David Rosenberg has a bit of advice for investors who think that the burgeoning recession is already over and its nothing but sunny ways ahead.
In the equity market, silly season is back with prices rising sharply even as earnings and earnings estimates decline. Anyone notice how U.S. homebuilder KB Home missed both its earnings and revenue targets? The forward P/E multiple has widened to 17.3x from 16.7x at the start of the year, which is a 5.7-per-cent yield and simply not enough to justify it over the level of risk-free rates, let alone what you can garner in the corporate bond market.
Such a pullback in economic-sensitive stocks amidst a Fed tightening that inverted the yield curve this much for this long has generated a recession a year later fully 100 per cent of the time in the past. Why fight those odds? And why on earth fight the Fed? Weren’t we told to not fight the Fed in the 2020-2021 doubling of the stock market by all the bulls, who somehow have turned silent on this strategy in recent months? I wonder why.
This only thing that is keeping me sane at this point, is that I won’t be here for what is coming. I have stated it before, and here it is again … Those of us who are between about 50 and 80 lived through the best period in human history. We had a good glimpse of personal freedoms, prosperity and relative peace.
We will move on to wherever over the next few years as this world crumbles.
I am grateful for the life I have enjoyed in the western world from 1943 to present. I am sad to see it all going down to greed, evil and stupidity, but I as we all know. The universe is in perpetual flux.
J, I fully agree with you. I was born in 1948, when Western democracies were still flush from the WW II victory. Now in 2022 the corrupted West is sleepwalking into economic and political disaster. The establishment elites rule — and it will be interesting to see how bad the next number of years will be.
The crux of the problem is that the left-wing elites despise Western society, and do everything and anything to do in the West.
Bottom line is that Western society has built so much wealth and prosperity … that it attracts thieves like flies to fruit. Our countries are being looted … and it’s an inside-job. We’re doomed, and I’m not certain recovery is even feasible.
“….I’m not certain recovery is even feasible.”
It’s a little tough to now put millions of homeless people, violent gangs, theft rings, drug addicted, and other liberal mentalisms back in the box.
Regardless of best intentions you have 1/2 the country (all western countries included) that want the destruction of the status quo and help enable the above mentioned decay of western civilization any chance they get. Whether they consciously know it or not.
Agree and commiserate totally. Feel particularly bad for my grandchildren. Not so much my children. They seem to be blithely unaware or willfully ignorant of what the future portends.
Regards,
Another 43’r.
The “gains” in the stock markets are really just reflections of inflation. There’s really no actual gains when the markets close higher. Closing lower means losses much larger than they appear.
As a retired economist, I have closely followed David Rosenberg. He started up his own financial advice company, after leaving (forced to leave?) a large financial company. He is a middle-of-the-roader with a keen eye on small details. He is almost universally ridiculed by the Bay Street, day-trader crowd for his overly-cautious advice to ordinary investors.
One tidbit about Rodenberg. During the wack-job spending of 2021-2021, Mr. Rosenberg compiled data showing that personal disposable income actually increased during the China-flu quarantine, given wasteful government giveaway-programs. No other economist or journalist bothered to mention that.
Rosenberg has a point here but his other takes have been way wide of the mark. The guy’s whole worldview is built on the period of time 2000-2020 and his view of it ie the era of low price inflation, low interest rates, and high asset price inflation. As a result he has not only gotten recent inflation wildly wrong but has doubled down on this stance, wantonly ignoring that its services inflation that is raging and blowing out PCE. His takes have been getting worse and worse over the past year or so because his ox is being gored.
Sound investors pay no heed to the stock market, and don’t bother trying to predict its direction. Instead they ask “Is this particular stock undervalued?”
Absolutely right. Fidelity super money manager Peter Lynch used to say if you spend five minutes a year thinking about what
“the market” is doing, you’ve wasted three minutes.
We no longer have recessions, as that is a politically inconvenient word that defined a politically unhelpful condition. Anyone paying attention will have noted that the word was redefined by progressive Democrats and the complicit media in the second quarter of 2022.
Please do try and keep up.
So much mediocre or broken crap is about to be washed out. It will be a whole different world in several years-and I have no doubt a better one. Not just lousy startups washing out or even established companies (I’m looking at the automakers) but entire countries. Ghana has already defaulted on its external debt. The economic and cultural ramifications of the end of cheap money are difficult to overstate.
unDORK
The gubberment shill is happy, but once the SHTF, he will change his attitude!
Move money into bonds.
GICs. I got myself a damn fine interest rate just two days ago on one. You can wait a bit to get a higher rate but that means you get the money out later too. There is honest to god almost nothing else that’s investable right now. It’s ugly out there.
You can buy a copper producer paying a 9% dividend plus possible extra special dividends when allowed by earnings. This company is not a miner, it produces from tailings. It is located in Chile.
Chile is not the place to be right now especially for a minerals business! Wait until Pinochet 2 is elected or otherwise comes to power. Further, I suspect copper is in for as bad a time as almost everything else with the era of cheap money ending.