I enjoy reading David Rosenburg’s daily commentary.  I suggest you sign up to receive it.  He is an unabashed bear and highly biased toward Canada.  I enjoy his point of view because he tells you everything CNBC is not.  I watch CNBC every day for 10-12 hours a day.  Usually it’s on mute, but sometimes I’ll listen in.  Usually I hear cheerleading about why this market is going to keep going up and up and how we are at the beginning of a new secular bull market.  Of course there are disagreements on that last point.  I thought, I’d post what David said yesterday on his daily newsletter about a comparison between the beginning of the last secular bull market in 1982, and now.  Enjoy. 

WHY THIS IS NOT THE ONSET OF A NEW SECULAR BULL MARKET — COMPARISONS WITH AUGUST 1982

                        P/E Multiples were 8x, not 26x.

                        Dividend yields were 6%, not sub-2%.

                        The stock market was trading at a discount to book, not a 2x premium.

                        Monetary policy was aimed at reducing money growth and inflation rates, not creating both as is the case now.

                        Fiscal policy was aimed at reducing nondefense spending, not accelerating it.

                        Deficits were peaking and coming down, not surging to 10%+ relative to GDP.

                        Global trade barriers were being torn down; not erected.

                        Deregulation back then was in; today it is all about re-regulation and government ownership.

                        Union membership was on the way down; today it is back on the rise.

                        The dollar was entering a Plaza Accord bull market, not a mercantilist bear market.

                        Credit, household balance sheets and participation rates were expanding, not contracting.

                        Tax rates, income, capital gains and dividends, were declining then; rising now.

In 1982, Ronald Reagan was President (two consecutive terms as Governor of California), Don Regan was Treasury Secretary (35 years of financial sector experience), Martin Feldstein as the Chief Economic Advisor to President Reagan (the dean of business cycle determination), and Paul Volcker was Fed Chairman (9 years of prior financial sector experience). Compare and contrast to Barrack Obama (junior senator from Illinois for 3 years); Timothy Geithner (21 years experience in government, three years as a lobbyist); Larry Summers (no private sector experience; 27 years of academia and government) and Ben Bernanke (no private sector experience; 30 years of academia and government).

Which team do you think deserved the higher multiple — the one with actual experience in the real world or the one immersed in academia and government?

Last 3 posts by Jason

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