shoes to drop I don’t see why the S&P500 wouldn’t reach 1,200.
At the same time, if we only have a recession to deal with why does the Fed deem it necessary to keep interest rates at zero? Why not 1% or 2%? Are things really that bad?
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