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Video: Rosenberg bullish on energy stocks, cautious on growth due to oil shock

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February 28, 2011 – Comments (13)

Don't know if this was already posted, but this is an excellent interview with David Rosenberg.

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Rosenberg bullish on energy stocks, cautious on growth due to oil shock
Markets | Edward Harrison | 26 February 2011 11:45

http://www.creditwritedowns.com/2011/02/rosenberg-bullish-on-energy-stocks-cautious-on-growth-due-to-oil-shock.html

Earlier in the week, David Rosenberg wrote that he is bullish on energy stocks due to the exogenous shock that tensions in the Middle East are creating in the energy complex. However, this is not a bullish story for overall U.S. growth or for business profit margins. In the Bloomberg video below Rosenberg tells Margaret Brennan that he believes U.S. growth will slow in the second half of the year due to rising oil and food prices and the anti-stimulus state and local governments will apply starting in July for fiscal year 2012. Rosenberg points to the huge downdraft in Treasury yields as an indicator that this is a deflationary shock rather than an inflationary one.

The key to whether this shock is fatal for a nascent recovery has much to do with Saudi Arabia, Rosenberg says. He wrote:

    "If Libya can spark a $10-a-barrel response, imagine what a similar uprising in Saudi Arabia could unleash. Do the math: we’d be talking about $200 oil."

Indeed, the Saudis are the key, not just in terms of threats over regime change in the Middle East but also in terms of increasing supply to meet global oil demand.


Watch the Bloomberg interview here

13 Comments – Post Your Own

#1) On February 28, 2011 at 1:27 PM, checklist34 (99.73) wrote:

rec.  the bullishness on oil stocks is nearly universal,... Wall Streets net long position in oil is at record levels, exceeding 2008 levels handily, oil has momentum, oil has "a good story", self fulfilling prophecy may be inevitable at least for a time. 

We really need to curb commodity speculation.  Stock speculation possesses the ability to hurt the participants, commodity speculation and bubble-blowing possesses the ability to hurt everybody.  

But, when Wall Streets fast money comes out of oil, it could have a whole lot of downside.  

Rosenberg is perpetually bearish. 

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#2) On February 28, 2011 at 1:47 PM, binve (< 20) wrote:

checklist34,

>>the bullishness on oil stocks is nearly universal,... Wall Streets net long position in oil is at record levels, exceeding 2008 levels handily, oil has momentum, oil has "a good story", self fulfilling prophecy may be inevitable at least for a time. 

Agreed.

>>Rosenberg is perpetually bearish. 

This is a false statement.

Has he been bearish on the US economy and most developed economies since 2007? Yes. Has he been bullish on this stock market during most of this spectacular rally? No. But he has a long track record of being bullish when it was contrarian (in the early 80s) and being bullish when it was obvious that the economy had recovered (late 80s and 90s).

Also, he is not bearish on everything. He has been bullish on Gold, Oil, and corporate bonds since late 2008 and has called the Government bond market trends for a long time.

Not being bullish on general equities or the econmy doesn't mean one is bearish on everything else.

Also, I agree with Rosenberg's list of what would make him long term bullish again on both equities and the economy. And moreover, I think these things will eventually occur. I always have been and remain a long term optimist: http://caps.fool.com/Blogs/intermediate-term-bullish/526187..

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#3) On February 28, 2011 at 2:12 PM, checklist34 (99.73) wrote:

Binve,

    I can't recall a bullish comment from rosenberg in my 25-26 months of involvement in the markets.  

http://www.businessinsider.com/henry-blodget-merrills-rosenberg-goes-out-swinging-just-a-suckers-rally-2009-5

http://finance.yahoo.com/tech-ticker/article/yftt_211995/Enjoy-the-Sucker%27s-Rally,-Says-Merrill%27s-Rosenberg?tickers=^gspc,^dji,^ixic

     Good calls.  He strikes me as a permabear because he tends to speak in absolutes and I cannot recall him being bullish on the economy in my time (2 years) of paying attention.

     It would be true that my interests over those two years have been essentially only US equities, and, so, the economy, so his comments on other topics I would not have been likely to follow. 

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#4) On February 28, 2011 at 2:14 PM, checklist34 (99.73) wrote:

We are in essential agreement over the bear market and eventual return to a secular bull...  from opposite sides of the fence I guess.  And that gold is a bubble, but again from opposite sides.  Vewwy eenteresting.

