From David Rosenburg economist, market analyst and conservative at Gluskin Scheff:
"...Think of all the White House policies that work against coal utilities, dirty oil (think Canadian oil sands!), asset managers, luxury retailers, big oil, not to mention private health care insurers. They will not be unperturbed I am sure by a Scott Brown victory..."
TW: Rosenburg is cheering for Brown and signaling which stocks to buy when Brown wins in Massachusetts. Somehow I don't think many of those "populist" tea-baggers working so hard to defeat the evil Dems think they are out there pushing the agenda of coal, dirty oil, luxury retailers etc. but they are, mosdef they are.
Showing posts with label David Rosenberg. Show all posts
Showing posts with label David Rosenberg. Show all posts
Monday, January 18, 2010
Friday, November 6, 2009
What Do You Want?
From David Rosenburg at Gluskin Sheff:
"...President Obama is now running fiscal deficits that would have made FDR blush.
If the consensus is correct that the recession is behind us, then what we have on our hands is the mother of all jobless recoveries
...But while Uncle Sam can try to stimulate spending on autos and housing and even mortgage credit via the myriad of policy measures that have been undertaken, the return to job creation is as elusive as ever. It is hard to fathom that, according to the White House estimates earlier this year, the stimulus was supposed to help cap the unemployment rate at 8.5%. Here we are today with both an unemployment rate and a fiscal deficit-to-GDP ratio both north of 10%. While real GDP did manage to rebound at a 3.5% annual rate in Q3 — stagnant if not for the government incursion..."
TW: This statement frames the messed up nature of our current economic discussions. One, Rosenberg conflates "Obama" with the current deficits. The vast bulk of the current deficit (and future deficits) are structural and would have been very high regardless of the POTUS. When economies contract tax revenues contract as well and things like unemployment spending, food stamps etc. go up. The graph below portrays the relative impact of various factors.
Two, Rosenberg seemingly laments interventions in things like clunkers etc. but then mentions that BUT FOR "gov't intervention" growth in Q# would have been stagnant. This is a common utterance from Wall Street- they bitch about government intervention but then what would they prefer? Financial Armageddon? Contractionary fiscal policies in the face of a massive demand contraction? We know they do not want financial regulation, what do they want?
I realize folks just want everything magically fixed- lower taxes, higher employment, lower deficits, a smidge of inflation but not too much. Let me know if you know where the magic button is. I am highly confident it is not anywhere near the tea-bagging fools.
"...President Obama is now running fiscal deficits that would have made FDR blush.
If the consensus is correct that the recession is behind us, then what we have on our hands is the mother of all jobless recoveries
...But while Uncle Sam can try to stimulate spending on autos and housing and even mortgage credit via the myriad of policy measures that have been undertaken, the return to job creation is as elusive as ever. It is hard to fathom that, according to the White House estimates earlier this year, the stimulus was supposed to help cap the unemployment rate at 8.5%. Here we are today with both an unemployment rate and a fiscal deficit-to-GDP ratio both north of 10%. While real GDP did manage to rebound at a 3.5% annual rate in Q3 — stagnant if not for the government incursion..."
TW: This statement frames the messed up nature of our current economic discussions. One, Rosenberg conflates "Obama" with the current deficits. The vast bulk of the current deficit (and future deficits) are structural and would have been very high regardless of the POTUS. When economies contract tax revenues contract as well and things like unemployment spending, food stamps etc. go up. The graph below portrays the relative impact of various factors.
Two, Rosenberg seemingly laments interventions in things like clunkers etc. but then mentions that BUT FOR "gov't intervention" growth in Q# would have been stagnant. This is a common utterance from Wall Street- they bitch about government intervention but then what would they prefer? Financial Armageddon? Contractionary fiscal policies in the face of a massive demand contraction? We know they do not want financial regulation, what do they want?
I realize folks just want everything magically fixed- lower taxes, higher employment, lower deficits, a smidge of inflation but not too much. Let me know if you know where the magic button is. I am highly confident it is not anywhere near the tea-bagging fools.
Sunday, August 2, 2009
So You Want To Buy Stocks...
