Money Show 2019 – David Rosenberg

David Rosenberg spoke in the opening remarks. His talk was called “Year of the Pig (Lipstick won’t Help”. He is the chief Economist and Strategist at Gluskin Sheff & Associates. His company’s site is here. He worked at Merrill Lynch prior to 2009 and joined Gluskin Sheff in 2009.

Rosenberg says that he is bullish on bonds. Bonds are more fun. He says Powell is now whimpering under Trump’s Tweets. Trump has taken on China and China has not backed down. It is now an economic war. This is the first time that the US has been challenged economically. There is uncertainty in the bull market. There are no winners in a trade war.

There is more uncertainty now than ever before. The macro impact is definitely on the Fed’s radar screen. People are saving more and spending less. Trump has made uncertainty great again. We have lost output worldwide of 1% because of Trump’s trade war.

There is a contraction in the industrial sector. Deflation pressure is intensifying. Corp growth is slowing. Leading economic indicators show a downtrend. This has been going on for 19 months now in the world and 13 months in the US.

For the first time ever the output gap never closed, that is supply output over demand. The expansion of the last 10 years is built on straw. That is debt. There is deflationary pression showing in interest rates. One year treasuries at 1.5% and 30 year treasuries at 2.5%. People are buying long term bonds at 3.5% because interest rates will go to 2.5%.

Recessions always follow a Fed tightening cycle of 300 basis points or more. Cycle peak following Fed hikes. Last 13 of Fed tightening cycles had 10 landing in a recession. So, there is an 80% change of recession following Fed hikes. Inverted yield carves equals a recession. Low unemployment rates happen first.

Recession probabilities are increasing (now 80%). We have a rising recession risk. Stock market will peak first. The era of positive investing is now over. He is bullish on gold.

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