Search Results
Results 101–150
of 211 found.
You Can't Make This Stuff Up!
by David A. Rosenberg of Gluskin Sheff,
In the October 6 New York Times, op-ed contributor Daniel Gross called on the American consumer to 'get back into the game.' 'The renewed willingness and confidence to spend money we don't have,' Gross wrote, 'is vital to the continuing recovery.' There was no mention in the article of the fact that with a 70 percent share of GDP, U.S. consumer expenditures never exactly went into hibernation, even if spending decisions have changed. And haven't employment and income always been the vital components to sustainable growth?
Is Warren Buffett Correct on this One?; I Love Gold, But?
by David A. Rosenberg of Gluskin Sheff,
Warren Buffett says that equities are currently cheaper than bonds, and that people who are buying bonds are 'making a mistake.' That's quite a statement considering what bonds, even at ultra-low yield levels, have managed to generate in terms of total returns this year compared to the equity market. It's not even close, with all deference to the recent snapback in the stock market. More fundamentally, there is a critical difference between something that is government guaranteed and comes due in 10 years versus something that has downside capital price risks and never comes due.
In a Word, Surreal
by David A. Rosenberg of Gluskin Sheff,
Why do so many people think bonds are in a bubble when they are actually the most detested asset class out there? After all, as we saw in the tech mania of the late 1990s and the housing mania of 2003-2006, bubbles usually involve a mix of adulation, admiration and adoration with the asset class in question, which is obviously missing in the current case as it pertains to Treasury securities. You can't lift up a newspaper or watch a business program on TV and not see pundit after pundit talking about the dangers of being invested in bonds. Something here is amiss.
What's On My Mind?: Five Developments Driving Investor Sentiment
by David A. Rosenberg of Gluskin Sheff,
The bottom-up S&P 500 operating EPS estimate currently driving equity valuations is $95. That would be a 14 percent gain on top of this year's anticipated 36 percent bounce. Here's the rub: to get that $95 operating EPS for 2011, we either need to see at least 7 percent nominal GDP growth, which last happened in 1989 when inflation was 5 percent, not close to zero, or margins manage to reach new all-time highs. The base case now, however, is for low single-digit nominal growth and some margin compression so frankly we could be looking at something closer to a $75 earnings stream next year.
Gold Still Shining and Renewed Housing Deflation
by David A. Rosenberg of Gluskin Sheff,
The latest data on U.S. new home prices, Case-Shiller and the FHFA data series are all pointing toward renewed housing deflation. The culprit? A new wave of foreclosure supply is saturating the market. According to RealtyTrac, 24 percent of all homes sold last quarter were homes that had been foreclosed. Meanwhile, as imminent quantitative easing by the U.S. Federal Reserve and the Bank of England threaten to grow supplies of fiat currencies, gold and silver will likely go much higher still.
Reality Check on the Macro Outlook
by David A. Rosenberg of Gluskin Sheff,
More than 80 percent of the economic growth we saw from the lows of 2009 in real GDP was due to the massive amounts of federal government stimulus and the huge inventory swing. The underlying trend in organic real final sales is barely above 0.5 percent. One therefore has to therefore wonder, with an estimated 1.7 percentage point drag from fiscal withdrawal in the coming year and the evident signs of a peaking-out in the inventory contribution to growth, how can the economy not contract heading into 2011?
What Happened on Friday?
by David A. Rosenberg of Gluskin Sheff,
On Friday, a very successful hedge fund manager came on CNBC and told viewers that the equity market now was a one-way ticket up. If the economy sputtered, he said, the Fed would step in and engage in more quantitative easing, and that would propel the equity market higher. And if the economy chugs along, then there will be no need for more Fed balance sheet expansion but the stock market will enjoy the fruits of stronger earnings growth. The third scenario he did not mention is that the economy will weaken to such an extent that the Fed will indeed re-engage in QE, but that it will not work.
Housing Still in a Deep Funk and Gold Going Higher Still
by David A. Rosenberg of Gluskin Sheff,
Existing home sales increased 7.6 percent month-over-month in August in what can only be described as noise around a fundamental downtrend. The three-month trend in single-family sales is still -72 percent at an annual rate, the six-month trend is -31 percent and the 12-month trend is -19 percent. Meanwhile, gold is now on the precipice of breaking above $1,300/oz, and is likely to remain in this secular uptrend for quite a while longer. We're talking years. We're still talking $3,000/oz.
