Seeking Alpha

The Fed is likely to stick with ZIRP through 2018, says David Rosenberg, in his chart-filled...

The Fed is likely to stick with ZIRP through 2018, says David Rosenberg, in his chart-filled outlook for 2013. He's guardedly bullish on stocks, not because earnings or the economy are set to power forward, but because real interest rates are set to remain negative for so long.
Comments (27)
  • hedge....
    21 Dec 2012, 03:24 PM Reply Like
  • bbro,


    Info is info regardless of source. You should click the link. It's interesting.
    21 Dec 2012, 05:19 PM Reply Like
  • Galt I have been following Rosenberg since 2002 he has had a lot of good
    stuff in his studies ( especially 2002 to 2007)...he was spot on for the upcoming crisis in 2008 and conversely he has committed the error of staying married to his
    ideas since then...


    P.S. Anybody who shows you a Debt/GDP chart should be required to show you a Debt to Assets and a Debt Service to GDP chart....
    22 Dec 2012, 12:42 AM Reply Like
  • bbro,


    I also have been following him since 2008 which depending upon how you look at it has been both a massive success and a failure if you followed his advice all along.


    He advocated gold/silver for a long time, corporate debt, high-yield, commodities, treasuries and some other interesting stuff all of which have performed massively well since the meltdown.


    However he was clearly wrong on the S&P from 2009-2010 (late) before becoming constructive on what he calls SIRP (Safety and Income at a Reasonable Price) which was a positive call on the defensive sectors with high dividend yields. Overall for about a 1 1/2 years he has been pretty positive on select US equities.


    For me the bond call has been a miraculous payoff especially considering that it was very contrarian all along the way from a 4% plus 10 yr to the current level. No one with the exception of Rosie, Hussman, Shilling, and a few others made this type of bold call.


    Everybody was expecting rates to rise so if you believe that you would have missed this run.


    Now however the domestic bond run on price appreciation is dead . If we get strong growth then the short will be the winning trade of this next cycle.


    I have always enjoyed our conversations.


    Good luck. Merry Christmas.
    22 Dec 2012, 12:06 PM Reply Like
  • And what will change to make the FED change their policy 5 years from now? We certainly won't be in a robust 3-4% GDP growth spurt?
    21 Dec 2012, 03:30 PM Reply Like
  • Buy bonds today and lock in zero return 5 years from now...if you are lucky...
    21 Dec 2012, 03:54 PM Reply Like
  • Zero return is better than negative. I can get 2% CD's at my local credit union.
    21 Dec 2012, 04:01 PM Reply Like
  • 2016 you will have booked a cool 8% total return....guess you are hoping the Mayans are just tardy...
    21 Dec 2012, 05:13 PM Reply Like
  • 8% compared to what?
    24 Dec 2012, 12:16 AM Reply Like
  • And this is news? Everyone knew this from 2009 onwards. What did people think the Fed will do? Raise rates and let the country go into a Greater Depression? First year economics students knew that monetary policy was going to be accomodative.
    21 Dec 2012, 04:13 PM Reply Like
  • The Fed will raise rates when the inflation rate is high enough such that higher nominal rates will still be substantially negative in terms of real rates once inflation is factored in.
    21 Dec 2012, 04:16 PM Reply Like
  • The Fed is not likely to raise rates until the inflation rate is high enough such that higher nominal rates will still be substantially negative in terms of real rates once inflation is factored in.
    21 Dec 2012, 04:19 PM Reply Like
  • Financial repression will not solve our growth problem, including a relative dearth of private investment.
    21 Dec 2012, 04:35 PM Reply Like
  • What needs to be financially repressed is the Fed, federal government, and multiple banking scams. The economy and individuals would recover if we can just get rid of the central planners, banks scamsters, and political morons.
    21 Dec 2012, 11:48 PM Reply Like
  • Back to the stone age I say!
    21 Dec 2012, 11:50 PM Reply Like
  • Good grief. If zero interests rates haven't worked by now, why does anyone thing they will work next year.... or the year after....


    Raise interest rates to 2.5%.


    Go in front of Congress and tell the American public the truth. Congress has spent this country into oblivion. They are a bunch of gutless wonders. The deficit must be drastically reduced and public spending has to be deeply cut.


    Until then we really don't need to hear any more blathering from the Fed chair.
    21 Dec 2012, 08:52 PM Reply Like
  • They haven't worked? ROFL! What do you think keeps on dropping the unemployment rate? And why raise it to 2.5%? Why not 25%?
    21 Dec 2012, 08:54 PM Reply Like
  • What keeps dropping the unemployment rate? People leaving the workforce.
    21 Dec 2012, 09:27 PM Reply Like
  • ROFL. You mean the retiring baby boomers?
    21 Dec 2012, 09:31 PM Reply Like
  • macro,
    Why don't you check the continuing drop outs in the overall labor participation rate if you really want to know what is happening with the unemployment rate. And do explain why the overall labor participation rate is the lowest it has been in decades .... certainly has nothing to do with zero interest rates.
    21 Dec 2012, 09:34 PM Reply Like
  • It's simple. The baby boomers are retiring.
    21 Dec 2012, 09:35 PM Reply Like
  • Actually, I believe the percentage of working elderly is higher than before the recession.