TW: Literally as I was punching out this post (Saturday) a feed came across from Barry Ritholz's blog quoting a Barrons piece quoting the same Rosenburg stuff I have below. Funny how the blogosphere works. But we pay more attention to Rosenburg than any other analyst. He used to be at Merrill Lynch before Bank of America gutted the place and replaced him with some happy talkers. Time will tell who is right.
In the mean U.S. employment is in very poor shape, maybe China is miraculously better managed than everyone else lets hope so or else that bubble will pop, and our banking system remains shattered with little consensus on how to fix it. Meanwhile our government remains split between those who would implement Hooverian policies and those who are more broad minded but very beholden to other interest groups (i.e. unions, pensioners etc.).
From David Rosenburg at Gluskin Sheff:
"...It is amazing that anyone would go long an equity market with a reported P/E multiple of 700x but that is indeed what we have on our hands. The end of the recession and the onset of a sustainable recovery, as we saw in 2002, are not the same thing. So this could still end badly but we will await confirmation signs that this is more than a very flashy bear market rally before shifting gears. As we said...yesterday, the cost of missing out on the first leg of a bull market, between the lows in the major averages and the lows in employment, is 20% — the price to pay to sleep at night. If we are late, and we do not intend on being too late or staying excessively bearish, we will know once the most important component of the business cycle, the engine that keeps the motor turned on, otherwise known as employment, begins to turn around on a discernible basis. We shall wait for that event, then make up our minds, and if this is the real deal, which at this time seems unlikely in the context of an ongoing credit contraction, then we will at least have 80% of the bull market to participate in … that is, if historical experience can be used as a guide.
...Something tells us that the marginal buyer of equities today at that price may well be the same person who was loading up on real estate during the summer of ’06..."
In the mean U.S. employment is in very poor shape, maybe China is miraculously better managed than everyone else lets hope so or else that bubble will pop, and our banking system remains shattered with little consensus on how to fix it. Meanwhile our government remains split between those who would implement Hooverian policies and those who are more broad minded but very beholden to other interest groups (i.e. unions, pensioners etc.).
From David Rosenburg at Gluskin Sheff:
"...It is amazing that anyone would go long an equity market with a reported P/E multiple of 700x but that is indeed what we have on our hands. The end of the recession and the onset of a sustainable recovery, as we saw in 2002, are not the same thing. So this could still end badly but we will await confirmation signs that this is more than a very flashy bear market rally before shifting gears. As we said...yesterday, the cost of missing out on the first leg of a bull market, between the lows in the major averages and the lows in employment, is 20% — the price to pay to sleep at night. If we are late, and we do not intend on being too late or staying excessively bearish, we will know once the most important component of the business cycle, the engine that keeps the motor turned on, otherwise known as employment, begins to turn around on a discernible basis. We shall wait for that event, then make up our minds, and if this is the real deal, which at this time seems unlikely in the context of an ongoing credit contraction, then we will at least have 80% of the bull market to participate in … that is, if historical experience can be used as a guide.
...Something tells us that the marginal buyer of equities today at that price may well be the same person who was loading up on real estate during the summer of ’06..."
Friday, June 19, 2009
Classic Posts: Understanding Short-Term Fiscal Policy
TW: Folks seem to be getting a bit sideways on fiscal policy still. I re-post this from March as I thought Rosenburg's comments were spot on. We MUST delineate between short-term fiscal policy and long-term fiscal policy, if not we WILL end up with very bad policy. The Hooverite conservatives are trying to lead us back down the path that made the Great Depression truly depressing. More to come after this post as well.
TW (from March 8th): Here is an economist's take, an economist without ideological agendas from either left or right. Is he concerned, most definitely.
From David Rosenburg at Merrill Lynch:
"Yes, the Fed’s balance sheet and the balance sheet of the federal government are expanding at record rates. But these reflationary efforts should be seen as a partial antidote, not a panacea, to the deflationary effects brought on from the unprecedented contraction in the largest balance sheet on the planet: The $55 trillion US household balance sheet. Based on what house prices and equity valuation have been doing this quarter, we are likely in for a total loss of household net worth approximating $7 trillion this quarter alone, which would bring the decline in consumer wealth to $20 trillion. This wealth loss exceeds the combined expansion of the Fed’s and government balance sheet by a factor of ten.That should put the reflation-deflation debate into perspective."
