Gluskin Sheff‘s David Rosenberg points out:

1. This remains a hope-based rally in the equity markets (with strong technicals). The magnitude of the employment slide versus the magnitude of the market advance is unprecedented.

2. Companies have only been beating their radically lowered earnings estimates – not the earlier, higher estimates heading into the reporting quarter.

3. Valuation is a poor timing device, but even on “normalized” trailing 10-year earnings, the S&P 500 is trading near 18x. That is not cheap;

4. Global growth has been inorganic — it is due to government fiscal stimulus.

5. Mr. Market may be pricing in a fine future for the U.S., but when the 3-month T-bill is 13bps north of zero, you know that there are still substantial fundamental imbalances that need to be worked through.

Good stuff to think about, Dave . . .

Category: Economy, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

38 Responses to “Rosie: 5 Points Worth On The Markets, Earnings & Ecomomy”

  1. karen says:

    Excellent and True points, every one. Unfortunately, in order to make money in this market, or even not lose money, you have to trade what you see and not what you know.. only, it’s very difficult to tell the two apart sometimes…

  2. leftback says:

    13bps on the T-bill and 89bps on the 2-year. 3.50% seems to be a ceiling for the 10-year yield now. It’s very unusual for EVERYTHING to go up in price together, except for the dollar. Something is going to have to give before long.

  3. I-Man says:

    Sentiments of the I, exactly karen.

    Rosey’s points are in fact all valid and true, should be taken as gospel even… its his “public service” afterall to share them.

    However, dont let them dictate your trading of this tape. Trade what you see, not what you would like to see.

    Unfortunately for me ideologically, that means getting long some of the “reinflation” trades.
    But fortunately, I have come to realize over this summer that my ideology is irrelevant, and that what “I think” about the macro backdrop doesnt matter. I’d rather make money than be right, to be blunt.

  4. Mannwich says:

    karen said: “you have to trade what you see and not what you know.. only, it’s very difficult to tell the two apart sometimes…”

    You nailed it for me right there. Just a very difficult environment.

  5. leaf_eater says:

    After reading this blog everyday since back in March I’ve finally taken the plunge and registered.

    @I-Man: “I’d rather make money than be right, to be blunt.”

    I’ve finally come round to this way of thinking myself, just wish I’d done this back in March when I placed my first trade but kept doubting the rally.

    My thoughts on what’s happened and happening, in March a rally looked certain, things have shown an improvement through the summer, but then they usually do through summer? also thanks to pumping the donkey, er, I mean bull with steroids. But now winters on it’s way, and like farmers those green shoots should have grown over summer and been harvested now before they wither away, but then again I could easily carry on being wrong.

  6. Thor says:

    Sure – all his points are true, they’re as true as they were back in April when he was saying the same thing. This is not to say he’s wrong in his overall impressions of the market, only that a person can say the rally is not healthy, that it’s overbought, etc etc until the cows come home. The fact is that the market is going up, and has been going up since March. How much longer can it go up? Does anyone really know? If the market is as “pumped” as many would lead us to believe, why can’t it go all the way back up to 14,000? Just because something is obviously out of whack does not mean it can’t remain that way for a very long time. Or did the .com and housing bubbles teach us nothing?

  7. globaleyes says:

    Will this 10-year span (2000-2010) be looked upon as America’s lost decade ?

    I think so.

  8. godly says:

    I think not only 2000-2010 will be looked as a lost decade, but the next decade will see it being reduced to developing nation as the dollar loses its power.

    An analysis of the debt levels and the dollar index at:
    The Debt Trap

    Fund Manager

  9. Andy T says:

    you know what I like about rosenberg is that he’s not flinching or hedging like the other gloomers like roubini…he’s standing by his analysis despite a complete face-ripper of a market. In the long run, he’ll be proven right…in the short run, though, it’s a market that has difficulty trading in the red.

  10. jturner says:

    Another fundamental issue that Rosie is brought up before is that it ultimately comes down to jobs, and currently there are few if any catalysts for job growth. This will continue to weigh on housing and ultimately undo whatever the govt is doing to try to stimulate demand. The markets will eventually reflect this, but as everyone knows, very few will be able to time this perfectly.

  11. Thor says:

    Andy – Wouldn’t ANYONE be proven right if you wait long enough? How many years was Roubini wrong before he was finally right? If I tell you that the sun is going to set “any minute now”. I will eventually be wrong. I fail to see how correctly predicting an outcome but completely blowing the timing of that outcome is any different than being wrong.

  12. Thor says:

    eventually be RIGHT, sorry

  13. leftback says:

    It’s very easy to be 2-3 months out in timing the markets. It happened in November, with bulls buying too early.
    The more rational among us see developments earlier than the herd, and are almost always early with predictions.
    Just as it took an amazingly long time for the last person to sell in March, it takes a long time to find the last buyer.

    Chances we are looking at a 20-year bear market that began in 2000, so a couple of months is irrelevant. Of all the things that Americans are good at, taking the long view and not obsessing about the moment is not one of them.
    Rosenberg isn’t interested in being entertaining, being good television or being right that day. Good for him.

