The Capex Recession Call

Published on
June 27th, 2019
38 minutes

The Capex Recession Call

Investment Ideas ·
Featuring David Rosenberg

Published on: June 27th, 2019 • Duration: 38 minutes

Back in March, David Rosenberg, chief economist and strategist at Gluskin Sheff, spoke to Real Vision's Ed Harrison, predicting a recession in business investment due to leveraged corporate balance sheets. In this interview, Rosenberg updates us on his capex recession thesis, and on the investment ideas he gave us in March. He tells us how close we are to recession, and updates us on his economic outlook and investment strategy. Rosenberg touches on Europe, Canada, and why UK interest rates are a sign of what’s to come in the US. Finally, he explains his thesis for why the Fed will cut by 50 basis points in July. Filmed on June 24, 2019 in New York.



  • ea
    edwin a.
    27 August 2019 @ 21:13
    He presents a relatively benign resolution to the corporotate debt issue, compared with Raoul's "doom loop" scenario....
  • NS
    Nishant S.
    28 July 2019 @ 17:41
    Excellent job laying out the thesis. Well done discussion
  • BN
    Barrett N.
    2 July 2019 @ 23:22
    Big fan of David’s thought process! Great interview. Thanks. BN
  • BS
    Bradley S.
    2 July 2019 @ 17:12
    Dear Real Vision, I commented a couple of months ago asking for quality improvements in transcription. It seems like your transcriber for this video had trouble with David's Canadian accent-- DR>Well, I almost feel like just maybe hanging up my Hewlett Packard calculator and calling it a day and that's almost like a market hop for me.. (Correction: ..almost like a market top for me..) DR>There's no look that those are obviously also risky in the sense if you're wrong on your forecasts, you can get smacked around. (Correction: There's no doubt..) Can you please take another look at your QC process for transcription? Maybe your presenters could be tasked to read through the draft transcripts for all their own episodes, for errors like these? If that's too much of an ask, do you have anyone on staff who can competently catch these types of annoyances? Thank you for your consideration.
  • MS
    Michael S.
    2 July 2019 @ 15:09
    Love hearing david
  • RW
    Robert W.
    30 June 2019 @ 22:48
    Listened to the audio today on a car drive and was thoroughly annoyed with the interviewer. 1) multiple times interrupted Rosenberg 2) interrupted to mention "who I am talking to" --> like I give a fuck about a nameless source 3) interrupted a blossoming conversation on fixed income to talk about equities (like you couldn't have waited until Rosenberg brought that up) 4) felt like the interviewer had an ear piece and someone was guiding this "conversation" Just let the interviewee talk... I don't want to hear about how Rosenberg "nailed it in the past" (though talking about previous theses and how they may have changed is beneficial--clearly Real Vision audience follows the market and can understand the P/L on these older ideas). I don't want the conversation to be directed by the interviewer or third party... because Rosenberg probably had some really root level thoughts that got rushed over or skipped by... What I want to hear: hunches, instinct, "variant perception" ... any thing that gets me thinking... not getting walked through trades.
    • RM
      Robert M.
      1 July 2019 @ 04:15
      Agreed. Rosenberg is a high caliber economist and deserves a higher caliber interviewer.
    • DL
      Darryn L.
      1 July 2019 @ 05:42
      We learn with experience, but I'd agree - less from the interviewer and more from the guest.
  • DW
    Denton W.
    1 July 2019 @ 04:11
    This isn't my favorite series but I have to give props to Ed Harris as an interviewer. He lets his guests speak but asks the right questions and has great insights of his own. Well done.
  • MB
    Michael B.
    29 June 2019 @ 22:40
    Dave misspoke the most important line of the interview when he was describing the 45 days after the first rate hike. He said you get an initial pop up 3-5% then on to the lows down 35-40 BP then said percent. Is he saying his mild recession call is going to cause a 35 to 40% drop in the market?
    • DF
      Daniel F.
      30 June 2019 @ 19:28
      yes, I believe he was saying a 35-40% drop in the equity markets peak to trough
    • Kv
      Kristian v.
      1 July 2019 @ 03:00
