David A. Rosenberg is Chief Economist & Strategist at Gluskin Sheff, with a focus on providing a top-down perspective to the Firm’s investment process. Mr. Rosenberg has earned both Bachelor of Arts and Master of Arts degrees in Economics from the University of Toronto. Prior to joining Gluskin Sheff, David was Chief North American Economist at Bank of America-Merrill Lynch in New York and prior thereto, he was a Senior Economist at BMO Nesbitt Burns and Bank of Nova Scotia. Mr. Rosenberg has ranked first in economics in the Brendan Wood International Survey for Canada for the past seven years and was on the U.S. Institutional Investor All American All Star Team for the last four years.
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Below are 10 reasons why we believe the Sweet Spot is Over :
1. For the time being, the equity market is going to have to contend with more chatter of the Fed's exit strategy.
2. The market also faces a new reality. While employment stabilizing (maybe) is a good thing, it means the era of declining unit labour costs and margin expansion is behind us.
3. Market leadership is beginning to fade as seen by the receding advance-decline line on the big board.
4. Market complacency is a worry with the VIX index back down to 21.25. The good news is that insurance against a correction is priced about as low as it can go. Protection is cheap.
5. The WSJ (page C1) reports that not only have individual investors been selling into this last leg of the rally (then again, the S&P 500 has really done nothing for over six weeks), but pension funds have been rebalancing too.
6. Volume has declined markedly and has surpassed 4.7 billion shares on the NYSE just once in the past three weeks.
7. With the correlation between a weak greenback and a positive stock market above 90% over the past eight months (versus zero over the past 30 years), a countertrend rally in the U.S. dollar would likely coincide with sputtering equity prices.
In the U.S., it was fascinating to see the stock market's reaction to the employment data on Friday; the markets couldn't handle the good economic news 8. The Dow transports/utilities ratio has turned in a classic triple-top and this is a signpost to get defensive.
9. The latest Investors Intelligence poll shows the bull camp at 50%; the bear share at a mere 16.7%. In other words, there are three bulls for every bear. This is negative from a contrary perspective (another sign of complacency).
10. Corporate bond yields have stopped narrowing over the past three months and have actually recently shown modest signs of an upward bias.
[...] Disclosures « THE SWEET SPOT IS OVER [...]
David A. Rosenberg, March 19, 2009, “We remained convinced this is still a bear market rally” http://finance.yahoo.com/tech-ticker/article/yftt_211995/Enjoy-the-Sucker’s-Rally,-Says-Merrill’s-Rosenberg
The investors who followed on Rosenberg’s “conviction” in March of this year have lost at least ~65% of potential gains (and possibly lost exponentially more if they shorted Rosenberg’s “bear market rally”).
What does it make you think you are correct this time Mr. Rosenberg?
Is it really different this time Mr. Perma-Bear?
CG riddle me this .. how many people can exit and take real gains before that 65% is a reversal answer: till the #s in accounts and the sensors over the pipes say its time to clean the pool backwash time
Climategate@ “The investors who followed on Rosenberg's "conviction" in March of this year have lost at least ~65% of potential gains…”
If someone allocated at 100% stocks during this period they would have done so AT VERY HIGH RISK (as is any normal environment). Rosenberg’s clients made profits during this timeframe, at lower risk, and at lower returns. Hence, IMHO, the people who followed his advice did not lose 65%. You sound bullish and he sounds bearish. YMMV.
@Greg0658
Re: “how many people can exit and take real gains before that 65% is a reversal answer”
I am not sure I understand the relevance of your question to Rosenberg’s excessive subconscious hate for the US, his excessive long-term perma-bearishness, and his multiple consistent wrong predictions (even a blind squirrel finds a nut once in a while).
We have many problems in the US, BUT we also have many POSITIVES.
Unfortunately, the perma-bear only selectively underlines the negatives and selectively omits all the positives.
In addition, his interpretation of the 2003 bull market was not all that dissimilar from his current outlook and interpretation of 2009 bull market rally.
Rosenberg warned people to get out prior to the collapse.
A bear market rally means a short-term, non secular move. It does not mean SHort equities here.
Had they listened to people like Climategate (or his ilk) before the collapse, they would not have any cash to invest anyway.
Climategate: It might be worth reading more about Rosenberg before you belittle him. Despite being continued bearish…he was also recommending to be long during the rally based on a lot of other reasons, besides his CORRECT belief that everything is a joke. He is not an idiot, he knows the basics just like and me. The trend is your friend…..never short the FED. He was saying as long as market was strong….be long it.
My view…..IT IS TIME TO NOW ONCE AGAIN SHORT THIS BULLCRAP THING WE CALL A MARKET HERE IN THE US.
Based purely on performance, David Rosenberg is ranked in the top 10 of all financial analysts. You comments (and your handle) say more about your jingoistic prejudices than they do about Mr. Rosenberg.
@ Scott F
“Rosenberg warned people to get out prior to the collapse.”
This is the most common misinformation that the mainstream media if propagating (the media is obsessed with all the negatives, and glorifies the perma-bears like Rosenberg and Roubini).
It is correct that Rosenberg was right in 2008, maybe even right in 2007, BUT he was wrong in 2003, wrong in 2004, wrong in 2005, wrong in 2006, and wrong in 2009.
During the last 7 years, he was correct for 1 or 2 years and wrong for 5 years — WRONG ~70-85% of the time (much worse than even flipping a coin — 50%)
@ all…
I think you can choose between who you think is going to provide the advice that you feel is right.
If you think as a bear… you accept the facts the the uber bear tells you. Rosenberg is a bear…
Or if your thinking as a bull… you’ll accept the polly-annie crap that any advisor telling you what is going to be hot… you’ll accept it as fact.
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