David Rosenberg: This is the Great Depression II


David Rosenberg has been one of the voices of reason warning of excesses during the recent boom and predicting the unraveling to which we are now witness.  I have quoted him liberally here.  There is a very good piece on Rosenberg in the Canada’s National Post (Rosenberg is a Canadian) from Dec 30th.  Below is a snippet form that article.


David Rosenberg drew on inspiration from market-rules theorist Robert Farrell and asset-bubble historian Charles Kindleberger to predict the economy’s demise this year.

Rosenberg, the chief North American economist at Merrill Lynch & Co. in New York, by January had already called the recession that this month was officially declared to have started in December 2007. He also said the Federal Reserve would lower its main interest rate to 1% by year-end, one-third of the median estimate of economists surveyed by Bloomberg News; by October, policy makers brought the rate to that level.

Rosenberg, 48, refused to trust his computer models, sensing that the end of the credit and housing-market booms would cause a deeper rout than most analysts thought. Now, he predicts the carnage will cause a 2.5% contraction in gross domestic product in 2009, and sees historians calling the current era “GDII,” a reference to the Great Depression.

“We came off a prolonged period of prosperity that was fueled by excessive leverage and an asset bubble of historical proportions,” Rosenberg said in an interview. “Either you believed that this was sustainable or you didn’t. I came to the conclusion that this was going to end very badly.”

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Please read the rest of this article at the link below. It has some good commentary on Robert Farrell, the now deceased Charles Kindleberger, and Jeremy Grantham.

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I should note that Rosenberg works at Merrill Lynch, and works in a brilliant  research team that includes Kathleen Bostjancic and Richard Bernstein who have been equally cautious about the economy and the markets over this business cycle.  Why weren’t the Merrill bosses like Stan O’Neal listening to their advice?  Similar questions should be asked about Jim O’Neill at Goldman or Stephen Roach at Morgan Stanley.  The chief economists at these firms were very cautious while their firms were risking everything.

I wonder if Rosenberg and his group are staying on at Bank of America now that the Merrill take over is complete.

How David Rosenberg foresaw the crash – National Post

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