My Life in 4 Trades: David Rosenberg

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0:35David, welcome to my life in four trades. Looking forward to the next hour, Maggie. It's fun to have you in person. We do a lot of these virtually. True. So the nature of this is we talk about two of your best trades, two of your worst trades. They're not your only good trades and your only bad trades, but they're just two that are kind of important or significant in some way. But before we dive into them, tell me a little bit about yourself. Where'd you grow up? What were you like as a kid? Oh, okay. Well, I grew up in Ottawa, which is the capital city of Canada. and uh what was it as a kid you're gonna be shocked when i tell you but i was uh i was shy i was a real shy i am gonna be shocked by that yeah because we just left a a auditorium where you were holding court you were really shy i was uh i was a uh i was a shy kid uh up until i was probably a young teenager and i also was a very poor student i hated school that's even more I love going to the hockey rink and playing hockey.

1:35And I came from a scholastic family. My mother was a kindergarten teacher. My dad worked. He had his master's degree in civil engineering. And when he wasn't working for the federal government, he was teaching at the University of Ottawa. I got two older sisters. One's a nurse and a teacher. One's head of education at a high school. And my brother taught at the University of Tel Aviv. if he was professor there. So I come from this family of pedagogues, and I was the black sheep of the family. And in fact, I remember when I was in grade nine, I got my final grade was 64%. It was like a C minus.

2:20And I remember I was the youngest of four kids, the Rosenbergs, that went to Hillcrest High School. And Mr. Hayes, the homeroom teacher, said to me, are you sure you're a Rosenberg? what happened to you but what happened was that um i ended up having an english teacher taught english and history in grade 10 and i don't know what it was about him it made me it made me think a lot later in life even to the day the importance of communication um because when i went to school it was like uh you know remember charlie brown's uh uh um school teacher that that's what it was all to me but so anyway this guy Mr.

3:01Haiba I was so jazzed I was never jazzed up to go to school I was at this point 15 years old and but he he spoke in a language that I understood and I got very excited about school because if you're not excited about something if you're not enthused you know I was more enthused about hockey. So it wasn't capacity it was you were not interested. I was just not interested in school and it was a big disappointment to my parents because education was like that was that was number one number one commandment and that can feed that sense of disappointment can feed on itself then and then you lose even more interest but then it moved in the opposite direction so the downward spiral started spiraling upwards and i started getting jazzed up about school of course not but you still had to be especially my hockey buddies whose marks were worse than mine but uh but anyway i was i was a shy kid i was uh i was a slow learner and yeah so I guess you know you look at me today and all I can say is that you know what you see isn't always what you get.

3:59Yeah or how you start out yeah often so did you once you re-engaged with school did you have an interest in finance or economics was that something that it sounds like you came from educators so it doesn't sound like it was necessarily the family business. No, but what's interesting is that I took economics in grade 11. And I remember the teacher's name, Mr. Dillabo. So I come home and my dad says to me, so how was your course in economics? This is high school. So I said, yeah, Dad, you know, we learned this Keynesian model where the assumption is that we're a closed economy. with no government.

4:45My dad looks at me incredulously and says, no government? Come here, son. And he shows me his paycheck. And he says, you see this? 50 % of my paycheck? He says, yeah, that goes to the government. He says, maybe you should take something a little more practical. So the next day, I dropped economics, only to retake it in university. And there's a story about that too. But yeah, I took economics in grade 11, took it for one day, and then dropped it, only to then become an economist. So how did you get back on the track to become an economist? Okay. So in the name of full disclosure, I actually started at University of Toronto in 1979, and I enrolled in the Bachelor of Commerce Department.