So the Recession is Over, Eh?
by David A. Rosenberg of Gluskin Sheff,
By now, based on when the recession ended, we should be at a new high in real GDP. As things stand, however, real GDP is still 1.3 percent lower now than it was at the end of 2007. Steep declines in GDP are typically followed by vigorous recoveries, but this time we had the largest decline in GDP since the 1930s and despite unprecedented amounts of monetary, fiscal and bailout stimulus, the recovery has been extremely weak ? real GDP growth of 3 percent is far less than half of what one would ordinarily expect to see coming out of such a deep downturn.
The Recession is Over! But No Recovery in Housing
by David A. Rosenberg of Gluskin Sheff,
Well, the National Bureau of Economic Research made it official yesterday: The recession ended in mid-2009. The equity market rejoiced, which itself is amusing since the stock market is supposedly a discounting mechanism, but it goes to show that old news sells well. Meanwhile, the National Association of Home Builders housing market index disappointed in September, coming in flat, at 13, instead of inching up a point to 14, as was widely expected. This well below the stimulus-led yearly high of 22 set in May.
Gold Breaks Out ? Again; Investment Strategy in a Deflationary Environment
by David A. Rosenberg of Gluskin Sheff,
What is amazing is that there are just about as many naysayers about gold out there as there are bond bears. Until the investment elite catches on, the odds of these two asset classes continuing as relative outperformers are quite high because no bull market ends until the masses fall in love with the asset or security in question. What makes the gold story so interesting is that bullion has so many different correlations - with inflation, with the dollar, with interest rates, with political uncertainty - and it also has different faces.
Can The USA Slip Into Outright Deflation?
by David A. Rosenberg of Gluskin Sheff,
The last time we flirted with deflation was in 2003, the year when the Fed cut rates to 1 percent. If the core goods consumer price index were to ever revert back to its historic lows of 2003 and bump against the current historic low in the core services CPI, then we would indeed slip into a mild deflation of -0.2 percent. That prospect, however, is not even remotely priced into nominal bond yields, even with the 10-year note sitting around 2.7 percent and the long bond yield just under the 4 percent mark.
Reality Bites and Models Broke Down
by David A. Rosenberg of Gluskin Sheff,
Week after week, and month after month, all the data show that households are embarking on a deliberate move to redress their underweight allocations in bonds and overweight allocations in equities. Yet again, the investment company institute numbers showed that last week, bond funds took in a net $5.73 billion inflow while equity funds posed a net redemption of $1.1 billion (on top of a $9.7 billion outflow the week before). Equities have not recorded a positive inflow for one week since early May!
Stocks For the Long Run? And a Look at Gold
by David A. Rosenberg of Gluskin Sheff,
The bond market usually gets it right, and the 0.9 percent yield on the 10-year TIPS security is back to where it was at the depths of the recession. Something is going to have to give. If we recall correctly, bonds led both the stock market and the economy in 1990, 2000 and again in 2007. In the next few months we may well look back at the 130 basis point rally in 10-year Treasury bonds this spring as an important event, analogous to the rally we saw in the summer and fall of 2007. David Rosenberg also comments on Tuesday's gold rally.
What Passes For Research These Days
by David A. Rosenberg of Gluskin Sheff,
A long list of published reports has claimed that private sector employment is actually running at a faster rate now than it was coming out of the 2001 recession. We should be extremely judicious, however, about how we interpret this research, especially since we know that the Fed just cut its macro forecast twice in two months, Obama felt the need to announce yet another fiscal stimulus package and the latest Fed Beige Book was the softest it has been in nearly a year. The macro backdrop could not possibly be more clouded.
Market Comment and Forecast Update
by David A. Rosenberg of Gluskin Sheff,
One can call it a 'growth recession,' but if Mr. Market wants to focus on the word 'growth' and ignore the word 'recession,' then one may well see ebullience take hold for a time. The most important factor right now is the prospect of significant downward revisions to earnings estimates in the next several months and quarters. The next great buying opportunity will be when the market has come to grips with or even overreacts to that. Therefore, patience over the near-term will be extremely important; now is not the time for impulsive buying behavior.
