The Bear Turns To Bull – Rosenberg’s Outlook For 2013 Shows Why Planning Works

In a somewhat unusual twist the best known bear in Canada, David Rosenberg is advising investors to get their cash back working and dividend paying stocks are not a bad choice as long as they diversify.

Rosenberg has been a bear for, well almost forever. His outlook though for 2013 seems at odds with his stance earlier when from 2009 to 2012 investors could have more than doubled their returns as stock markets recovered.

I am not sure what to make of his present stance. In a note to clients he advised that clients need to be nimble and that cash is not king. Nothing new here for most investors but certainly for Rosenberg. Many analysts though who have shunned stocks are tired of the poor gains they have received as the Fed has kept interest rates pretty well at zero.

It is estimated that 7 trillion dollars is sitting in cash accounts in the United States alone. Earning anemic returns for four years now perhaps investors are getting ready to put some cash back to work. Where they were, when stocks were unbelievably cheap in 2009, I am not sure but with stock markets almost recovered to their 2007 pre-crash highs, it does make you wonder when analysts begin talking about “cheap” when most of us are told not to buy near market tops.

Strange to see Rosenberg switch from bear to bull now that the stock markets have come so close to complete recovery. He predicts no recession for 2013. On the earnings side he indicated that the outlook is muddled and revenue growth has evaporated. Are not earnings important for stocks to move higher, even dividend stocks? Meanwhile he points out that balance sheets in North America are in phenomenal shape as almost 80 percent of corporate debt is locked in at historic low-interest rates. As a result he likes corporate bonds and credit arbitrage.

He also likes the Canadian Banks for dividend income and large-cap US tech companies that he indicates has growth in dividends “second to none”. He now labels cash as the “pain trade” for the next few years since the Federal Reserve has vowed to keep interest rates at almost zero until unemployment reaches 6.5 percent or inflation moves above 2.5 percent.

He likes China which he feels has managed a soft landing from a weak period of growth, oil, gold, emerging markets and dividend stocks. He is looking to create a cash stream from a variety of investments. As he put it, “we have to continue to be creative in generating relatively secure cash-flow streams.”

Stocks Bottomed In 2009

Where were all the analysts when stocks bottomed in 2009?

Basically then Rosenberg has flipped from being a perma-bear to the bull side which for some investors may make them wonder, where were these analysts in 2009 when investors could have made some real money. The answer is simple – They were all waiting for the second shoe to drop. So with stock markets almost fully recovered another analysts jumps into the markets. Investors often wonder why they end up buying at tops and selling at bottoms. I think the answer is pretty obvious.

Now you know why I believe in the strategy of 40% in stocks, 30% in cash and 30% in bonds and why having a plan is essential to consistent annual profits. Now you also know why I don’t follow the advice of analysts.

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  • Derek Barrett

    I agree, I think he’s late to the party. The US dividend stocks are starting to get expensive. Not in bubble territory but the time to buy them was 2 years ago when they were selling at huge discounts.

    There’s probably alot more room to run with financials and banks but consumer defensive is really overpriced right now.

    I see alot of analysts right now favoring China and even Japan as good picks for next year.

    Not alot of value out there but there are gems here and there. Intel is slightly undervalued, and I like traditional energy – STO and PSX still have some room to run.

  • With stocks now getting fully valued in many instances, I prefer put selling on dips or using the Bollinger Bands Strategy Trade.

  • Flsterling

    David is a charming guy but like many economists he’s a perfect contra-indicator.