It would appear some imposter has taken over for David Rosenberg in writing his daily note, because whoever wrote today’s piece is almost giddy at how good the economy is.
First, he talks about the big tax deal, which he expects to pass:
All in, this should be considered a second stimulus bill (deficit commission R.I.P.). While the big part was the Bush tax cut extension, which basically just saves the economy from $400 billion of restraint over the next two years, all the other measures (depreciation allowances for businesses, continuation of a college-tuition tax credit, expansion of the earned tax credit, and among others) actually nets the economy $300 billion of fresh stimulus over the next two years (about 40% of the size of the first stimulus bill that was passed in 2009).
I doubt that the ducks in Congress will prove to be that lame, even if there is the odd voice of opposition. This is the first tangible sign of flexibility/compromise we are seeing out of the White House, which is good news indeed. Then again, the Fed’s focus on the equity market, the weaker estate tax, and the full extension of the Bush tax cuts are not exactly going to do very much to help the President in his election campaign pledge to address the country’s extreme income polarization dilemma. But that is not the market’s problem, nor its focus.
We will soon quantitatively assess what these measures, in turn, mean for the pattern of Q4, Q1 2011 and Q2 GDP growth.
Suffice it to say that these moves (it seems to add up to around $300 billion of potential restraint that will now be taken off the table) along with the Fed’s pump-priming, have pretty well extinguished double-dip recession risks, notwithstanding the myriad of other headwinds out there (the ECRI leading indicator is almost back to break-even). Imagine what could happen if Obamacare were ever rescinded!
But what about last Friday’s negative jobs report? Surely that throws a monster wrench in the gears, right?
Here’s how he addresses that, and it’s downright weird
There are many folks out there dismissing the weakness in Friday’s U.S, employment report due to the November data on withholding income taxes, which do show a visible uptrend. At the same time, we are sure these pundits will be out in full force today armed with a piece of information showing that the jobs picture has brightened. Notably the Q1 Manpower hiring intentions survey for the U.S., which almost doubled from +9 to +5 in Q4 and now stands at the highest level in two years.
What’s funny here is how he says they’ll be out “in full force” as though they’ll do anything to justify the good news, when this actually is good news, and a legitimate reason to think that the economy continues to recover.
As for the market overall, Rosenberg almost sounds bullish:
So what are businesses now seeing?
• A shift in the political winds to a less adversarial climate,at least in terms of what the November 2nd election means for the corporate sector (did Obama just throw his base under the bus?). Again, that is not a market problem.
• A Fed that is determined to boost asset prices, especially the equity market, and what this in turn implies for the cost of capital.
• A White House that begrudgingly will work with Congress to propose near-term fiscal measures to help improve the spending outlook.
One would ordinarily think that all this pro-growth news would invigorate the dollar, but in this new world of investing, when the risk-on trade is on, then rest assured that the greenback falls back — slipping below the 100-day moving average this morning. These Fed/Fiscal measures ensure that the beta and speculative trade remains intact — hence the big equity gainers are in Emerging Markets, which is riding a five-day winning streak.
So the beta/risk trade is intact! If you can stomach the weak dollar, then you’re all set.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.