  14. I-Man says:

    Holy TLT Leftback.

  15. ben22 says:

    “you know what I like about rosenberg is that he’s not flinching or hedging like the other gloomers like roubini…he’s standing by his analysis despite a complete face-ripper of a market.”

    Agreed and then I wonder why is he one of the few doing it? Conclusion: I think there is less career risk with him being at Gluskin instead of ML. In him doing so, and being right he could greatly improve the brand for Gluskin, whereas if he’s wrong, it’s easy to say, he’s only an economist not a money manager. DR also never gained rock start status like Roubini did during the fall, plus, and this is jmo, I think he always understood what was happening better than Nouriel from the start.

    I guess what I’m getting at is who do you think is more correct, Bianco or Rosie? Completely different views. I know who I would go with, but as Karen said above, that doesn’t mean you go all in with that investment right now.

    last: primary dealers and long bonds…..

  16. Onlooker from Troy says:


    I think you really have to differentiate between those who really do see the underlying fundamentals that are being masked by govt intervention and an irrational, greedy crowd (that’s in denial, in large part), and those who just beat the same drum without any real understanding of what’s going on underneath; they’re just either perennially pessimistic or optimistic (and therefore look wrong or right depending upon what the market it doing).

    Realizing that this country’s (and probably the entire globe’s) fundamental economic structure has been on a bad path since the ’70s or ’80s (or earlier, pick a date) that continues to lead to imbalances and unsustainable trends has made you look like some kind of perma bear pessimist as the bubble economy continued to boom and bust and boom again. But that doesn’t mean they’re wrong, I think (hope) you’d agree.

    Getting the timing is very hard and you’ll find VERY few who have done it consistently. The perma bulls have looked right more often than the obverse over the last decade-plus, no doubt, in terms of the stock market. But in terms of the real underlying economy that affects all the people, not just the investor class, that’s a different story.

    And it also depends upon the time frame and how much risk you’re willing to take (those who pretend there’s no risk in this market are rationalizing). And whether you hold yourself out as a person who can and is predicting the short term path of the market. I think that Rosie openly acknowledges that his outlook can be at odds with the market for some time (as does Hussman). He’s honest about that. Others have not been and have continued to attempt market calls. Those are the ones you’re referring to, I would think, and deserve the “stopped clock is right twice a day” characterization.

    So who’s “more right”? The momentum trader who can very deftly identify and follow the market’s trend and capitalize on it, but doesn’t really have a clue about the macroeconomic picture, especially a long term view. Or the person who has really identified the structural problems and has therefore been consistently negative even through all the “noise” of a rising market and a bubble economy that APPEARS to be thriving on the surface but is doomed to failure in the longer term. It depends upon what you’re looking for. Quick and easy riches, or a more structurally sound society.

    That pessimistic person would also flip to very optimistic if we were to have a true restructuring and somehow reduced our debt to levels that wouldn’t suffocate us and put us at great risk, etc. That unfortunately won’t be coming any time soon. But if we’d listened to them a long time ago we wouldn’t be in this condition and they wouldn’t have had to become perma bears! :)

  17. Thor says:

    Troy – very good points, all of which I agree with. I concede your point as well, I was not making a distinction between perma-bears and people like Rosie who seem to be commenting on the underlying health of the market/economy. In my own defense, I think this has more to do that I hadn’t paid much attention to economics before this year. Another lesson learned!

  18. leftback says:

    I-Man: Holy TLT indeed – and a 1-0 win for the US and a 5-1 win for England.

    Bear markets never truly end until every last Tom, Dick or Harry Permabull has had his rear end violated several times by Mr Market and been BANNED from trading for life by Mrs Permabull.

    Insider selling: buying is about 50:1. Draw your own conclusions.

  19. ben22 says:


    I wish I could hold on to the insider selling idea more but these chumps were also doing a lot of buying at the peak.

    anyway, this:

    “Bear markets never truly end until every last Tom, Dick or Harry Permabull has had his rear end violated several times by Mr Market and been BANNED from trading for life by Mrs Permabull.”

    Is hilarious. And True.

    The 30 year auction appears to have gone well today, and primary dealers are not getting heavy short on bonds right now. Who is smarter, Tom Dick and Harry buying risk or primary dealers. Something will give here, but when of course. Further confirmation as well from Mr. Lochart today, nice contrary indicator imo.

    My money is on Gary Schilling….

  20. leftback says:

    Gary and Rosie are both in the middle and long end of the curve since the summer – like LB, and will both have made money by now on long bonds – with another FTQ in the Fall, they will make more.

    People are thinking that the “breakdown” will be caused by rates breaking HIGHER, but they are reading Bonfire of the Vanities when they should be reading Grapes of Wrath. I love EWF & Steely Dan, BTW, but this aint the 70s.

