My Breakfast with Dave

David Rosenberg

A month ago, one of the most closely followed market observers, Gluskin Sheff’s David Rosenberg, moved his Breakfast with Dave commentaries behind a pay-wall, ending an era of free access to his insights.  Last Friday, however, he presented his views publicly to an audience of 500 advisors and investors, your author included.

The inflation-versus-deflation debate was Rosenberg’s topic.  His verdict was that deflation will dominate.

Rosenberg spoke at the Strategic Investment Conference in San Diego, which was sponsored by Altegris Investments and John Mauldin.

Rosenberg began by asking those in the audience whether they believed that inflation would lessen in the coming year.  Almost no hands went up, mirroring recent consumer opinion polls that found only seven percent of Americans expect inflation to abate this year.

He then cited Bob Farrell’s rule number nine:  When all the experts and forecasts agree – something else is going to happen.

“We are our own best contrary indicator,” he said.  Rosenberg showed the cover of Time magazine from July 2008.  It proclaimed that inflation was back, following a month when the CPI rose 5%. 

Over the next year deflation set in, and the net change in the CPI was -1.0%.

Let’s look at the reasons behind Rosenberg’s forecast of deflation – a forecast that agrees with that of Gary Shilling, who also spoke at the conference and whose views are presented here.