David Rosenberg is still at it, pouring cold water on your optimism.

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• The FASB 157 changes a year ago have allowed the banks to post great

credit-related earnings even as their asset base shrinks. Ex-financial

earnings are up the grand total of 5% in the past 12 months. That doesn’t

look so V-shaped to us – far less than the market would have you believe.



• Inventories will only take you so far in an expansion - -to perpetuate the

inventory cycle, final sales have to come through. In a normal post-

recession recovery, final sales growth averages nearly 5% in the first two

quarters. This time around, the big rebound has been barely over 1.5% --

and with record amounts of government stimulus.



• If the savings rate continues along the path it has been on so far this year it

will be back at zero by mid-summer.



• It is amazing how many people believe that home prices are stabilizing in

the United States when there is so much evidence to the contrary. The

FHGA price index is down two months in a row. Ditto for the

LoanPerformance house price survey. The Radar Logic 25 MSA price index

has deflated now for three months running. The key Case-Shiller index has

yet to decline but that is only due to the generosity offered by the seasonal

factors – the raw data show four declines in a row. With the new unsold

housing inventory rising back to a nine-month high of 9.2 months’ supply,

and to a six-month high of 8.6 months’ in the resale market, why would

anyone think that there could be anything but downside to housing values?

• We get this all the time – looking at US profits in the context of US GDP is

misleading because so much of the earnings pie is being influenced by the

global economy. Really? Well, which countries does the US really do

business with because last we saw, shipments bound for the BRICs account

for barely more 1% of U.S. GDP. Europe is three times as important and

again, last we saw, the EMU economy stagnated in Q4. When you dig

through the National Accounts data, what is apparent is that total earnings

derived from the non-U.S. economy are actually down 7.6% YoY. This has

been, and remains largely a story of the financial sector being able to

manufacture their own model-based credit-improvement-led profits

rebound.



• While everyone gazes at the drib-drab improvement in jobless claims and

the BLS data showing renewed job growth in the private sector, how much

better have conditions improved in the labour market when Congress yet

again passes a bill to extend jobless benefits? The grim reality is that the

U.S. labour market is so weak that the average number of weeks that the

unemployed have been without work at a record 31 weeks is now higher

than in Newfoundland (17 weeks) where much of the workforce is seasonal

in nature. It doesn’t take a rocket scientist to know that after an 8.4 million

slide in payrolls to levels prevailing a decade ago, that we have likely hit

some point of inertia. But to describe the job market environment as

anything but grim – as difficult as it is to speak the truth – is nothing less

than dishonest; at a minimum, irresponsible.



• There is pervasive belief that housing has hit bottom and about to

bounce. At 10, the NAHB customer traffic sub index is back to where it

was when the equity market thought the world was coming to an end back

in March/09. How does that comport with a housing recovery view that has

become so prevalent?



