Financial Thought Leader David Rosenberg is predicting a generational investment shift. The influential Chief Economist and Strategist at Toronto-based wealth management firm Gluskin Sheff recently reversed course on his long standing deflation and bullish bond theme. He believes Federal Reserve Chairman Ben Bernanke’s fight against deflation is working and that we are already seeing signs of inflation emerging and the economy strengthening beyond what most on Wall Street expect. He explains his new call and why investors should be making some proactive changes to their portfolios now.
WEALTHTRACK Episode #1016; Originally Broadcast on October 11, 2013
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David Rosenberg
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Guest Info
DAVID ROSENBERG
Chief Economist and Strategist
Gluskin Sheff & Associates, Inc.
Newsletter
Government shutdowns come and go- we hope! it’s interesting that even after yesterday’s big rally that both the Dow and S&P are essentially unchanged from where they were on October 1st when the shutdown began. As far as the much more ominous debt ceiling debate, both sides are making encouraging sounds, which is exactly what investors had expected them to do. After all, Congress has managed to raise the debt ceiling 15 times in the last decade!
What has been the defining financial trend of the last 30 years? It’s not government squabbling. It’s not even financial crisis. Yes, we had a whopper five years ago, but we also had the savings and loan crisis of the 1980’s and the Asian financial meltdown crisis of the late 1990’s- both huge at the time.
No, the biggest financial trend of the past 3 decades has been the decline in interest rates and the submission of inflation, thanks in a large part to the efforts of Federal Reserve Chairman, Paul Volcker. Volcker, you might remember, came to the Fed in 1979 under the Carter administration when inflation had become a way of life. The consumer price index regularly exceeded 10% in those days. Volcker waged war against inflation by tightening monetary policy, including raising interest rates and the economy went into what was the deepest recession since the Great Depression at the time.
It worked. Over the 80’s and 90’s and inflation has declined and so have interest rates. But ever since the financial crisis current Fed Chairman, Ben Bernanke, has been waging his own war in the opposite direction. He has been fighting against deflation and keeping interest rates low to reflate the economy. How effective will his campaign be?
Very effective according to this week’s guest, Financial Thought Leader, David Rosenberg, who recently reversed course on his long standing deflation and bullish bond theme and now predicts inflation will return and interest rates will rise, which would eventually mean a whole new ball game for investors.
Rosenberg is the influential chief economist and strategist for Toronto-based wealth management firm Gluskin Sheff. His daily “Breakfast With Dave” report is considered must reading by many institutional investors. In his 7 years as Chief North American Economist at Bank of America-Merrill Lynch, he was consistently ranked as an “All Star Analyst” by Institutional Investor magazine.
You can see both the show and our EXTRA session with Rosenberg starting this evening.
Have a great weekend and make the week ahead a profitable and a productive one.
Best regards,
Consuelo
Action Point
CONSIDER ROSENBERG’S “HIRP” INVESTMENT THEME
“HIRP” = HEDGE INFLATION, RISK PROTECTION
– Consider making small portfolio adjustments
– Rosenberg suggests inflation hedge such as TIPS- Treasury Inflation Protected Securities
One Investment
ROSENBERG: SMALL LUXURIES
– Expects higher wages for U.S. consumer
– Buying cable and media companies
“One of our top themes is exactly what I was talking about before, which is what is the source of the inflation? The source of the inflation is coming under the labor market, higher wages. So we want to find those small luxuries that the American consumer, you know, wasn’t participating in over the past few years. So we are allocating more of our equity money into that particular part of the retail space, otherwise known as cable and media.”
– David Rosenberg
Transcript
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WEB EXTRA: An Economist By Chance
David Rosenberg from the Archives
July 13, 2012
The “Financial Thought Leader” who has gotten it right throughout the financial crisis and beyond. What does David Rosenberg, Gluskin Sheff’s Chief Economist and Strategist see in the future now? And why, after years of pessimism, does he believe “the future is brighter than you think?”
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November 11, 2011
The “Financial Thought Leader” who has gotten it right throughout the financial crisis and beyond. What does David Rosenberg, Gluskin Sheff’s Chief Economist and Strategist see in the future now? And why, after years of pessimism, does he believe “the future is brighter than you think?”
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August 13, 2010
A Financial Thought Leader who called the credit and housing bubbles way ahead of the pack. Gluskin Sheff’s prescient Chief Economist, David Rosenberg shares his economic and market outlook, plus advice on how to invest in it.
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