Although David Rosenberg has been incorrect for the entire move up in equities, I firmly believe that his message has been largely correct. This recovery has not been built on sound fundamentals and organic growth. It has been built on the back of government stimulus and the greatest mean reversion in modern economic times. Whether it sprouts into an actual organic and healthy growing economy is still very much in doubt.
I spent more than my fair share of time reading Rosey’s research in my days at Merrill Lynch and his interpretation of the 2003 bull market was not all that dissimilar from his current outlook. He proved to be quite prescient in his calls back then though he is certainly not much of a market timer (something he does not get paid to do). His macro calls are almost always based on sound research and strong secular trends. Ignoring the short-term noise is vital when reading his work.
After all, if Mr. Rosenberg were wrong all the time he wouldn’t be one of the most highly respected analysts off Wall Street. His latest missive was particularly eye opening. If this rally unravels and the economy dips back into recession in the coming 12 months Mr. Rosenberg will be splashed on the cover of every investment magazine known to man. This is a must read regardless of Mr. Rosenberg’s near-term opinion on stocks.