Bob’s back*Previous RBS posts:
RBS’s chief strategist Bob, ‘The Bear’, Janjuah has returned from his summer travels and he is as bearish as ever.
In fact his latest missive is at times almost apocalyptic:
I do however think that we are VERY MUCH in the tail end of the correction of the Oct 07 to Mar 09 bear move, where S&P lost nearly 60% from peak to trough, and where the correction from the Mar low would, at 1120, represent the 50% retrace. Once what I assume is a bear mrkt correction finishes, over the next month or so, I expect the Bear to return with vengeance and I retain my call for NEW LOWS in equities. That’s 550 S&P!!
Wow. 550 on the S&P. Eat your heart out Albert Edwards. Bob continues:And here why Bob is so bearish:The crossroads is only weeks away, and visibility is poor, thus it is extremely difficult to make big calls at this time, esp. when the call is against the growing weight of opinion. Something extra-ordinary MAY be happening and, joking aside, even if its not, precise timing is always difficult. But based on everything I know and see I would be using any further risk asset rallies over the next month or so as an oppose to sell risk/raise cash/get short, and to flip out of high beta risk low quality risk, into low beta high quality risk.I have yet to see ANY meaningful evidence of self-sustaining private sector demand, which I have said for many months is the key to a sustained/secular economic recovery and asset price recovery. All I see is growth and asset price gains driven by the willing and reckless destruction of government and central bank balance sheets. This is NOT sustainable IMHO. I continue to see a private sector that wants to pay down debt, increase savings, cut costs, take less risk....MORE
August 12, 2009 (just before he went on vacation)
Royal Bank of Scotland uber-bear issues fresh alert on global stock markets
...Britain's Uber-bear is growling again. After predicting a torrid "relief rally" over the early summer, Bob Janjuah at Royal Bank of Scotland is advising clients to take profits in global equity and commodity markets and prepare for another storm as winter nears.
"We are now in the middle of a parabolic spike up," he said in his latest confidential note to clients.
"I expect this risk rally to continue into – and maybe through – a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September 'tipping zone', driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets."...
..."A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.More from the Telegraph:
Such a slide on world bourses would amount to one of the worst bear markets over the last century....MORE
South Sea Bubble Survivor Says Dismantle RBS Along With Lloyds
From Bloomberg:Henry Hoare made a 1.6 million- pound ($2.2 million) profit [*] from the South Sea Bubble, a speculative bust that bankrupted thousands of English families in the 1720s.HT: FT Alphaville who headlined their linkpost "Esoteric headline of the day"
His great-, great-, great-, great-, great-, great-grand- nephew boosted the deposits of his family’s bank by 20 percent in the past year to come through one of the worst financial crises since then, which is why people might want to listen to him.
“Keep it simple, stupid,”[**] Alexander Hoare said in an interview in his drawing room on the first floor of C. Hoare & Co.’s 180-year-old office on London’s Fleet Street. “Get the depositors in, lend to people who can afford to borrow.”That’s a lesson Royal Bank of Scotland Group Plc should have learned, said Hoare, 46, whose family-owned firm started in 1672 and now has about 10,000 customers....MORE
*From deep in the link-vault comes a tiny treasure, an analysis of Hoare's trading during the South Sea bubble (15 page PDF):Riding the South Sea Bubble
By PETER TEMIN AND HANS-JOACHIM VOTHThis paper presents a case study of a well-informed investor in the South Sea bubble. We argue that Hoare’s Bank, a fledgling West End London bank, knew that a bubble was in progress and nonetheless invested in the stock: it was profitable to “ride the bubble.” Using a unique dataset on daily trades, we show that this sophisticated investor was not constrained by such institutional factors as restrictions on short sales or agency problems....MORE**As pointed out in Friday's "Markets: Where Do We Go From Here?", we are firm believers in the low I.Q. approach to business.