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Strategies & Market Trends : The Residential Real Estate Crash Index
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From: John McCarthy9/12/2009 1:52:16 PM
of 306849
 
David Rosenberg - Barrons - Sept 14 - Page 34-35

* Favors Bonds over Stocks

* SP Earnings this yr $50
* SP Earnings next yr $60

* How? - cost cuttings + 6% productivity
* Never in history have seen this before

* Cost cuttings (firings) = weak aggregate demand = weak revenues

* The key word is "sustainability" and market expecting
+40% EPS growth. ... thats a little too much.

* GDP 09 down -2.5% (annual)
* GDP 10 +1% to +2% (annual)

* 10 Year Treasury

-- Inflation expections to come down

-- Inflation = wages , credits , rent
all 3 heading lower

-- rents (deflating) for 1st time in 17 yrs and
equal 30% of CPI

-- 10 YRS have locked in a 2% to 4% range
and very high probability of yields at or
below 3%

* Deflation driven by insufficent demand
and excess capacity (my interpretaion of
what he said)

* Why bonds over stocks
Equities de facto priced for 4% GDP growth.
Bonds priced for 2% GDP growth.

* If SP priced at 840-850 he would be liiking
at equities.
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