COVID-19, The Fed, and Corporate Zombification

Published on
June 25th, 2020
48 minutes

COVID-19, The Fed, and Corporate Zombification

Investment Ideas ·
Featuring David Rosenberg

Published on: June 25th, 2020 • Duration: 48 minutes

David Rosenberg of Rosenberg Research joins Real Vision managing editor, Ed Harrison, to break down his view of the economy, financial markets, and their direction over the next six to eighteen months. Rosenberg notes the success of working from home and the negative implications it has for commercial real estate – both residential and office. He points to internet infrastructure, consumer staples, healthcare, and big tech as sectors that are poised to do well over the next year and predicts that elevated personal savings rates, a reduction in capital expenditures, and a credit downgrade cycle will contribute to weaker GDP numbers for 2020. He argues that the Fed has enabled the zombification of the corporate sector though artificially low interest rates, and Rosenberg and Harrison consider whether the actions of the Fed could trigger insolvency and liquidity crises by suppressing price discovery in the market. Rosenberg also touches on Japan, Canada, and gold in the context of COVID-19 and monetary policy responses to the pandemic. Filmed on June 23, 2020. To register for Rosenberg Research's free trial, visit



  • RK
    Roger K.
    28 June 2020 @ 09:56
    RV has gone to s*** now. Its quality has gone down tremendously. I remember the days we only had one 30min piece a day with a higher quality. Now too many pieces with more than hours or longer. Return on time spent is very low. You becomes information over-loaded and confused.
    • AG
      Asim G.
      28 June 2020 @ 15:57
      It's true but they are a business and have to make money. That's also why they went to the tiered pricing with the "super exclusive" private advisory one... the key to using RV is to watch the recent stuff sparingly, and watch the classics like the Felix Zulauf interview over and over and over....
    • AF
      Andre F.
      29 June 2020 @ 03:37
      You choose what you want to watch, you choose how much or how little you should watch. You accept that your time must go to a variety of things and manage this fact appropriately. When you go to the gym do you need to use every piece of equipment in order to extract "value"? No, you go in do what you need to do and then leave.
    • HS
      Henry S.
      30 June 2020 @ 19:50
      Deden interview was excellent. A few other were good. I liked Cuban interview a lot. Oil & Gas expert is good, too. Otherwise not a lot is worth time spent. Harrison does a fairly good job interviewing. Rupal is an annoying interviewer. He needs to practice keeping his mouth closed more. I have been a big fan of Rosenberg, but his insights to the pandemic are not convincing. His read of the S.F. Fed report on pandemics is weak. He's just following headlines on the pandemic, in my opinion, unlike his usual sharp insights. ( US infections are spiking, but not the deaths. It remains that only elderly are affected).
  • ME
    Michael E.
    29 June 2020 @ 13:45
    Truly amazing, those they know & have a passion like Raul talk very simple language that everyone understand. Suck as Dr. Lacy Hunt, David Rosenberg, and 5 more. Those who make it complicated, they don’t eat, breath, sleep investment/ economy.
  • IH
    Ian H.
    28 June 2020 @ 06:48
    Quote of the month for me "We just had a non-essential recession". I then spent the next 10 min lecturing the kids about getting an essential job in later life.
  • DD
    Daniel D.
    26 June 2020 @ 02:43
    Why would you want female labor force participation when you don't have nearly enough kids?
    • JO
      JOHN O.
      26 June 2020 @ 16:27
      So employed woman don't have kids? I'll have to let my wife know and try to figure out where these young humans came from.
    • JO
      JOHN O.
      26 June 2020 @ 16:30
      Or, we could welcome immigrants. They sure have helped the US and other countries in the past AND you don't have to deal with changing diapers and paying for college 😉
    • SS
      Stephen S.
      26 June 2020 @ 22:56
      Downvote if you want but it’s true.
    • AF
      Andre F.
      27 June 2020 @ 03:28
      Daniel, quite simply: an increase of female participation in the Japanese labour market is not going to create an opportunity cost of missed births, in births that were already NOT happening anyway.
