Rosenberg: The Market's Already Overvalued, And We're Entering A Period Of Lower Liquidity And Higher Taxes

In his morning letter, David Rosenberg of Gluskin-Sheff highlights some reasons to be nervous:

The consensus is as optimistic on earnings growth as it was bearish this time
last year — consensus is expecting +70% YoY for Q1 EPS, as an example.
Analyst earnings revision ratios have gone from 62% two-months ago to 50%
today (see page M4 of Barron’s). 
• Fiscal policy is actually set to tighten, not ease, due to the accelerating
restraint at the State/local government level (see Bob Herbert’s column on
page A15 of the Saturday NYT — A Ruinous Meltdown and read about the
“draconian cuts in services” across the country — “the tissue-thin national
economic recovery is being undermined.”  This guy gets it.  Fiscal conditions
at the lower levels of government are in such a mess that criminals are being
released from jail before their terms are served (see More Ex-Cons on the
Streets, Fewer Jobs on page A3 of the weekend WSJ).  You really cannot make
this stuff up.   
• The equity market is overvalued by more than 20% on a normalized Shiller
P/E ratio basis.    
• The expensive health care reforms will require higher tax rates on investment
income (Mr. Market is aware of this, correct?).  A 3.8% Medicare tax on capital
gains on “upper bracket taxpayers” is part of the Obama plan, effective 2013
(see House Seeks Tax Policy U-Turn With New Medicare Levy on page A5 of
the weekend WSJ).  


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