Interview With David Rosenberg: “To Bet on Inflation is to Bet Against Human Ingenuity”

hank

Highly respected economist David Rosenberg was mentioned in this week’s Barron’s (“Up & Down Wall Street” column). This interview from a month or two ago is very in depth. Honestly, I haven’t fully digested it all yet.

A few excerpts:

“There are bubbles everywhere: residential real estate, equities, corporate credit, cryptos. But there is nothing in my interest rate forecast that is bearish for risk assets. Because in the final analysis, the central banks have to offer a policy based on the real economy. Without doubt, the valuations are crazy, and there will be a day of reckoning. It’s just not clear that it will be in the next twelve months.”

“We can argue if (bonds) are a good investment. But if you agree with my view, they will be a good trade. If you have anything remotely close to a contrary antenna, you have to be owning Treasuries right now, I mean the very long end of the curve. That will generate the biggest return.”

“If you’re looking for a hard asset that is unloved and underowned, gold and gold mining stocks will be a very good place to be. Very recently, gold has been firming despite a strong U.S. dollar. If I’m right with my forecast and the dollar depreciates next year and real interest rates stay negative, this will be a very important tailwind for gold.”

Interview

bee

Thanks @hank...great interview.

I have been impressed with FRIFX as a Real Estate Income Fund. This was a favorite of @catch22. FRIFX has has a great 2021 and in terms of Rosenberg call for lowering interest rates I believe it will continue to perform well into his "lowering of interest rate" call.

As for Japan, Matthews (MJFOX) and T Rowe Price (PRJPX) have highly rated Japan funds as well as Hennessy (HJPNX).

yogibearbull

FRIFX is a good real estate hybrid - RE stocks & bonds. It did have a terrible 2020 when both real estate stocks and bonds were badly hit. It is less volatile than all-equity VNQ, FRESX, etc.

sma3

Will read the article but it is a rather odd title. I was alive in 1970-1981 when the federal funds rate hit what? 12 14%? My first mortgage in 1984 was at 11.5%

Somehow all the humans I knew then seemed pretty ingenuous.

hank

Rosenberg seems to think both long duration bonds and gold are an attractive play.

I’d actually intended to make a small spec play today with a bet on on GLDB, which combines a gold position with investment grade corporate bonds. Looking at the substantial damage today to that “cocktail” brew (the fund’s down nearly 2%), I decided to stay put. By chance, I rebalanced Friday and sold off a bit of OPGSX. That proved fortunate.

Predictions ….. Who the f knows? I agree somewhat we’re in a bubble. But, as Rosenberg mentions, it could continue on for years. The action today is nasty in the metals and bond markets for sure.

Thanks @bee for noting. It is one of the more in depth interviews I’ve seen.

yogibearbull

Keep in mind that David Rosenberg is among generally bearish strategists and he has been so for a long while. He was formerly with ML/BoA and Gluskin Sheff. He started his own consulting in 2020.

catch22

I read David Rosenberg for a few years after the market melt of 2008 and agree with @yogibearbull, that Mr. Rosenberg, much of the time seemed to be on the edge of "don't invest in equity right now". Perhaps his investments were heavily damaged in 2008 and that he remained "twitchy".
FRIFX is a unique fund in the real estate area, maintaining somewhat of a balance between equity and bonds. Many of the bonds ARE NOT investment grade. I did invest in this area after 2008 for a few years.
Surprisingly, in the chart below; FRIFX did well during the chart period, relative to the more heavily positioned in equity of the other funds in the comparison.
Being curious about the investments mentioned in this thread:
Below chart is for FRESX, VNG (Vanguard real estate eft), FREL (Fido real estate etf) and FRIFX

CHART Chart limited to start of Feb. 2015 due to an inception date for FREL. At the left bottom edge of the chart, one may select the "red and green" icon to display a bar chart for the returns period.

hank

yogibearbull said:

Keep in mind that David Rosenberg is among generally bearish strategists and he has been so for a long while.

Yes, of course. I should note that (while not a sharp strategist like Rosenberg) I am also bearish on many risk assets. (I’d compare investing in today’s environment to navigating a minefield.) So I tend to post articles that coincide with those views.

Note that Rosenberg isn’t calling for a “meltdown” this year or next. He’s concerned about over-valuation in many (not all) risk assets … but also believes that situation could persist for many years. One must also take note of the euphoria among small investors. In the past that has often been a sign of market tops. That all makes our jobs as investors harder. But neither he nor I would recommend avoiding equities or other risk assets (like higher yielding bonds) altogether.

If you are young (under 50) I believe you should be dollar averaging into equities for the long run - regardless of your view of valuations. Time cures a lot of missteps. If you are much older and in “preservation mode”, keep in mind that a 25% portfolio loss requires about a 33-34% gain just to get back to break-even.

Thanks @Catch22 for the insights.

davfor

catch22 said:

Below chart is for FRESX, VNG (Vanguard real estate eft), FREL (Fido real estate etf) and FRIFX

CHART Chart limited to start of Feb. 2015 due to an inception date for FREL. At the left bottom edge of the chart, one may select the "red and green" icon to display a bar chart for the returns period.

Thanks for the hint about the icon. I have been using these charts since losing the ability to save comparative charts using M*. But I hadn't thought to switch to the bar chart view to compare the cumulative returns for the selected time periods.

catch22

Hi @davfor
ALSO, when in the bar chart mode for comparison; one may right click anywhere on the chart and select the last item in the drop down menu....."Performance sort ON". With this, regardless of the order one has entered the "tickers" originally for charting the "order" of performance will now start on the left with the best percentage performance, for all tickers being compared. You may toggle back to performance "OFF", if not desired.