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The week

Nine ‘sobering thoughts’ from David Rosenberg after a wild week Add to ...

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The World according to Rosenberg
David Rosenberg has nine “sobering thoughts” to offer, but first he wants to set the record straight.

The well-known chief economist at Gluskin Sheff + Associates has long been seen as a bear. And thus it came as a surprise to some when he was seen to turn bullish.

So much so that on Thursday, a Business Insider blogger wrote how “one of the most bearish economists since the financial crisis is now a straight up bull.”

Mr. Rosenberg responded to that Friday, saying he’s no such thing. He just sees a better climate.

“I’m not a ‘straight up bull,’” he said.

“And I was never a ‘perma bear’ either,” he said in a lengthy report, citing recent findings by the Federal Open Market Committee, or FOMC, the Federal Reserve’s policy-setting group.

“The media like to find labels. My forecast is actually not that far out of line, at least as far as 2014 is concerned, than the Fed’s, but there is nobody on the FOMC that would be characterized as a ‘straight up bull.’ The markets don’t trade off of ‘good’ or ‘bad’ – levels don’t matter much. But rates of change do. So what matters for markets is ‘worse’ or better.’”

And on that note: “My sense is that the outlook has been getting ‘better’ or at the very least, the economy has a firmer floor underneath it than it did before.”

So, yes, he is “incrementally more positive” on the outlook for the United States, but threats remain.

Here are the nine thoughts of the neither-straight-up-bull-nor-perma-bear:

1. “The economy is coming off what appears to be a woeful second quarter performance … Perhaps there is a firmer underbelly, but we are still not yet on the path towards escape velocity.”

2. “Europe is far from out of the woods. Things are only quiet because a lot of stinky stuff is being swept under the carpet ahead of the German election.”

3. “China is slowing precipitously, as is the entire emerging market space as the world loses this important source of growth.”

4. “We have a confused Fed with Bernanke appearing to be speaking out of all sides of his mouth of late and we know from the FOMC minutes that half of the Fed officials want to start to taper before the year is out.” He’s referring here to confusion on the timeline of the Fed’s plans to start pulling back on quantitative easing.

5. “I was struck this week by the downbeat tone out of Family Dollar – as it regards the backdrop for the low- and mid-end consumer.”

6. “The run-up in mortgage rates was so sharp and sudden that it does indeed seem to be impacting demand.”

7. “Congress is as dysfunctional as ever.”

8. “From an investment standing, the landscape remains challenging.”

9. “Valuations are stretched just enough and bond yields are so low that ex ante expected returns in a classic diversified stock-bond asset mix is a mere 2.4 per cent – the lowest de facto expected return in over a century.”

Mr. Rosenberg's comments came at the end of one heck of a week, one that saw U.S. stocks reach new closing heights, sparked by Fed chairman Ben Bernanke's comments late Wednesday.

Investors had been betting that the central bank would start in the fall to pull back on its quantitative easing asset-buying program, from monthly purchases valued at $85-billion (U.S.), and end the strategy completely next year.

But minutes of the Fed’s last meeting, released on Wednesday afternoon, showed FOMC members divided, waiting to see a marked shift in the outlook for unemployment. Then, in comments after a speech later the same day, Mr. Bernanke suggested the Fed won’t begin to “taper" until the economic recovery is strong enough.

He also urged investors not to confuse any easing in QE with an end to this era of emergency low interest rates. But he left some confusion in his own wake as markets have no clear picture of the timeline.

The week in Business Briefing

The week in Streetwise (for subscribers)

The week in ROB Insight (for subscribers)

Required reading
As home prices climb ever higher, a generation is lowering its living expectations, Brent Jang reports from Vancouver.

If business groups in Canada and the United States get their way, new free-trade rules would limit the ability of governments to block cross-border flows of personal and financial data, Barrie McKenna reports from Ottawa.

New mortgage rules cooled property sales over the past year but there are still big hurdles for those with modest incomes. Jeff Gray, Thandiwe Vela and Tim Kiladze look at the impact one year later.

Even as hope for a resurgence in the securities business wanes, there are signs the worst is behind it, Streetwise columnist Boyd Erman writes.

BlackBerry Ltd. held its annual meeting in Waterlook, Ont., Tuesday, CEO Thorsten Heins urging patience before a crowd of some 200 anxious investors, Omar El Akkad reports.

Market blogger David Berman looks at the new stock market darlings: Small-cap U.S. stocks, often eschewed by conservative investors for their turbulent ways, have emerged from the recent market volatility and hit new high.

Apple Inc. lost a landmark price-fixing case that could change the way all digital entertainment is bought and sold, Omar El Akkad writes.

China’s growth strategy is exhausted, its economy headed for a markedly slower pace. ROB Insight writer Scott Barlow looks at China's changing fortunes.

North America's hottest oil play, the Bakken shale, faces higher costs as regulators examine new rules to make shipping crude by rail over long distances safe, Moody's Investors Service warns. Jeffrey Jones reports.

Microsoft Corp. is launching the biggest operational and managerial shakeup in its history, an effort to streamline decision-making and address shifts in consumer preference, Omar El Akkad writes.

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