  21. Charles Maley says:

    It is tough to make predictions, especially about the future. – YOGI BERRA

    In his book “The Black Swan” Nassim Taleb says, “We have seen how good we are at narrating backwards, at inventing stories that convince us we understand the past. In spite of the empirical record we continue to project into the future as if we were good at it, using tools and methods that exclude the rare events.” Funny isn’t it, since the big, rare, unpredictable events are precisely what shape the world. Events like the automobile and the World Wars, the internet and the Beatles.

  22. zell says:

    What’s so unusual about the market being in a bull phase without any basis other than buyers are eager? Haven’t we just seen this? Buyers are trying to make up for the hit they’ve taken and think they’ll get out in time. I’m trying to get of clunkers I’ve been holding which I never thought I’d see par on again. As far as I’m concerned this is another cash for clunkers program.
    Rosie is the man: clear; concise , and on target. Unless you’re trading you can take him to the bank- not a bad place to be, since we know what’s coming.

  23. leftback says:

    @zell: Good post. Lot of traders and insurance companies trying to get back to “par”. “Please, Timmy, lend us some hot money so we can make up some of our losses and sell these effing stocks to some dim-wit before the collapse.”

  24. Mannwich says:

    That’s been my thesis (of many) for a while now. It’s a mass rush to try to “get even”.

  25. Seattle Chill says:

    I know people personally who insist they’ll cash out once they get back to “even,” defining “even” as the all-time high, of course. As if I would believe for a moment that any of them would actually have the discipline to sell with the market right on the verge of making new all-time highs!

  26. ben22 says:


    Agreed, good post. Sadly though, what will happen for many (most?) is when they break-even, which might be a respectable place to sell, they will end up doing just the opposite and buy more.

  27. leftback says:

    Ben: Barbecue/pool party at Brian’s SUNDAY, to celebrate new highs for 2009… Be there or be square. JOHNNY

  28. Seattle Chill says:

    Have fun at the party, fellas. I’ll be at Club TLT, drinking with the guys in gray suits.

    Which reminds me of a story: back in mid-June, a family member asked me for a second opinion about a hot stock tip from her doctor: he was buying up something called “TBT,” which was going to break out, because everyone knew the government was fast going broke. (Doctors are very smart with money, of course, because after all, they have so much of it!) I told her to skip it, that the big move was over and it would probably roll over any day now. As of today, it’s down 21% from that “break out.” What’s worse, TLT is only up 9%! I wonder how many doctors have heard of “beta decay.” (Hint: it has nothing to do with x-rays.)

  29. I-Man says:

    I and I actually HOPING to get stopped out of SLV so I can get long some TLT instead.

    Second, “Club TLT” for the Natty Dread.

    Who is well red…

    Chanting down fire ‘pon babylon fed.

  30. leftback says:

    Complacency seems remarkably high. It’s almost as though all the problems have been magically Hoovered away. :-)

  31. “Complacency seems remarkably high.”


    Right? makes one anxious in the face of it, no?
    “I wonder how many doctors have heard of “beta decay.” (Hint: it has nothing to do with x-rays.)”

    yon’ S Chill, funny~ most Dr.s, these daze, seem, only, to know what thier PFE rep.s are spoon-feeding them..
    “…The complaint charged that Pfizer sent doctors on all-expense-paid trips to resorts, gave out free massages, and paid kickbacks to doctors, all to get them to prescribe its drugs for off-label uses. Although it is legal for physicians to write such prescriptions, and a common practice, companies are barred from actually promoting their drugs for purposes other than those that have won Food & Drug Administration approval…”

  32. jc says:

    Jobs & housing – 2 sucking chest wounds for the economy.

    At some point there’ll be a jailbreak with the shadow inventory of foreclosures,FDIC will start liquidating a couple mid-sized banks with a lot of foreclosures clustered in FL, CA places like that and prices will start to crater and suddenly the big banks will be racing to unload theirs before it gets worse.

    I heard on Bloomberg that job losses would have been 3.5M instead of “just” 2.4M without stimulus – maybe thats why todays job losses were the “best” since July LOL

  33. WallStreetNobody says:

    Rosenberg is smart, I agree with a lot of what he says, but don’t take it as near/short term investing advice. Anyone just swallowing it up and playing bear has been getting killed the last several months. Stay nimble, stay liquid, and don’t fight the trend whether it be up or down unless you’re a big enough player in the market to either move it or can afford to keep “doubling down”.

    For all those “daytraders” who read the bears and get tempted to go out and trade something like FAZ don’t be an idiot, trading FAS intraday is about the easiest money to be made in the market right now.

  34. WaveCatcher says:

    “Valuation is a poor timing device.” Truer words never said. How many people bought into the market all the way up based on the Fed Model? How many people today are buying stocks because the P/E ratio is below the 10-year average?


  35. kek says:

    market is up big from where……a crazy panic low. YTD we are up modestly, while the economy has started to gain hold (not get worse). where did all the zombie banks go?

  36. [...] David Rosenberg’s 5 points on a nonsense rally, another guy who has been as right as rain. [...]