Statistics, Damned Statistics and Lies
by David A. Rosenberg of Gluskin Sheff,
We just completed the fourth quarter of the statistical recovery from the 2009 lows in real GDP. Normally, that particular quarter is running at over 6 percent annual growth. This time around, it was 1.6 percent and likely to get marked fractionally lower again. The notion that it is normal to have a growth pause this early in the cycle, assuming we are early in the business cycle as opposed to slipping along a downward trend line, is nuts.
It's a Depression and Other Thoughts
by David A. Rosenberg of Gluskin Sheff,
This is what a depression is all about - an economy that 33 months after a recession begins, with zero policy rates, a stuffed central bank sheet, and a 10 percent deficit-to-GDP ratio, is still in need of government help for its sustenance. We had this nutty debate on Friday on Bloomberg Radio in which another economist claimed that there was no evidence of any indicator pointing to renewed economic contraction. And yet, that very day, the ECRI leading economic index came in at a recessionary -10.1 percent print for last week.
The Economy is in a Modern Day Depression
by David A. Rosenberg of Gluskin Sheff,
The economy is in a modern day depression. A depression, put simply, is a very long period of economic malaise, a series of rolling recessions and modest recoveries over a multi-year period of general economic stagnation as the excesses from the prior asset and credit bubble are completely wrung out of the system. Depressions usually are caused by a bursting of an asset bubble and a contraction in credit, whereas plain-vanilla recessions are typically caused by inflation and excessive manufacturing inventories. You tell me which description fits the bill today.
You Call This Capitulation?
by David A. Rosenberg of Gluskin Sheff,
The extent of the denial over U.S. double-dip risks is unbelievable. Investors Intelligence did show the bull share declining further this past week, to 33.3 percent from 36.7 percent. The bear share barely budged, however, and is still lower than the bull share at 31.2 percent. Are we supposed to believe that at the market lows, there will still be more bulls than bears out there? Hardly. At true lows, the bulls are hiding under table screaming 'uncle!.'
What's With Equity Valuation?
by David A. Rosenberg of Gluskin Sheff,
Historically, the average consensus estimate forward price-to-earnings ratio on the S&P 500 has been 15.6x. And yet, what we actually end up with on average is 19.2x. The consensus, in other words, is systematically publishing earnings forecasts that make the market look cheap. Meanwhile, the Shiller P/E, which uses the 'bird-in-the-hand' earnings, takes them in inflation-adjusted terms, and cyclically-adjusts the earnings data, currently generates a multiple of 20.6x, which is 26 percent above the historical norm.
Even More Job Loss Ahead?
by David A. Rosenberg of Gluskin Sheff,
The size of the securitized loan market has shrunk 60 percent in the past two years. Balance sheets, production, order books and staffing requirements are all rightsizing to this new semi-permanent landscape of reduced credit availability. In fact, we could see a situation where another 4 to 5 million jobs could be shed in the United States - especially in the three sectors that were, and remain, the most affected by the housing crisis and financial collapse: construction, finance and state and local government.
Is it Japan All Over Again?
by David A. Rosenberg of Gluskin Sheff,
Everyone has been contemplating the possibility that the U.S. could reenact Japan's Lost Decade of protracted slow growth- especially as the Treasury yield curve flattens out in sashimi-like fashion. What is interesting, however, is that things are evolving much more quickly in the United States than in Japan. Japan let its imbalances linger for longer, which is why their unemployment rate never did break above 5.6 percent, while today in the U.S. it sits at 9.7 percent.
The Bear Market in Housing Starts is Still Far From Over
by David A. Rosenberg of Gluskin Sheff,
With the homeownership rate still at 67 percent versus the pre-bubble norm of 64 percent, and with lending requirements more stringent, including a new emphasis on down payments, you can forget a revival in housing demand anytime soon. Instead, demand will shift toward the old room at Ma and Pa's, the basement guest room at the in-laws or space in the rental sector. Indeed, demand for apartments may actually do well in this environment. The critical question, however, is: 'Have the builders done enough cutting?'
