Posted By
By Dale Roberts, Cutthecrapinvesting
Special to the Financial Independence Hub
Canadian economist David Rosenberg is known as a perpetual bear. That framing is a little unkind. Let’s just say Mr. Rosenberg is always cautious and is more than aware of the many risks. But certainly he will dwell or concentrate on those risks. We might think that it is the job of the economist to ‘beware the negatives’. In a recent interview Mr. Rosenberg revealed what was in the big bear portfolio.
Here’s the link to the Financial Post interview that was posted on their YouTube page. It’s an engaging video I would encourage you to watch it.
Mr. Rosenberg sees a dreadfully slow economic recovery. He uses the word ‘sclerotic’. And it’s all about the consumer and consumer demand.
Maudlin Economics reinforces that on the consumer front, unemployment is the driver. Here is a must read and a must follow.
That post references the following Tweet, and follows up with some shocking charts.
Based on the consumer and more, Mr. Rosenberg sees a fishhook shaped or L-shaped economic recovery. And here’s more bear piling on. From a recent Globe and Mail article –
Economists at the UCLA Anderson School of Management stated in a report that the pandemic had “morphed into a Depression-like crisis.” They estimate that the economy declined at a 42% annual rate in the second quarter and predict that the lost ground will not be made up until 2023.
The stock market is not the economy.
Of course don’t tell that to the stock markets. They’ll do whatever they want. As we continue to learn, the stock market is not the economy. Those Robinhooders still love their stocks.
And on the simplicity front, the more traditional Balanced Portfolio barely felt a thing.
The more bearish economists will suggest that the stock markets may learn to count again, one day. And many economists and investment gurus feel that the traditional balanced portfolio might not get the job done. Mr. Rosenberg is shaping his portfolio for a period of stagflation. He feels that could arrive in 2-3 years.
Yes that word stagflation may send many investors to investopedia.
For the investor it was/is a time when not much works against the beast known as vigorous inflation. David Rosenberg wants to protect against that event.
What’s in the big bear portfolio?
For the last few years my favourite bear has been a fan of higher quality dividend payers.
Mr. Rosenberg also likes Gold and precious metals and commodities. On the stock side: COVID-friendly consumer staples. I had covered that topic on Seeking Alpha with the lower volatility sectors do it again in the recent correction. The big bear portfolio will also include some of the new consumer technology staples. We simply can’t live and work without many of these companies.
On the bond front real return bonds and TIPS. Yes, we can get those bonds with a built-in adjustment to cover off inflation.
Of course you can cover off much of the above with ETFs. For those who are interested in protecting their portfolio against the possibility of an era of inflation or stagflation, I’ll be back with a post on the stagflation ETF portfolio.
Dale Roberts is the Chief Disruptor at cutthecrapinvesting.com. A former ad guy and investment advisor, Dale now helps Canadians say goodbye to paying some of the highest investment fees in the world. This blog originally appeared on Dale’s site on July 12, 2020 and is republished on the Hub with his permission.
