Capitulating Deflationists: David Rosenberg and Rick Ackerman

One by one members of the deflationist camp have been capitulating.

I earlier pointed to populist analyst John Mauldin and celebrity guru Nouriel Roubini.

Now, Pragmatic Capitalism’s Cullen Roche says this time it’s David Rosenberg’s turn.

From Mr. Roche

After trying to call the top in equities every other week for the last two years, David Rosenberg has finally thrown in the towel on the bearish calls. In his Wednesday research report he detailed why he believes equities have achieved a “holy grail” and should continue to move higher:

“On a very near-term basis, and despite my long-standing macro concern list, which has not gone away, it does look like the market is set to rise further. The technicals are suggesting as much, though I do await what Walter Murphy may have to say on the matter. I had said before that a breakout to new highs led by higher volume would be an important technical signpost. Well, we achieved that Holy Grail yesterday – both in level terms and with respect to the change. This is not throwing in the towel, it is an acknowledgment of what the market internals are flashing at the current time from a purely tactical and technical standpoint….

“…All that said, we had a breakout to new highs yesterday and this time, the volume rose on the major exchanges, not to mention rising above the 50 DMA on the Nasdaq, which is a clear sign that the big boys are putting money to work. This market continues to impressively climb a wall of worry. Market internals are too strong to ignore right now – the NYSE advancers beat decliners by a 3 to 1 ratio yesterday; the Dow transports soared 1.9%; and the small caps beat their major benchmarks. My overall macro concerns have not gone away, but these market facts on the ground are tough to ignore.”

Austrian economics Professor Gary North also points to the defection of Rick Ackerman after 30 years of adhering to the deflationist outlook. He follows Martin Weiss in 2009

Writes Professor North,

What I have always said is this: there is no deflationary factor in the structure of the capital markets to keep a central bank from destroying the currency unit. There are no deflationary forces that central banking cannot overcome if it chooses to destroy the currency unit.

Well, this represents the fundamental flaw of deflationists, which they have stubbornly refused to pay heed to... of course, until the markets have proven them constantly and profoundly wrong which eventually led to their apostasy.

Nevertheless as a saying goes it's better late than never.

Capitulating Deflationists: It’s John Mauldin’s Turn

Like Nouriel Roubini whom I pointed out earlier, we see another deflationist throwing in the proverbial ‘towel’.

From ‘Fisherian’ John Mauldin,

It takes at least 12 months (or longer) for monetary policy to work its way into the economy. The current small rise in inflation is not due to QE2. That will show up later. It appears to me the deflation war, at least for the time being, is won (the next recession will bring that worry back). But now, it is time for the adults at the FOMC to stand up and say stop the printing presses.

More and more celebrity gurus appear to be capitulating.

Oil Below $50! Goldman Recants Super Spike Oil Theory (Signs of Capitulation?!)

With the OIL prices breaking beyond the $50 psychological barrier to a 22 month low (CNN Money), could we be seeing some signs of “capitulation”?

Courtesy of stockcharts.com

Goldman Sachs, once a key proponent of the “super spike” in oil prices theory which they forecasted would lead to $200 oil have now retracted! For them, No more super spike!

This from Barron’s stockstowatchtoday,

``That ‘’super spike” in oil prices that Goldman insisted would lift crude to $200 a barrel ….? Turned out to be a dagger that has pierced Goldman itself. It never really turned out to be that prescient: instead of the 50% jump in oil that Goldman anticipated back in May, when it made the call with crude trading at $132, the price of a barrel never got more than 11% higher. And has since, of course, lost fully two-thirds of that price in the intervening four months.

``Now Goldman is left with the ignomy of summarily abandoning the investors who listen to its research calls, telling them effectively that they’re on their own. On Thursday, Goldman said it was ”closing” its recommendations for oil trades. Meaning that in a perilous time when the traders who pay attention to Goldman’s recommendations could use some guidance the most, Goldman has opted to give them the least. And some traders are furious about it, comparing the maneuver to then-strategist Abby Cohen’s decision to abandon her targets for equity indexes in the fall 2001, citing the uncertainties abounding in the market.

``Goldman specifically talked about four trade recommendations it previously issued, and said clients shouldn’t put any stock in them any longer. One particular trade, a Nymex-WTI swap on the 2012 contract, issued in September, when crude already had declined to below $70, suggested that the contract would reflate to a range of $120 to $140. Obviously, that hasn’t happened.

``In the end, the last laugh is on Goldman, ironically enough. Back in 2005, when Goldman oil analysts first started talking about a ‘’super spike” in energy prices, the prospect of crude going to as much as $105 a barrel, as they suggested, seemed like folly. The market subsequently vindicated them. When those same analysts raised their foreecasts last March, and first spoke of the $200 price point, a lot of traders still tittered. When Goldman spoke more determinedly about $200 in May, it seemed less far-fetched.

``The big losers, of course, would be anybody who continued to trade on Goldman’s recommendations. And the stocks of companies linked to those underlying commodities. Exploration and production names have had an awful go of it Thursday, integrated majors bad to a lesser extent. Apache (APA) lost 6%, Chevron (CVX) fell 2%, and ConocoPhillips (COP) 1%. But Goldman …? What did Goldman lose today? It’s worth noting that, for reasons unrelated to its oil trading call, Goldman shares dropped below their 1999 IPO price in Thursday’s trading.”

Our comment:

The dominant perspective of the present oil dynamics had been principally anchored on the feedback loop of falling prices=falling demand equals falling demand=falling prices.

We are not convinced with the simplified theory of the "falling demand" driver as discussed earlier in Reflexivity Theory And $60 Oil: Fairy Tales or Great Depression?

Especially NOT when we see this…

Courtesy of St. Louis FED: Exploding Monetary Base! (11/20)

Or this…

Courtesy of St. Louis FED: Fed Funds Rate Below .5%!(11/20)