The Bond Bubble Debate: 'One Rosie' Takes on 'Two Jeremies'
by David A. Rosenberg of Gluskin Sheff,
What we have on our hands is a powerful demographic appetite for yield at a time when income is under-represented on boomer balance sheets. The two most significant determinants of the trend in long-term bond yields - Fed policy and inflation - continue to flash 'green' at a time when the yield curve is still historically steep and destined to flatten. Finally, the central bank has already assured us that short-term rates will remain at rock-bottom levels for as long as the eye can see. David Rosenberg also comments on growing acceptance of frugality by retailers.
Not the Time For a Jubilee
by David A. Rosenberg of Gluskin Sheff,
We are in the early stages of a secular credit collapse following the biggest credit bubble in human history. The housing bubble was the result of a universal, irrational and linear belief in real estate asset appreciation that developed in the 1990s and reached its glorious peak in 2007. Now we are rolling back into pronounced economic weakness, with contraction in GDP likely to soon follow the stagnant economic conditions of the current quarter.
Double-Dip or Single Scoop?
by David A. Rosenberg of Gluskin Sheff,
It is only a commentary on the human condition and the innate need to be optimistic that the vast majority of economists, analysts, strategists and market commentators still seem to be acting like ostriches with their heads in the sand, even in the face of fairly substantial evidence that GDP growth was cut at least in half in Q2 and that there is negative momentum in real retail sales being 'built' into the current quarter. If we are realistic, however, we can actually deploy strategies that will generate profitable results - certainly better than zero percent yields on cash.
Bonds Have More Fun
by David A. Rosenberg of Gluskin Sheff,
Yields cannot go to microscopic levels, even with large-scale government debts. In the past, at the peak of bull markets in bonds, the yield curve has gotten so flat that the average spread between the long bond and the federal funds rate has been 100 basis points. It would seem that just as BB-grade sliver in the corporate bond universe was the laggard with the greatest return potential, within the Treasury curve it would seem that the long end carries with it the most compelling total return opportunity.
Not in Kansas Anymore
by David A. Rosenberg of Gluskin Sheff,
The transition to the next sustainable economic expansion and bull market in these types of business cycles takes between five and 10 years, and is fraught with periodic setbacks. While an underweight positions in equities still makes sense, a bar bell between basic materials and defensive dividend stocks is a prudent strategy, with the overall emphasis in the asset mix tilted towards bonds, especially the BB-rated sliver or that part of the higher quality non-investment grade space that currently has the greatest unexploited potential for spread compression and capital gains.
Some Salient Facts About the July Payroll Report
by David A. Rosenberg of Gluskin Sheff,
David Rosenberg outlines a number of reasons why last Friday' U.S. nonfarm payroll report was even weaker than we thought. He also comments on the recent 120 basis point decline on 10-year Treasury note yields, and its implications for the stock market.
Perspective Needed
by David A. Rosenberg of Gluskin Sheff,
We are heading into the third quarter knowing that there was minimal growth coming from U.S. consumers. July's data on chain store and auto sales were both below expectations. Personal bankruptcies jumped 9 percent in June, and 2010 is now on track to have the largest number of consumer insolvencies in five years. If capital spending is going to do the heavy lifting, then it will have to accelerate by nearly 10 percentage points for every percentage point slowing in household spending. Now that is a daunting task.
Slow Motion Recovery and What Would Make Me Bullish
by David A. Rosenberg of Gluskin Sheff,
Legions of economists are claiming that it is normal to see the economy take a breather at this stage of the cycle, but in truth, what is 'normal' in the context of a post-WWII recovery is that four quarters into it, real GDP expands at over a 6 percent annual rate. That puts the current 2.4 percent growth rate into a certain perspective. David Rosenberg also lists 10 economic developments that could turn him bullish.
The Emerging Consensus; A Gold Buying Opportunity?
by David A. Rosenberg of Gluskin Sheff,
Almost everyone is dismissing double-dip risks in the U.S., while Wall Street research departments are concluding that the ECRI leading index is not foreshadowing another recession. This brings back memories of 2007 and 2008, when all the research houses came to the conclusion that once you strip out the effects of housing, the U.S. economy was still in fine shape. Meanwhile, even though the gold price will ebb and flow, gold is in a secular bull market and will retain its natural hedge against recurring concerns surrounding the integrity of the global financial system.