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#5) On February 28, 2011 at 2:19 PM, binve (< 20) wrote:

checklist34,

>> He strikes me as a permabear because he tends to speak in absolutes and I cannot recall him being bullish on the economy in my time (2 years) of paying attention.

Seriously? If you are bearish for two years you are a permabear?

Isn't your statement full of absolutes? You listened to somebody who has decades of market experience for all of 2 years and you then take that position and distill it down into one word: permabear. Without even researching his past calls and stances (or even really acknowledging current calls and stances outside of equities).

That just seems very odd.

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#6) On February 28, 2011 at 2:35 PM, checklist34 (99.73) wrote:

Fair enough...  I should have said "he is consistently bearish in my epxerience".  I certainly have no recollection of his views in the early 80s.  And he was, angrily if I recall, bearish with the S&P down 50% from its previous highs and down 50% over 9 years... 

that doesn't really strike me as a balanced, clinical outloook.  

I classify market commentators into three boxes... to avoid "perma" I'll say "consta" or "generally"

generally bulls:  folks who are generally bullish and as such in happy times you have to mildly discount their arguments

generally bears:  folks who are generally bearish and as such you have to take them with a grain of salt when they are talking bearish

floppers:  folks who flop positions.  Inside floppers we have

momo floppers:  people who flop their opinion with the market action.  

contra floppers:  people who tend to always go against the grain of the market and...

accurate floppers:  I don't konw of one of these in my reading.  Doug Kass has been fantastically accurate in flopping bullish, but tends to turn bearish early in rallies.  He's an accurate/contra flopper.  

Going with the "real money silver" cast:

kass:  contra/accurate flopper

cramer:  momo flopper perhaps

marcin/casa:  generally bearish

etc, etc.  

Rosenberg is firmly classified as "generally bearish" in my system, and it seems like it would be difficult to argue that (if you please, think over the last 2 years).  

Fair enough?

 

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#7) On February 28, 2011 at 2:53 PM, binve (< 20) wrote:

>>Rosenberg is firmly classified as "generally bearish" in my system, and it seems like it would be difficult to argue that (if you please, think over the last 2 years).Fair enough?

Yes, I think that is fair and said exactly the same thing in my response to you in comment #2.

I just think that the terms permabull/permabear have become overused hyperbole. It's now used to the point where someone takes the time to lay out a thesis for why they think the way they do, and then the response is 'Don't pay attention, they are just a permabear'. As if this was proof of a point somehow.

The problem is, there are many valid and thoughful points that some make who are labeled permabears. Then there are also invalid and hyperbolic points made by others who are permabears. So continuation of terms like that makes no distinction among opposing viewpoints, they are all lumped into one group.

I know from experience, I have previously (and regretablly) resorted to using hyperbole in my writing before. I thought that it would drive my points home. But the opposite is true. Hyperbole is not only polarizing, but it ususally covers up a lack of understanding.

And I fully admit that I do not understand everything, and that I have allowed my opinions to be change by both bullish and bearish writers. I try to be more discerning in who I choose to read, but also in my own writing. I have tried to tone down my opinions and to stick to facts or observations that I think are relevant to either the markets or macroeconomics. I think I have been mostly successful with that over the last several months, but it is a process of continous improvement for me.

In that vein, I have been looking for (and writing about) bullish macro developments that I see, whereas in the past I would discount or ignore them. I fully admit that I have been very unbalanced in the past and I am trying to be more balanced now and in the future, in my investing/trading thoughts and blog writing.

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#8) On February 28, 2011 at 3:06 PM, checklist34 (99.73) wrote:

Binve,

     stating an opinion here, from my own perspective.  Many if not most bearish pundits have been so consistently bearish throughout as to have drifted a ways into the "little boy who cried wolf" camp.  I do celebrate this, rather I lament it, as it diminishes their predictive value and increases the odds taht I get caught with my pants down as something goes afoul.  That is part of the reason for my ongoing caution this year.  A broken clock and all of that...

     Its like relationships.  If you gripe at a kid or spouse or girlfirend or boyfriend all the time, after a while they just don't care anymore what you have to say.  The key is to get upset over things that really matter when they really matter and then they actually care if you're irked at them.  

     From my spot in the cheap seats most bears are so constantly bearish, and so dramatically bearish, as to be not listenable to.  The dollar isn't likely to suffer weakness, its  going to collapse.  The S&P won't see another drop before the secular bear ends, its going to 200.  And so forth.  The US is zimbabwe, a banana republic, on and on.

