David Rosenberg sat down with Jeremy Szafron on Kitco News and told the entire complex it may be trading a ghost.
Two months earlier Rosenberg wanted a cut and owned long duration bonds. Then oil cleared 100. Diesel sat near 6 dollars. August payrolls printed 162,000. Core CPI ticked up 0.3 percent.The market decided the debate was over. Rosenberg decided the numbers were dirty.
“162,000 for a number that is 100 percent chance of getting revised.”Revisions have been lower for most of the past year. Seasonal noise from back to school education jobs. A World Cup bump in leisure and hospitality. “There was a lot of hair in that number.”
His verdict on anyone riding that print into a hawkish bet was not polite. “If you’re trading on faulty data, my heart goes out to you.”
Then he aimed at the building on Constitution Avenue. “If the Fed is going to respond to faulty data, then they’re going to be on the precipice of a policy misstep.” That is the line built to travel. One hike is theater. A string of hikes on war oil and revised payrolls is how you break an economy that is already cooling in the only place that matters, paychecks. He tore the core CPI the same way. Hotel industry tapes for early August were negative while the CPI lodging line jumped. Telecom services in the CPI posted a record surge while PPI telecom went negative.Used cars rose in the CPI while the Manheim auction index said they fell. Map the private industry data onto the Bureau’s basket and “that core number was actually close to being flat.”
Critics will scream data mining. “No. I actually refer to it as data analysis.” It “looked a little spurious to me. Not something as a central banker that I would be raising interest rates on.”
Even Esther George, a historic hawk from Kansas City, said she would probably sit on her hands. Rosenberg’s translation of the current Board is uglier. Kevin Warsh got the job sounding more dovish than Jay Powell, then turned hawk at Jackson Hole.Three dissenters already wanted hikes last meeting. Markets herded. “It would be a weird 90 percent price in for the Fed not to go.” He had assumed a fragile Iran truce would keep oil behaved. That truce died. “These hawks’ minds were already made up.”
Five years of core inflation above target left a credibility scar. Hiking now does not rewrite 2021. “I don’t know what raising rates today is going to do to change the rearview mirror.”
They want to “flex their anti inflation muscles.”
Here is the SilverTrade hinge. This is not 9 percent CPI coming back. Core still has a two handle, about two and a half percent. The trend flattened. It stopped decelerating. That is not a wage spiral. “There’s no inflation coming out of the labor market.”You do not get durable inflation without wages answering, which is exactly what happened in 2022 and 2023. An oil shock can steal a headline. It does not automatically become a new inflation regime.
He is still a buyer of the 10 year around 5 percent. If the Fed hikes once to look tough and then the growth data rolls, the short base in bonds is fuel.A policy mistake plus a growth scare is how you get a violent covering rally in duration. He also said the Treasury itself now has more quiet power over the curve than most retail traders want to admit. Buybacks, coupons, and supply games can shove yields around while the Fed plays sheriff on television.
Gold is not a side bet in that book. It is his long term hedge against a dollar he thinks has entered a bear market. Hard assets you can touch sit in the same drawer.Forty years of research just went into a fund with Corton Capital, the ROSY ETF on the TSX, because he wants the thesis in a vehicle instead of a PDF.
Judge that book over a cycle, he said, not over a Wednesday close.
They need a policy error and a currency that leaks. Rosenberg just told Kitco both are on the table.
The market priced a hike. Rosenberg priced a misstep. The 10 year at 5 percent is his entry. Gold you can hold in a vault is the insurance policy if the house keeps hiking until something breaks.
