First confirmed permabull Jim O'Neill presented 10 "grizzles" why the bear market may be coming back, then Bob Janjuah reiterated his very bearish outlook on life, and, right on cue, here is Albert Edwards with his latest crucifixion of unwarranted bullish sentiment."As we head into a double-dip, the current technical correction will rapidly turn into a resumption of the structural bear market for stocks. We have not seen the worst yet." Perhaps BMO's recommendation for a zero equity weighting is spot on...See, for example:
Over the past month David Rosenberg has been pounding the table on the signal being sent by the collapse in the ECRI leading indicator. It appears his message has not fallen on deaf ears.
From SocGen's Albert Edwards:
Frederic, one our US equity salespersons, is worried. He mailed me yesterday asking me about the steep downturn in the Economic Council Research Institute (ECRI) weekly leading indicator (see chart below). To quote “I find the acceleration seen since May pretty alarming, the ECRI never had such a pace, even in 2008 in the middle of the CDO explosion, when nobody had a clue if the financial system could hold!!”Of course, ECRI could well be ignored if it did not also match up perfectly with shifts in overall analyst sentiment. Which is precisely what it is doing...MORE
Now the last time Frederic contacted me about this leading indicator was back in early 2009. I had spent most of the bear market pontificating that we should all learn the lessons from the Japanese bear market viz that in a post-bubble world the equity market and economic cycle would become much more synchronized. Hence it was much easier for an investor to time a tactical re-entry into equities during the Ice Age. One merely had to wait to buy when the leading indicators began to turn upwards.
So in early 2009 Frederic began calling me to point out the ECRI was indeed recovering and given what I had said, shouldn?t I be moving back into equities on a cyclical basis ?irrespective of whether the structural bear market was over or not? Good point Freddie. What did I do in the face of this clear buy signal I had so long been waiting for? I did absolutely nothing. It was a case of do as I say, rather than do as I do. Firm in the knowledge that the structural bear market had not fully played itself out, I managed to miss one of the biggest cyclical equity rallies on record. Do I deserve to be taken out by research management and publicly thrashed to within an inch of my miserable life? Yes I certainly do.
Apr 27: Société Générale's Albert Edwards: "Global economy to roll over in six to nine months’ time; bearish for shares"
Apr. 16: Société Générale's Albert Edwards: "We Are Now Only One Cyclical Downturn Away From Outright Deflation"
And Many MORE
Feb 24: Société Générale's Albert Edwards: "Stocks Face ‘Ice Age’ Drop as Indicators Peak..." Euro to $1.25; We're all Doomed