Gluskin Sheff’s David Rosenberg hit out at Jim Paulsen of Wells Capital Managment in his Monday missive. Why?
Here’s an extract from Paulsen’s latest monthly newsletter:
We believe the recession has ended, and the U.S. is very early in a new economic and stock market recovery that will likely mature and sustain during the next several years. The lagged impact of massive economic policies may just now be starting to show up on Main Street, and these medicines should continue to strengthen activity for some time. Businesses are incredibly lean and mean (after all, they prepared for the “Great 2008 Depression that wasn’t”), they are woefully understaffed and underinventoried, and are posting the profits necessary to drive a significant capital spending and hiring cycle. Consumers are just beginning to stick their heads out of there foxholes, possess considerable pent-up demands, have amazingly large cash balances, are seeing stock and housing values starting to rise again, and should soon see a return of job creation. Finally, the U.S. economy has perhaps never experienced a recovery with the amazing new asset and global growth booster called the emerging world!
With so many Halloween Horrors about, the trick this holiday season may be staying focused on future “treats”!!!!
And from David Rosenberg’s Breakfast with Dave on Monday, courtesy of Gluskin Sheff:
We sifted through Barron’s over the weekend and found out in ‘The Trader’ column that Jim Paulsen of Wells Capital Management is “a favorite market strategist”. Well, everyone is entitled to their opinion and we have debated Mr. Paulsen in the past, and just as we may be looked upon as ‘perma-bears’, he most certainly is a ‘perma-bull’. We can’t lay claim to be able to pick every peak and valley but we have been consistent with our view that we are halfway through a secular bear market in equities, and while we were never quite optimistic enough during the credit and asset bubble from 2003 to 2007, we like to feel that we saved people who listened to us a lot of pain during what economists now call the Great Recession.
We saw it coming, and admittedly we were early on the call, but after re-read Bob Farrell’s market rules to remember and Charles P. Kindleberger’s “Manias, Panics and Crashes” and we’re confident that the housing and credit bubble would collapse under its own weight of dramatic excess. We all make calls that in hindsight proved to be inaccurate. But the question is where you were on the really big calls. The calls that really mattered — that actually saved people their hard-fought wealth and capital. Well, on November 22, 2007, a month away from the steepest economic downturn since the 1930s, and as a matter of public record, Mr. Paulsen had this to say:
“This thing hasn’t been about people losing their jobs and their incomes. It’s been more about CEOs getting fired, banks writing off hedge fund losses and a showdown between Wall Street and the Fed.”
Mr. Paulsen wasn’t the only one to dismiss the credit bubble bursting and what was to follow. But just because he stayed bullish and caught this year’s government-induced rally, pundits like him are now viewed as being a “favourite” in one of the most influential business journals is rather incredible. But it does attest to the ‘what have you done for me now’ mentality that has gripped an equity market that has stayed so short-term focused.
A reader of our daily missives reminded us last week that as for the current non-fundamentally based situation, we might want to reference the beginning of Annie Hall when Woody Allen tells the joke about the family thinking about institutionalizing their crazy uncle who believes he’s a chicken. Here it goes:
This guy goes to a psychiatrist and says, “Doc, uh, my brother’s crazy. He thinks he’s chicken.”
And, uh, the doctor says, “Well, why don’t you turn him in?”
And the guy says, “I would, but I need eggs.”
That just about sums up a market that can rally more than 60% over a span when the economy managed to lose three million jobs and organic personal income hit new lows for the cycle. It goes to show that if the government can change accounting rules in the middle of the game, take a 40% stake in Citigroup, GM, and a 100% stake in Fannie and Freddie, have the Fed orchestrate a controversial bailout of AIG, allow the FHA to dominate the mortgage lending market with a 3.5% down-payment and encourage consumption through an array of housing and auto subsidies, at a time when the deficit has ballooned to over $1 trillion, then anything is truly possible.
Related link’s
Poor Dave – FT Alphaville
Fuming with Dave – FT Alphaville
Dave’s furious – FT Alphaville