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David Rosenberg: 'I refuse to be labeled a perma-bear'

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TURNING BULLISH
DailyFeed
Economic data this week continued to look positive: initial jobless claims fell; existing home sales popped; the Philadelphia Fed survey looked upbeat.

The question for skeptics, however, is one of sustainability. Can the economy expand without the continued sustenance of public sector support? What happens when policymakers and lawmakers stop lending a helping hand?

Right now, says Gluskin Sheff’s David Rosenberg, what we have on our hands is a recovery built on straw instead of bricks. “An economic expansion and bull market built on rampant expansion of the Fed and Federal governments’ balance sheet is neither sustainable nor desirable,” Rosie writes.

The strategist says that, in order to turn more optimistic about the USA, some major policy shifts have to take place. Here are the 10 he would need to see:


1) An energy policy that truly removes U.S. dependence on foreign oil.

2) A complete rewrite of the tax code that promotes savings, investment, and a revamp of the capital stock. Cut tax rates, eliminate loopholes and costly tax breaks. Tax consumption, promote savings and investment.

3) A credible plan that reverses the run-up in the debt to GDP ratio. This includes not just on-balance sheet items but new rules governing entitlements too. We need delineation of the future of Fannie and Freddie if there is any…We need a complete rewrite of social contracts and a reversal in sacred cows that have been created over the years that are completely unaffordable.

4) A massive mortgage write-down by the banks that provide much-needed equity to upside-down homeowners.

5) A creative strategy to put people to work instead of paying them to be idle — having nearly half of the unemployed ranks out of work for over 15 weeks and a 25% youth jobless rate is unacceptable at any level.

6) Tort reform. This is the only way to rationally bring down health care costs to more manageable levels.

7) And from six — use whatever proceeds they can save to enhance their education skills, especially in the sciences and mathematics where the U.S.A. is sliding down the global scale.

8) Financial sector regulatory reforms that actually have some teeth.

9) Change tax policy to free up the hundreds of billions of dollars of corporate cash sitting in reserve in overseas accounts — bring this money home!

10) Our Republican friends may not like this too much but in Canada, we understand the importance of immigration inflows and the U.S.A. should be doing more on this front to stimulate its long-run growth potential.
POSITION:  No positions in stocks mentioned.

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