At Merrill, One Economist Who's Telling The Truth
David A. Rosenberg may be headed for trouble. But not the kind of trouble that Wall Street researchers have become accustomed to lately.
Rosenberg, the chief North American economist at Merrill Lynch, is an economic heretic who lately has been straying often from the investment community's script about the improving health of U.S. businesses. I find his reports refreshing, if not startling, because they are coming from inside the world's biggest brokerage firm. But I'm sure the folks on Wall Street don't share my enthusiasm.
Take two of Rosenberg's reports, on Sept. 5 and Oct. 6, as examples.
In the first report, Rosenberg concluded that the money being spent on computers and other technology by businesses is nowhere near what is being reported by the government.
"What if we were to tell you that in nominal terms, business outlays on computers/peripherals has only risen $15 billion from the recession trough?" - and not the $133 billion the government pretends - Rosenberg says.
The economist notes that the tech spending "accounted for 30 percent of the overall increase in GDP, so the economy ex-computer expenditures has only risen at a 2 percent annual rate." The government is officially reporting GDP at nearly twice that rate.
Rosenberg is noticing the discrepancy I've mentioned here many times. Businesses don't really have to spend money to get tech spending up. All it really takes are improvements in things like computers.
More bang for the same buck is translated by Washington into higher spending.
In his Oct. 3 report, Rosenberg took the recent job figures to task. While nearly everyone else on Wall Street was cheering news that 57,000 new jobs were created in September - the first increase in eight months - Rosenberg told clients, "This was not a strong report in and of itself and we shouldn't let the shock factor of a '+' sign confuse matters."
Why was it really weak? The Merrill economist offered 10 concerns about the government report, including the fact that more companies are still cutting workers than adding them; that the drop in hourly wages shows "income growth is sluggish;" and that the number of people who only have a part-time job because they can't find full-time work soared last month.
Is Rosenberg a sign of the new, improved Wall Street, which is willing to call a spade a spade? We'll see how long before he is muzzled.
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David A. Rosenberg may be headed for trouble. But not the kind of trouble that Wall Street researchers have become accustomed to lately.
Rosenberg, the chief North American economist at Merrill Lynch, is an economic heretic who lately has been straying often from the investment community's script about the improving health of U.S. businesses. I find his reports refreshing, if not startling, because they are coming from inside the world's biggest brokerage firm. But I'm sure the folks on Wall Street don't share my enthusiasm.
Take two of Rosenberg's reports, on Sept. 5 and Oct. 6, as examples.
In the first report, Rosenberg concluded that the money being spent on computers and other technology by businesses is nowhere near what is being reported by the government.
"What if we were to tell you that in nominal terms, business outlays on computers/peripherals has only risen $15 billion from the recession trough?" - and not the $133 billion the government pretends - Rosenberg says.
The economist notes that the tech spending "accounted for 30 percent of the overall increase in GDP, so the economy ex-computer expenditures has only risen at a 2 percent annual rate." The government is officially reporting GDP at nearly twice that rate.
Rosenberg is noticing the discrepancy I've mentioned here many times. Businesses don't really have to spend money to get tech spending up. All it really takes are improvements in things like computers.
More bang for the same buck is translated by Washington into higher spending.
In his Oct. 3 report, Rosenberg took the recent job figures to task. While nearly everyone else on Wall Street was cheering news that 57,000 new jobs were created in September - the first increase in eight months - Rosenberg told clients, "This was not a strong report in and of itself and we shouldn't let the shock factor of a '+' sign confuse matters."
Why was it really weak? The Merrill economist offered 10 concerns about the government report, including the fact that more companies are still cutting workers than adding them; that the drop in hourly wages shows "income growth is sluggish;" and that the number of people who only have a part-time job because they can't find full-time work soared last month.
Is Rosenberg a sign of the new, improved Wall Street, which is willing to call a spade a spade? We'll see how long before he is muzzled.
