Speaker 1: Joining us right now for the half hour. David Rosenberg
Speaker 1: of Rosenberg Research in Toronto. I need to explain this
Speaker 1: to people that what is so important with David Rosenberg
Speaker 1: is the heritage where you stole Merrill Lynch research for
Speaker 1: no other reason, a guy named Farrell and a guy
Speaker 1: named Rosenberg. He's continued that tradition. And if you steal
Speaker 1: David Rosenberg's research, now it's about the re asserting of
Speaker 1: a deflation area or disinflationary trend. David, do you once
Speaker 1: again just say the permanence here is towards lower interest rates.
Speaker 2: I do believe that wouldn't surprise me if the FAED
Speaker 2: engages in what people would call a hawkish cut on
Speaker 2: December eighteenth, signal a pause, and probably the dot plots
Speaker 2: will go from four cuts to two, and then we
Speaker 2: go to March, and I believe the data will then
Speaker 2: push them back to predicting four cuts from two. So
Speaker 2: these these dog thoughts move around a lot, because the
Speaker 2: fed is just basically operates on a contemporaneous basis. But
Speaker 2: I do believe that the trend in rates will be lower,
Speaker 2: and I think that the trend in inflation is going
Speaker 2: to be lower and I think that, you know, the
Speaker 2: one thing that I'm confident of more now than it
Speaker 2: was even a few weeks ago, is that we're not
Speaker 2: going to be seeing the big terrifikes that were being
Speaker 2: pledged during the campaign. It's very clear, just early on
Speaker 2: before Trump's taken office, and we've seen how we standled
Speaker 2: Mexico and Canada, that the tariffs are really being used
Speaker 2: as a weapon to achieve, you know, other security goals.
Speaker 2: I don't think we're going to get the big tariff increases.
Speaker 2: I think that, you know, the economics team's put together
Speaker 2: has been pretty impressive. I think that they're going to
Speaker 2: incur ridge Trump to resist those temptations for a global
Speaker 2: trade war, big tariff increases, and then what's left, what's
Speaker 2: left is going to be a deficit reduction, and that's
Speaker 2: not going to come from the President, but it's going
Speaker 2: to come from Congress. David, the hunt and we're going
Speaker 2: to get We're going to get deregulation and more oil production.
Speaker 1: David, let me go to the heart of the method.
Speaker 2: Of very difficult to believe that we're going to generate
Speaker 2: an inflation cycle out of those developments.
Speaker 1: David, the heart of the matter is that we had
Speaker 1: a triple stimulus out of the pandemic. Let me a
Speaker 1: question that many people ask, is the American exceptionalism. Is
Speaker 1: the American boom and productivity nothing more than a follow
Speaker 1: on of a unique stimulus that austere Europe didn't do.
Speaker 2: Well. You know, the the productivity side really comes from
Speaker 2: the supply side of the economy, not the demand side,
Speaker 2: So there was really nothing. I don't think that we
Speaker 2: can point to stimulus being the driver of productivity. Curiously enough,
Speaker 2: what COVID managed to do and that's the reason why
Speaker 2: productivity growth has been surprisingly strong. So we came out
Speaker 2: of COVID with a productivity shift to the upside. And
Speaker 2: the one sector actually that has led the growth in
Speaker 2: productivity has not been technology or finance. It's actually been
Speaker 2: the retail sector. Because during the pandemic and the lockdowns
Speaker 2: and the aftermath, if you didn't digitize your business and
Speaker 2: follow the Amazon model as a retailer, you're going to
Speaker 2: go out of business. So even before what's happened on
Speaker 2: the AI side, which the markets certainly believe that this
Speaker 2: is going to be a productivity game changer, and it
Speaker 2: probably will be. The post COVID environment and actually generated
Speaker 2: this sort of productivity improvements that Japell has been talking about.
Speaker 2: They're real. And then the question is going to be
Speaker 2: for the next five or ten years, what will this
Speaker 2: model shift from the inflection point on the technology curve
Speaker 2: into the productivity in the future. And I will actually
Speaker 2: tip my hat to the bulls who say that this
Speaker 2: is going to be a game changer. David.
Speaker 3: The Federal Reserve appears to be focusing on the labor market.
Speaker 3: Here we got initial job as claims today a little
Speaker 3: bit higher than expectations. What's your view of the US
Speaker 3: labor market given that the Fed is really looking at it.
Speaker 2: The way I would describe it is cooling but not contracting.
