Rosie is wondering if we're already in recession

Rosie May Be Right: Cash May No Longer Be Safe

David Rosenberg points out that financial repression could go on as long as 2018, here:

[T]he Fed said in its December post-meeting press release that it will not budge from its 0% policy rate until the U.S. unemployment rate drops to 6.5%. It is currently around 8%.

We have done estimates based on various assumptions and found that achieving this Holy Grail likely takes us to the opening months of 2018 or another five years of what is otherwise known as financial repression.

People think their money is safe in cash, but it isn’t.

Following on that, just compare cash in the form of Vanguard's Prime Money Market Fund with stocks in the form of Vanguard's Total Stock Market Index Fund over the last five years and you will see that while cash was relatively safe compared to stocks for the four years up to May 2012 with stocks mostly underperforming cash, since then stocks have firmly broken out, as of about May 31, 2012 (the dot on the chart grabbed from Morningstar).

The only problem is that with a Shiller p/e today of 24.26 it's an awfully rich time to be investing in stocks which have reached new all-time highs.

And the alternatives don't look very attractive either.

At this hour the gold/oil ratio stands at 15 indicating that relative to each other their prices may have normalized but both at high levels relative to the long term.

Housing prices also are at the far upper end of the long term trend prior to the bubble.

And the bond market is within 2% of its highest valuations and also remains expensive to buy.

In my humble opinion the smartest thing to buy under these conditions is any long term debt one may be carrying at a rate of interest higher than about 3.5%. To retire it one would have to deploy capital, i.e. savings, but you can hardly lock in say 6.25% for twenty or twenty-five years anywhere else more easily than by retiring a 30yr-mortgage taken out at that rate in 2007. Bonds have returned less than 5% annually over the last ten years, and one year returns have fallen below 3.5%.

Still, there is no substitute for savings.

The surest way to get a 10% return is to save one dollar of every ten earned.

Stunning GDP Drop Stunning To Everyone But David Rosenberg

(This post has been corrected).

Before the election, here, David "Rosie" Rosenberg actually predicted a negative GDP print in Q4 due to Hurricane Sandy. That GDP actually came in at a only slightly negative 0.1% is beside the point. In Q3 2012 the annualized rate of growth was reported as +3.1%. That means that during Q4 the annualized rate of growth hit a brick wall to decline by over 100%. If all it takes is a category 1 hurricane to send the greatest economy in the world negative, we are in sorry shape indeed.

Busted GDP. Busted Inaugural JumboTron. Busted Presidency. Busted Country.

Look For A Negative GDP In Q4 Due To Sandy, Says Rosie

Here.

Rosie Agrees: The Market Cheers Bad News, Because That Means More Stimulus Is Coming

Here's Rosie:

It's gotten to the point, he said, where the market actually cheers bad news . . ..

"We're back to the situation where for the stock market bad news is good news, because the good news is that we're going to get more gobs of stimulus to push asset prices higher at least over the near term," he said. "That's a driving factor behind this recovery that we've seen in the stock markets globally in the past month or so."

After Two Years, Bear David Rosenberg Finally Throws in the Towel

“This is not about throwing in the towel; it is an acknowledgement of what the market internals are flashing at the current time from a purely tactical and technical standpoint.”

“The (US dollar) is on a one-way ticket south and so far has been orderly—will that be sustained is anyone’s guess."

“For now it is being viewed as fodder for the global liquidity and risk-on trades.”

"[The tech rally] is a clear sign that the big boys are putting money to work."

“Market internals are too strong to ignore right now—NYSE advancers beat decliners by a 3-to-1 ratio (Tuesday); the Dow transports soared 1.9 percent; and the small caps beat their major benchmarks."

“My overall macro concerns have not gone away, but these market facts on the ground are tough to ignore.”

-- David Rosenberg, quoted here

GDP for Q2 2010 In Context

"Historically, four quarters following a bottom in GDP, growth is running over a 6% annual rate. Rejoicing over 1.6% because it wasn’t 1.4%, particularly in the context of the most radical bailout, monetary and fiscal stimulus in U.S. history, totally misses the point that we are operating in a totally abnormal and fragile economic environment."

-- David Rosenberg, quoted here

"Bond Markets Tell Us We Are Already In Depression"

Ambrose Evans-Pritchard had a memorable line in a posting July 27th which is apropos after Friday's stock market rally despite so much bad GDP news yesterday:

As David Rosenberg at Gluskin Sheff reminds us eloquently every week, the bond markets are telling us that we are already in a deep and intractable depression – which does not preclude Japanese-style rallies, technical recoveries, and bursts of growth, all within a Kondratieff Winter.

Depression Caliber Statistics

From Ambrose Evans-Pritchard at The UK Telegraph:

The broad U6 category of unemployment rose to 17.3pc. . . .

Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. . . .

The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of "option ARM" contracts due to reset violently upwards this year and next. . . .

David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War. . . .

For the record, manufacturing capacity use at 67.2pc, and "auto-buying intentions" are the lowest ever. . . .

The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc. . . .

To read the whole thing, go here.