Market Thoughts and the Long-Term Outlook for Inflation
by David A. Rosenberg of Gluskin Sheff,
The bull market in bonds will end reasonably close to the point in time that inflation (or deflation) bottoms. This is because the major economic factor that correlates consistently with the direction of market-determined interest rates, at least for long term Treasury Bonds, is CPI Inflation. Core inflation should recede from around 1 percent now to near 0 percent in the next 12-to-24 months, which would imply an ultimate bottom in the long bond yield of 2.5 percent and 2 percent for the 10-year T-note.
We're All Chartists Now
by David A. Rosenberg of Gluskin Sheff,
Fed chairman Ben Bernanke may not be the world's best forecaster. He has the deepest rolodex, however, deeper than that of any CEO. And when he uses the phrase 'unusually uncertain' to describe the economic outlook, it is irrational to ascribe anything fundamental to the current market rally. The technical picture has indeed improved. The market gets it wrong, however, as often as it gets it right. There is still potential for many disappointments in earnings reports to come.
Earnings Season Masks the Slowdown in Q2 Economic Growth
by David A. Rosenberg of Gluskin Sheff,
Program trading, algorithms, momentum trading, technicals ? all are at play. Meanwhile, the Treasury market has steadfastly refused to budge from a double-dip view, with real rates still under downward pressure, and while the breadth of the market has been decent, this rally has continued to lack volume ? down a further 2 percent on Friday on the NYSE. We are also at another key technical juncture ? the Dow and Nasdaq have retaken their 200-day moving averages while the S&P 500 and the Nasdaq are caught between the 50-day and 200-day m.a.'s.
So What Else are the Bulls Looking at Right Now?
by David A. Rosenberg of Gluskin Sheff,
This is still a meat-grinder of a market. The bulls have the upper hand, but only until the next shoe drops in this modern-day depression and post-bubble credit collapse. The best we can say is that we do have a tradable rally on our hands and that we are at a critical technical juncture at the 50-day moving average on the S&P 500 - but remember, in a secular bear market, these rallies are to be rented, not owned. To be sure, 140 companies have reported so far and the news overall is good ? but earnings are a coincident, not a leading indicator.
Sediment or Sentiment?
by David A. Rosenberg of Gluskin Sheff,
The growth rate on the ECRI leading index sank further into negative terrain, to -9.8 percent during the week ending July 9, down from -9.1 percent the prior week. This was the 10th deterioration in a row. We have never failed to have a recession with the ECRI at current levels. There is, however, an inherent volatility in the index that requires acknowledgment. In the past few weeks, the index has gone from pricing in even-odds of a double-dip to two-in-three odds. It may take a while, but Mr. Market will figure it out before long.
The Fundamental Trendline is Still Down
by David A. Rosenberg of Gluskin Sheff,
What we are grappling with is this: If the consensus earnings forecast is 'the market,' then the S&P 500 is de facto pricing in $96 of operating earnings next year - a new peak. That is a 35 percent increase from here, and it is extremely difficult to see profits soaring that much at a time when margins are already back at cycle highs and with the prospect of slowing nominal GDP growth. It just does not add up.
Recession Odds Still on the Rise
by David A. Rosenberg of Gluskin Sheff,
The Economic Cycle Research Institute's weekly leading index fell again last week despite the equity market bounce. The spot index fell 0.6 percent for the second week in a row, and the growth index slipped to -8.3 percent from -7.6 percent at the end of June. While this is the only indicator so far suggesting that recession odds are rising, once you get to -8.3 percent, looking at the historical record, downturns occur more often than not.
Challenging Your Own View
by David A. Rosenberg of Gluskin Sheff,
A big part of the 'income theme' has been this dramatic move in the disinflation process towards eventual price stability, and perhaps even deflation. Indeed, the Fed (except for some of the regional bank presidents) is taking the deflation risk so seriously, the Washington Post ran an article on methods the central bank is contemplating to head it off ? ranging from even more direct rhetoric in the press statement to reinforce the message that rates will stay near zero indefinitely, to cutting rates charged on bank reserves, to expanding quantitative easing.
Double-Dip Revisited
by David A. Rosenberg of Gluskin Sheff,
The U.S. economy is very fragile and more vulnerable to exogenous shocks than has been the case in the past. It takes time for these shocks to percolate - six months in 1995 and 12 months in 1998 - and we have yet to feel the full brunt of the European debt crisis hit home, in terms of the depressing impact of their aggregate demand on our export growth. Where the offset from government stimulus comes from next will be interesting to see. If it's not fiscal policy or the Fed, then something tells us that the bond market is going to have to work that much harder.