TW: In other words, you hear conservatives squealing about the inflationary impact of "trillions" of bailouts and stimulus. The problem with their concern is that the aggregate wealth destruction is measured in tens of trillions, the government bailouts and stimulus are merely efforts to mitigate the hugely deflationary impacts of that wealth destruction. What does wealth destruction mean, it means few buying discretionary goods, most buying cheaper food, clothing etc., no one taking risks in new businesses etc. The government is stepping in to try to keep the pump primed lest the flickering lights of our economy completely snuff out.
From Rosenburg cont.:
How we get any sustained inflation is totally beyond us
In addition to credit contraction, asset deflation, profit compression and employment destruction, we are also in a vicious inventory reduction phase in the manufacturing sector. If our forecast is correct, this would then suggest that the capacity utilization rate in manufacturing will make a new all-time low of 66.6% from 68% in January. The employment data also tell us that there is a very high probability that wages and salaries deflated -0.3% in February as well. How we end up getting any sustained inflation pressure, or backup in bond yields for that matter, as the economy moves further and further away from any semblance of “full employment” in either the labor or product market, is totally beyond us."
TW: There will be a time to worry a great deal about inflation. But one does not paint with the same brush all of the time. When the recovery commences the Fed and the federal government will have very challenging decisions to make regarding how hard and quickly to contract monetary and fiscal policy without snuffing out the burgeoning recovery. Will they make mistakes, very likely, BUT:
We are faced with a choice. Trust the Fed and Obama to act swiftly in the future to contain inflation or pursue the proposed contractionary policies advocated by Republicans that will almost certainly make the current MASSIVE demand contraction worse.
TW (from March 8th): Here is an economist's take, an economist without ideological agendas from either left or right. Is he concerned, most definitely.
From David Rosenburg at Merrill Lynch:
"Yes, the Fed’s balance sheet and the balance sheet of the federal government are expanding at record rates. But these reflationary efforts should be seen as a partial antidote, not a panacea, to the deflationary effects brought on from the unprecedented contraction in the largest balance sheet on the planet: The $55 trillion US household balance sheet. Based on what house prices and equity valuation have been doing this quarter, we are likely in for a total loss of household net worth approximating $7 trillion this quarter alone, which would bring the decline in consumer wealth to $20 trillion. This wealth loss exceeds the combined expansion of the Fed’s and government balance sheet by a factor of ten.That should put the reflation-deflation debate into perspective."
TW: In other words, you hear conservatives squealing about the inflationary impact of "trillions" of bailouts and stimulus. The problem with their concern is that the aggregate wealth destruction is measured in tens of trillions, the government bailouts and stimulus are merely efforts to mitigate the hugely deflationary impacts of that wealth destruction. What does wealth destruction mean, it means few buying discretionary goods, most buying cheaper food, clothing etc., no one taking risks in new businesses etc. The government is stepping in to try to keep the pump primed lest the flickering lights of our economy completely snuff out.
From Rosenburg cont.:
How we get any sustained inflation is totally beyond us
In addition to credit contraction, asset deflation, profit compression and employment destruction, we are also in a vicious inventory reduction phase in the manufacturing sector. If our forecast is correct, this would then suggest that the capacity utilization rate in manufacturing will make a new all-time low of 66.6% from 68% in January. The employment data also tell us that there is a very high probability that wages and salaries deflated -0.3% in February as well. How we end up getting any sustained inflation pressure, or backup in bond yields for that matter, as the economy moves further and further away from any semblance of “full employment” in either the labor or product market, is totally beyond us."
TW: There will be a time to worry a great deal about inflation. But one does not paint with the same brush all of the time. When the recovery commences the Fed and the federal government will have very challenging decisions to make regarding how hard and quickly to contract monetary and fiscal policy without snuffing out the burgeoning recovery. Will they make mistakes, very likely, BUT:
We are faced with a choice. Trust the Fed and Obama to act swiftly in the future to contain inflation or pursue the proposed contractionary policies advocated by Republicans that will almost certainly make the current MASSIVE demand contraction worse.
