David Rosenberg:’The Chicken and the Egg’

Here is David Rosenberg with some critical remarks for market strategist Jim Paulsen of Wells Capital Management.

In his daily note Rosie also points out that while he can’t lay claim to be able to pick every peak and valley, he says he’s been consistent with the view of being halfway through a secular bear market in equities, and he feels he saved people, who listened to his advise, a lot of pain during what economists now call the Great Recession.

Dave, let’s be realistic here. While there is no denying you are a distingusihed economist, the fact is most investors are also screaming in pain for missing a massive 60% market upside as a result of your perma-bearish views on the market and economy.

via Gluskin Sheff

“We sifted through Barron’s over the weekend and found out in ‘The Trader’
column that Jim Paulsen of Wells Capital Management is “a favorite market
strategist”. Well, everyone is entitled to their opinion and we have debated Mr.
Paulsen in the past, and just as we may be looked upon as ‘perma-bears’, he
most certainly is a ‘perma-bull’. We can’t lay claim to be able to pick every
peak and valley but we have been consistent with our view that we are halfway
through a secular bear market in equities, and while we were never quite
optimistic enough during the credit and asset bubble from 2003 to 2007, we
like to feel that we saved people who listened to us a lot of pain during what
economists now call the Great Recession.

We saw it coming, and admittedly we were early on the call, but after re-read
Bob Farrell’s market rules to remember and Charles P. Kindleberger’s “Manias,
Panics and Crashes” and we’re confident that the housing and credit bubble
would collapse under its own weight of dramatic excess. We all make calls
that in hindsight proved to be inaccurate. But the question is where you were
on the really big calls. The calls that really mattered — that actually saved
people their hard-fought wealth and capital. Well, on November 22, 2007, a
month away from the steepest economic downturn since the 1930s, and as a
matter of public record, Mr. Paulsen had this to say:

“This thing hasn’t been about people losing their jobs and their incomes. It’s
been more about CEOs getting fired, banks writing off hedge fund losses and
a showdown between Wall Street and the Fed.”

Mr. Paulsen wasn’t the only one to dismiss the credit bubble bursting and
what was to follow. But just because he stayed bullish and caught this year’s
government-induced rally, pundits like him are now viewed as being a
“favourite” in one of the most influential business journals is rather incredible.
But it does attest to the ‘what have you done for me now’ mentality that has
gripped an equity market that has stayed so short-term focused.

A reader of our daily missives reminded us last week that as for the current
non-fundamentally based situation, we might want to reference the beginning
of Annie Hall when Woody Allen tells the joke about the family thinking about
institutionalizing their crazy uncle who believes he’s a chicken. Here it goes:
This guy goes to a psychiatrist and says, “Doc, uh, my brother’s crazy. He
thinks he’s chicken.”

And, uh, the doctor says, “Well, why don’t you turn him in?”

And the guy says, “I would, but I need eggs.”

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