Rosenberg: 10 Near-Term Uncertainties & How to Invest Around Them

In his note on Friday David Rosenberg provided some excellent macro thoughts on big picture themes that are dominating the current landscape.  Here are his 10 near-term uncertainties and how to invest around them:

1)  Fat-tail distribution curve: Need to be more diversified than normal across asset classes and currencies.

2)  Near-6% output gap: Deflation themes trump inflation themes.  Preservation not just of capital, but of cash flows.

3)  Fed to keep rates near 0% through mid-2015: Interest rate volatility minimized; long-short fixed-income strategies in vogue.

4)  $1.7 trillion in cash on corporate balance sheets: Corporate bonds remain a solid investment given prospective low default risks.

5)  Fed to replace Operation Twist with outright bond buying: Treasury yields head even lower, making dividend yield in the equity market that much more alluring.

6)  Real interest rates to remain negative: This is a very powerful positive thrust for the precious metals complex.

7)  Stephen Harper around until 2015, Mark Carney around until January 2015; Barrack Obama around until November 2016, Ben Bernanke around until 2014: Very bullish for the Canadian dollar.

8)  Geopolitical tensions — Middle East, China transition, Greek default, U.S. fiscal cliff, high and rising youth unemployment rates and Japan-China rift: Exposure to raw materials is a good hedge against these recurring flare-ups.

9)  Looming political change in Japan: Bad for the yen, good for large cap exporters.

10)  Malthusian population dynamics: That two more billion people to feed in the next 35 years means we need 70% more food; an agrarian revolution is in its infancy stages.

Source: Gluskin Sheff

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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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