     I guess, and I'm not saying this is right, I sort of hold the opinion of everybody who was angrily and hugely bearish in march of 2009 in... low esteem.  Rosie included.  Maybe that will one day prove to be to my chagrin.

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#9) On February 28, 2011 at 3:25 PM, checklist34 (99.73) wrote:

well man, I think you're one of the best contributors on CAPs, for whatever its worth.  There are alot of smart folks here, for sure...  frankly, I think CAPs is the best collection on the web.  Somehow seekingalpha is just too commercialized to interest me, I rarely read it.  

 

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#10) On February 28, 2011 at 3:27 PM, binve (< 20) wrote:

checklist34,

I agree with pretty much all of this.

The key is to be intellectually and analytically honest enough to admit when you are wrong, and to revise your opnions and writings in the face of new / contradictory evidence. I certainly have been wrong and fully admitted it. This rally is built on the back of some honest-to-goodness economic fundmanentals. I used to discount that, and even deny it, but that is what is going on.

Now, does that mean that fundamentals are the only thing accounting for the rally? Not a chance. Is there a huge speculative component associated with it? Absolutely. I think this is true for every bull market as well and they are different only in matters of degree. However the problem before analysts is "what is more important? the fundamentals or the speculation?". If you are bearishly inclined, you will say speculation and if you are bullish, you will say fundamentals. But I think the honest answer is: both. We have positive and increasing fundamentals right now, and you really have blinders on if you don't admit that (and I used to have blinders on).

So in the face of overwhelming evidence against my previous uber-bearish stance, I had to change my stance. I have to be honest with myself and my analysis and admit that.

I am still wary about the long term nature of the recovery. It was driven by government stimulus. I am not convinced that there is enough organic growth to turn this into a secular bull economic period. So my expectations for this cylical bull market rally remain tempered. And even though I expect it to continue for years, I don't think it is a secular bull market.

And if that turns out to be an incorrect position, that I will have the honesty to admit that as well.

But I feel much more comfortable that I am being much more open in my thinking and analysis and considering both bullish and bearish drivers for both the stock market and macro environment.

So when I do point out comments made by David Rosenberg, I do so because I think they are valid / useful points, and not necessarily because I am being overly bearish. I have made several bullish observations as well the last couple weeks.

This market seems like it is at an inflection point and is waiting for a catalyst to make up its mind where to head for the next 3-6 months...

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#11) On February 28, 2011 at 3:30 PM, binve (< 20) wrote:

checklist @ #9.

Thanks man! Seriously, I appreciate that. About a year ago, I was annoyed how you came onto my blog and started tearing all my opinions apart :) But you honestly did challenge my opinions and forced me to reconsider them by making exceptionally valid observations of your own. I have read every single one of your blog posts since then :) Thanks!.

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#12) On February 28, 2011 at 11:42 PM, checklist34 (99.73) wrote:

binve, ...  I appreciate your comments in #11. 

My rants about cults and negativists and so forth are, of course, partly self indulgent, it feels good to blow off some steam in the direction of people or things that frustrate us.  But also...  I have the most sneaking feeling that another great buying opportunity is probably going to occur in the next 5-10 years, and I wouldn't be surprised if we got 2.  And I hope to get some people to buy them and not remain completely negative if we ever see a market down 50% again. 

 

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#13) On March 01, 2011 at 10:28 AM, binve (< 20) wrote:

Absolutely checklist. I don't always agree with all your opinions, but I always do read and consider them.

I completely agree here. I do think the secular bear will end in the next 5-10 years, and that is the buying opportunity that I am waiting for. That is when I sell all my Gold and buy stocks will both hands. I will likely be the biggest bull you have ever seen (well maybe not, but I will be pretty darn bullish).

We have the innovation, drive and (ultimately) the willpower to restore our economy. Science and Technology will lead the way. I think there is still a huge amount of unhealthy activity that needs to be cleaned up first and I think that will be the purpose of the final leg of the secular bear. And with a little poltical good fortune, laws like Glass-Steagall will be reinstated.

I honestly think as painful / violent / volatile has the next 5-10 years will be be (like the last 10) there has never been a better time to be an investor. Right now I am a trader. But I am looking forward to the day where I can be an investor again. I am just being very patient in awaiting for my opportunity. I don't want another crash. I don't want people to suffer in the stock market. But I think it is a very likely event (likely, if not unaviodable). So my uber-bullishness is still waiting until I see the US economic fundamentals and macro turn around and align with a potential beginning for a secular bull stock market.

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