Wednesday, April 15, 2009
Bottom Pickers And Other Rude Acts (cont.)
Above from John Maudlin-From David Rosenburg at Bank of America/ML:
"...we continue to hold the view that investors are confusing an ‘improvement’ relative to the post-Lehman shock when the economy was literally falling off a cliff to an actual
improvement that would lead us to believe that a renewed upturn is at hand."
"...we continue to hold the view that investors are confusing an ‘improvement’ relative to the post-Lehman shock when the economy was literally falling off a cliff to an actual
improvement that would lead us to believe that a renewed upturn is at hand."
TW: The market is up from its lows, but were they new lows or THE low? Who knows. But our guy David Rosenburg remains skeptical and the earnings estimates keep changing in one direction- down. The above estimates are reported earnings as in the real earnings (or as real as they are given the exigencies of GAAP etc.). You may see higher estimates based on "operating" earnings which do not reflect "extraordinary" items. In normal times operating and reported earnings differ (operating higher) but not by much. In these extraordinary times though, not surprisingly extraordinary items are rocketing upward creating a large gap (50-100%) between the two types of earnings. In normal times it did not matter too much whether a pundit based her analysis on operating or reported earnings, now of course it matters greatly. Not surprisingly the bulls are throwing around P/E multiples using "operating" numbers, the bears tend toward the "reported".
At current prices the P/E for 2009 using "operating" earnings is about 30, using "operating" more like 15-20ish. Both numbers in this environment seem pretty high (long-term average being about 15). We shall see.
Monday, March 23, 2009
State Level Spending Contracts While Federal Spending Expands
TW: Have mentioned this before but states do not have the ability to print money and run fiscal deficits like the federal government (if the Confederates had won then they might have but I digress...). When state governments cut their spending they create a pro-cyclical dynamic whereby just when the private sector is contracting the states are contracting concurrently creating a vicious circle. Hence the need for federal stimulus (hello Hooverites!!!). Imagine if the Federal government were similarly constrained, taxes would either be shooting up or spending significantly reduced right into the teeth of a severe demand contraction. A vicious circle would ensue leading without question into GD 2.0.
From David Rosenburg Merrill Lynch economist:
"...The focus and headlines remains exclusively on what the Federal government is doing to boost the economy. But few write about what the state and local governments are doing to stay solvent – cutting back on spending at an
unprecedented rate. Indeed, what seems to be forgotten is that after consumer spending, the lower level of government, with a 13% share of GDP, is the most important part of the economy – this is a sector that represents our teachers, law enforcement, fire prevention, and health and social assistance. The state and local government sector employs 20 million, or 15% of the total, compared with 13 million in manufacturing, 8 million in financial services, less than 7 million in construction and fewer than 3 million at the federal level. Fiscal gaps have now opened up in 42 states, and, when added to the shortfalls at the start of the year, they to a whopping $80 this offsets more than 60% of the fiscal tailwind. And in 2010, the amount of fiscal tightening from the states/local governments is expected to total $85 billion which bites into 30% of the stimulus we will see at the federal level..."
From David Rosenburg Merrill Lynch economist:
"...The focus and headlines remains exclusively on what the Federal government is doing to boost the economy. But few write about what the state and local governments are doing to stay solvent – cutting back on spending at an
unprecedented rate. Indeed, what seems to be forgotten is that after consumer spending, the lower level of government, with a 13% share of GDP, is the most important part of the economy – this is a sector that represents our teachers, law enforcement, fire prevention, and health and social assistance. The state and local government sector employs 20 million, or 15% of the total, compared with 13 million in manufacturing, 8 million in financial services, less than 7 million in construction and fewer than 3 million at the federal level. Fiscal gaps have now opened up in 42 states, and, when added to the shortfalls at the start of the year, they to a whopping $80 this offsets more than 60% of the fiscal tailwind. And in 2010, the amount of fiscal tightening from the states/local governments is expected to total $85 billion which bites into 30% of the stimulus we will see at the federal level..."