U.S. Economy Hits a Speed Bump, to Put it Mildly
by David A. Rosenberg of Gluskin Sheff,
There is certainly nothing on the fundamental front to elicit a rally at present as double-dip risks continue to rise; there should, at a minimum, soon be a growth slowdown of significance. The reason why everyone bought into the V-shaped recovery view was because the equity market told them that it must be the case. Now, however, we have a situation where $1.6 trillion of wealth has been wiped off the books in the past three months as a result of the stock market setback, and so it?s no coincidence that at the margin, question marks are surfacing over the longevity of the recovery.
Bonding with the Bond
by David A. Rosenberg of Gluskin Sheff,
The U.S. long bond yield is edging lower with each and every passing day, and now stands below 3.90%. It could ultimately reach 1.9%. The most important driver of bond yields is inflation expectations ? more important that fiscal policies or other variables. Core inflation will head lower. As for the equity market, the news, unfortunately, is not good. The S&P 500 has broken below the key line of support for the past five months of 1,040.
ECRI Data, Our Themes in the Morning Press, and Radically Restructuring Entitlements
by David A. Rosenberg of Gluskin Sheff,
David Rosenberg sets the ECRI?s record straight, arguing that the Lex column should ask about the recent equity market drop rather than the unpredictable rally. Rosenberg comments on the themes of inflation and deflation in the press and how society is becoming familiar with Bob Farrell?s rule, ?Exponentially rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.?
Breakfast With Dave
by David A. Rosenberg of Gluskin Sheff,
In today's issue of Breakfast With Dave, David Rosenberg comments on a continued rally in bonds that will remain the most painful trade out there given how the non-commercial accounts are positioned. He also comments on the big drag from the State and local government sector and mixed news on the American consumer.
-Big drag from the State and local government sector
-Mixed news on the American consumer ? just take a look at the slew of conflicting articles in today?s WSJ
Not Much Out of G20
by David A. Rosenberg of Gluskin Sheff,
David A. Rosenberg summarizes the current conditions and calls for restraint. Fiscal restraint was the overarching message of the G20, which established a goal 'to shave fiscal deficits in half by 2013.' Debates continue as to whether current trends predict 'the third depression' and as to what measures might be taken to prevent that outcome. Rosenberg cites this weekend?s outpouring of articles on deficits, crises, and deflation. There seems to be no 'bottoming out' for the housing market.
The Big Picture
by David A. Rosenberg of Gluskin Sheff,
Escalating global economic imbalances have dramatically increased the vulnerability of the global recovery. The chances of a growth relapse in the second half of the year are higher than the equity market and credit market have priced in. Treasury bonds seem to be the asset class that most closely shares these cautious views. Anyone with a pro-cyclical bent has to answer for why it is that the yield at mid-point on the coupon curve is below 2 percent, a year after a whippy rally in equities and commodities and what appeared to be a sizeable policy-induced GDP jump off the bottom.
Daring to Compare Today to the 30s
by David A. Rosenberg of Gluskin Sheff,
Look at what we have today: No room to cut rates. No room ? let alone political will ? to cut taxes. And, in contrast to starting a new war, the U.S. is going to be pulling troops out of Afghanistan, which is a good thing for the troops and their families, but in terms of GDP impact it does represent fiscal withdrawal. The options to resuscitate the economy when it enters a 2002-03 style growth collapse are extremely thin, and probably lie on the Fed?s balance sheet, which means the bond-bullion barbell will likely remain a viable strategy.
The Case for Bonds
by David A. Rosenberg of Gluskin Sheff,
The problem with trying to assess either supply or demand in the current market environment is that everything is so confusing in the early stages of this new secular paradigm of a global credit collapse. There is no way to get it completely right. As Lacy Hunt has always maintained, it makes much more sense to assess the outlook for inflation as the primary effort in predicting Treasury rates. Maybe perhaps instead of inflation, we should really be discussing deflation, which has emerged as the primary trend, and governments have few bullets left in the chamber to deal with it.
Results 101–150
of 211 found.