David Rosenberg, Bay Street’s most famous pessimist, sounds positively upbeat as he describes his new business venture.
What he wants to do, he suggests, is to offer investors a McDonald’s-sized menu – but for economic research, not burgers.
The high-profile economist, who has worked at the money manager Gluskin Sheff and Associates for the past decade, is heading out on his own in the new year. He is looking to build on the success of his Breakfast with Dave newsletter, a $1,000-a-year subscription product that delivers Mr. Rosenberg’s opinionated brand of market analysis to readers every weekday morning.
Breakfast with Dave has roughly 2,200 subscribers in 40 countries, Mr. Rosenberg says. He believes it can be a starting point for a much bigger enterprise.
“To put it in restaurant terms, Breakfast with Dave is really the Big Mac. But if you go to McDonald’s, you can order a lot more than a Big Mac. So I have staffed up with an A-1 macro team and we will be doing Breakfast with Dave and a lot more.”
He expects Rosenberg Research and Associates Inc. to have an initial staff of six – himself, four other economists and a business manager. In addition to a daily newsletter, the Toronto-based team will produce podcasts, build economic models, write in-depth reports, play host to conference calls and offer one-on-one meetings. “It’s going to be very bespoke, very tailor-made for the needs of the subscriber base,” he said.
He’s targeting both big and small investors. At the moment, he says, about half his customers for Breakfast with Dave are institutions – banks, pension funds and the like – while the other half are individual investors, ranging from retirees to financial advisers. Individual investors will be able to continue getting a daily newsletter at a price “not far off” the current level, while institutional clients will be able to negotiate prices for custom projects.
“Our primary objective is to be the go-to research shop for investors of all kinds,” Mr. Rosenberg said.
One feature that has set him apart from many economists in the past is his willingness to be bluntly bearish. Whether that will be a help or a hindrance in attracting clients remains to be seen.
Mr. Rosenberg rose to prominence before the financial crisis, when as chief North American economist at Merrill Lynch, he warned of the dangers building in the overheated U.S. housing market.
The spectacular success of that call set his tone for the next few years. Even after the Great Recession ended, he stayed bearish, warning of a double-dip recession that never came.
Mr. Rosenberg changed his mind around 2012 and sounded a more optimistic note. Over the past couple of years, however, his message, at least for equity investors, has once again turned downbeat.
“Stock markets are really just breathing fumes,” he said, ticking off a list of worrisome indicators, from lacklustre leading indicators around the world to a contraction in per-capita economic growth rates in Canada. Even if both Canada and the U.S. avoid recession and muddle through the next year with nothing worse than a patch of disappointing but still positive growth, he argues that stock prices are likely to come under pressure.
His gloomy outlook raises the question of why he is starting up a business when he believes so many dark clouds are gathering.
Mr. Rosenberg brushes off suggestions that his decision stemmed from the takeover this summer of Gluskin Sheff by the private-equity giant Onex Corp. He says he has been thinking of launching his own venture for close to a decade and actually started doing some legwork on the venture three years ago, before eventually deciding to stay on at Gluskin.
Now, with his 60th birthday on the horizon, he says he has decided it’s time to finally act on his entrepreneurial itch. But he will continue to produce Breakfast with Dave for Gluskin until his new firm officially launches in January.
Mr. Rosenberg points to the success of the newsletter as proof of the value of his approach. He is no “radical perma-bear," he insists. Instead, he is driven by whatever the data tell him. Many of his subscribers, he says, are looking for a window on his thought process. They want him to point out factors they may not have considered themselves.
The problem with most economists, he says, is that they’re so scared of being wrong, they find it difficult to be right. They will debate fractions of a percentage point in the next quarter’s growth forecast, while missing key turning points.
“If you want to help people make money, you have to be willing to make the big call,” Mr. Rosenberg said. “I will make a big call … and I will definitely give you something to think about.”