    • SO
      Sercan O.
      27 June 2020 @ 20:37
      Great! Another highly intelligent man deciding what is right or wrong for women! He clearly understands women have to choose between work and making babies. How could they think otherwise? :( Reading these comments even at RV makes me sick. I feel like a total failure that my daughter still has to grow up in a world full of people like this and she will still have to face this stupid discrimination!
  • LP
    Lauri P.
    26 June 2020 @ 18:36
    Interesting points on Japan, yet hard to align that with what I see living in Tokyo. Monetary / policy side can arguably be called success, but that's only part of the puzzle. The human side (demographics, huge amount of red tape, working style that kills creativity, rigid labour markets) will make sure the economy won't be growing fast any time soon. There have definitely been some policy changes to ease immigration, especially on the labour intensive sectors, yet the overall population is still shrinking fast. The un-attractive working culture combined with a very difficult language and generally racist culture will make filling the gap difficult. Maybe the point was that rest of the world will get as stagnant as Japan is, re-rating equities in rest of the world to similar valuations? In that case could work as a pair-trade, but hard to make a case for a long on it's own as a whole. Individual (export oriented) companies could definitely be attractive though.
    • AB
      Alastair B.
      27 June 2020 @ 12:08
      Look at what happened to the Japanese economy during the Korean War when the US was actively trying to contain China in Asia. If this happens again, then Japan will benefit.
    • LP
      Lauri P.
      27 June 2020 @ 18:37
      On a relative basis, Japan could indeed benefit from the tensions with China. Still, during the Post war period Japan had many other tailwinds, including a highly efficient "war economy", favourable demographics and none of the zombified companies. Hard to see the economy booming on absolute terms now.
  • HS
    Henry S.
    26 June 2020 @ 23:04
    I read the San Francisco Fed research on the long term affects of pandemics, as referenced by Mr. Rosenberg. Frankly I struggle to see the applicability to the current pandemic. The said Fed paper presumed 510,000 UK deaths and 2.2 MM US deaths. These figures are not even in the ballpark for what we are witnessing. The Fed paper also surmised that in the aftermath of past pandemics there was depressed investment opportunity due to excess capital per unit of surviving labour. Well, adjust the much lower actual deaths in the current pandemic for the elderly (people not actually in the workforce), and the result puts the current pandemic further out of the ballpark.
    • RI
      R I.
      27 June 2020 @ 12:41
      Give it time. The US is doomed. Let’s hear your take when Houston Texans football stadium is full of covid patients in a matter of weeks.
  • HR
    Humberto R.
    25 June 2020 @ 22:45
    Japan is one of the most racist countries on earth. And it succeeds because they have been able to keep "others" out. If going forward that will be changing, as I believe it will, then they will eventually face the same internal problems that we are facing here. Good luck with that Japan. Human nature doesn't change despite all the whining and wishing from so many.
    • AF
      Andre F.
      27 June 2020 @ 01:49
      Your claim about their racism is something that I think an honest person must consider as a possibility at least. I've thought about it myself over the years due to a number of reasons that I won't get into. I used to take it for granted that the Japanese are racist, now I'm not so sure. It's a fine line sometimes between seeing how things actually are and seeing things how you are, so to speak. I feel like I need to go to Japan for a trip, see things for myself, as much as that is possible. It will take a generation, at least, until they have very serious social problems from racism /prejudice against future immigrants. Maybe they will handle it better than one might expect.
    • AF
      Andre F.
      27 June 2020 @ 03:02 An article from the FT in line with the matters that Humberto has raised. It points to the need to address easily predictable immigration problems and the need to undertake Japan's immigration project carefully and prudently. Surprisingly Abe is starting out the project with sloppiness and dishonesty, an opposition MP one Yuichiro Tamaki is trying to repair Abe's irresponsibility and deception before they take too deep a root. The comment section of this FT article is just as important to read as the article itself. It goes into matters of xenophobia, racism, Japan as a closed society, feeling unwelcome in Japanese society as well as others who say the Japanese are gracious and welcoming.