5:31So I want to be an accountant. Don't ask me why, because as I found out later in life that economists are accountants, but with better personalities. So I'm taking accounting and it's already December. It's like halfway through the first semester. And I'm doing well in everything except one course. The one course that you'd want to actually do well in if you want to be an accountant, which was financial accounting. So like I'm failing miserably and I can't for whatever reason in the midterms, I can't get the T accounts to balance no matter how I try. I can't get in the balance. so um i go to my professor and in those days um uh it was the accountants that worked at the big accounting firms were the lecturers and first year and i'm doing well managerial accounting fine you know uh computer science fine you know calculus not a problem but i couldn't balance the books so i go to uh mr lee gary lee was his name how do you like that i can you remember all of them i can't i can't remember my last bad forecast but old professor's names those i remember really well so i say so i have a meeting with mr lee and i say mr lee like what's what's what's the matter with me he says whatever it is he says you've got a mental block you can't you can't you you you can't balance your t accounts dave you got a mental block i said what do you what do you tell your students who can't balance the books he says oh i tell them to go in economics so so that's what i did it's not saying a lot for the field of economics is it no it's actually that's why when you see uh you know the the worst finance ministers or treasury secretaries are people who actually have an economics degree we need to get an accountant in there like tell me is janet yellen bouncing the books i don't think so not these days she's an economist so there you go we we don't do a good job uh of bouncing the books uh but we do a very good job at confusing people.

7:32That's what I do well. So how did you make your way into working in finance? Did you, upon graduating, say, I want to head toward banking or I want to, did you even know, or was it just that you kind of stumbled into it? I stumbled into it for the most part. So I graduated with my master's degree from the University of Toronto. So like when I go to the States and I said, I graduated from U of T, they say, Oh, I didn't know you went to University of Texas. No, no, University of Toronto, sorry. That happens all the time to Canadians, doesn't it, when they're working in the U.S. So, yeah, so I actually had my degree in, my specialty was international economics, but I graduated in the early 80s, and there was not a lot of jobs in that field, and actually we're coming out of the horrible recession of the early 80s, but I was a teaching assistant for the housing and real estate economics course.

8:30It was a very specialized course and the professor thankfully really liked me and I was also a teaching assistant for that course when I was doing my graduate work. So he put a good word in for me and the federal government, this was back in 1984, was starting to expand in a lot of areas, doing a lot of cost-benefit analysis. Back then, the Conservatives, who had been out of power for like 20 years, came into power, and they were doing a deep dive cost-benefit analysis into every Liberal government program that there was. We're going to get them. So Canada Mortgage and Housing Corporation, which is basically Canada's equivalent to Fannie Mae, developed this thing called Program Evaluation Division, which is really going back and seeing, do we need all these housing programs?

9:18and if we do, how do we change them, make them more efficient, or if we don't, how do we get rid of them? So I basically got hired in this housing cost-benefit analysis department for the federal government because Canada Mortgage and Housing, it's called a crown corporation. It's like an arm of the government. I'm there for three years in Ottawa. So I grew up in Ottawa, went to University of Toronto for five years, came back to Ottawa. My parents were begging me to come live with them. You know, I'm 23 years old and come back to the house, Dave. And I said, mom, dad, thanks, but I think I'll just live downtown if that's okay.

10:00So I went to CMHC, but I found it very stifling. Honest to God, I don't know how my dad managed to be in government for like 30 years. And he was at the same job for 30 years. Who does that anymore? But I found after three years, the bureaucracy was stifling. It's very different from the private sector. And you know what? I could see people that were the slackers of all slackers. We're not even talking nine to fivers. We're talking 11 to twos. I feel like even if they're not like that, when they get in there, they become like that. Well, because the union was so strong, the public sector union, you couldn't get rid of these people.

10:37And it was just hard to get anything done. We would come to decisions on these housing programs, and you'd have to go through so many different layers of committee. And so I just found a lot of hard work. So you're like, I'm out of here. I need a more dynamic. Well, I actually, going into my third year at Canada Mortgage and Housing, I started putting feelers out on Bay Street, which is the equivalent to Wall Street in Toronto. So I applied to all the banks. Now, back then, there's no internet. You know, you actually had to type. type deer who was, you know, and so when I had my CV, you know, he didn't email anything, right?