Monday, March 9, 2009
Some Feel We Are Not Being Aggressive Enough
TW: The stimulus debate has been framed by the media as a choice between Obama's plan and smaller plans advocated by Republicans. There are reputable economists and observers who believe the debate should be between the Obama plan and larger plans due to the severity of the crises.
From Paul Krugman at NYT:
"One major sin of news coverage, especially on TV, is the way certain points of view just get excluded from consideration — even if many of the best-informed people hold those views. Most famously and disastrously, the case against invading Iraq was just not heard in the months before the war.
And still it happens...the idea that the Obama stimulus plan might be too small — a view held by many well-known economists — basically went unreported on broadcast news during the stimulus debate. Out of 59 broadcasts addressing the plan, only 3 mentioned concerns that the plan was inadequate"
From David Rosenburg at Merrill Lynch:
"War must be declared against this modern-day depression
We do not aim to be critical, and we do not claim to be public policy experts by any stretch, but the reality is that the economy is in dire need of a major positive exogenous shock. Whether that means the Fed starting to buy Treasuries to pull down market rates even lower, the public sector establishing land banks to establish a floor under residential real estate prices, or the White House instructing Congress to dole out a $1 trillion zero percent long-term loan to the beleaguered state and local governments who are being forced to cut back services and raise taxes at the worst possible time, or all of the above, we will leave open for debate. What is not open for debate is the state of the economy,and we can no longer just label this a recession after the latest string of shockingly negative employment reports. The government has to declare war right now … against this modern-day depression."
TW: Rosenburg elsewhere in the report outlined how the employment figures are far worse than the headline numbers which were bad enough yet sufficiently not bad to spur some market optimism. As you can see he is VERY concerned.
He is calling for not less but more action!! I would add republican economist Martin Feldstein has come out suggesting a second stimulus will likely be necessary as well.
From Paul Krugman at NYT:
"One major sin of news coverage, especially on TV, is the way certain points of view just get excluded from consideration — even if many of the best-informed people hold those views. Most famously and disastrously, the case against invading Iraq was just not heard in the months before the war.
And still it happens...the idea that the Obama stimulus plan might be too small — a view held by many well-known economists — basically went unreported on broadcast news during the stimulus debate. Out of 59 broadcasts addressing the plan, only 3 mentioned concerns that the plan was inadequate"
From David Rosenburg at Merrill Lynch:
"War must be declared against this modern-day depression
We do not aim to be critical, and we do not claim to be public policy experts by any stretch, but the reality is that the economy is in dire need of a major positive exogenous shock. Whether that means the Fed starting to buy Treasuries to pull down market rates even lower, the public sector establishing land banks to establish a floor under residential real estate prices, or the White House instructing Congress to dole out a $1 trillion zero percent long-term loan to the beleaguered state and local governments who are being forced to cut back services and raise taxes at the worst possible time, or all of the above, we will leave open for debate. What is not open for debate is the state of the economy,and we can no longer just label this a recession after the latest string of shockingly negative employment reports. The government has to declare war right now … against this modern-day depression."
TW: Rosenburg elsewhere in the report outlined how the employment figures are far worse than the headline numbers which were bad enough yet sufficiently not bad to spur some market optimism. As you can see he is VERY concerned.
He is calling for not less but more action!! I would add republican economist Martin Feldstein has come out suggesting a second stimulus will likely be necessary as well.
Sunday, March 8, 2009
Your Choice: Follow the Hooverites Or Actual Reputable Economists (Part 2)
TW: Here is an economist's take, an economist without ideological agendas from either left or right. Is he concerned, most definitely.
From David Rosenburg at Merrill Lynch:
"Yes, the Fed’s balance sheet and the balance sheet of the federal government are expanding at record rates. But these reflationary efforts should be seen as a partial antidote, not a panacea, to the deflationary effects brought on from the unprecedented contraction in the largest balance sheet on the planet: The $55 trillion US household balance sheet. Based on what house prices and equity valuation have been doing this quarter, we are likely in for a total loss of household net worth approximating $7 trillion this quarter alone, which would bring the decline in consumer wealth to $20 trillion. This wealth loss exceeds the combined expansion of the Fed’s and government balance sheet by a factor of ten.That should put the reflation-deflation debate into perspective."
