Bob Janjuah's Latest Big Picture Outlook
The latest big picture observations from one of the original skeptics: Bob Janjuah.
Bob's World - Vigilantes bite back
The themes I have been highlighting all year certainly seem to have played a major role in driving markets over the past two weeks:We last mention Bob in "Coming into the Far Turn Russell Napier and Albert Edwards Lead the Gloomster Stakes But Felix Zulauf is Making a Move With an S&P at 500 Prediction":
A. The bond vigilantes did their job with respect to Italy. While Greece, Portugal and Ireland are, in my opinion, insolvent nations that need debt relief or restructuring, it seems clear to me that the market does not want to attack Italy out of any speculative spite. As long as the sensible fiscal policies of the last decade are further built upon, I am confident Italy can exit the eurozone debt crisis in acceptable health.
B. The 8 July jobs report told investors all they need to know about the weakness in DM growth. I am very confident that both DM and EM growth will only get weaker as H2 unfolds. But in the near term I think a combination of a "fudged" US debt ceiling agreement, more talk of stimuli in the form of QE3, a genuine push by most Italian policymakers to back Mr Tremonti and implement the required fiscal adjustment, and a little more of the Q2/Q3 Japan bounce, will together be viewed, at the margin, positively by markets. But I would expect this to be only a short-lived reprieve.
Therefore, in terms of markets:
A. Although I think the current risk-off phase could last a little longer in the very short term, for the latter half of July and heading into August I am bullish and favour another risk-on phase. In this coming risk-on phase I expect to see over late July and August my S&P targets are 1350/1370, with a possibility of a bigger move to 1440. And 1250/1220 S&P remain my bear alert levels....MORE
Napier is at 400Nomura's Bob Janjuah: QE2 Has Run It's Course, "Time to Fade Jackson Hole"':
Albert says 450
Bob Janjuah trails at 550.
I think he's early on the call.
The Fed's open market purchases of treasuries are scheduled to run through June and equity market participants are fully aware that they are playing a game of Chicken with each other. The problem the punters face is the miserable returns offered elsewhere, a half-point picked up in a Netflix scalp can equal the interest earned on T-bills in 100 days. So they stay at the market.
It is going to take one of those collective Wile E Coyote moments:
Wile E realizes there is nothing supporting him a nanosecond before gravity reasserts itself. We aren't at the mass realization stage yet. As I said yesterday, "When the music stops try to grab a chair, this is a dangerous little game we're all playing.".
We all know it, we've been babbling about it since August.
Last month in "How Dysfunctional Is This Market? (SPY; XLF)":
Everyone knows this market is rigged. The general feeling is that when it tanks "I" will be sharp enough to recognize it....
The markets topped out on April 29.