11:13And so I applied to the big six banks in Toronto. Well, I guess one was in Montreal at that point. And one bank got back to me. And they came, they interviewed me. and I got the job. But I had applied. See, I was basically senior policy analyst for the federal government. And they brought me on. This is the Bank of Nova Scotia. So this is 1987. By the way, I started on October 19th, 1987, the day of the crash. I remember this from us talking. I was just going to bring that up. So it's so interesting that your foray into that was on such a cataclysmic day. But I got to make this point because they bring me in as an intermediate economist.

12:03And I said, hey, but I'm senior. They said, yeah. In Ottawa, you're senior. In Toronto, you're intermediate. Intermediate economist at the Bank of Nova Scotia. And I was making, in Ottawa, I was making$32 ,000. And the Bank of Nova Scotia was going to bring me on for$28 ,000. My dad was my mentor. He was my rock. I said to him, reduce title and lower pay into a higher cost city. And my dad said to me, sometimes in life, you've got to take a step back to take two steps forward. So where do you see yourself in five or 10 years? Not next year, the year after. And I thought about that a lot because where was I going to be if I stayed in Ottawa, right?

12:49So I took the pay cut. I mean, who do that today? took the pay cut, took the, you know, the reduction in title. You know, within a few years, I made up for all that. But that was a first learning lesson. And I wrote about that, about my dad. In life, you sometimes have to take a step backward to take two steps forward. 100 % right. It just means, you know, eliminating the noise. Hey, everyone. We're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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14:28And investing in yourself, you had faith that would pull you forward. Well, 100%, although I got to tell you something, I didn't know what I was doing. Like I didn't, I was this, I've been out of school three years, academic economist with housing, coming on being the financial economist on - Do you think it was helpful that you walked in into chaos? Because sometimes people are so crazy that they're not really paying attention. Things are disrupted. So you have an ability to sort of every, no one knows what that means now. So you kind of level the playing field. 100%. And I went into an economics department where my two bosses, the chief economist and the citizen chief economist, were truly like, they could tear apart the Fed and the Bank Canada's balance sheet like it's nobody's business.

15:13They were truly, knew how to and what i loved about it was there wasn't just ivory tower economic economics they were tied everything we did was tied in to the financial markets so i remember my first day well my first day in the job was the crash uh which is just crazy by the way i said well my boss said to me uh aaron gapple he says did you did you read baron's i what's baron's he says never come to the office again without reading baron's and without reading ellen abelson's up was up and down wall street don't never come in if you don't okay um but yeah that was um but starting at the at scotia yeah uh and um i'm walking around with warren justin he's a chief economist aaron gampel he's the assistant chief and we're going and i i'm like i'm the newbie it's my first day on the job and i don't know how many pairs of underwear that i brought with me that day but it wasn't enough but i'm just standing behind the wall and we're going to office we're going the whole treasury department, but then we're going all the way up to the CEO.

16:14Okay. And all the senior, all day long, and I'm following these two guys along and they had the charts showing that this was a liquidity event. This is not a fundamental event. They're making their case. Making their case. There's no recession coming out of this and you want to start adding to risk almost immediately. Which is amazing. It was the right call. Well, I learned the difference between a solvency crisis and an economic crisis and a fundamental crisis and something that's more of a liquidity crisis. And having the courage to stand by your forecast and conviction, because it could not have been easy delivering that message in that moment of abject fear.

16:50Absolutely right. In any event, they were right. But the senior management at the Bank of Nova Scotia thought there was going to be a recession. And within a month, they sliced the research budget at the bank by half, including economics. So my boss, my direct boss is Aaron, Aaron Gampel. And he comes to me and he says, hide under your desk today in your office. Don't come out. And I think I did. I think I actually hid under the desk all day long. Like the George Costanza bed from Sunfall. Half the department got fired. Oh dear. Oh, and they were, I just started. I was there basically a month and half and people who've been there 20, 30 years and And there were tears.

