The pandemic has changed the state of the economy, and with it, the most attractive risk assets. David Rosenberg expects rates to remain very low for as far as the eye can see, with deflation a bigger risk — not rising prices. He believes this is an ideal environment for Gold to appreciate, and he is long the metal.
The former Chief Economist at Merrill Lynch now runs his own firm Rosenberg Research. (Our 2015 interview is here). Being independent allows him to make unfettered and honest research calls without the oversight and institutional fears from within a larger firm.
Rosenberg notes of the 10 million jobs recovered since the Great Financial Crisis, all of those (and more) were lost during the first month of this crisis. Worse yet, the jobs newly created since the GFC included many of the low skill/low wage variety, without the option of working remotely from home. He expects at least 10 million jobs of these sorts of positions will become permanently lost due to this pandemic.
We also discuss the Federal Reserve’s interventions, and what his expectations are for the labor market. There are now 41 million newly unemployed workers, and it will get worse before it gets better, according to Rosenberg. He notes that the 2019 economy was already on thin ice, with low corporate capital investment and expenditures, and a near earnings drought. Even before the crisis hit, Industrial production and Exports were weak.
You can stream and download our full conversation, including the podcast extras, on iTunes, Spotify, Overcast, Google, Bloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.
Next week, we speak with Jon Litt, Land & Buildings Investment Management chief investment officer, about the prospects for recovery in commercial real estate.