      Daniel is correct. Recessions, even mild ones, aren’t pretty for equities.
  • MB
    Michael B.
    29 June 2019 @ 15:10
    Ive listened to this interview three times. Each time it makes more sense as it sinks in. Give it another listen.
    • PC
      Peter C.
      30 June 2019 @ 18:00
      So, are you following his advice? buying TLT, REITS,...
  • MK
    Michael K.
    30 June 2019 @ 14:32
    Well Done Ed Harris. I kept my tongue bit about making naturally cynical comments that come too easily because I miss Grant and Raoul on a constant basis, and in this interview you showed more historical context, self reflection, and not just asking questions but questioning the questions.
  • CM
    C M.
    27 June 2019 @ 17:40
    Goodbye to Crypto Week, this is what I am talking about. Great interview, highly relevant to markets today. Loved it.
    • HH
      HODL H.
      27 June 2019 @ 21:50
      Lol but Cetto week was so awesome ;) !!!!!
    • CC
      Chris C.
      30 June 2019 @ 09:38
      Agree! Crypto week was pointless. I want a 1 week refund. Now back to real data.
  • SU
    Shakeel U.
    29 June 2019 @ 00:05
    Great interview, David Rosenberg was brilliant. Also big shout out to Ed Harrison he was brilliant as well. I hope Ed stays at RV for a long time.
    • AW
      Aaron W.
      30 June 2019 @ 04:54
      One of Ed's best interviews yet, he's such a pro now!
  • VS
    Victor S. | Contributor
    27 June 2019 @ 19:15
    Excellent David -someone who speaks clearly and gives you the bottom line!
    • BM
      Bryan M.
      27 June 2019 @ 21:35
      Victor, when are you going to enlighten us again with another RV interview? We mere mortals need your input.
    • RA
      Robert A.
      27 June 2019 @ 23:59
      Would love to hear from Trader Vic again!
    • PC
      Peter C.
      30 June 2019 @ 03:33
  • BF
    Brad F.
    29 June 2019 @ 20:25
    Wouldn’t the most important ratio for corporate debt be interest expense to EBITDA. I would be interested to see a chart if that over a long time horizon. I know that the debt needs to be refinanced. And there will be casualties in that rollover process. But ultimately those yield starved asset managers are still hungry, so as long as the cashflows are there they will supply the debt. Rationally there should be mass downgrades but historically the ratings agencies have shown considerable flexibility to serve the people paying their bills so it’s likely they find a way to spin this unless regulation prevents them.
  • DS
    David S.
    28 June 2019 @ 22:52
    There is, of course, some cause and effect with the Fed and the business cycle. Is it possible, however, like most folks they just do not know what to do? Their approach is often just as wrong as everyone else. It seems to me that the business cycle may be somewhat independent of the Fed, they just make each business cycle worse/better depending on the situation. The place where they can shine is the first reaction to major disasters. I believe that QE1 did help ground the situation, but thereafter they should have let more people go bankrupt to show there are consequences to bad management. DLS
    • DS
      David S.
      29 June 2019 @ 19:40
      From listening to other RVTV presentations, it seems to me that excess leverage in governments, businesses and markets is a major sign of the market top and the end of the business cycle. The Fed's missteps are an attempt to attenuate this massive leverage. The Fed may contribute to the problem, but excessive leverage seems to me to be a major cause. DLS
  • TH
    Timo H.
    29 June 2019 @ 19:12
    Rosie is not a permabull nor a permabear. Permaright is quite accurate term, instead :-)
  • SB
    Stewart B.
    29 June 2019 @ 15:01
    With checking the history of Fed Funds target cuts. Many of these did not turn into a recession and were immediately followed by higher 10Y yields. I could name 5 or 6 in the 80s and 90s alone.
  • TB
    Tina B.
    28 June 2019 @ 18:16
    Great interview from both. Please try to have David on once a quarter. Cheers!
    • AB
      Aron B.
      28 June 2019 @ 18:51
      That’s a great idea to have Rosie on once a quarter.
  • fc
    flavio c.
    28 June 2019 @ 14:47
    Awesome interview! He have the data, no much of "feelings" ! Also big thumbs up to ED always very informed and prepared to interview!
  • PB
    Pieter B.