17:33And I wasn't like. The fact you were paid so little probably saved your job, by the way. Well, the thing is that at the same time, the person who was mentoring me, the person whose job I took over, Monica Smith, she got a job offer at another bank at the Royal Bank. And she was supposed to tutor me along for the first six months. So next thing you know, I'm also doing the morning meetings. I'm having to do stuff that I wasn't supposed to do for at least six months. And I was just thrown, you know. Into the fire. Into the fire. And it's like Aaron said to me, it's going to be time sink or swim for you.

18:04And your workload is going to go up now that we're. But I remember there used to be this bar called the Louisiana Purchase, not just underneath in the underground shopping area. If you've been to Toronto, there's this incredible miles of like underground shopping malls and bars. Where you hide in the winter. Yeah, exactly. So anyway, it was, I went to Louisiana and they had a party there and everybody's hugging each other. I just started, right? and it was a goodbye party for like like 10 people that got let go and i said to myself self that is never going to happen to you if i if my boss ever fires me he's going to have to make it feel like he's amputating his right his right arm so i made sure so but basically i was but at the same time this is all happening and i'm freaking out i come into like a crash i come into like this department just got decimated and my mentor monica yeah you gotta fake it till you make it now and i'm there and i'm there thinking um wow and and and and i uh i worked my tail off now the thing is that i had a very public sector academic writing style wasn't bad it was just not made for a wall street or b street audience so i'm writing so i'm doing all my writing that i'm supposed to do and every time I'm getting it back from one of my two bosses red x is everywhere rewritten arrows everywhere this went on for weeks my stuff was being rewritten like it was nobody's business and once again I am like freaking out so I said to myself once again because I talk to myself a lot and uh so I actually told my friends don't bother me for the next three weekends I'm not going out drinking i'm not going out partying which is a lot for canadian hockey players say well you know i was i was i was a hockey player wannabe it was uh i i um i basically uh got in my little honda accord drove to the office on early on a saturday morning i and i think i double parked because i remember i i got a ticket but it was worth it i went upstairs and I photocopied everything that Aaron Gampel and Warren Justin, the two guys heading there, I photocopied everything they had done for the previous three years.

20:26I went down with 15 boxes of stuff. Oh my goodness. This is the day's photocopying machines. I mean, you know. You're probably going to draw Rob in the place. I printed it. And for three weekends, I sat there in my apartment, and I read, and I read, and I said, I am going to get into their brain. Come hell or high water, I'm getting into it. I'm going to figure out what makes these two guys tick. You know why? Because I want to keep my job. Yeah. It's like studying for Hollywood Park. So I'm reading and reading and reading and reading. and then there's this one day I wrote my usual report and there it is I went to do some some meetings come back and it's sitting on my desk and there's not a red mark on it so I'm really confused and I don't know why there's no red mark on it so I go to Aaron's office here's my direct report he's not there uh he went out somewhere but Warren Justin the chief economist is in his office.

21:30So I sort of meekly go up and I knock on Warren's door and I go, Warren. He goes, yeah. So I'm at the, right by his door and he's sitting in his big old desk. I said, Warren, I thought I gave this to Aaron for you and Aaron to proof. And it's sitting on my desk and there's no, there's no mark on it. And I could see Warren and we're friends today. You know, it's quite a bit of an age difference, but he's trying hard not to smirk. And he says, Dave, you finally get it. So I went out that night with my friends on a bender to end all benders. You have no clue. And the alarm gets me up. I realized I'm going to be late for the morning meetings.

22:20And I run and take a really quick shower. I think I'll use soap. Can't remember. And I get dressed and I head downtown on the subway because I've got the morning meetings to do. I'm sitting on the subway. I am so hungover. I don't even think I was hungover. I think I was still slightly. Still drunk. Yeah. I look down on my shoes. And two different shoes. Not just two different shoes, but remember in the 80s? No, I don't think you'd remember. You were like, you know. I remember. I don't think. So in any event, one shoe had tassels and one didn't. So you know what I'm saying? It's noticeable. This is not going to pass.

