Big Bear Rosenberg and the Great Rally

Bear David Rosenberg wrestles with the uber-rally on CNBC Monday morning:

Comments

[TheFounder:]

I would have to agree with David on all counts.

Oct 20 08:23 AM

[peterthepai...:]

I cannot see how this analysis can be faulted...

Oct 20 09:29 AM

[Ricard:]

Marc Faber:

Don't underestimate the power of printing money.

Oct 20 10:06 AM

[Oscar Sahlberg:]

David is a great commentator but he's not really been disciplined by a daily P&L at ML. Maybe GS+A will be different. Also there is the time-portal fallacy (nicely delineated in DE Shaw's market insights in july 2009) which a lot of these sophisticated market strategies exhibit...

Oct 20 06:12 PM

[untrusting ...:]

Oscar,
The time-portal fallacy (D.E.Shaw) basically deals with ranges of possible outcomes, for example in a trade or an insurance contract. And further it states that even though in the LT a highly possible outcome is likely, there certainly can be great divergence from the highly possible outcome in the ST or medium term ( the time-portal from start to finish of the transaction).

And Shaw goes on to show how that is precisely what essentially happened in AIG and caused failure in AIG via derivitives. In effect the low probability that derivitive/insurance contracts would fail by maturity of the derivitive/insurance proved wrong in the ST as the margin/collateral calls in the ST effectively bankrupted AIG in the ST.

With regard to David Rosenberg, he does present pretty compelling arguements why the market is significantly overvalued, based on virtually any fundamental or past recession metrics. And in our view he is very likely correct. However, as per the time-portal fallacy , he is simply incorrect in the ST. Mainly because of the real factors that are driving the market upward at this point such as:1) massive Fed liquidity, 2) ultra low interest rates, 3) steep dollar devaluation, 4) hugh trading volume dominance by a handful of prop trading desks and HFT's. None of which are sustainable as a basis for the rally.

Thus Rosenberg will probably be correct, and a significant downward correction in the market will happen. The big question is when? Who knows, but our guess is sooner rather than later. One would have thought that it would have started already, but then again there is that time-portal fallacy in action yet again.


On Oct 20 06:12 PM Oscar Sahlberg wrote:

> David is a great commentator but he's not really been disciplined
> by a daily P&L at ML. Maybe GS+A will be different. Also there
> is the time-portal fallacy (nicely delineated in DE Shaw's market
> insights in july 2009) which a lot of these sophisticated market
> strategies exhibit...

Oct 21 01:13 AM