  • RA
    Robert A.
    27 June 2020 @ 00:02
    Does anyone have an opinion on whether the etf “FLJP” would be a good vehicle for Japan investment? The performance hasn’t been great, but the .09 cost and it’s breath of Cap investments are compelling despite their modest AUM. Any help on a couple of good low cost Japan equity etfs would be appreciated (I’d like to steer clear of EWJ and DXJ).
  • MI
    Miloslav I.
    26 June 2020 @ 00:22
    I heard that James Rickards had a conversation about MMT with some well known MMT representative. I also heard that RV doesnt want to publish the interview. Im asking WHY?
    • Am
      Abdul m.
      26 June 2020 @ 02:40
      If that’s true . I would like to know why also.
    • AF
      Andre F.
      26 June 2020 @ 09:10
      James Rickards is a "smooth talker" (practically monotone, which is useful when trying to hypnotize people in to drinking Kool-aid) who is repeatedly wrong on his gold forecasts, and repeatedly wrong on his fantasy catalysts for moving the gold and precious metals prices higher, and repeatedly wrong on his very dramatic geo-political conflict forecasts. I believe it was back in 2018 when he was citing sanctions against Iran and tinderbox tension in the South China Sea as the catalysts that were imminently going to shoot gold to 5k at least. He's repeatedly wrong and an alarmist (and an LTCM alum) and yet continues to have a following. If Rickards never spoke another word in the finance/investing world, I don't think it would be a loss at all.
    • TS
      Timothy S.
      26 June 2020 @ 11:12
      A copy of Rickard's June 25 tweet on the subject @JamesGRickards: By the way, I taped a lengthy debate on MMT versus one of its leading advocates for the fakers at @RealVision. They're MMT groupies. They refused to air that segment. Guess I won.
    • mM
      marc-andre M.
      26 June 2020 @ 13:16
      Agree.. I would like some kind of reply from RV. Maybe it's an misunderstanding.
    • DB
      Douglas B.
      26 June 2020 @ 22:23
      It’s probably because real vision realizes that he offers zero value to their subscribers
    • DS
      David S.
      26 June 2020 @ 22:49
      Since Mr. Rickards can be seen on YouTube anytime of the day or night, why is this a problem? There is a YouTube live interview of Mr. Rickards hosted by Mr. McCullough of Hedgeye on April Fool's Day 2020 with about 60,000 views. DLS
  • DB
    Donald B.
    26 June 2020 @ 18:09
    Ed Harrison, you did a magnificent job with David Rosenberg. Great to see you two old friends doing what you do best and we are all the better for it. Thank you.
  • RM
    Roberto M.
    26 June 2020 @ 04:43
    David is of course great but RV what a great format. Ed you're a great interviewer. You let the man speak, you ask great questions, listen. This doesn't exist anywhere else on the internet or TV. Anywhere else someone would be cutting in every 2 minutes with some stupid setup question.
  • mB
    marc B.
    26 June 2020 @ 01:58
    Rosenberg is one of my favorites! I’m increasing gold exposure. This is going to get real mid July!
  • Ab
    Anthony b.
    26 June 2020 @ 01:41
    fascinating - occasional comment about New Zealand economy would be appreciated
  • JD
    Jonathan D.
    25 June 2020 @ 21:37
    Great interview.
  • DS
    David S.
    25 June 2020 @ 20:48
    Solid and enjoyable interview. I wish Mr. Rosenberg continued success. It is ironic that many people talk about the economic Japanization of Western economies. Stagflation is a risk to all. The West, however, is in a much deeper hole than Japan is now. As Mr. Koo explained, the Japanese corporations took the opportunity to decrease corporate debt dramatically while US corporate executives were buying back massive amounts of stock. During the same time, the Japanese government built infrastructure all over Japan. (I remember a quote that every fishing village in Japan has a new port.) Many Western governments, corporations and individuals are highly leveraged while infrastructure in the US, Germany and other countries need major rebuilds. Stagflation in the West will start with high debt, poor infrastructure, high unemployment along with corporate and personal bankruptcies. Japan has the additional advantage of being able to supply both Asia and the West easily. The American consumer has been the basis of world GDP growth. It will take a long time for world trade to recover. I agree that Japan will be a good place to invest, but only as the world economy picks up. DLS
  • VK
    Vaclav K.