23:02So in any event, one of the junior, junior economists, more junior to me, I could see. Give me your shoes. No, well, nobody was in the office because the morning meetings were early. I'm the only one there. But I see. It's like an oasis in the desert. This guy, his name was Marc Pauvin. He got a pair of shoes by his desk. But he was like a, I'm a size like 10, he's a size 9. So I got a fit in his shoes. And I'll send him an apology later. But I put on his shoes. But like my toes are like curling. So I'm thinking this is going to be really rough because not only am I really hung over. And my eyes are half open.

23:50But like I'm squinting because my feet, my toes are in pain. So anyway, did the meetings, put the shoes on, got through it. And that was a, and I've written about this, that day of the no red mark, it was like the day of Mr. Haiba in grade 10. Yeah. It's like, it was like. Open the next door. Well, it was like an aha moment. But then all of a sudden, you know what happens? Well, this is what it does, right? How you shift from a total lack of self-confidence to then having self-confidence. Yeah. And then it just - Builds on it from there. It just builds the momentum. So I actually was the first economist on Bay Street to make it to senior economist before 30.

24:41We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

24:52Amazing for a guy to start out. So I'm going to pick up and we're going to dive into your trades now with a sort of understanding. And it's interesting you said that's never going to happen to me on those layoffs because your first trade is one of your best. I think these are in chronological order. That was starting your own newsletter in 1998 when you were at Bank of Montreal. So you obviously moved. You moved your way up. You're confident, doing well. You have a great reputation. So what's happening at this point? You're in Bank of Montreal. What sparked that trade? Well, so going to the Bank of Montreal was basically, I could see after being at the Bank of Nova Scotia for seven, eight years that Aaron and Warren weren't going anywhere.

25:35And I was starting to bump up against where Aaron was. but there was no room for me to be promoted to where I wanted to be. So out of the blue, I got called by a headhunter from the Bank of Montreal, and I was going to be the number two person in their economics department, which is what I wanted, and it was actually monetarily was going to be a lot more lucrative too. So money talks, and after being in Scotia for seven, eight years, I went to Bank of Montreal and I'm there for 1998 I guess I was already there four years but there was a new management came in at the Bank of Montreal and one of the guys who was heading up like the whole treasury department was a guy named Bill Down who ultimately became the CEO of the Bank of Montreal years later so what happened was that i used to do the morning meetings again uh like i did when i was at scotia i used to split them with erin gampel but i did most of them when i was at bmo and so with the with the traders and the sales guys and this guy bill down who is now heading up the whole treasury group sees me at a at a client event and we're at one of the hotels and uh he finds me where you usually find me at around 10.30 at these things, which is at the bar.

27:05I was guessing the bar until you said 10.30. Having a double single malt. And Bill Down comes up to me, and he's a very senior guy. He's probably like the number four guy at that point at the bank. He says, Dave, I'm going to talk to you. He says, I've been watching with the morning meetings the past little while, and I don't want to take this the wrong way because everybody loves your morning meetings. But you speak really fast. And then becomes a game of broken telephone. What did Rosie say? What did Rosie say again? What did Rosie say again? So he says, I have a great idea for you. He says, I want you to start your own newsletter every morning.

27:47I want you to get your thoughts from these morning meetings down on paper. Blast it out. And he says, in fact, we'll market the you-know-what out of it. And we'll send it off to clients as well and off to the media. Yeah. But he says first things first, which is to get your thoughts down on paper every single morning. Now, the thing is that I pushed back on that. Like, you know. Because that's work. Well, it's not that. It's like, I mean, it's a bad reason, but it's something I learned from, which was what if it fails? Right. It's not just said. It's like a record of it. Yeah. Like what if it flops?