TW: In other words, you hear conservatives squealing about the inflationary impact of "trillions" of bailouts and stimulus. The problem with their concern is that the aggregate wealth destruction is measured in tens of trillions, the government bailouts and stimulus are merely efforts to mitigate the hugely deflationary impacts of that wealth destruction. What does wealth destruction mean, it means few buying discretionary goods, most buying cheaper food, clothing etc., no one taking risks in new businesses etc. The government is stepping in to try to keep the pump primed lest the flickering lights of our economy completely snuff out.
From Rosenburg cont.:
How we get any sustained inflation is totally beyond us
In addition to credit contraction, asset deflation, profit compression and employment destruction, we are also in a vicious inventory reduction phase in the manufacturing sector. If our forecast is correct, this would then suggest that the capacity utilization rate in manufacturing will make a new all-time low of 66.6% from 68% in January. The employment data also tell us that there is a very high probability that wages and salaries deflated -0.3% in February as well. How we end up getting any sustained inflation pressure, or backup in bond yields for that matter, as the economy moves further and further away from any semblance of “full employment” in either the labor or product market, is totally beyond us."
TW: There will be a time to worry a great deal about inflation. But one does not paint with the same brush all of the time. When the recovery commences the Fed and the federal government will have very challenging decisions to make regarding how hard and quickly to contract monetary and fiscal policy without snuffing out the burgeoning recovery. Will they make mistakes, very likely, BUT.
We are faced with a choice. Trust the Fed and Obama to act swiftly in the future to contain inflation or pursue the proposed contractionary policies advocated by Republicans that will almost certainly make the current MASSIVE demand contraction worse.
From David Rosenburg at Merrill Lynch:
"Yes, the Fed’s balance sheet and the balance sheet of the federal government are expanding at record rates. But these reflationary efforts should be seen as a partial antidote, not a panacea, to the deflationary effects brought on from the unprecedented contraction in the largest balance sheet on the planet: The $55 trillion US household balance sheet. Based on what house prices and equity valuation have been doing this quarter, we are likely in for a total loss of household net worth approximating $7 trillion this quarter alone, which would bring the decline in consumer wealth to $20 trillion. This wealth loss exceeds the combined expansion of the Fed’s and government balance sheet by a factor of ten.That should put the reflation-deflation debate into perspective."
TW: In other words, you hear conservatives squealing about the inflationary impact of "trillions" of bailouts and stimulus. The problem with their concern is that the aggregate wealth destruction is measured in tens of trillions, the government bailouts and stimulus are merely efforts to mitigate the hugely deflationary impacts of that wealth destruction. What does wealth destruction mean, it means few buying discretionary goods, most buying cheaper food, clothing etc., no one taking risks in new businesses etc. The government is stepping in to try to keep the pump primed lest the flickering lights of our economy completely snuff out.
From Rosenburg cont.:
How we get any sustained inflation is totally beyond us
In addition to credit contraction, asset deflation, profit compression and employment destruction, we are also in a vicious inventory reduction phase in the manufacturing sector. If our forecast is correct, this would then suggest that the capacity utilization rate in manufacturing will make a new all-time low of 66.6% from 68% in January. The employment data also tell us that there is a very high probability that wages and salaries deflated -0.3% in February as well. How we end up getting any sustained inflation pressure, or backup in bond yields for that matter, as the economy moves further and further away from any semblance of “full employment” in either the labor or product market, is totally beyond us."
TW: There will be a time to worry a great deal about inflation. But one does not paint with the same brush all of the time. When the recovery commences the Fed and the federal government will have very challenging decisions to make regarding how hard and quickly to contract monetary and fiscal policy without snuffing out the burgeoning recovery. Will they make mistakes, very likely, BUT.
We are faced with a choice. Trust the Fed and Obama to act swiftly in the future to contain inflation or pursue the proposed contractionary policies advocated by Republicans that will almost certainly make the current MASSIVE demand contraction worse.
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