    25 June 2020 @ 19:01
    Nothing new was said. Or did I miss something?
  • MT
    Mark T.
    25 June 2020 @ 18:38
    Mr. Rosenberg is a great interview. Great job Ed.
  • DB
    Dan B.
    25 June 2020 @ 08:59
    Ed you are an epic interviewer mate, I always love your videos and interactions
    • PW
      Pratik W.
      25 June 2020 @ 17:35
      Absolutely, His interview style is infectious. I think I am learning how to interview along with learning finance. Thanks Ed.
  • Jv
    Joël v.
    25 June 2020 @ 16:45
    Great interview, as almost always. These days Zombies eat inflation... Zombie Credit and (Dis-)Inflation: Evidence from Europe NBER Working Paper No. 27158 Issued in May 2020 '...estimates suggest that without a rise in zombie credit post 2012, annual inflation in Europe during 2012-2016 would have been 0.45 percentage points higher.'
  • pk
    philip k.
    25 June 2020 @ 13:09
    Do you think Asia ex Japan will come out of all this much better ? They spent less, less unemployment less disease and dysfunction.
    • Jv
      Joël v.
      25 June 2020 @ 16:43
      Well, aren't SE Asia and India often picked as the most likely growth areas the coming years?
  • SS
    Stephen S.
    25 June 2020 @ 16:35
    There’s good and bad to the policies David mentions regarding Japan. We’ve kinda been running that experiment for decades here in the America and Europe. It’s gotten us here.
  • BK
    Ben K.
    25 June 2020 @ 16:29
    Excellent interview. I especially appreciate the information on the Canadian Economy. Thank you!
  • SS
    Stephen S.
    25 June 2020 @ 15:46
    Fed intervention doesn’t just not benefit lower income people it hurts them. It pushes up housing prices to an unaffordable level and it never lets financial assets drop so perhaps they could buy in. It’s not surprising young people like Socialism.
  • KT
    Kai T.
    25 June 2020 @ 14:58
    Great interviewee, great interviewer. This is why I subscribe to Real Vision.
  • CS
    Connor S.
    25 June 2020 @ 12:12
    amazing insights, thank you both
  • MC
    Michael C.
    25 June 2020 @ 11:00
    When the Central Bank becomes the lender of first and only resort what happens to the banks? The Central Bank is competing with them and will put them out of business. Prof Richard Werner is right. SIBs (banks) will be nationalised and lead to the sovietisation of the banking system and the economy. Gold and crypto are the escape mechanisms. How does the death of the banking system end? Is it a deflationary pop or a slow grind into zombie world because debts wont be forgiven?
  • GH
    Gregory H.
    25 June 2020 @ 09:34
    Not just aging population in Japan... everyday you wake up, there are 1,000 less Japanese people that the day before, and the negative growth is accelerating...
  • PU
    Peter U.
    25 June 2020 @ 09:14
    David is the best in our time!
  • JB
    Jamie B.
    25 June 2020 @ 08:36
    David has a unique ability to take a Macro outlook and break it down to a granular level. That's a unique & valuable ability. Thanks, Ed & David.
  • BA
    Bob A.
    25 June 2020 @ 07:13
    David is always one of my favorite. He is clear and straight-forward. I have no doubt that years from now there will a slew of books written on the sweeping changes in economic and social behavior thath will significantly reshape the way consumer and companies operate. These developments are just starting and I have to believe that Neil Howe wakes up excited and maybe slightly concerned every moring. I think watching and understanding how that develops will be the key to investing success over the next decade and beyond.