Albert Edwards, a global strategist at Societe Generale, has been underweight stocks since 1996 and despite being met, he says, with "utter derision," believes a fall by the S&P to 400 is "almost inevitable."
Edwards said he has been long government bonds for the same amount of time and now feels vindicated with the yield on the 10-year Treasury having fallen from 7 percent to 1.75 percent, "a hair’s breadth" from his longstanding target 1.5 percent target.
He dismisses those who argue that stocks are cheap historically and believes US stocks are overvalued based on Tobin’s Q , or the ratio of firms' assets to their stock prices; Shiller, Graham & Dodd’s normalized price-to-earnings ratios; and cyclically adjusted price-to-earnings measures.“Investors ignore these at their peril. The forward PE may be back down at the same level as the low of the last bear market, but 1) we are on peak earnings, and 2) the Ice Age secular trend of lower PE lows in this secular valuation bear market will mean that we move to single-digit PEs in this, the third post-bubble recession” said Edwards....MORE
Thursday, September 29, 2011
Société Générale's Albert Edwards: "S&P Fall to 400 Is ‘Inevitable’" (Sept. 29, 2011)