28:25What if it's a flop? I don't want to be a flopper. so uh so you had a lot of fear or trepidation yeah you know there was there was fear and the fear of failure which is a lousy excuse not to undertake a new endeavor um because when so many people struggle with yeah well i you know what the most successful people i met had a lot of failures and those were learning lessons and then you don't really know what success is until you've had those but um i was nervous but how can i say no the guy was going to be the future ceo he was technically my boss's boss's boss's telling you to do it i i said to him well the thing is that the chief economist at the time my boss was sherry cooper and yeah i've interviewed her very often right well she and she was a big name yeah big name back then on bay street and i said i don't think that sherry's gonna go for this he says you leave sherry to me so uh i started this newsletter.

29:25And at that point, it was called Rosie's Tidbits. And it went viral. The next thing you know, the next thing you know, the sales desk is taking me out to see institutional clients. That never happened before. And I'm in the Globe and Mail. I'm in the National Post. I'm in, you know, I'm getting TV interviews. And it created, shall we say, some tension with Sherry and myself okay uh because what happened was that because of the notoriety um the brennan woods survey which is like the investor's intelligence on wall street um so i outranked sherry in my last year there in 1999 so uh like i said it created quite a bit of friction the one thing you never want to do is outrank your boss no that's the thing is that and and and i could sort of see like i said to bill down sherry's not going to go for it you leave sherry to me he says But the thing is, it took off.

30:22And I'm doing all these institutional meetings and getting presence in the media. Because let's face it, if you're in the media. Did it go to your head? No, never did. No. No, never did. Media attention like that, especially quickly, can be a beast. It never, even those years at Merrill, and it's only because, I got to say, Maggie, my, I mean, the biggest uptrade, not the biggest, one of the biggest. upgrades that I had in my life. I didn't even have a choice. And it was my parents. So I sort of feel badly, I think, for kids today, maybe even my own kids, although I grew up with it. I'm talking about being raised by depression era parents with such a strong value system.

31:13So I had that. No, no, I was, there was never a chance I was ever going to let anything get to my head. But all the notoriety, I remember this was before I even went to Merrill. Okay. I was well known in Canada, but the people in the States didn't know who I was. But even then, even then, even I started getting ranked in the surveys. I mean, I couldn't believe it. I think it's interesting because you can, with that background, it's possible to have great confidence without the ego mania that comes with it. Sometimes people aren't able to separate it, but if you have a good value and good grounding, you can get the confidence from success, but without buying into the, you know, drinking your own Kool-Aid basically, which is probably really, really important.

32:05I think that humility is something that you have to ingrain in somebody. And my parents ingrained it in me my entire life and all my siblings too. I'll agree with you that it's a scarce resource these days. Yeah. And, you know, it doesn't mean that, you know, you have this big personality on TV and he's got this sharp elbows and he's this big bad bear. But 100%, humility was something that I was taught at a young age. So what do you think you learned from starting that newsletter? What did you learn from that trade, that positive trade? Well, you know, it was just basically symbolized what I love to do, what my passion is.

32:56And I have this guy who's my boss's boss's boss telling me, I want you to do this. Now, yeah, I was, you know, what I learned is that, you know, don't fear failure. You know, it's extra work, 100%. It is extra work. Doing that daily is like an extra job. But I love it. If you like it, it doesn't feel like work. It's not just like. It's basically, I don't know, a musician picking up the trumpet, you know, or just going on and sitting down playing the piano. It's like that to me. And so I realized, and again, it comes down to when you start getting self-confidence and, you know, how that just builds on itself.

33:41But the, you know, I realized it was more than just the accolades and the attention, but I realized this daily note is making a lot of difference. Yeah, it's a creative process that's having positive impact, right? But, you know, I just absolutely, I love doing it. And I don't even consider it to be work. Like an extension of yourself. That's exactly, 100%. That's exactly how I look at it. So it gave me an opportunity to do mandated on a daily basis. What does it love to do? What do I love to do? I love to research. I love to write. I love to analyze data and title into the markets and sort of think outside the box.