    If anything there has been an increase in the number of boomers moving to disability in their 50's as an early retirement program.
    22 Dec 2012, 07:46 PM Reply Like
  • Boomers are aged 48-66 in 2012.


    Very, very few Boomers are retiring.


    You have been trotting out anti-Boomer sentiment for fifteen years now, at which point Boomers were aged 33-51.


    As anyone NOT biased towards 1/3 of the US population - and probably 1/2 of activist voters - knows:


    Boomers are the best-educated generation in American history, with a such a high proportion of professionals, it will probably never be duplicated by future generations.


    Boomers are the vast majority of small business owners.


    Boomers are the vast majority of members of Congress and the executive branch, both on the national and state levels. (The judicial branch is still crowded with those in Boomers' parents' generations.)


    Boomers occupy the majority of upper management positions across all industry sectors, even tech.


    Boomers are in the majority among money managers, wealth managers, and family office managers.


    Boomers - and Boomers' parents - are still the vast majority of active investors - and probably active traders.
    22 Dec 2012, 11:36 AM Reply Like
  • The fall in unemployment is due to self employment. I know a lot of people on food stamps, without medica, who are repairing appliances, doing manual labor and with food stands that are selling fruits and vegetables on the side of the road. Many live in Govt housing.
    Issue is when the Mexicans left that hole was filled by US citzens working under the radar. There is a large labor underground rising which will soon eclipse the above ground labor.
    22 Dec 2012, 02:53 PM Reply Like
  • Somewhere over the past 8 years we turned a structural corner in our economic history. Too many people are still trying to make sense of it with outdated models and stats. Other people never made the jump and sadly never will. This is the new economic reality. It's not black or white, but more a shade of grey. It's also the natural course of progression. There is a good deal of opportunity and money to be made, but it will not be in the old ways.
    22 Dec 2012, 06:28 PM Reply Like




    It seems quite a few people have forgotten what their grandparents learned the hard way. Folks, we are NOT on a gold std - since 1933. Didn't you notice?


    There is a difference between a fiat CURRENCY ISSUER and the CURRENCY USERS. A currency ISSUER manages a real-goods/capabilities budget, and uses fiat currency entirely for internal bookkeeping (no different than how a math teacher has a class utilize numerals). Currency USERS utilize that currency as an accurate proxy for their local real-goods/capabilities budgets (and can forget how fiat currency works, if not educated). It's not the buying power of a given dollar you need to worry about, it's your net income, your net savings and your economy's net liquidity as endless options requiring liquidity present.


    For a country to GROW it's economy, the fiat currency supply (aka, liquidity) absolutely must grow constantly. What does FIAT mean? It means we (aka, our Treasury Dept, aka, our Gov) does not GET fiat from anywhere. Taxes are irrelevant to the issuer of a fiat currency. "Revenue" has no meaning to a fiat currency issuer - only inflation/deflation, and REAL economic growth.


    see page 35 here
    Taxes for Revenue are Obsolete (it's a nice discussion, from 1944)


    Anyone reading these links above - from the folks who guided us off the gold std and through the mind-boggling expansion of WWII - will get a chance to absorb what your grandparents knew, and hence adjust your perspective accordingly.


    Everything about monetarism conflates our fiat-std with the gold-std paradigm. Reality is that nearly everything about fiat currency is SUPPOSED to float freely. Our real race is to use that policy agility to continuously expand national goals, grow capabilities, maximize employment, and minimize our Output Gap. We can make things ridiculously easy in this country by working together (teamwork?), or decline by going back to the European model of trying to sequester "money" from our neighbors.


    How is it that we can win WWII, put a man on the moon, and create computers, cell phones & the internet ... yet we can't grasp something as simple as a spread-sheet-based fiat currency system?


    Ben Franklin did.
    “Benjamin Franklin And the Birth of a Paper Money Economy”
    24 Dec 2012, 11:26 AM Reply Like
  • It's amazing how many economists - and investors - no longer know these simple facts. That ignorance is killing our country, by allowing policy to revert to the low of mercantile feudalism - which is very low indeed.


    Without understanding context, we end up with local tactics masquerading as national goals, policies and tactics.


    How the hell are you supposed to invest wisely on a personal level, while the entire ship is sinking? That's like collecting wood by drilling and hoarding plugs from the hull of your cruise ship. We have to co-invest in both micro- and macro-economics, which means investing in our platform of democracy, not just hoarding liquidity units.
    24 Dec 2012, 11:33 AM Reply Like
DJIA (DIA) S&P 500 (SPY)