Thursday, March 25, 2010

Markets: What's Big and Bad and On the Horizon?

I usually don't have much time for Gluskin Sheff's David Rosenberg. His pig-headed refusal to listen to the market as the averages advanced more than 70% was not only arrogant but expensive for his firm's clients.

I can handle arrogant as long as you're right, hell I can tolerate a fat guy in a grass skirt and spike heel Manolo Blahniks if he's right.
It would be fun to watch him tottering around.
But Mr. Rosenberg hasn't been right for a while and he's not funny.

Funny is important if you're doing the Angel of Death schtick. Here's our thinking:
Unlike his fellow gloomster David Rosenberg, Société Générale's Albert Edwards amuses* as he forecasts gloom, doom and despair. They both bow to the master, the Telegraph's international business editor, Ambrose Evans-Pritchard whose writing I once described as a "continuum that ranges from morose to suicidal.
Here he is at his despondent best...
Back in October we posted "Gluskin Sheff’s David Rosenberg has finally lost it":

We haven't posted much, if anything, from Mr. Rosenberg. His adamant refusal to acknowledge the rising market is at odds with our approach, playing the cards you're dealt.
Unlike our gloomy pal Ambrose Evans-Pritchard who can be downright funny in the depths of his despair, Mr. Rosenberg is a strategist. He'll be right one of these days, we hope we are too.
Oh well, here's the story from FT Alphaville:

Poor Dave

Much as we love him, we must report that Gluskin Sheff’s David Rosenberg has finally lost it. Here’s the evidence - from his latest “Breakfast with Dave” note to clients on Thursday:

So far, the backup for the U.S. 10-year Treasury note yield is a 38% Fibonacci retracement of the decline from the nearby high established in August.

Fibonacci analysis!?!? That, surely, is the domain of wacko tip sheets and self-help investment seminars.

It seems the Dow’s journey above the 10,000 mark finally tipped Dave over the edge:

The media are certainly going to town on this news but it is, in fact, old news; it’s “only” the 26th time the Dow has managed to cross this milestone.

Dave, of course, has been leading us all in fighting the tape these past few months. A selfless act - and also a bit foolhardy, in hindsight. Look at the sad result...MORE

On the other hand his latest, via ZeroHedge caught my eye:

As usual, some prudent market observations from Rosie.

A good friend, and long-time reader, was kind enough to pass along these thoughts yesterday. Basically, the stars are starting to align for something really big to happen.

First, the Shanghai index peaked in August 2009 and had a secondary top in December 2009 (global demand slowing?). Many emerging markets are all negative year to date.

Second, gold peaked in the first week of December 2009 (and now breaking down) while the U.S. dollar index (the DXY) is breaking higher (Greece has not been resolved).

Third, TIPs (ETF) peaked the first week of December 2009 (and just broke to a new four month low).

Fourth, commodity prices peaked in the first week of January and appear to be rolling over. Head-and-shoulders top from October 2009 peak?

Fifth, could we be in for a March peak in equities? The NYSE new high list peaked six trading days ago. Recall that a market correction followed in October of last year and January of 2010 following similar peak in new highs....

Bottom line: Stronger U.S. dollar. Rising bond yields. Lower commodity prices. Slower growth. And the stock market is flirting at post-crisis highs. Bond yields are rising temporarily and this will very likely prove to be a good buying opportunity; however, over the near-term, higher yield activity may well persist and the question is how the equity market is going to handle this backup in market rates....MORE
*A couple links from that post "Société Générale's Albert Edwards: "Stocks Drop May Turn Into ‘Rout’ as Economy Peaks":

May, 2008: "This Week’s Advice: Canned Food, Guns and a Ham Radio"

June, 2008: "Société Générale: “We see a y-shaped global recession. We are going down before looping backwards”'

October 7, 2009: "Climateer Line of the Day (Société Générale's Albert Edwards edition)":

“Investors think this is a sweet spot, but it is in fact a putrid boil that has not been properly lanced”

Ya gotta love it. And just so you know he isn't all grins and giggles:

***Alert****Economic and equity market meltdown imminent****Alert***
--September 5, 2008, ten days before Lehman failed, AIG became a wholly owned sub. of the U.S. Treasury, WaMu etc., two days before Fannie and Freddie were nationalized."Meltdown"-Société Générale"