    28 June 2019 @ 13:47
    Thanks a lot Ed & David!
  • NI
    Nate I.
    27 June 2019 @ 19:35
    Great interview Ed. I wish you would have asked Rosie about MMT. I would really appreciate hearing his thoughts on that topic.
    • WS
      Wm S.
      28 June 2019 @ 11:50
      The recent Hidden Forces podcast features an interview with DR, who equated MMT to debt monetization. He says it's coming to the U.S. "It's so old. It's written up in the Old Testament!" Start 48:45 MARK —
  • PJ
    Peter J.
    28 June 2019 @ 09:20
    Sharp, informative and on point. Great interview.
  • DV
    Dimitri V.
    28 June 2019 @ 07:57
    LOVE Breakfast with Dave! Please continue bringing him on!
  • JD
    John D.
    27 June 2019 @ 22:53
    Thanks RV. Interesting that DR's positioning is exactly the same as Hedgeye's (Quad 4 positioning). Two excellent Macro Resources who use different methodologies and have come to the same positioning conclusion. Worth taking note of. Only difference is that DR didn't mention gold in this interview, however, he did earlier in the week on Hidden Forces (Hedgeye is long GLD and GDX). Cheers John.
    • Kv
      Kristian v.
      28 June 2019 @ 06:32
      Similar positioning but slightly different reasoning. Hedgeye is very focused on the steepening base effects going into Q3 due to last year’s tax cuts boosting profits. Their call is for a profit recession leading to Fed cuts. Rosenberg is calling for cap ex led recession by companies trying to avoid having their debt downgraded. Both are looking at current economic data and see potential disaster just around the corner.
  • Hv
    Hannah v.
    28 June 2019 @ 02:32
    Thanks for the Canadian content. It’s hard to find integral POVs up here as our man-child trust-fund leader sputters more about gender positions than equity positions. Please consider hosting more Canadian content.
    • Kv
      Kristian v.
      28 June 2019 @ 06:19
      I’d take Trudeau over Sheer but agree on your call for Canadian content.
  • DS
    David S.
    27 June 2019 @ 22:47
    Great interview. What will be the normal effect on treasury bond yields when many BBB bonds are downgraded to junk bond status? Thanks. DLS
  • SV
    Steven V.
    27 June 2019 @ 22:08
    My only argument against a rate cut is they should stop the balance sheet unwind first, but nothing the Fed does makes sense, so it will be interesting to see what happens.
  • AM
    Andrew M.
    27 June 2019 @ 21:56
    I do love David. I always thought he was a bit of a permabear and didn't look at swings in liquidity - '16-17 especially. But regardless, this is fantastic and a good value add for sure. and it remains to be seen whether CBs can simply repeat the Shanghai Accord - and what appetite there is given the trade war etc.
  • HH
    HODL H.
    27 June 2019 @ 21:48
    Anyone’s audio off?
  • AB
    Anne-Marie B.
    27 June 2019 @ 21:36
    What a great job with this interview, Ed. You were so prepared! Thank you both, gents, for some great info.
  • BM
    Bryan M.
    27 June 2019 @ 21:31
    Classic DR! So my question come the 2 thumbs down??? Like...why would anyone argue/disagree with, the best main street economist in the land?
  • JH
    Joel H.
    27 June 2019 @ 18:55
    totally agree
  • JM
    John M.
    27 June 2019 @ 16:36
  • ag
    anthony g.
    27 June 2019 @ 16:15
    David is generally worth listening to. Thanks to RV for getting him on again.
  • RE
    Richard E. | Contributor
    27 June 2019 @ 15:45
    Rosie is very solid and always has evidence for his views, right or wrong. This is his type of market.
  • GH
    Gary H.
    27 June 2019 @ 15:37
    Fantastic update by David and great questions by ED. Well done gentlemen
  • RM
    Richard M.
    27 June 2019 @ 13:48
    Fantastic interview Ed (as usual)! Rosie is one of the few (and I do mean few) economists that "gets it"! He is not always 100% correct but he is usually close to it, and always backs up his thesis with real time relevant data. Please do make this a quarterly occurrence to keep us updated on Rosie's outlook. Many thanks.
    • CJ
      Charles J.
      27 June 2019 @ 15:02
      I second everything you just said.
  • CC
    Chris C.
    27 June 2019 @ 13:36
    He's right! ;)
  • SS
    Shanthi S.
    27 June 2019 @ 09:51
    Thank you David and Ed. Enjoyed this very much. Makes a lot of sense. Ed always does a great interview.