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David Rosenberg

Prominent Economist David Rosenberg at Israel Bonds Webinar Gives Insightful Economic Analysis to over 300 people

by Rhonda Spivak, May 28,2020

David Rosenberg, who has been referred to as Canada's most famous economist gave an insightful economic briefing at a webinar hosted by State of Israel Bonds on April 27, 2020. Over 300 people called in from across Canada to listen to Rosenberg's  worthwhile economic analysis, given at a time when Canadian Provinces are announcing plans for phased re-openings of their economies.


Rosenberg began the session by noting that "All I can do is give you my opinions as opposed to iron clad forecasts."   He later noted that "We are in far worse shape than the U.S. is," adding that he  thinks "our recession will be deeper and our recovery will be shallower."


Introduced by Barry Zagdanski, a member of the Israel Bonds international board of directors, Rosenberg covered a range of economic issues and scenarios that could occur in the coming months.


“The fact is, we morphed into a financial crisis  because we went into this recession not prepared at all for a health event, and also because we are up to our eyeballs in debt at every level of society. Balance sheets simply were not equipped to deal with a recession of any kind, and that is what has produced so much of these perverse market effects, excess of leverage. I have warned about this for years. The bubbles don’t create the recession as much as the recession exposes the bubble. We will see that firsthand in residential real estate," Rosenberg stated.


Toronto and Vancouver residential real estate "will be hit the worst," noted Rosenberg, who correctly warned of a U.S. housing bubble in 2005 when he was Chief North American Economist at Merrill Lynch.


“This time, the culprit - and I’ve talked about this for some time in my publications and interviews - was the corporate dept bubble and that’s now come home to roost.  In Canada, it’s not only a corporate bubble, it’s also a household debt bubble”, said Rosenberg.


Rosenberg  pointed out that “What the world looks like after this crisis ends, is truly anyone’s guess. I will say with 100% clarity that it’s going to look a lot different than it did before. I think a lingering fear  of the return of the pandemic is going to fundamentally alter lifestyles and will have a profound influence not just on the way that we live, but  also how we conduct ourselves in our business and our commercial lives.  Work at home is certainly going to be a more dominant force."


 Rosenberg noted that even when airports  re-open ,people won't flock to them, just as they won't be going on cruises anytime soon, even if cruises re-open. 


Rosenberg stated, "I was struck by the PEW research survey, which showed that half of the people who had been working in an office don’t intend on going back to the office. If that poll has any forecasting ability, the implications are obviously negative for office real estate, probably negative for cars as well. But if you look at the bright side, it’s positive for all the stuff we are using for the work-at-home trend that we’re in right now. Internet infrastructure, computer hardware, video conferencing…so I think looking forward, there’s going to be a sharp reduction in travel to work, travel in general.  Delivery services have now become essential, so there’s a budding bull market right there and that’s all being reflected in the stock market."


“The one exposure you want to have in your personal accounts is gold.  I am also more than happy to be buying things that have a reasonably spaced yield. In an inflationary environment, I want to be owning investments that generate a reliable and recurring cash flow screen," stated Rosenberg.


“So, I would include to the gold portfolio a short duration, high quality investment grade corporate bond. I would also be buying long duration government bonds - I imagine Israel Bonds would fit that bill,” Rosenberg said.


Overall, Rosenberg predicted that as a result of the pandemic "Our world will be smaller, more nationalistic, and more protectionist than before," adding that,  "The supply chain will be more local and less global."


Rosenberg said that "There will be an era of frugality," which "is not a friendly forecast."


Rosenberg believes that we will see an economic recovery "in fits and starts, not a V shape recovery," as only a vaccine will take us back to a path of normalcy. 


Rosenberg is of the view there will be a sharp depreciation in the Canadian dollar over the coming months as compared to the U.S. dollar. He said that the Canadian dollar could fall to 60 cents U.S. He predicted that  that Canada  is likely facing a series of downgrades to its AAA credit rating as the total debt in the economy is already an unprecedented 350% of Gross Domestic Product (GDP). 

Rosenberg, who started Rosenberg Research & Associates Inc. this past January after more than a decade as chief economist at Gluskin Sheff & Associates Inc., said Canada may be cut to a AA credit rating. According to Rosenberg,  the rampant growth in money supply required for the Bank of Canada to fund federal spending by purchasing new bonds will cause international investors to lose confidence in the relative value of the country’s currency.


Raquel Benzacar SavattiCEO of Canada-Israel Securities Limited/Israel Bonds, gave some opening remarks before Rosenberg spoke. Speaking about the importance of connecting with Israel through investments in Israel Bonds, Savatti said,“Israel bonds are known as a strong investment that have been part of many of our clients’ investment strategies. Today, over 25% of our business comes from financial advisors who regularly invest in Israel bonds on behalf of their clients’ RRSPs and TFSAs. Our rates are competitive and today, you can buy Israel bonds online."


She added “These are unprecedented times and Israel is unique in having the Israel bond program. Now more than ever, the State of Israel needs to know that we in the Diaspora remain committed to supporting Israel.  Every investment in Israel bonds sends that message to Israel”


In closing remarks, Barry Zagdanski said, “Israel and her people are very resilient as most of you know and have seen over the past many years. The nation is resilient, as are its people.  Add to that the last 70 years of a perfect record of repayment on Israel bonds.  Israel bonds are part of my portfolio. They’ve always been reliable; they've always been great.”


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Rhonda Spivak, Editor

Publisher: Spivak's Jewish Review Ltd.

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