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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (49296)	4/5/2006 10:59:47 PM
From: regli	Read Replies (4) \| Respond to of 116555

I am not saying that he was necessarily right <g> but here is a summary of his comments by Daniele Di Martino from Dec 2004: risk-adjusted.com "December 20, 2004, DALLASNEWS.COM, "Fed's Fear May Be Inflated:" This article by Danielle DiMartino reviews Merrill Lynch Chief Economist, David Rosenberg's recent remarks in a letter to clients in regards to the economy and actions by the Federal Reserve. Key points are: Merrill's measurement of the "augmented" unemployment rate "remains above 8.5%, close to its recession high." "...year-over-year productivity growth stands at 3% - double the normal for a recovery that's just turned 3 years old." "Year-on-year unit labor costs are still south of 1%, no the 4+ percent you'd expect to see at this stage." "The latest urge to merge has resulted in massive layoff announcements, which could slow labor cost growth even more in the year to come." "Every measure of core inflation is running below 2%." He is looking for economic growth to "come in somewhere around 3% for all of 2005, a half-percent below economists' consensus estimate" and that "...the offshoot of economic growth below 3.5% is that excess capacity, especially as it pertains in the labor market, will linger in 2005." The article's author chimes in, "The slowdown Merrill (and everyone else, for that matter) is predicting necessarily implies a slowing in jobs growth." Also, the key for our website page, "if, as Mr. Rosenberg predicts, all of these factors converge, core inflation should fall next year not rise." Thus, it sounds like Mr. Rosenberg is expecting disinflation! Also, he is amazed "at the [bond] market's assumption that the Federal Reserve will raise rates three more times by the middle of 2005." Apparently he is amazed because he thinks the economy is too weak for that. We agree; however, we believe the Fed is really raising rates to protect the dollar and that an unfortunate consequence will be that this managed rate rise is happening in a very weak economy and could cause it to stagnate further and also cause disinflation or even deflation, especially of prices of riskier assets. EDIT And here his bearish introduction at Merrill from CNN: money.cnn.com A Bear in a Bull's World Merrill hires a bearish economist--just as things are looking up. By Anna Bernasek November 10, 2003 (FORTUNE Magazine) – Timing is everything, especially on Wall Street. Last November, Merrill Lynch fired its chief economist, Bruce Steinberg, a 16-year Merrill veteran who had held the post for five years. A perma-bull, Steinberg rose to prominence during the '90s, but as the recession dragged on his bosses deemed him out of sync with the times (so, too, did Merrill's clients, who were suffering through the worst market conditions in years). The irony? Just as Steinberg was on the way out, the recovery that he had been predicting for years finally gained traction. So along comes his replacement, David Rosenberg. Plucked from obscurity, Rosenberg had been working in Merrill's Toronto office for three years as chief Canadian economist. (How many economists does it take to cover Canada?) But Rosenberg was exactly what Merrill brass wanted--someone skeptical about the recovery and not afraid to say so. Trouble is, Rosenberg has stayed glum, but the economy keeps improving. Today he's one of the few bearish economists on Wall Street. ...