David Rosenberg Brought Down The House With This Depressing Presentation At A Conference This Week


Photo: David Rosenberg/Gluskin Sheff

One of the speakers at this week’s Big Picture Conference was David Rosenberg, the famously bearish chief economist of Canadian wealth management firm Gluskin-Sheff.Rosenberg is often labelled a perma-bear, which is something he denied vehemently, but he definitely presented a glass-half-full view of the economy, using charts to argue that the U.S. will be facing demographic and debt-related headwinds for years to come.

According to Rosenberg — who jokingly put on a pair of rose-tinted glasses at the start of his presentation — the U.S. is at best halfway through the deleveraging. The stock market, he says, is only up by dint of Fed intervention, and that there are already signs that the latest bout of QE-Open Ended is not having the same effect as last time.

Regardless of what you think of him as an investor (he has clearly been too negative on equities since the bottom of the crisis) he is an extremely impressive economist, with a wealth of charts and historical datapoints to draw on.

His presentation was definitely a highlight of the conference, and everyone was blown away (not just by the presentation but also his stagemanship).

Big thanks to Gluskin-Sheff for giving us permission to run the entire feature.

On the other hand, Bernanke clearly worries about a lot. He has a lot on his mind.

Bad news: We're not done crashing, even with all the stimulus.

Bear in mind, this recovery stinks by any kind of historical standard.

Unemployment: still awful.

Meanwhile, there are all kinds of drags.

Why was this recession so bad? Basically, unprecedented asset collapse and deleveraging.

This is the defining chart of the crisis. It shows the wealth of the Baby Boomers evaporating.

Bad news though: Debt ratios are still way too thigh.

And just based on historical averages, the deleveraging probably isn't over.

The government debt has always been an issue.

And yes, our debt-to-GDP ratio is huge.


Safe governments are collapsing everywhere.

The world has too much debt, and crucially, 2008 did not break that.


Europe is already turning down.

And there's no sign of a turnaround.

The US isn't decoupling. Don't confuse a lag with a decoupling.

Europe is crushing Asia.

If all that weren't enough, the fiscal cliff is also an issue.

If we hit the fiscal cliff, it will be like nothing the country has ever seen before.

If rates turn up, watch out. The US government willg et slammed.

THIS is the big red flag: Core CAPEX and retail sales falling. This shows nervousness!

What you think housing is coming back?

Ditto with home sales.

Meanwhile, the Fed keeps getting more and more pessimistic.

Again, this is despite extraordinary efforts by the Fed.

The Fed's balance sheet has exploded.

One reason to like bonds is that the Fed has #timestamped low rates for a long time.

An overview of the QEs like crazy.

Make no mistake, Bernanke is clearly targeting asset prices and promoting a wealth effect.

When the Fed does QE, the market rallies. Period.

All that being said, the market has been incredibly volatile.

Here's the problem. The raw fundamentals are awful.

Earnings are on the way back down.

Here's the crazy part. The Fed announced QE Open Ended as inflation expectations have reached a high

The new QE is coming as the dollar breaks down and gold surges.

Real rates are collapsing.

There's one big reason to buy equities: The dividend yield is far superior to the yield on bonds now.

Dividend income has grown for the economy while interest income (thanks to QE) is super-low.

Still, dividend payout ratios are at record lows.

Corporate bond yields are super-low.

Meanwhile, there's a lot of room for an uptick in defaults.

The good news is that corporate sector finances are generally in good shape.

So this is why there's so much gloom.

You have to link bonds, because investors are still underinvested.

But the flows are definitely happening.

The retiring boomers are a huge force.

Getting older and older.

Fact is, there's no fighting demographics.

Here's a look at different returns.

The proper investment strategy: Safety And Income At A Reasonable Price.

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