While high-profile economist and market strategist David Rosenberg did nothing to diminish his reputation as a contentious “perma-bear” during his morning keynote address to the annual Fortigent Winter Forum in Savannah, GA last week, he also made clear he believed bonds, utilities and defensive stocks were a buying opportunity in 2012.

True to form, Rosenberg, chief economist and strategist for Gluskin Sheff, but perhaps best known for Breakfast with Dave, his widely read – and debated – sharp-tongued daily take on the economy and the markets, painted a gloomy picture for the global economy and US stock market.

Europe is already in a recession, Rosenberg said, and the only question is if it will be severe or mild. “Greece is toast,” he said and would default on its debt, followed by Portugal, with Italy looming as a big question mark.

While the impact of the European crisis is still unknown, Rosenberg doesn’t think it will be confined to the continent. “I can’t believe I keep hearing it will be contained,” he said.

The US economy is still going through a deleveraging cycle, and will remain in a deflationary phase for at least several more years, he declared. What’s more, the economy’s post-recession growth has peaked and the rate of growth is now slowing down, Rosenberg asserted.

Nor did he have much hope for the US equities markets. “Color me skeptical,” he said, “but I think the market will be flat yet again and earnings will disappoint.”

Bright spots

But Rosenberg, the former chief North American economist at Merrill Lynch, wasn’t completely bearish and did talk up thirty-year Treasury bonds, corporate bonds, utilities, hybrid funds and defensive stocks.

He told the assembled wealth managers that sometimes they have to not only try to see where the market is going but step back and ask: "What is the market telling me?"

At present, there was little doubt the market was indicating that “income is scarce,” Rosenberg said. As a result, he recommended seeking out stocks with good yields and dividend growth and cited Canadian banks as being particularly attractive. He also said he was putting money into hybrid funds, combining yields and equity appreciation, and cited solid performance by REITs and Master Limited Partnerships.

“The more defensive you can be in your defensive positions the better,” he said.

Rosenberg said he also thought too many investors were shying away from a terrific buying opportunity in bonds because of what he called “numerical micro phobia – fear of small numbers.”

Investors are turned off by very low single digit bond yields, but if anything, bond yields are “too high” and will come down over time, Rosenberg argued. But because deflation is currently a bigger risk than inflation, “a bear market in bonds won’t happen until the Fed raises rates, which won’t happen for three years.”

Even though the yield is small, investors can still make good returns on price appreciation as the yield falls, he reminded the assembled wealth managers.

Rosenberg was also high on corporate bonds, and said he was impressed by the strength of corporate balance sheets.