Bloomberg hosted the wonkish equivalent of the Ultimate Fighting Championship on Wednesday, which pitted a famously pessimistic economist against a famously optimistic one. Anchor Margaret Brennan played referee.
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Gluskin Sheff chief economist David Rosenberg had been speaking on Bloomberg TV when Brennan introduced Wells Capital chief investment strategist Jim Paulsen, whom she called a "bright, shining optimist." With the bull released into the bear's den, Brennan stepped aside and let them do battle.
Paulsen began with a qualification ("It's not like there aren't issues and problems") but soon launched into his main argument: The recovery only seems weak, and, compared to the previous two recoveries, in the early 1990s and early 2000s, it's right on track. He took a subtle dig at the pessimistic "new normal" idea championed by Bill Gross and Mohamed El-Erian of Pimco, and said that in terms of real GDP, this recovery has been the strongest in 25 years.
"I just think the attitudes are so much worse than the reality on the ground," he said. "And that differential leaves a lot of room for stock prices to go higher."
Rosenberg was quick to respond, saying Paulsen was ignoring just how damaging this recent recession has been. The previous two recessions, which were followed by recoveries that Rosenberg likened to "a blink of an eye," do not compare to this one. By focusing on GDP, Rosenberg said, Paulsen wasn't taking a broad enough view.
"Practically every single variable outside of exports is not anywhere even close to where it was in December 2007," Rosenberg said.
Paulsen again pointed to history, saying the GDP growth of the past 25 years has been slower than most people realize, so that the current seemingly weak growth isn't actually that weak -- relatively speaking.
Rosenberg, for his part, said the government has "injected" "steroids" into the economy with the "most aggressive monetary, fiscal and bailout policy of all time," and yet consumer confidence is anemic and unemployment is near 10 percent. Any positive development, Rosenberg said, has to be weighed against the fact that the economy currently does not "stand on its own two feet."
Brennan had to step in, and the session ended without compromise. When September's unemployment data is released early Friday morning, one economist will be vindicated.
This wasn't the first time Rosenberg and Paulsen had faced off. In July, the Wall Street Journal published an interview with both of them, in which they expressed largely the same positions they did Wednesday. Paulsen said a major drain on the economy was the widespread bad attitude, calling the current age the "era of 'irrational pessimism.'"
In one of his daily letters last year (hat tip to Business Insider), Rosenberg railed against Paulsen, whom Barron's had recently called "a favorite market strategist," claiming Paulsen had simply gotten lucky.
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