5 Common Economic Beliefs Trashed By Merrill Lynch's Economist David A. Rosenberg
Posted: Monday 27 February 2006 - Economics Section
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We're always surprised that many people haven't clocked that Wall Street is primarily made up of a collection of extremely well oiled and sophisticated marketing firms who happen to be selling financial products. It is a perhaps a testament to just how successful their businesses really are when they're perceived as 'financial firms'.
Of course, this view is always open to debate but nonetheless there's certainly a truth about it.
It's therefore always refreshing when somebody with clout steps up to debunk the current 'party line' which 95% of the time is always bullish, afterall bad news never sells inventory.
Last week David A. Rosenberg an economist at Merrill Lynch published a 29 page report trying to debunk the perceived economic wisdom at present. The five points he highlights and then argues against are -
- The US economy is booming
- The consumer is going to remain underpinned by even as rates rise and housing slows
- High end retailing stocks will be safe because the 'well off' homeowner did not play a role in the housing boom
- Interest rates are still far too low to generate any weakness in the economy
- The tight labour market is on the precipice of triggering wage inflation, and therefore the Fed has much more to do
Rosenberg's conclusion in his paper - There's a 50-50 chance of a hard landing in the US within a year. Now if that happens it will create a real challenge to the marketing men, sorry money men on Wall Street.
