David Rosenberg Thinks That Bulls Are Missing These 6 Big Things

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Photo: Rich Moffitt via Flickr

There’s good news today in the economy (ADP, ISM), but surely you want to get your fill of glass-half-full reasoning is well, which is why we love reading David Rosenberg.In his daily note, he identifies six major things that the bulls aren’t appreciating.

They range from politics to energy.

We’re not sure how he knows what bulls are thinking about or considering, but if you’re bullish, it may not be a bad idea to be sure you’ve considered them all.

Borrowed growth

'How much of 2011 growth was borrowed from 2012 (the payroll tax cut and bonus depreciation allowance end in December 2011). This may be an issue heading into Q4.'

Source: Gluskin-Sheff

Energy prices

'If oil breaks above $100 and gasoline prices approach $3.50/gallon then expect the consumer to sputter. Every penny at the pumps drains $1.5 billion out of household cash flow. At the moment, U.S. gas prices at the pumps are at $3.15/gallon, but consider that back in September, it was closer to $2.70/gallon. This increase in energy prices is hardly the result of booming consumer demand, which we know from the monthly personal consumption expenditure data is down more than 2% from a year ago. This is nothing more than an exogenous negative shock, which, at current levels, is approximately a $50-60 billion annualized drag from the U.S. household cashflow (basically absorbing half of the payroll tax relief). If, as many experts predict, gas prices ultimately go to $4/gallon, then this would siphon another $100 billion into the gas tank.'

As for oil, the rule of thumb is that a 10% increase in prices shaves off 25 percentage points off GDP. This means that oil could be a near-one percentage point hit to GDP growth.'

Source: Gluskin-Sheff

Spending cuts

'The GOP-led House is pressing for $100 billion of spending cuts for this year. If enacted, and this could be part of a deal to resolve the debt ceiling issue looming this spring, could cause GDP estimates to be trimmed.'

Source: Gluskin-Sheff

Obama might get re-elected

'Obama just enhanced his 2012 re-election chances by appointing Daley as his chief of staff. Either he is really going to move to the centre, or he is trying to cement the next election.'

Source: Gluskin-Sheff

The improving jobs market

'Everyone believes that a better employment picture will brighten the stock market's prospects even more but in fact the opposite will happen as margins get squeezed by rising labour costs. Remember what happened in 1994. Be careful what you wish for.'

Source: Gluskin-Sheff

No QE3?

'I am hearing that the Fed is moving further away from entertaining the notion of a QE3 program in the second half of the year. Something the market will be grappling with in the second quarter, and I see that the second quarter may well offer up the best buying opportunity of the year since that is the quarter where the concern list will likely start to grow; lagged impact of China tightening shows through, big European refinancings, signs of no more QE, and the debt-ceiling issue hitting its peak.'

Source: Gluskin-Sheff

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