Speaker 2: Even if we get the consensus estimate of call it
Speaker 2: close to two hundred thousand tomorrow, you know, in the
Speaker 2: context of what happened in October, that leaves you with
Speaker 2: an average of about one hundred thousand. So the trend
Speaker 2: is cooling off. I expect that that will continue. And
Speaker 2: like most of the other parts of the economic pie,
Speaker 2: I mean, the incoming data, I've just been so confusing.
Speaker 2: I mean, you get the numbers from Jolts and they
Speaker 2: show openings up but hirings down. You get the ADP
Speaker 2: number out, and the ADP showed that hiring amongst large
Speaker 2: businesses surged, but yet small companies, which are really in
Speaker 2: the weeds of the economy a lot more than big companies.
Speaker 2: Small companies on net have let people go in three
Speaker 2: of the past four months. I read the bag Book yesterday,
Speaker 2: and you know, I'm shrugging my shoulders as to how J.
Speaker 2: Powell can talk about the economy being strong when the
Speaker 2: bag Book itself had about two hundred and fifty references
Speaker 2: to the economy either being slightly growing, modestly growing, or
Speaker 2: just outright week only twenty nine times was the word
Speaker 2: strong used in the Beige Book, and a fifty one
Speaker 2: page document to which I say, you know, mister Powell,
Speaker 2: if you're going to spend all the time, resources and
Speaker 2: money on the Beige Book, why don't you at least
Speaker 2: listen to it. What was very striking in the Beige Book?
Speaker 2: And I would still say it's qualitative, it's not quantitative,
Speaker 2: but it's not revised. It just gets updated every six weeks.
Speaker 2: And I don't know if you guys went through it.
Speaker 2: I went through it tooth and nail because that's what
Speaker 2: I have to do. It's the most pleasurable reading in
Speaker 2: the world. The labor market. I mean, there are elements
Speaker 2: that improved in the past six weeks overall economic activity yes,
Speaker 2: the consumer yes. But funny enough, the labor market was downgraded,
Speaker 2: and there were numerous comments on how wage growth is cooling.
Speaker 2: So how do you get wage growth cooling in the
Speaker 2: labor market that everybody thinks is tight or tightening. So again,
Speaker 2: we just are riddled with all these anomalies and inconsistencies.
Speaker 2: But I would say that if you want to trend
Speaker 2: out the data, labor market not contracting yet, but it
Speaker 2: is cooling off.
Speaker 1: David. One final question quickly here it is the Rosenberg
Speaker 1: bull market.
Speaker 2: Can you buy? Can you own stacks?
Speaker 1: Here? David Rosenberg?
Speaker 2: Well, I'm having my own epiphany right now on this
Speaker 2: topic because, let's face it, it was the best year for
Speaker 2: the stock market since twenty nineteen. I'm not alone. I mean,
Speaker 2: the consensus at the end of last year for the
Speaker 2: end of this year for the S and P five
Speaker 2: hundred was forty nine hundred, and we've just blown through
Speaker 2: six thousand, and I think that there's a couple of
Speaker 2: things that are happening that should have you feeling bullish.
Speaker 2: I'm still concerned over market positioning and sentiment is off
Speaker 2: the charts, and I am expecting in your term correction.
Speaker 2: The question is, which would be normal? Is what you
Speaker 2: do if we get the debt? And I think that
Speaker 2: you'd want to buy the debt. And I say that
Speaker 2: because you know, I've been calling this a bub for
Speaker 2: a while, but it's maybe a bubble if you look
Speaker 2: at trailing P multiples or one year four P multiples.
Speaker 2: But if in fact we've had an inflection point on
Speaker 2: the technology curve, if we've had a model shift when
Speaker 2: it comes to what AI is going to deliver in
Speaker 2: terms of future profitability and productivity, I'm thinking that the
Speaker 2: market is sending you a message that it is taken
Speaker 2: that investors have basically lengthened their time horizons. So all
Speaker 2: the classic evaluation metrics that I've been using, I'm not
Speaker 2: going to say they're obsolete, but they're probably just not
Speaker 2: relevant to today's backdrop. So I would say that, yeah,
Speaker 2: I guess if you can want to color me more
Speaker 2: probably more positive on the stock market on a secutor basis,
Speaker 2: based on everything that I've seen this year in particular,
Speaker 2: then yeah, I would say that, you know, expect the
Speaker 2: near term correction. I think it would be normal considering
Speaker 2: the nose levels rat However, I think it's a depth
Speaker 2: that you probably will want to buy.
Speaker 1: We're out of time, but next time you're on, we
Speaker 1: want to talk to you about Canada as at fifty
Speaker 1: first State and I'll love to see how that goes.
Speaker 1: David Rosenberg's with Rosenberg at Research